Can Human Resources prove its function really adds value?

Many HR departments have a desire to become “strategic”. This may only mean the deployment of their professional knowledge and skills, working with managers whilst doing things that will improve the organisation in some way. Andrew Mayo, author of Human Resources or Human Capital?, explains that he prefers to use the term “adding value”, primarily because it focuses the mind on the outcome of HR’s contribution. But, of course, before you can measure the “added value” of HR, you need to define what you mean by the expression.

Using the term “added value” on its own is not enough, as we need to say to what or to whom this value is being added. When challenged, people often say “to the organisation”. Mayo says that it needs to be more focused than that, because all organisations have been created to provide value, or benefits – financial and/or non-financial – to its stakeholders.

The starting point should be to identify the stakeholders in an HR function. The three most important stakeholders will normally be internal: senior management, line managers and employees, although there are others, the importance of whom will vary. They may include the local community, educational institutions, suppliers, trade unions or other internal support departments.

As with all measures, we do not need to adopt every possible option available. It is important to determine priorities as far as possible by identifying which stakeholders are the most strategically important, and for each of them the value added that matters most. Consequently, the first step should be to define the nature of the value or benefit that is added through the activities and initiatives of HR.

Generally, we tend to forget that the concept of stakeholders is not a unilateral one. Rather there should be an exchange of values. If we think about how HR function adds value to managers, there could be a parallel question of how managers add value to HR. A dialogue around “expectations” is needed, where the two types of values are discussed and defined. This means that HR and its stakeholders should sit down together and discuss what values are required to achieve organisational goals. But since HR stakeholders include the organisation’s employees, the use of carefully worded surveys might help to achieve feedback on their values as well. The expectations of stakeholders from HR It is expected that senior management are concerned with areas such as costs and efficiency, reputation, leadership development, culture and values and supporting the business with appropriate people strategies. It would then be logical to ask what measures of these areas of concern we can reasonably use, how often they should be measured and what our target or level of expectation should be. But has anyone thought about the expectations of HR? They also have the right to expect support from senior management in their programmes and initiatives, mainly in communication and participation. The value given to line managers and employees from HR Generally, the second group of stakeholders are line managers. The ways in which HR adds value to them include administrative services, professional advice, meeting recruitment and operational needs in a timely manner, working with issues of motivation and engagement, providing learning solutions and helping employees develop as individuals. In return, HR has few legitimate expectations from line mangers. It is very likely that they will expect managers to play their agreed part in processes and procedures and to see people management as being second nature. Sometimes, coaching and/or training may be needed for line managers, and the measures here would include:

Service and advice: regular (biannual) short surveys, response times.

Recruitment: time to recruit, cost to recruit.

Motivation and engagement: trends in standard data such as labour turnover, engagement levels and absenteeism and analysing the causes behind each.

Learning and development: investment levels, participation, and effectiveness as appropriate on specific programmes.

Personal development: individual dialogue.

Employees acquire value from: salaries, bonuses, policies, benefits, security, communications and training and development, although it is highly likely that every employee would have different perceptions of what is valuable to them personally. There may be specific initiatives throughout the year that merit a focused feedback evaluation to assess whether the intended value has been received. Employees have to feel that they form part of an added value triangle, which includes line management and HR, where neither party has an exclusive influence on the value received. On the contrary, this should feel more like a partnership.

HR professionals do sometimes agonise about whether or not the added value they are able to give is understood and appreciated. Often, this is not the case, especially where the historical perception of HR is one of it being an extension of the administration department. The dialogues discussed above can, however, lead to that understanding. They can also identify important HR functions, leading to higher expectations from other departments within the organisation.

It will be clear from the above that analysing the areas of added value from HR forms a significant contribution to a framework for HR metrics. It does not provide everything that is needed, but is definitely a good starting point. It should give confidence to HR professionals in acknowledging their potential contribution to the organisation. And, in clarifying which activities add value, these can be found in the periodic time analysis studies, which will show what percentage of time is spent on them, as opposed to routine work and problem-solving – which are still necessary activities. That ratio of value added time to total time is probably the best measure of productivity in a function such as HR.

Dulcie Brincat Peplow is a researcher at the Foundation for Human Resources Development