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 would 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 of the 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 human resources (HR) function contribute to the bottom line of the
organization? Over the years, there has been tremendous emphasis placed on HR practitioners
becoming strategic business partners and being a value-added source within organizations.
Traditionally, HR professionals could talk generally and conceptually about employee morale,
turnover, and employee commitment being outcomes of HR efforts. Furthermore, the HR
function is often viewed as an expense-generator and an administrative function and not as a
value-added partner. Ulrich (1997b) reiterated that to fulfill the business partner 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 would 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 of the 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.
The framework has proven its effectiveness at many companies showing how HR creates
value, utilized the information collected to increase investments in specific HR strategies and
eliminating ineffective investments, and used as a critical resource in the 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 need to be constantly evaluating 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 create
significant impact on organizations. Given any significant change or event, how ready are we as
an organization to react in order to remain competitive?
Many factors are driving changes in organizations today including the use of technology,
globalization, changes in workforce demographics, eliminating the bureaucracies in
organizational structures, and balancing work-family issues. Understanding the potential of an
organization’s resources and optimizing the output of such resources given the changes, provides
the impetus for HR being the key source of creating the competitive advantage for the
Insert figure 1 about here
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 contribution (Ulrich, 1997a). Although these roles are valid and have proven to be
value-added in recent years, there is now the critical need to move beyond the strategic business
partner role to players in the business (Ulrich & Beatty, 2001). Players, according to Ulrich &
Beatty, contribute to the profitability of the organization, they deliver results and they do things
to make a difference. The roles of players are to a) coach b) design, c) construct, d) change the
organization, e) creating followers, and f) playing by the rules. Another perspective on the role
of HRM suggests that in leading-edge companies, HR professionals play four key roles: a)
strategic business partners, b) innovators, c) collaborators, and d) facilitators (Schueler &
Jackson, 2000). As a strategic business partner, HR professionals should understand the nature
of the business from a strategic, operational, financial, and other aspects necessary to be part of
an effective team managing an organization. Functioning as an innovator, HR professionals are
challenged to continuously search 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. 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. Figure 1
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, there is frequently little evidence to demonstrate such belief. A recent survey of 54
companies in the Midwest, USA conducted by the author revealed that 51 of the 54 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, Huselid, and Ulrich (2001) indicated that less than 10% 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). There is now the imperative need to justify each
dollar invested, compare strategies to determine maximum worth, and to decide on where to
invest especially as companies scramble to survive after 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 so that it can make
meaningful changes is for practitioners to measure the cost and effectiveness of what they do.
And they must put that into language that 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 to 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 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 and given the strong belief of HR as a source of added value in
organizations, there is no choice than for HR professionals to be able to quantitatively and
qualitatively explain its strategic role in the organization. There has been substantial evidence
over the years to show the relationship between HR and organizational performance as
summarized by (Yeung & Berman, 1997). Some of the studies include MacDuffie and Krafcic
(1992), US Department of Labor (1993), Pfeffer (1994), Arthur (1994), Huselid (1995), and
Even though these studies exist, there 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. The framework describes clusters within
the HR function and encompasses: a) strategic planning, b) selection, c) training and
development, d) organization development and change, e) performance management, f) rewards
system, and g) organizational behavior & theory.
HR’s Activities & Outcomes
Even though there are several classifications or groupings of HR activities, the author uses seven
groups of activities seen as being most strategic and influential in realizing the strategic 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.
Insert figure 2.0 about here
The role of the HR function has changed tremendously over the past 10 years where HR
functions have previously been viewed as not being an integral core of the business and merely
viewed as an administrative function to today’s economy where HR practitioners are more
frequently considered business partners. Being a business partner, the ideal situation would be
the inclusion of the HR leader in the strategic business planning (SBP). “In the most
fundamental sense, SBP involves choosing how an organization will compete” (Rothwell, 1994).
The questions of what product to produce, where should the product be sold, how many to make
available, how the products and services differ from the competition are included as part of the
business planning process. Business strategy can also be defined as 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, Fombrum, & Devanna, 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 the critical
need for business leaders to continually assess their talent pool to determine if the appropriate
expertise needed to accomplish the business strategies are available within the organization. If
not, where and how can the organization acquire the necessary skills? Another critical area is to
identify what skills are 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 those organizational decisions and actions, which yield the greatest advantage under
various assumptions about the organization and its environment. The integration of human
resource function into the organizational strategy provides the basis to enable the human
resource 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, and eventually maximizing
By addressing these issues at the strategic planning stage with HR included, there is the
higher 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 (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., (Tichy et al.,
1982) reiterated that there are three core elements for organizations to function effectively and
include 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 capabilities to successfully compete through a particular strategy,
determining the appropriate rewards system, determining appropriate organization structures,
and developing strategies to increase employees’ performance.
Given the definition of strategic planning as how an organization will compete, the
question arises as to how would an organization 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 of time. Has the planning resulted in a) the attainment of the
organization’s goals and objectives, b) financial profitability, b) positioning to create advantages
for the short-term and long-term, and d) created a sense of social responsibility? In essence, this
process determines the decisions and actions an organization will undertake to create and sustain
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 that they have the
expertise needed to help achieve the mission of the organization. The economic challenges due
to the consequences of the 9/11 terrorists attacks on the United States also continue to affect
organizations’ financial position and subsequently on recruitment and selection strategies.
Gatewood & 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. Indeed, these are critical metrics in deciding the cost in acquiring employees.
Nevertheless, to fully understand 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 the 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 that 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 organizations needs to be performing 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 9/11
terrorists attacks, organizations have been forced to layoff even thousands of employees in some
cases in order to survive. The real challenge for HR in the upcoming months and even years
would be to predict the demand for their products and services and then to determine the need for
labor. Nevertheless, one still has to be able to reasonably 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 involve the skills and competencies currently available
within the organization and what other intellectual capital would be needed in the future to
adequately meet the needs of the stakeholders.
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 their candidates. In assessing the
effectiveness of recruitment and advertisement sources an organization uses to recruit its
employees, it is imperative to relate the actual performance of the incumbent to the advertising
and recruitment. Some of the factors that should be included in this evaluation are historical
employee turnover data, absenteeism, actual performance on the job, and ability to advance in
one’s career. There may also be a high level of correlation with specific school, number of years
of work experience, education major, GPA, and other such factors with one’s performance.
Given the collection and analysis of this data, HR is much more likely to invest their advertising
and recruitment budget to where real value is created for the organization.
Fitz-enz (2002) described the need to ensure that the recruitment function to be efficient
and further stated that it is better to measure recruiters as a team than as individuals whenever
applicable. In determining their efficiency as a team, 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, number of interviews needed to make a quality hire.
Another means of determining the effectiveness of the recruitment function is a measure to show
the change in the number of qualified candidates that is available for selection. This could be a
significant cost reduction strategy given that advertising costs can re reduced if there are
qualified candidates available for future openings and other jobs currently available.
Training and Development
The American Society for Training & Development estimates that US organizations are
spending more than $60 billion annually on employee training and development. Given this
significant investment, it is reasonable for one to ask about the benefits of such investments,
especially since more companies are seeing a need for lifelong learning and are integrating
technology in their strategies. Swanson (1995) defined employee training and development as
the process of systematically developing expertise in individuals for the purpose of improving
performance. The argument as to whether T & D helps to create a competitive advantage has
shown that conceptually, it can be a source of competitive advantage. Nevertheless, there still is
a critical need to develop frameworks and strengthen the argument for being aware of 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 HRD, of which T & D is a major category.
• What is the forecasted financial benefit resulting from the HRD intervention?
• What is the actual financial benefit resulting from the HRD intervention?
• What is the approximate financial benefit resulting from the HRD intervention?
(Approximate financial benefit is used whenever there is some level of uncertainty of 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
In understanding the impact of the 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 of the performance of the employee, the
department, the process, and the overall performance of the organization. Furthermore, were
there adequate opportunities for the employee 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 with 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 perspectives?
In sum, measuring the impact of a training initiative regardless of the scope, size of investment,
and number of employees involved, there is the imperative need to determine the purpose of
doing the training and if the goals have been met at various intervals after the intervention had
been completed. To determine the benefit, ROI, or whatever terminologies we choose 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:
• Has the employee’s attitude changed since the training?
• Did the employee acquire knowledge and expertise in an area that would enable
him/her to perform more effectively on the job?
• Has the employee’s performance changed after the training?
• How has the change in the employee’s performance affected the business strategy
and performance of the organization?
These are all areas to be integrated in assessing the impact of training and development in
today’s economy. With answers to these questions, it is relatively simple to determine if the
training investment was worthwhile and to articulate how training and development 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, it is a necessary component of the HR strategy to ensure that the
organization is adapting to the external and internal variables it current 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). A growing importance and competency expected from the HR
professional, therefore, is his or her ability to plan and implement the necessary changes for the
purpose of improving performance. Swanson (1995) defined organization development (OD) as
the process of developing and implementing planned changes in organizations for the purpose of
improving performance. The opportunity for HR through its organization development
interventions is to create organizational effectiveness at the individual, department, function,
process, and organizational levels.
Many OD practitioners may argue that OD is not a measurable effort, at least
quantitatively. The challenge arises again as to what value do the 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. 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:
• What is the quality of the output and does it meet the customers’ expectations?
• Does the service offered by the organization provide a competitive advantage as
compared to its competitors?
• How effectively does the system respond to changes in the external environment?
• Does the organization allow for maximum sharing of information, leveraging each
employee and work unit, and resolving any internal or external challenges?
• 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?
The responses to these questions based on the respective organization provide the basic
measurements in assessing the readiness and effectiveness of the organization 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 in answering the role of OD in achieving the business strategy of the organization.
“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, Hollenbeck, Gerhart, & Wright, 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 and the utmost of managing performance 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, what type of output is
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:
• Ensuring that job descriptions are developed through timely and effective job analyses.
• Job descriptions are updated on a regular basis to reflect to changing business
• Feedback is shared continuously among all stakeholders.
• 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.
• There are measurable outcomes assigned to every task reflecting the role of the position
and incumbent in achieving the goals and objectives of the organization.
• There must be congruency and consistency in performance measures across the entire
organization and performance standards should always be measured consistently.
• The process and the system must be viewed as credible, fair, valid, and reliable.
• A survey with numerical ratings can be used by employees and supervisors to assess if
one’s role and responsibilities are fully aligned with the goals of the organization,
satisfaction with the actual process and 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 mapping a process through
the identification of the purpose and role of each incumbent, one is easily able to identify where
the deficiencies may exist and to develop corrective actions, identify the strengths of each
individual and to maximize each employee’s potential and hence their contribution to the
financial contribution to the bottom-line of the organization.
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 could design the reward system to provide
incentives specifically designed 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 (Vroom, 1964, Lawler, 1971, and Kerr, 1975) have
shown that effective rewards 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
Given such premise, the question arises as to how one can determine that the actual
rewards provided to the workforce is fostering behaviors from individuals and the organization
in general enabling the organization to maximize its profitability. A core outcome of an effective
rewards system is the role in assisting in attracting and retaining critical employees. In
measuring the effectiveness of the rewards system, the following factors should be considered:
• Does the current rewards system represent and provide incentives that reward behaviors
to support the business strategy?
• Are new employees accepting offers with the organization based in part to the rewards
• How does the rewards system reflect the employees’ personal values and the overall
culture of the organization?
• What percentage of employees and role within the organization does the reward system
assist in retaining?
• What is the overall satisfaction level of the workforce with the rewards they are offered?
• Is the rewards system flexible enough to be changed if there are external challenges and
opportunities that would create a need for changing the system?
• What is the overall cost of the rewards system as compared to its overall benefits?
A survey conducted by Watson Wyatt (1998), concluded that organizations whose reward
systems are 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. The outputs, therefore,
of an effective rewards system are centered around the financial profitability of the organization
and to create competitive advantages for the organization
Organizational Behavior & Theory
A key aspect of successful leadership is the ability to understand one’s workforce, be able to
influence their behaviors, and predict their behaviors given any specific conditions. Today, the
HR function may not view this as part of their core responsibility, but in reality if is definitely
their responsibility to understand the needs of their workforce and how any given policy or
practice may affect the behaviors of the employees. McShane & Von Glinow (2002) defined
organizational behavior as the study of what people think, feel, and do in and around
organizations. The importance of focusing on organizational behavior is to assess if the way
people are thinking, feeling, and behaving correspond to the strategic intent of the organization
and produce 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 organization will behave in specific situations as exemplified through 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 what strategies
may be more effective in improving performance among the workforce.
The measurements, therefore, for organization theory and behavior would be the ability
of HR and other leaders to reasonably predict and plan accordingly for the future based on
historical data and current environments. In addition, it is imperative for the leaders to be fully
aware of what of is transpiring in other organizations across the world, political and economic
developments, and technological changes and the possible effect on one’s organization. Being
able to reasonable to understand and predict the behaviors of employees provides a definite
competitive advantage in making relevant changes to capitalize on current and future
Summary of Framework for Assessing HR in Today’s Global Economy
With the importance of showing how HR contributes to the business strategy and understanding
the how to determine the level of HR’s effectiveness in contributing to the financial profitability
of the organization, it is intended that these strategies be used to enhance the profession in
creating higher levels of value for organizations. The following summary lists and briefly
describes the respective HR cluster, its outcomes, and possible measurement to determine its
effectiveness in creating value:
Strategic Planning o Analysis, decisions, Financial profitability
and actions needed to Social responsibility – viewed by
create and sustain society as ethical, moral, and a
competitive choice employer
advantages Integrated all areas of the
Efficiently utilized available
Acquisition of o New employees Adequate number of qualified
Employees effectively contribute incumbents
to the implementation Relatively short period of time to
of the business hire qualified candidate
strategy Reduced cost per hire
o The planning process, Increased applicant pool
advertising and Reduced employee turnover ratio
recruitment sources Higher performance output from
support the business incumbents
o Interviewers are
effective in selecting
the right candidates
Employee Training o Positive change in Improvement in the performance
& Development attitude of participants of the individual, process, and the
o Increased expertise in organization
areas applicable to
o Opportunities to
acquired skills on the
o Support from peers,
supervisors and others
in utilizing knowledge
gained in training
Organization o Higher levels of Ability of the organization to
Development & productivity, quality of effectively compete in the current
Change products, and service internal and external
o Positive change in environments
responsiveness in The quality of the output with
meeting customers’ respect customers’ expectations
needs Does the service offered by the
o Organization culture organization provide a
reflects the competitive advantage as
organization and compared to its competitors?
supports the business The ability of the system to
strategy effectively respond to changes in
o Fluid organization the external environment
structures The organization allows for
maximum sharing of information,
leveraging each employee and
work unit, and resolving any
internal or external challenges?
Performance o Each position and the Job descriptions are developed
Management tasks performed by the through timely and effective job
incumbents adequately analyses.
support the strategic Feedback is shared continuously
business objectives of among all stakeholders.
the organization. Every employee is fully aware of
o The process is his or her role in the organization.
effective in Measurable outcomes identified
maximizing employee and measured for each position.
performance The process and the system
viewed as credible, fair, valid, and
Rewards System o Rewards system New employees accept offers
viewed as motivating with the organization based in
for employees to part to the rewards system
increase their Rewards system reflect the
performance. employees’ personal values and
o Provide incentives to the overall culture of the
achieve individual and organization
organizational Outcomes of the rewards system
behaviors aligned with are cost-effective.
Organization o Understand, predict, The ability of HR and other
Behavior & Theory and influence leaders to reasonably predict and
employees’ behaviors plan accordingly for the future
based on historical data and
Does HR contribute to the bottom-lime 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 of HRM 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 is not just a nice thing
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that would naturally resist this important aspect of HR, but through coaching, training, and
practice, expertise will be developed and ultimately improving their performance and the
effectiveness of the HR function. It is only through such efforts that HR can validate its claims
that it is a strategic business partner and a value-added department within the organization.
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