How to Measure HR Effectiveness

Human resource management is concerned with staffing, motivating, maintaining good employer-employee relationships and running welfare services.

The performance achieved in all these spheres will have to be assessed by the general management to ascertain the efficiency and quality of personnel man.

There are many criteria that can be used to measure the effectiveness or ineffectiveness of the HR department.

Experts used the following criteria to measure the efficiency of the HR department:

  1. Recruitment cost report.
  2. Labor productivity report.
  3. Labor turnover report.
  4. Discipline.
  5. Employee morale.
  6. Welfare provisions.
  7. Employee satisfaction.
  8. Cost-effectiveness.
  9. Timeliness.
  10. Adherence to Policy.
  11. Industrial relations.
  12. Profitability.

1. Recruitment cost report

This report indicates the recruitment cost for different categories of employees and compares such costs with results over time.

If the recruitment cost has increased over the year, it reflects the inefficiency of the HR department. If it has reduced, it is an index of successful HR policy.

2. Labor productivity report

Although labor productivity depends not only on the efficiency of labor, but also on many other factors which lie outside the jurisdiction of the personnel department, yet the personnel department is mainly responsible for maintaining an efficient workforce.

A comparison of labor productivity and efficiency of different departments and between different periods is a good index of labor productivity.

If the total productivity falls, the personnel department is inefficient; if it rises, the personnel department will be considered efficient.

3. Labor turnover report

Labor turnover may be used as an index to judge the efficiency of the personnel department.

One of the most important tasks in the management of employees is to make sure that labor turnover is minimized and that all vacancies that exist are filled.

Labor turnover is a measure of the number of people that leave a business in a given period of time as a percentage of the average number of people employed during that period.

Excessive labor turnover indicates a failure of personnel policy while lower turnover reflects the success of such a policy.

4. Discipline

Discipline is an indication of the success or failure of the personnel policy concern. Discipline is good when employees follow willingly the rules of the company and discipline is said to be bad when employees disobey them.

5. Employee morale

The effectiveness of the personnel policy determines the morale of the employees.

Morale is the state of mental health. An individual’s morale is high when he is happy with his work, his surroundings, and fellow-beings.

High morale indicates the efficiency of personnel administration while poor morale reflects its failure.

Poor morale is reflected in high rates of absenteeism, turnover, accident records, grievances and lower level of output.

6. Welfare provisions

The HR department looks after welfare activities within the organization.

When workers feel that the company has an adequate labor welfare policy, their tendency to complain and protest will disappear. Welfare activities will reduce labor turnover and absenteeism and will increase the efficiency of the workforce.

7. Employee satisfaction

When employees are satisfied, they work hard and their commitment to the organization will be increased.

8. Cost-effectiveness

The cost of work performed should be used as a measure of performance only if the employee has some degree of control over costs.

9. Timeliness

How fast work is performed is another performance indicator that should be used with caution. In many cases, projects are not completed on time.

10. Adherence to Policy

Deviations from policy indicate an employee whose performance goals are not well aligned with those of the company.

11. Industrial relations

The management of human resources may also improve industrial relations.

A business may consider that a reduction in the number of industrial disputes, days lost through industrial action and grievance against the business by employees might indicate effective management.

12. Profitability

The main aim of most private sector businesses is to make a profit.

Modern approaches to HRM suggest that the management of human resources should be geared towards improving the productivity of workers, reducing costs, raising revenue and increasing profit. Increasing profit may be a result of improvements in HRM.