Measuring Human Resource management's effectiveness in improving performance.

This article examines the strategic role of HR and its main practices, describes the outcomes of respective categories of HR practices, explains the critical reasons for measuring HR's efforts, and proposes a framework for assessing HR. Ultimately, organizations will be able to utilize the information to determine how particular HR practices correlate with better business results; determine potential areas for investments, expansions, and reductions; justify budget allocations; and be more accountable for each dollar spent within the organization. The framework proposed does not merely explain the cost for each major HR activity, but demonstrates the value of the activity and, hence, the opportunity to determine if it is a worthwhile investment and strategy for creating a competitive advantage.

What value does the HR function contribute to the bottom line of the organization? Over the years, tremendous emphasis has been placed on making HR practitioners strategic business partners and a value-added source within organizations. Traditionally, HR professionals could talk generally and conceptually about employee morale, turnover, and employee commitment as outcomes of HR efforts. Furthermore, the HR function was often viewed as an expense-generator and administrative function and not as a value-added partner. Ulrich (1997b) reiterated that to fulfill the business partnership role of HR. concepts need to be replaced with evidence, ideas with results, and perceptions with assessments.

This article examines the strategic role of HR and its main practices, describes the outcomes of the respective category of HR practices, explains the critical reasons for measuring HR's efforts, and proposes a framework for assessing HR. Ultimately, organizations will be able to utilize the information to determine how particular HR practices correlate with better business results; determine potential areas for investments, expansions, and reductions; justify budget allocations; and be more accountable for each dollar spent within the organization. The framework proposed does not merely explain the cost for each major HR activity, but demonstrates the value of the activity and, hence, the opportunity to determine whether it is a worthwhile investment and strategy for creating a competitive advantage.

The framework has proven its effectiveness at many companies, to show how HR creates value, to utilize information to increase investments in specific HR strategies and eliminate ineffective investments, and to serve as a critical resource in strategic business planning and budget allocation. The companies include Fortune 500 and smaller companies from retail, transportation, and financial industries.

Understanding the Strategic Role of HR

In today's business environment, organizations constantly need to evaluate their internal and external environment for challenges and opportunities to remain competitive and to sustain growth. Political, economic, social, and even psychological changes within our societies have a significant impact on organizations. Given any significant change or event, how ready are organizations to react in order to remain competitive?

Many factors drive changes in organizations today, including the use of technology, globalization, changes in workforce demographics, the elimination of bureaucracies in organizational structures, and the need to find a balance between work and family issues. Understanding the potential of an organization's resources and optimizing the output of such resources, given the changes, provides an impetus for HR to become the key source of creating the competitive advantage for the organization.

To create value and deliver results, HR professionals must begin not by focusing on the work activities or work of HR but by defining the deliverables of that work. HR's roles in building a competitive organization include management of strategic human resources, management of transformation and change, management of firm infrastructure, and management of employee contributions (Ulrich, 1997a). Although these roles are valid and have proven to be value-added in recent years, now there is a critical need to move beyond the strategic business partner role to becoming a player in the business (Ulrich & Beatty, 2001). Players, according to Ulrich and Beatty, contribute to the profitability of the organization, deliver results, and do things to make a difference. The roles of players are to (1) coach, (2) design, (3) construct, (4) change the organization, (5) create followers, and (6) play by the rules. Another perspective on the role of HRM suggests that in leading-edge companies, HR professionals play four key roles: (1) strategic business partners, (2) innovators, (3) collaborators, and (4) facilitators (Schuler & Jackson, 2000). As strategic business partners, HR professionals should understand the nature of the business from strategic, operational, financial, and other aspects necessary to be part of an effective team managing an organization. Functioning as innovators, HR professionals are challenged to search continuously for strategies that will create value for the organization and not merely function in a reactionary mode. Furthermore, HR professionals will also serve as collaborators with senior leaders and all employees to implement business strategies forming the strategic link throughout the organization. Finally, as facilitators, HR professionals function as the change agent providing rationale, support, and readiness for planned changes designed to support the business strategies.

The fundamental role of HRM is essentially to maximize profitability, quality of work life, and profits through effective management of people (Cascio, 2003). Given this premise, it can be easily inferred that HR's role is to help create value to the organization. Exhibit I illustrates some of the external challenges and changes facing organizations, their impact on the organization, and how HR is impacted.

The Importance of Measuring HR's Activities

Even though HR professionals are convinced that their efforts add value to the organization's bottom-line, frequently there is little evidence to demonstrate such belief. A recent survey the author conducted of 54 companies in the midwest revealed that 51 of the companies conducted little or no assessment of their HR department's efforts and therefore could not have provided any quantitative measures of HR's value to the organization. In addition, a study conducted by Becker, et al. (2001) indicated that less than 10 percent of the 968 firms that participated in their study had a formal estimation procedure to measure HRM.

Measurement in most HR departments is usually restricted to processes, measuring costs, and not showing value-added (HRPS, 1993). Each dollar invested must be justified first, strategies to determine maximum worth must be compared, and where to invest needs to be decided, especially as companies scramble to survive the economic conditions following the September 11 tragedy. Pepitone (1997) reiterated that HR leaders should know how to prove the value-added of their services because management is increasingly requiring departments to give evidence of their worth. In addition, Sorensen (1995) stated that the best way for HR to gain credibility in order to make meaningful changes is for practitioners to measure the cost and effectiveness of what they do. And they must put that into language senior executives understand: financial results. HR managers need to measure the cost and effectiveness of their activities far more closely than they have in the past. Many organizations have been forced and are continuing t o determine ways of being more cost-effective. Many of the other functions including finance, accounting, and marketing are able to show a return on investment for their respective efforts, so given the increased emphasis on HR practices, it is imperative for HR to be able to show its effectiveness in creating value for the organization. The new HR is a transformed role comparing itself to any other function, not only through espoused value creation strategies, but also through outcomes, qualitative and quantitative measurements, and direct relationships to profitability.

The simple option of showing HR's value or becoming extinct as a department presents itself to HR professionals; given the strong belief that HR is a source of added value in organizations, there is no choice than for HR professionals to be able to explain quantitatively and qualitatively its strategic role in the organization. Substantial evidence over the years has shown the relationship between HR and organizational performance, as summarized by Yeung and Berman (1997). Some of the studies include MacDuffie and Krafcic (1992), US Department of Labor (1993), Pfeffer (1994), Arthur (1994), Huselid (1995), and Ostroff (1995). Despite these studies, HR still lacks a framework that is grounded in theory, yet practical enough for practitioners to use that shows the major HR activities, outcomes of the respective activities, and how they can be measured. Such a framework is discussed here, one that describes clusters within the HR function and encompasses: (1) strategic planning, (2) selection, (3) training and d evelopment, (4) organization development and change, (5) performance management, (6) reward system, and (7) organizational behavior and theory.

HR Activities and Outcomes

Even though there are several classifications or groupings of HR activities, the author uses seven groups of activities seen as the most strategic and influential in realizing the business objectives of the organization. Today's economy dictates that organizations continually assess the external and internal environment and make relevant changes in order to remain competitive. The author examines each of the clusters and provides a description of each, its importance in achieving the business strategy, and how it can be measured to determine its effectiveness.

Strategic Planning

The role of the HR function has changed tremendously over the past 10 ears. Previously, HR functions were viewed not as an integral core of the business but rather as an administrative function. In today's economy, HR practitioners are more frequently considered business partners. The ideal situation would be the inclusion of the HR leader in the strategic business planning (SBP) process. "In the most fundamental sense, SBP involves choosing how an organization will compete" (Rothwell, 1994). The questions of what product to produce, where the product should be sold, how many to make available, how the products and services differ from the competition, are included as part of the business strategy process, the "process by which the basic mission and objectives of the organization are set and the process by which the organization uses its resources to achieve the objectives" (Tichy, et al., 1982).

Why is it important for HR to be involved in the strategic planning process? In developing strategies in today's complex and dynamic business environment, there is a critical need for business leaders continually to assess their talent pool to determine if the appropriate expertise needed to accomplish the business strategies is available within the organization. If not, where and how can the organization acquire the necessary skills? Another critical area is to identify the skills needed to be developed internally for current employees to perform at the level necessary for the organization to be competitive. Does the organization need to change any of its current policies and practices in order to derive the intended behaviors of employees? How should performance be measured and what types of rewards should be given for the intended behaviors? These are all fundamental areas of effectively managing an organization and imperative to be addressed at the strategic planning stage. Typically, the HR function has the most experience and knowledge in addressing these critical issues. Strategic planning seeks to identify the organizational decisions and actions that yield the greatest advantage under various assumptions about the organization and its environment. The integration of human resources into the organizational strategy provides the basis for enabling the HR function to support and implement the strategic plan to achieve a competitive advantage (Wofford, 2002). This strategy provides for the maximization of human capital, reduction of wasted and inefficient labor, and other financial investment, eventually to maximize profitability.

Addressing these issues at the strategic planning stage, with HR included, increases the likelihood of more efficiently reaching the business outcomes and avoiding chaos, massive layoffs, crises resulting from not having skilled employees to carry out particular tasks and not having the right fit among employees, corporate strategies, and business environments. C.K. Prahalad (1990), in describing the roots of competitive advantage, stated that the real sources of competitive advantage are to be found in management's ability to consolidate corporate-wide technologies and production skills into competencies that empower individual businesses to adapt quickly to changing opportunities. Moreover, Tichy, et al. (1982) reiterated that there are three core elements for organizations to function effectively: mission and strategy, organization structure, and human resource management. Clearly, the HR function plays a pivotal role in determining the business strategy through the assessment of the organization's capabil ities to compete successfully through a particular strategy, determining the appropriate rewards system, determining appropriate organization structures, and developing strategies to increase employee performance.

Given the definition of strategic planning as how an organization will compete, the question arises as to how an organization would be able to assess the effectiveness of its strategic plan. Indicators of a successfully crafted strategic plan include creating advantages that are sustainable over a long period. Has the planning resulted in (1) attainment of the organization's goals and objectives, (2) financial profitability, (3) positioning to create advantages for the short-term and long-term, and (4) creation of a stronger sense of social responsibility? In essence, this process determines the decisions and actions an organization will undertake to create and sustain competitive advantage.

Acquisition of Employees

In the era of increasing globalization and the struggle to create sustainable competitive advantages, organizations are continuously evaluating their strategies to ensure they have the expertise needed to help achieve the mission of the organization. The economic challenges resulting from the 9/11 terrorists attacks on the United States also continue to affect organizations' financial position and subsequently recruitment and selection strategies.

Gatewood and Feild (2001) define selection as a "process of collecting and evaluating information about an individual in order to extend an offer of employment." Fitz-enz (2002) described ways of measuring the cost per hire, source cost per hire, and interviewing cost--critical metrics in deciding the cost of acquiring employees. Nevertheless, to understand fully the value and effectiveness of the selection process, one has to analyze the impact of the employee's contribution to the organization not only from a cost factor, but also from performance in the short-term and long-term. Has the employee been able to contribute to the successful implementation of the business strategy? In examining the efforts that are part of the acquisition, one has to examine the effectiveness of the planning process, advertising and recruitment sources, effectiveness of the interviewers in selecting the right candidate, change in the pool of qualified candidates, and performance of the incumbent on the job.

HR planning involves the process that specifies the activities a firm must use in order to develop its human resources to improve its overall practices (Gatewood & Feild, 2001). The process entails determining how many employees the organization needs to perform at its optimum and where the employees should be working in the organization given the external and internal challenges and opportunities. With the economy still struggling to improve after the 9/11 terrorists attacks, organizations have been forced to lay off thousands of employees in some cases in order to survive. The real challenge for HR in the upcoming months and even years will be to predict the demand for products and services and then to determine the need for labor. Despite uncertainty, companies still have to be able reasonably to predict labor demands and determine if employees have to be laid off or how many employees have to be recruited within a specific period. In addition, HR planning should assess the skills and competencies currently available within the organization and what other intellectual capital will be needed in the future to meet the needs of the stakeholders adequately.

Another aspect of the acquisition process involves the advertising and recruitment sources. Given the high costs of advertising in newspapers, Internet websites, journals, employment agencies, and direct and indirect costs associated with advertising, there is a definite need for HR professionals and other senior leaders to be aware of the effectiveness of the respective sources being used to advertise and recruit candidates. In assessing the effectiveness of recruitment and advertisement sources an organization uses to recruit employees, it is imperative to relate the actual performance of the incumbent to advertising and recruitment. Some of the factors that should be included in this evaluation are historical employee turnover, absenteeism, actual performance on the job, and career advancement. There may also be a high level of correlation between individual performance and specific schools, number of years of work experience, education major, GPA, and other such factors. Given the collection and analysis of this data, Human Resources is much more likely to invest its advertising and recruitment budget where real value is created for the organization.

Fitz-enz (2002) described the need to ensure that the recruitment function be efficient and further stated that it is better to measure recruiters as a team than as individuals whenever applicable. In determining recruiter team efficiency, Fitz-enz stated that the measurements should focus on the productivity of their interviewing techniques, the average length of interviews for the respective job groups, the number of interviews needed to make a quality hire. Another means of determining the effectiveness of the recruitment function is to measure the change in the number of qualified candidates available for selection. This could be a significant cost-reduction strategy given that advertising costs can be reduced if there are qualified candidates available for both current and future openings.

Training and Development

The American Society for Training & Development estimates that U.S. organizations are spending more than $60 billion annually on employee training and development. Given this significant investment, it is reasonable to ask about the benefits of such investments, especially because more companies are seeing a need for lifelong learning and are integrating technology in their strategies. Swanson (1995) defined employee training and development (T&D) as the process of systematically developing expertise in individuals for the purpose of improving performance. Conceptually, T&D has been shown to be a source of competitive advantage. Nevertheless, there is still a critical need to develop frameworks and strengthen the argument for the actual benefits provided by this intervention. Developing a framework for assessing the financial benefits of T&D, Swanson (2001) listed three questions that provide the variations on the assessment of human resource development (HRD), of which T&D is a major category.

1. What is the forecasted financial benefit resulting from the HRD intervention?

2. What is the actual financial benefit resulting from the HRD intervention?

3. What is the approximate financial benefit resulting from the HRD intervention? (Approximate financial benefit is used whenever there is some uncertainty about the exact value created by the intervention.)

The framework describes three perspectives to assess the benefits, including positive benefits, relative benefits, and return on investment. The positive benefits are those indicators that show the benefits exceeding the costs. The key issue in this perspective is to determine that the benefits at least equal the costs. It may also mean the inability of the measurement to show a financial benefit, but demonstrates the benefit of, for example, strengthening the culture and maintaining the tradition of the organization. Return on investment (ROI) is a ratio that expresses the relationship of every dollar of performance value to every dollar expended to achieve that value.

In understanding the impact of training, it is imperative to determine what difference, if any, the investment made in supporting the business strategy of the organization. The assessment of the training should focus on the difference in the performance of the employee, the department, the process, and the overall organization. Furthermore, were there adequate opportunities for employees to practice what they learned in the classroom, were they rewarded for improvements made as a result of attending the training, and can a relationship be demonstrated between the training and the organization's performance?

Fitz-enz (2002) suggested that in addressing the results of the training process, the following questions be answered:

1. How well did the employee learn?

2. How effectively did the employee apply the learning from a business standpoint?

3. What difference did it make to the business?

In sum, to measure the impact of a training initiative, regardless of the scope, size of investment, and number of employees involved, one must determine the purpose of doing the training and whether the goals have been met at various intervals after the intervention has been completed. To determine the benefit, ROI, or whatever terminologies are chosen to describe the outcome, one has to consider the direct costs of developing and implementing the intervention, in addition to the indirect and opportunity costs. This total cost would then have to be compared with the intended benefits and actual benefits immediately after the training and at different intervals after the intervention based on its nature. It is therefore imperative to address the following questions given the critical need to understand the impact of the intervention:

1. Has the employee's attitude changed since the training?

2. Did the employee acquire knowledge and expertise in an area that would enable him/her to perform more effectively on the job?

3. Did the employee's performance improve after the training?

4. How has the change in the employee's performance affected the achievement of the business strategy and performance of the organization?

These are all areas to be integrated in assessing the impact of training and development. With answers to these questions, it is relatively simple to determine whether the training investment was worthwhile and to articulate how T&D supports the business strategy and contributes to the bottom line of the organization.

Organization Change and Development

Given the continuing changes in the global economy, demands of customers, preferences and values of employees, a necessary component of the HR strategy is to ensure that the organization is adapting to the external and internal variables it currently faces and would likely face in the future in order to meet its stakeholders' expectations. The pace of global, economic, and technological development makes change an inevitable feature of organizational life (Cummings & Worley, 2002). The HR professional is therefore expected to be able to plan and implement the necessary changes in order to improve performance. Swanson (1995) defined organization development (OD) as the process of developing and implementing planned changes in organizations for the purpose of improving performance. Through its organization development interventions, HR has the opportunity to create organizational effectiveness at the individual, department, function, process, and organizational levels.

Many organization development practitioners may argue that OD is not a measurable effort, at least quantitatively. The challenge arises again as to what value change efforts really have on the bottom line of the organization. Should OD be excluded from quantitative measurement? Given a downturn in the economy and the need to reduce labor cost, are OD practitioners able to justify their worth to the organization?

In answering these questions, it is necessary to examine the outputs of OD. In many instances, the outputs should be an improvement in performance at the individual, process, and organizational levels. Fitz-enz (2002) suggested that OD can be measured through productivity, quality, service, responsiveness, development, and survival. For example, how efficiently are products and services delivered to the customer? These factors are indeed critical in assessing the effectiveness of OD's efforts and therefore should be part of the process of making changes in organizations. Some of the key measurements can be derived from the following questions:

1. What is the quality of the output and does it meet the customers' expectations?

2. Does the service offered by the organization provide a competitive advantage as compared to its competitors?

3. How effectively does the system respond to changes in the external environment?

4. Does the organization allow for maximum sharing of information, leveraging each employee and work unit, and resolving any internal or external challenges?

5. Are the values and ethics of each employee and work unit representative of the overall culture of the organization and supportive of the business strategy?

How each respective organization responds to these questions measures its readiness to function effectively in its current and anticipated internal and external environments. Should the responses indicate less than optimal performance at the individual, process, and organization levels, the opportunity exists for HR to conduct an analysis and develop and implement planned changes to improve performance at all levels. As pointed out by Becker, et al. (2001), HR professionals too often want to measure their success by their activity rather than the actual business results. By having concrete answers to these questions, there will be appropriate responses as to how OD contributes to achieving the business strategy of the organization.

Performance Management

"Performance management systems make clear to employees what is expected of them and assure line managers and strategic planners that employee behaviors will be in line with the company's goals" (Noe, et al., 2003). Many organizations still rely on the performance appraisal, viewed as an annual ritual and primarily the responsibility of the HR function. In today's economy, which calls for the utmost of performance management to create a competitive advantage, Noe, et al. (2003) grouped performance management into three categories of defining performance, measuring performance, and the feedback aspect of performance.

Performance management systems are geared to ensure that each employee within the organization, based on previously conducted job analyses, is performing the tasks intended at the expected level to support the strategic business objectives of the organization. The thinking of HR practitioners and other business leaders that an annual performance appraisal is performance management must become obsolete. Effective performance management entails a process where each employee is fully aware of his or her role in the organization, the type of output expected, and how the output will be measured.

How would one determine the effectiveness of the performance management system in creating competitive advantages for the organization? In answering this key question, the following areas should be addressed to ensure that:

1. Job descriptions are developed through timely and effective job analyses.

2. Job descriptions are updated regularly to reflect changing business conditions.

3. Feedback is shared continuously among all stakeholders.

4. Every employee is fully aware of his or her role in the organization, which can easily be accomplished in the performance planning phase of the process.

5. Measurable outcomes are assigned to every task, reflecting the role of the position and incumbent in achieving the goals and objectives of the organization.

6. There is congruency and consistency in performance measures across the entire organization, and performance standards are always measured consistently.

7. The process and the system are viewed as credible, fair, valid, and reliable.

Employees and supervisors can use a survey with numerical ratings to assess (1) whether roles and responsibilities are fully aligned with the goals of the organization, (2) satisfaction with the actual process, and (3) satisfaction with the supervisor s management of the performance management process. An aggregate of the responses produces an assessment of the performance management system and its effectiveness in improving individual and organizational performance.

One of the critical strategies in performance management is to understand the fundamental role of each employee in achieving the mission of the organization. By clearly identifying the purpose and role of each individual, one is easily able to identify where deficiencies may exist and develop corrective actions, identify the strengths of each individual, and maximize each employee's potential and hence his or her contribution to the financial bottom line of the organization.

Reward System

The starting point for any reward system design process needs to be the strategic agenda of the organization (Lawler, 1990). By understanding where the organization is positioning itself for various intervals in the future, an organization can design the reward system to provide incentives specifically intended to foster behaviors, attitudes, and outcomes among the workforce that directly correlate with the strategic agenda of the organization. As indicated by Lawler (1990), numerous studies including those by Vroom (1964), Lawler (1971), and Kerr (1975) have shown that effective reward systems can significantly increase the motivation of individuals to increase their performance. As inferred from these studies, the fundamental intent of rewards in organizations is to provide incentives to achieve individual and organizational behaviors that would enable the organization to create competitive advantages and maximize the value of the shareholder's investment.

Given such a premise, the question arises as to how one can determine that the actual rewards provided to the workforce are fostering individual and organizational behaviors that enable the organization to maximize its profitability, and are assisting in attracting and retaining critical employees. In measuring the effectiveness of the reward system, the following factors should be considered:

1. Does the current reward system provide incentives that reward behaviors to support the business strategy?

2. Are new employees accepting offers with the organization based in part in the reward system?

3. How does the reward system reflect the employees' personal values and the overall culture of the organization?

4. What percentage of employees and roles within the organization does the reward system assist in retaining?

5. What is the overall satisfaction level of the workforce with the rewards they are offered?

6. Is the reward system flexible enough to be changed if there are external challenges and opportunities that would create a need for changing the system?

7. What is the overall cost of the reward system as compared to its overall benefits?

A survey conducted by Watson Wyatt (1998) concluded that organizations with reward systems linked to business strategy to a great extent have higher returns than those with less of a linkage. Schuster (1996) also concluded that organizations using strategically designed pay systems perform better than the traditional pay counterparts based on financial objectives such as earnings per share, return on assets, profit per employee, and cash flow; therefore, the outputs of an effective reward system are centered around the financial profitability of the organization and the creation of competitive advantage for the organization.

Organizational Behavior and Theory

A key aspect of successful leadership is the ability to understand one's workforce, to be able to influence their behaviors, and to predict their behaviors given any specific conditions. Today, the HR function may not view this as part of its core responsibility, but in reality it is definitely HR's responsibility to understand the needs of the workforce and how any given policy or practice may affect the behaviors of employees. McShane and Von Glinow (2002) defined organizational behavior as the study of what people think, feel, and do in and around organizations. Focusing on organizational behavior is important in assessing whether the way people are thinking, feeling, and behaving corresponds to the strategic intent of the organization and produces the outcomes necessary for the attainment of the organization's business goals.

With an increase in organizational turbulence (Daft, 2001), it is much more difficult to predict how organizations will behave in specific situations as exemplified by the many layoffs and restructuring of organizations after the September 11 terrorist attacks. Nevertheless, organizations can be much more successful if HR and other leaders are able to analyze historical data, benchmarking other departments and organizations, and even using simulations in planning and implementing future interventions. It is also crucial for HR and other leaders to understand the theories that are relevant to managing employees within specific contexts and the strategies that may be more effective in improving performance among the workforce.

The measurements for organization theory and behavior would therefore be the ability of HR and other leaders reasonably to predict and plan accordingly for the future based on historical data and current environments. In addition, the leaders must be fully aware of what is transpiring in other organizations across the world, political and economic developments, and technological changes and the possible effect on their own organizations. An ability reasonably to understand and predict the behaviors of employees provides a definite competitive advantage in making relevant changes to capitalize on current and future opportunities.

Summary of Framework for Assessing HR in Today's Global Economy

Recognizing the importance of showing how HR contributes to business strategy and financial profitability, and determining the level of HR effectiveness, the framework presented here is intended to enhance the profession by creating higher levels of value for organizations. By way of summary, Exhibit 3 briefly describes the respective HR clusters, their outcomes, and possible measurements of effectiveness in creating value.

Conclusion

Does HR contribute to the bottom line of an organization? Given that several large-scale studies have proven that HRM is a critical driver in an organization's financial performance, it is imperative for HR and other leaders to understand the critical nature and utmost importance of understanding the effectiveness of all HR activities in creating value for the organization. It is only through measuring that one can really articulate the benefits of HR strategies in achieving the organization's business strategy and in the process enhance the credibility of the HR profession.

The HR profession is at a juncture where measuring HR's efforts has become an integral focus of the HR department. Some practitioners will naturally resist this important aspect of HR, but through coaching, training, and practice, expertise will be developed, ultimately improving the performance and effectiveness of the HR function. Only through such efforts can HR validate its claim that it is a strategic business partner and a value-added department within the organization. EXHIBIT 3 HR Measurement FrameWork Clusters Outcomes Strategic Planning * Analysis, decisions, and

actions needed to create and

sustain competitive advantage Acquisition * Effective contribution of of Employees new employees to business

strategy implementation

* Planing process,

advertising, and recruitment

sources support business

strategy

* Interviewers effective in

selecting right candidates Training & * Positive change in attitude Development of participants

* Increased expertise in areas

applicable to job

* Opportunities to practice

newly acquired skills on the

job

* Support from peers,

supervisors, and others in

using knowledge gained Organization Change * Higher levels of and Development productivity, quality of

products and services

* Positive change in

responsiveness in meeting

customer needs

* Culture reflects

organization and supports

business strategy

* Fluid organization

structures Performance * Each position and task Managment supports strategic business

objectives

* Effective process for

maximizing performance Reward System * Reward system motivates

increased performance

* Incentives provided to

achieve individual and

organizational behaviors

aligned with business

strategies and investments Organization Behavior * Employee behaviors reflect & Theory desired organizational

culture and alignment with

business strategy Clusters Measurements Strategic Planning * Financial Profitability

* Social responsibility--viewed by

society as ethical, moral, and a

preferred employer

* Integration in all areas of the

organization

* Efficient utilization of

available resources Acquisition * Adequate number of qualified of Employees incumbents

* Relatively short period of time

hire qualified candidate

* Reduced cost per hire

* Increased applicant pool

* Reduced employee-turnover ratio

* Higher performance output from

incumbents Training & * Improvement in the performance of Development the individual, process, and

organization Organization Change * Ability of organization to and Development compete effectively in current

internal and external

environments

* Quality of output with respect to

customer expectations

* Service provides competitive

advantages

* Effective response to changes in

external environment

* Maximum sharing of information,

leveraging each employee and work

unit, and resolving any internal

or external challenges Performance * Job descriptions developed Managment through timely and effective job

analysis

* Feedback shared continuously

among all stakeholders

* Every employee is fully aware of

his or her role in organization

* Measurable outcomes identified

and measured for each position

* Process and system viewed as

credible, fair, valid, and

reliable Reward System * Acceptance of employment offers

based in part on attractiveness

of reward system

* Reward system reflects employees'

personal values and overall

culture of organization

* Cost-effective outcomes of reward

system Organization Behavior * Ability of HR and other leaders & Theory to understand, predict, and

influence employee behaviors

* Ability of HR and other leaders

to plan for the future based on

historical data and current

environment

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Biographical Sketch

Sunil Ramlall is an assistant professor at the University of St. Thomas, Minnesota. He has a Ph.D. and M.Ed. in Human Resource Development from the University of Minnesota and a MBA and BA in Human Resource Management from the University of St. Thomas. His primary areas of research include measuring human resources strategies, utilizing information technology to enhance HR's effectiveness, strategic HR planning, and training and development. Dr. Ramlall has also worked in various HR capacities at Northwest Airlines, the University of Minnesota, Target Corporation, and at Carlson Companies.