HR Evaluation

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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 Managementshirshendupandey@gmail.com
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