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Human resources are the collective knowledge, skills and abilities of your organization’s people that largely contributing to its success. Key Performance Indicators (KPI’s) are quantifiable measurements of a business’ performance in certain areas of importance, and if effectively utilized can mean a more productive and successful relationship between Human Resources (HR) and organizational leadership.
Considering the importance of alignment with HR and organizational performance, KPI’s illustrate in-depth comprehension of business strategy. Leaders recognize this as more than compliance with the strategy but a want for improvement and involvement by Human Resources, resulting in an improved relationship between HR and leadership regarding decisions. This creates the best case scenario, increasing engagement of HR in future strategic decision making.
Where to start? The ideal start when devising KPI’s is to begin with organizational culture; specifically, citing your organization’s values. This involves leadership in the development process as well as stakeholders – those directly affected by the actions of the organization – both externally and internally. External stakeholders are customers, vendors etc. Internal stakeholders are employees, leaders and the Board of Directors. Strategically, internal stakeholders are the core of a company and HR must initially create KPI’s mirroring the ideals of these internal stakeholders, to align with corporate culture. Doing this is most beneficial for HR by prioritizing, focusing, and building relationships and dissolving misconceptions about themselves. Ultimately, HR showing the rest of the organization they are a strategic entity.
Why create measurements for Human Resources? Simple, KPI’s, improve the bottom line of your company by transitioning HR from a hiring-firing entity to a strategic business partner by:
Devising strategic alternatives
Creating and implementing strategies
Creating measures for strategic success
Appraising readiness to implement strategies in cases where quick action is needed
Viewing possible M&A’s or other strategic concepts
Communicating with leadership
Recruiting and developing talent (1)
A recent survey concluded strategic involvement is the top value addition for HR. The same study revealed HR leadership only feels HR is a 60% strategic partner in regards to relationships with leadership. In parallel form, 24% of executives viewed HR as a lesser strategic partner.
This study revealed primary strategic activities linking “bottom lines” with organizational objectives. For example, the following activities provide actions that should be taken to increase corporate alignment between HR and leadership:
Data based talent strategy
Communication with line managers
Methodical support for strategic decisions
Data to support change management
Devising data-based decisions concerning human capital managing (2)
Alignment of HR, senior leaders and the bottom line can be relatively new, as it is too many organizations. Because of this, it is recommended HR develop relationships between varying partners within your organization to prove strategic worth, alignment and continuity. Several suggestions are
Involvement of HR in overall strategy development
Acquire support for KPI’s outside of HR
Use this support to form new KPI’s
Put an emphasis on relationships between your people and decision
Acquire manager support through training sessions and seminars
Work to simplify data collection to make human capital management easy to understand and manage (3)
Measuring human resources is a growing trend in business and 84% of organizations intend to implement measurement tactics within the next year. Human Resource departments must grasp and understand KPI’s to ensure organization alignment as well as involve itself in strategy involvement and execution. If HR departments can accomplish this, then leaders will exercise them as a strategic entity within their company exhuming knowledge, advancement, and as a partner for organizational success.
(1) Lawler III, E. E., Boudreau, J. W., & Mohrman, S. A. (2006) Achieving strategic excellence: An assessment of human resource organizations. Palo Alto, CA: Stanford University Press
(2) Ibid.
(3) Gates, S. (2002). Value at work: The risks and opportunities of human capital measurement and reporting. New York: The Conference Board
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