HR Evaluation


Published on

Published in: Business, Technology
1 Comment
No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

HR Evaluation

  1. 1. Human Resource Evaluation and Business PerformanceA Study of Contemporary Human Resource Performance Measurement Practices and its Association with Business Performance
  2. 2. AgendaObjectives of the StudyBusiness Performance ManagementHuman Resource EvaluationThe Perfect Performance Management SystemLinking HR Evaluation Practices with Profitability of firms
  3. 3. Objectives of the Study To gain complete understanding of Business Performance Management Systems To understand the HR Evaluation Practices and critically examine them To find the link between HR Evaluation Practices and Profitability
  4. 4. Business Performance Management System
  5. 5. Defining Business Performance What is Performance? Efficiency and Productivity Effectiveness and Efficacy Quality Dimensions:  Time Frame  Time Orientation  Means or Ends  Qualitative Vs Quantitative
  6. 6. Why Measure Performance? ‗What can‘t be measured, can‘t be improved upon.‘ Control Communication Alignment Strategy Motivation Balance and Sustainability Objectivity
  7. 7. The Evolution of Performance MeasurementSystems Dupont Pyramid
  8. 8. Evolution Contd. GE‘s Performance Measures
  9. 9. Evolution Contd. Performance Matrix (Keegan, Eiler, Jones)
  10. 10. Evolution Contd. SMART Pyramid(Lynch  Fitzgerald‘s Ends and and Cross) Means Model
  11. 11. Evolution Contd.Macroprocess Model(Brown)Business ExcellenceFramework (EFQM)
  12. 12. Evolution Contd. Balanced Scorecard
  13. 13. Evolution Contd. PRISM Model (Adams, Neely)
  14. 14. Human Resource Evaluation
  15. 15. Why Measure HR? Big Expenses Sustainability and Health of a Company linked to Strategic HRM Productivity linked with Employee Morale and Satisfaction High Attrition Costs People could be a Competitive Advantage Differentiation based on Talent
  16. 16. Human Resource Accounting As old as Industrial Revolution itself ‗The Human Oraganisation‘ by Likert Brummet, HR as Cost Flamholtz, Replacement Cost Hekimian, Onward looking Cost Kermanson, HR as Goodwill Lev and Schwartz, Economic value of Employee Freidman and Lez, Market Company Pay Differential Morse, HR not an Asset Critique
  17. 17. Human Resource Metrics Productivity Quality Costs (Incurred, Saved) Direct Value Generated Time Soft Data Critique
  18. 18. Human Capital Management Why HCM? Talent approach Development and Improvement Need Automation Data Analytics Decision making Future Oriented Critique
  19. 19. HR Scorecard
  20. 20. Audit Approaches HR Audits HRD Audit and HRD Scorecard Why Audits?  Cost  Maturity Constraints Why not Audits?  Generic  One size doesn‘t fit all  True value added not researched well  Completion and success can‘t be differentiated
  21. 21. The Perfect Performance Management System IPMS Reference Based Model
  22. 22. The Ideal Performance Management System:The Way Forward Future: Integrated Performance Management System (IPMS) Based on Reference Model
  23. 23. IPMS Systems Layer Pyramid Display Stakeholders Requirements (Setting Directions) External Control(Competition, Market and Uncertainities) Objectives (Goal Setting and Employee Performance Management) Metrics (Measure, Coordinate and Control) Stakeholders Requirements (Setting Directions) External Control (Competition, Market and Uncertainities) Objectives Process Metrics (Goal Setting and Employee Performance Management) (Next Level Pyramid) (Measure, Coordinate and Control) Process (Next Level Pyramid)
  24. 24. Reference Model(with Levels) for IPMS
  25. 25. Why IPMS? Accountability at Pyramid level Simplicity and Drill Down Complex Display Each Level considered (Unit Problem) Each Stakeholder can be Accommodated Metrics not bigger than Framework A good mix of Ends and Means A good mix of Leading and Lagging Measures Objective Needs high level of Automation and IT systems Maturity and Integration
  26. 26. Linking HR Evaluation Practices with Profitability of a Firm An industry wide study of Fortune 100 companies
  27. 27. Research Problem How do HR Evaluation Practices Impact Performance of a Firm?
  28. 28. Methodology Sample: Fortune 500 Companies Performance : Utilization of Assets (ROA) Employee Satisfaction: Glassdoor Ratings (ESR)  Career Opportunities  Communication  Compensation and Benefits  Employee Morale  Recognition and Feedback  Leadership  Work Life Balance  Fairness and Respect
  29. 29. Methodology contd. Indexed HR Evaluation Practices (HRE) 1. HRA 2. HCM 3. Communication 4. Framework 5. Process Audit 6. Accountability 7. Motivation Market to Book Value Ration (MBR)  Future Earnings Capacity  Indicator of Certainty, Technology and Intellectual Capital
  30. 30. Data Analysis Model 1 ROA = f (HRE, ESR, MBR) Model 2 ROA = f (ESR, HRE) Model 3 ROA = f (MBR, HRE) Model 4 ROA = f (HRE)
  31. 31. Analysis Contd. Model 1 Model 3
  32. 32. Discussions and Conclusions ESR and ROA poorly correlated for the sample. ESR and ROA correlation increases with the industry classification or MBR classification Higher MBR has been linked with higher ESR Correlation with ROA HRE as expected correlates highly and is very significant in the model HRE and MBR together explain 55% of variation in ROA. HRE practices directly influence firms ability to utilize the talent or human capital Accountability and Motivation are both important in order to leverage the HR Evaluation
  33. 33. Limitations and Recommendations Limitations  ESR Source not very clean  Singular measure of performance  High dependence on Secondary Data  No Time Scale Comparison Recommendations  Further research needed to prove marginal increase in productivity if HR is held accountable and incentivized  More Time Series data needed to confirm increase in profitability with change in HR Evaluation Practices  Research based on SBU‘s and not corporations could also link HR Evaluation Practices with Competitiveness
  34. 34. Thank You Shirshendu PandeyFORE School Of
  35. 35. Bibliography Alchian, A. & Demsetz, H. (1972). Production, information costs and economic organization. American Economic Review, 62, 777-795. Barney, J. B. (1995). .Advances in Strategic Management: Theory and Practice, Reading, MA: Addison-Wesley Publishing Company Becker, B., & Gerhart, B. (1996). The impact of human resource management on organizational performance: Progress and prospects. Academy of Management Journal, 39(4), 779-801. Borman, W. C. (1991). Job behavior, performance, and effectiveness. In M. D. Dunnette & L. M. Hough (Eds.), Handbook of Industrial and Organizational Psychology (2nd ed., pp. 271-326). Brown, M.G. (1996). Keeping score: Using the Right Metrics to Drive World-Class Performance. New York: Quality Resources. Brummet, R.L., Flamholtz, E.G. & Pyle, W.C. (1968a, April). Human resource measurement: A challenge for accountants. Accounting Review, 217- 224. Brummet, R.L., Flamholtz, E.G. & Pyle, W.C. (1968b, March). Accounting for human resources. Michigan Business Review, 20-25. Brummet, R.L., Flamholtz, E.G. & Pyle, W.C. (1969, August). Human Resource Accounting: A tool to increase managerial effectiveness. Management Accounting, 12-15. Burns, J. (1998) Conceptualizing management accounting change: an institutional framework. Management Accounting Research, 11 (1), 3-25. Academic Press. Crowe, R. (1999). Winning with integrity. The Guardian, 27 November. Dyer, L., & Reeves, T. (1995, May 31-June 4, 1995). Human resource strategies and firm performance: What do we know and where do we need to go? Paper presented at the 10th World Congress of the International Industrial Relations Association, Washington, DC. Epstein, M.J. and Manzoni, J.F. (1997). The balanced scorecard and tableau de Bord: Translating strategy into action. Management Accounting (US) 79(2), 28–36. Ewing, P. and Lundahl, L., 1996. The Balanced Scorecards at ABB Sweden—the Pilot Projects, Paper presented at the 19th EAA Congress, Bergen 2–4 May 1996. Fitzgerald L (with T J Brignall, R Johnston and R Silvestro), Product Costing in Service Organisations, Management Accounting Research, ISSN 10445005, volume 2, number 4, pp 227248, 1991. Flamholtz, E.G. (1971). A model for human resource valuation: A stochastic process with service rewards. The Accounting Review, 253 -67. Friedman, A. Lev, B. (1974). A surrogate measure for the firm‘s investment in human resources. Journal of Accounting Research; Autumn; pp. 235-250. Giles, W.J. and D. F. Robinson (1972). Human Asset Accounting‖, Institute of Personnel Management and Institute of Cost and Management Accountants, London. Gupta, D.K. (1999). The HR Accounting. Essays in HR Accounting. 36-47 Halcrow, A. (1995) Survey Shows HR in Transition. Workforce, June 77(6), 73-80 Halcrow. A. (1995) ―Optimas Awards Recognize Triumphs in HR,‖ Personnel Journul, January Hekimian J., S., and C. H. Jones. 1967. Put people on your balance sheet. Harvard Business Review 45 (January- February):105-113. Hermanson. R.H. (1964). Accountng for Human Assets. Occasional Paper No. 14. East Lansing, Michigan: Bureau of Business and Economic Research, Michigan State University, East Lansing). Huselid, M. A. (1995). The impact of human resource management practices on turnover, productivity, and corporate financial performance. Academy of Management Journal,38(3), 635- 672. International Accounting Standards Board (2009). www. Jaggi, B., and S. Lau .(1974, April). Toward a Model for Human Resource Valuation. The Accounting Review, 321-29. Johnson, H.T. and Kaplan, R.S. (1987). Relevance Lost: The Rise and Fall of Management Accounting. Boston, MA: Harvard Business School Press.
  36. 36.  Kanji, G.K. andWOng, A. (1998), Business Excellence model for supply chain management. Total Quality Management, VOL. 10, NO. 8 Kaplan, R. S. and D.P. Norton (1992) The Balanced Scorecard: Measures that Drive Performance, Harvard Business Review, (January-February): 71-79. Kaplan, R. S. and D.P. Norton (1996a) The Balanced Scorecard: Translating Strategy into Action, Boston: HBS Press. Kaplan, R. S. and D.P. Norton (1996b) Using the Balanced Scorecard as a Strategic Management System,‖ Harvard Business Review (January-February):75-85. Kaplan, R. S., & Norton, D. P. (1996). The Balanced Scorecard: Translating Strategy into Action. Boston: Harvard Business School Press. Kaplan, R.S. and D.P. Norton (2000) The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment, Harvard Business School Press Keegan, D. P., Eiler, R. G., & Jones, C. R. (1989). Are your performance measures obsolete? Management Accounting, June, 45-50. Lev, B., & Schwartz, A. (1971). On the Use of the Economic Concept of Human Capital in Financial Statements. Accounting Review, 103-112. Lewis, R. W. (1955) Measuring, Reporting and Appraising Results of Operations with Reference to Goals, Plans and Budgets, Planning, Managing and Measuring the Business: A case study of management planning and control at General Electric Company, New York: Controllwership Foundation. Likert, R. (1967). The Human Organization. New York: Mc Graw-Hill. Lingle, J. and Schiemann, W. (1996), ‗‗From balanced scorecard to strategic gauges: is measurement worth it?‘‘, Management Review, March. Lynch, R.L., Cross, K.F., 1991. Measure Up!: Yardsticks for continuous improvement. Blackwell Publishers, Cambridge. Maisel, L. S. (1992). Performance measurement: The balanced scorecard approach. Journal of Cost Management, 6, 47-52. Milkovich, G. (1992). Strengthening the pay performance relationship: The research. Compensation and Benefits Review, 24(6), 53 -62. Morse, W.J. (1973). A Note on the Relationship Between Human Assets and Human Capital. The Accounting Review; July, pp. 589 -93. Neely, A.D. (2001), Business Performance Measurement. Wiley Books. Neely, A.D. (1998). Performance Measurement: Why, What and How. London: Economist Books. Neely, A.D. and Adams, C.A. (2001). The Performance Prism perspective. Journal of Cost Management, 15(1), 7–15 Neely, A.D., Gregory, M., and Platts, K. (1995). Performance measurement system design – aliterature review and research agenda. International Journal of Operations and Production Management, 15(4), 80–116. Neely, A.D., Mills, J.F., Gregory, M.J., Richards, A.H., Platts, K.W., and Bourne, M.C.S. (1996). Getting the Measure of Your Business. London: Findlay Publications. Phillips, J.J. (1999), Accountability in Human Resources. Butterworth Heinmann Publications Rao, T V (1999). HRD Audit, New Delhi: Response Books (Sage Publications). Rogers, E.W. and Wright, P.M. (1998). Measuring organizational performance in strategic human resource management: Problems and prospects (CAHRS Working Paper #98-09). Ithaca, NY: Cornell University, School of Industrial and Labor Relations, Center for Advanced Human Resource Studies Rowe, W. G., & Wright, P. M. (1997). Related and unrelated diversification and their effect on human resource management controls. Strategic Management Journal, 18(4), 329-338. Russel, J. S., Terborg, J. R. & Powers, M. L. (1985). Organizational performance and organizational level training and support, Personnel Psychology. 38(4), 849-863. Stalk, G., Evans P. and Schulman. L.E. (1992). "Competing on capabilities: The new rules of corporate strategy." Harvard Business Review. 70 (March-April): 57-69. Ulrich, D., & Eichinger, R. (1998). Delivering HR with an attitude. HR Magazine. Ulrich, D., Brockbank, W., Yeung, A. & Lake, D. (1995). Human resource competencies and empirical assessment. Human Resources Management, 34(4), pp. 473 –496. Venkatraman, N., & Ramanujam, V. (1986). Measurement of business performance in strategy research: A comparison of approaches. Academy of Management Review, 11(2), 801-814.