HR’s Contribution to Organizational Performance

Business performance and its evaluation

The business performance evaluation is an essential part of the working process in a sustainable company. Usually, it has the form of measurement and quantification and is the first step to any improvement. The business performance evaluation aims to find the areas that require managerial attention, stimulate improvements in performance, compare the results to the objectives of a company and evaluate the extent to which strategic goals are met.

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In other words, the business performance evaluation helps to achieve organisational goals through proper managerial decisions (Reference for Business https://www.referenceforbusiness.com/management/Or-Pr/Performance-Measurement.html).

There are two groups of business performance indicators, namely, traditional and modern. The traditional approach to performance measurement is based on financial accounting and information available in cost and management accounting. Profit/loss is the main financial indicator of a company’s performance and its primary objective. Competitive position demonstrates the place of a company among rival companies. Market share also shows the position that the company has already acquired.

There are also key performance indicators (KPIs) and service level agreements (SLAs). KPIs measure the effectiveness of solutions, functions and processes in a company against its strategic goals. At the same time, SLA is an agreement between an internal or external service provider and the end-user of that service. Customer feedback indicates areas for improvement and measures staff proficiency; it is also an excellent tool to demonstrate care for customers.

It includes sales data, complaints, questionnaires and feedback on social media. Another indicator is product or service assessment; it is usually measured by the rates of returns and warranty claims. High-quality products and services approved with awards are crucial for company performance. The level of safety is an instrument to document the organisation’s adherence to procedures. Stability index or turnover is another standard indicator, as high turnover can be costly.

The modern indicators of business performance evaluation differ from the traditional ones. Employee engagement is an approach that results in a higher commitment to the goals and values of the company and can increase the motivation to contribute to organisational success. The mutual expectations and obligations of both the company and employees are called a psychological contract, which can be measured by various questionnaires.

The readiness of people who work for the company to promote it, including on social media, is called employee advocacy. At the same time, employee brand appears in the process during which employees internalize the desired brand image and are motivated to project the image to customers and other organisational constituents. Brand stability or the level of brand risk indicator also helps to measure the performance of a company. Brand risk is anything that threatens the sustainability of current and future demand for the products or services provided and the economic freedom of the company.

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Social media presence can facilitate connection with customers, prove authenticity, increase people’s awareness about the products and services provided and boost sales. Corporate social responsibility (CSR) is designed to assess how the company influences society. Its main goal is to create ethical policies to preserve the environment, support the local community and individuals. Finally, the staff development indicator should be mentioned because a company has to develop its workforce to accomplish strategic goals continually.

HR contribution to business planning and change management

The business planning of the future development of a company is usually carried out by the heads of departments, marketing specialists, CEOs and boards of directors. However, HR professionals should also participate in this process as they help to establish a more stable connection between setting and implementing prior goals of a company. After all, people are the resource that drives all kinds of business processes.

HR professionals usually contribute to business planning through the HRM (human resources management) strategy. HR interventions should align with both each other and other organisational policies. Scientists mention that the main areas of practice that have an impact on performance “are around job design and skills development” (Strategic Human Resource Management https://www.cipd.co.uk).

That means that to drive business performance, HR professionals have to create a positive relationship between the managers and the employees in a supportive environment with strong values. They should also create highly skilled human capital through individual HR practices. Such an approach will promote the willingness of the employees to give the extra effort, which is crucial for organisational and business performance.

To effectively contribute to business planning, HR professionals use tools like Resourcing, Performance Management, Learning and Development, Employee Engagement and Reward Recognition. Here is an example that will illustrate how it happens. Let us imagine that I work as an HR manager at the ‘XYZ’ company engaged in software development. ‘XYZ’ has 25 employees, of whom 10 are IT, specialists. Things are going well, and the company is currently receiving more orders than it can process. Besides, orders are too variegated, so the programmers do not cope. To meet business objectives, I have to increase employee productivity as fast as possible.

Thus, I immediately set a plan to optimize the work processes. I use a Resourcing HR tool and suggest setting off the current tasks from 2 programmers, so they could only develop new templates for the rest; productivity grows significantly. Then I use the Performance Management tool and create a flexible schedule with work from home opportunities. I also apply the Reward Recognition tool and suggest paying for the job done, not for hours spent at the workplace; again, the productivity grows significantly.

Companies continuously face changes in all spheres of human life. Sometimes these are large-scale changes like Brexit that entail many changes in the state legislature and directly affect the way companies conduct their businesses. Perturbations in the global economy, such as the economic crisis of 2008-2009 or the crisis in trading relations between the US and China, also have a significant influence on business processes. Sometimes these are individual or purely economic changes within the company. Drivers of change include growth opportunities, economic downturns and challenging trading conditions, shifts in strategic objectives, technological developments, competitive pressures, customer or supplier pressure, government initiatives (Change Management https://www.cipd.co.uk).

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Companies manage changes to meet their objectives, save jobs and continue their businesses. Therefore, HRs should consider organisational issues like the absence of a coherent change plan, lack of effective project management and program management, which may lead to slipped timings, lack of effective leadership, poor communication and over-managing. There is also resistance to changes when employees show resistance to the content or the process of change implementation.

Let us consider HR’s contribution to the change management on the ‘XYZ’ company example. I am still the HR manager at the ‘XYZ’ company engaged in software development. The orders problem has been solved successfully, but now another problem appeared – demand for the websites is falling, while demand for gaming applications is growing rapidly. As a competent HR professional, who understands business and has a unique 360˚ perspective, I suggest that we need to start developing gaming applications.

Not everyone is happy with this shift; however, planning and implementing changes expertise helps me to manage people through the change journey. As soon as HR’s responsibilities include managing legal issues, I provide compliance with legislation on the gaming business as well.

Business Data

Benchmarking and Competitor analysis

Benchmarking is often used to provide a better understanding of a company’s business performance by making comparisons with other businesses. These are usually the businesses of the same market sector. Such indicators, like market position and company objectives, will affect what kind of comparisons the will benchmark include. Performance measures usually depend on the key drivers of business success. External data for comparisons may be found in trade associations as companies often share sector-wide statistics. Commercial markets of data may be another good option for a more detailed view.

Benchmarking can be held internally, within the company’s own business, and then it is called internal benchmarking. It is used in more prominent companies and aims to share good working practices between different departments. At the same time, external benchmarking includes competitive benchmarking, parallel benchmarking and generic benchmarking (Carter and Robinson, Employee Returns https://www.employment-studies.co.uk/system/files/resources/files/365.pdf). Competitive benchmarking is a direct comparison of the full range of HR performance. Parallel benchmarking is a selective comparison of different HR policies, practices and processes. Generic benchmarking is a comparison of HR activities common to most companies, such as payroll and recruitment.

HR professionals use benchmarking data to develop and implement HRM strategies and increase the rates of organisational and business performance. They sometimes set targets to reach the desired benchmark values. When working with benchmarking data, HR professionals have to be sure that they are comparing like with like. It means paying attention to the staff numbers (are full-time staff equivalent or absolute numbers used) and terminations numbers (like the voluntary and non-voluntary leaves can be differentiated or not).

Balanced Scorecard

A balanced Scorecard can also be used as a reliable source of business data. It monitors the organisation’s performance and helps to align company management by setting common objectives. Balanced Scorecard operates with financial and non-financial performance measures distributed across various perspectives. It has a form of a table with many measures and target values set for each measure.

This table is reviewed from time to time, and by comparing actual performance against the target performance, managers spot the areas of non-compliance and improve the organisation to prevent more serious problems. The primary purpose of a Balanced Scorecard is to highlight areas where the organisation is failing to do what is required or expected (What Is Balanced Scorecard? https://2gc.eu/article/balanced-scorecard).

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It can be ordered from companies like 2GC or developed by HR specialists and other company employees with relevant competencies. HR professionals use the Balanced Scorecard to maintain performance improvements. It gives a better understanding of the role and contribution of shared services (HR, Finance) of the company. At the same time, a Balanced Scorecard instils clarity and consensus within management teams of different departments on their shared goals and priorities while also giving feedback on their progress.

To develop content for the Balanced Scorecard, HR professionals should find appropriate measures and targets, choosing five or six measures from each perspective, such as Financial, Customer, Internal Processes, Learning and Development. Perspectives may differ depending on the market and other conditions. Then a diagram called “Strategic Linkage Model” or “Strategy Map” should be made. It illustrates how various objectives are related to each other and provides a stronger basis for choosing the right measures.

Finally, the whole team has to find out how organisation performance will look like in the future if the company implements an operational plan successfully. It helps to find common ground for a new business strategy, align the objectives between the different managing units and chose sensible measures and targets.

Salary Surveys

Hay Group Salary Surveys is also a good, exhaustive source of external business data. HR professionals conduct such surveys during a year and then published the results in the Salary and Employment Reports on a company’s website. These business data are based on the information gained from thousands of employees working in various industries. As a rule, Salary and Employment Reports reflect the current situation in a particular region. However, HR can also apply them to a broader perspective.

Thus, such business data usually include information like salary growth rate among working professionals, salary expectations, job change rate, job change expectations rate, recruiting expectations. According to a company’s website (Salary and Employment Report https://www.hays.ae/salary-and-employment-report/index.htm), Hays 2019 GCC Salary and Employment Report is “based on survey findings from over 2,000 employers and employees across the region.” The report considers salary and hiring trends from 2018, as well as employee and employer expectations for 2019. Sectors and professions covered in the 2019 report include Accountancy and Finance, Construction, Property and Engineering, HR, Technology and Digital, Marketing and Digital Marketing, Office Support, Sales and Supply Chain.

This information can be beneficial for HR professionals in the business planning process. Mainly, they may use data considering salary growth rates and salary expectations inside the industry when planning the wage growth for the company’s employees. Whereas information on the job change rates and recruiting expectations can be applied when planning future business development. It also helps to form a general vision of where the whole business is heading. At the same time, data considering the most important factors when choosing a new job, satisfaction with work-life balance and usage of flexible working options, or benefits included in the standard employment package may be useful when developing individual HR strategy.

Transferring knowledge into working practices

Above, there is plenty of knowledge that I will surely transfer to my future working practices. In the first section, I discuss business performance evaluation methods. These methods may be applied when comparing the results before and after implementing various HRM strategies. In the following paragraphs, I describe the most common methods of HR professional contribution to business planning and change management. A proper understanding of these processes is necessary to grasp the role and responsibilities of the HR specialist.

Even more detailed information is provided in the second section. HR professionals widely use business data in HRM strategic planning, and it is important to know where to find them and how to work with them. Such methods of business analytics like Benchmarking, Balanced Scorecards and Salary and Employment Reports are invaluable sources of information about business and organisational performance.

Benchmarking is highly beneficial when comparing HR processes inside and outside the company. Balanced Scorecards can give valuable insights regarding managing processes in a company. Salary and Employment Reports provide a panoramic view of HR contacts in major industries.

References

Reference for Business. Web.

Strategic Human Resource Management factsheet. Web.

Change Management factsheet. Web.

Carter and Robinson, Employee Returns. Web.

What Is Balanced Scorecard? Web.

Salary and Employment Report. Web.

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StudyCorgi. (2021, June 24). HR’s Contribution to Organizational Performance. Retrieved from https://studycorgi.com/hrs-contribution-to-organizational-performance/

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StudyCorgi. 2021. "HR’s Contribution to Organizational Performance." June 24, 2021. https://studycorgi.com/hrs-contribution-to-organizational-performance/.

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