Bratton & Gold: HRM 3e CHAPTER 2

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Title
Evaluating HRM
Words of Wisdom The typical HR type is not able
to link his/her HR experience to bottom-line
measures and results the organization can
understand and value. HR used to be the
feel-good department. Now the focus is on value
added. We are in the midst of a fundamental shift
from being a cost item on the balance sheet to
being, if not a profit centre, then to at least
be able to justify return on investment. HR
must become bottom-line valid. It must
demonstrate its validity to the business, its
ability to accomplish business objectives and its
ability to speak of accomplishments in business
language. The HR function must perform in a
measurable and accountable way for the business
to reach its objectives.
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Chapter outline
Evaluating HRM
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Evaluating HRM
Evaluating HRM

• Human resource management evaluation refers to
  the procedures and processes that measure,
  evaluate and communicate the value added of human
  resource management practices to the
  organization.
• The HR specialist is involved in both operational
  recruitment and selection, rewards, training
  and development, and employee relations and
  strategic dimensions of the business.
• HR professionals have become increasingly
  concerned with demonstrating the financial
  contribution, the return on investment (ROI) that
  the HR function makes to the organizations
  performance.

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Fig 13.1 The rationale for a value-added approach
Rationale for HRM Evaluation
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Fig 13.2 HRM-organization performance model
HRM-Performance Model
For HR-measurement, demonstrating the link
between HRM strategy and organizational
performance requires the measurement of some set
variables.
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Measurement Issues
HRM-Performance Model

• Measurement issues
• Measurement is central to the HRM-organization,
  but there are a number of challenges in selecting
  and using measurement
• 1. Do the measurements accurately describe the
  phenomenon they claim to measure?
• 2. Research on the outcomes of new HR strategy
  requires management participation and a
  disclosure of commercially sensitive information
• 3. A key element is based on subjective
  judgements
• 4. How to isolate external variables?

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Researching HRM Designs and Methods
Researching HRM Designs and Methods

• Both the academic researcher and the HR
  professional must make choices about how to
  handle the most important HR variables and how to
  study them these choices demand an overall
  research design, usually in the form of one of
  the following
• 1. Survey research
• 2. Qualitative case study research
• 3. Experimental research
• 4. Existing research and meta-analysis

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Fig 13.3 The pre-test/post-test experimental
design
Researching HRM Designs and Methods
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Fig 13.4 The meta-analysis review process
Researching HRM Designs and Methods
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Research Design Issues
Researching HRM Designs and Methods

• Research design issues
• When academics conduct research in the workplace,
  at issue is the question of how knowledge is
  constructed.
• The study of knowledge and the justification of
  belief is referred to as epistemology.
• This has practical implications in terms of
• The research context
• The nature and size of the sample
• The sources of data employed

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Approaches to evaluating HR strategy
Approaches to Evaluating HR Strategy

• Once the data have been collected, the emphasis
  shifts to evaluation the ways in which the data
  are used and analysed to interpret the
  HRM-organizational link.
• There are a number of ways of evaluating HRM
  practices and the HRM system
• Statistical evaluation
• Financial evaluation
• System evaluation

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Statistical evaluation of the HR strategy
Approaches to Evaluating HR Strategy

• Statistical evaluation of the human resource
  strategy
• Includes basic descriptive indices as well as
  statistics that allow us to make statements about
  the relationship or correlation between HR
  practices and outcome variables.

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Tbl 13.1 Proportion of establishments reporting
improvements
Approaches to Evaluating HR Strategy
Statistical evaluation of the human resource
strategy
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Tbl 13.2 Estimated impact of choice of HR
strategy...
Approaches to Evaluating HR Strategy
Statistical evaluation of the human resource
strategy
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Financial evaluation of the HR strategy
Approaches to Evaluating HR Strategy

• Financial evaluation of the HR strategy
• The basic approach is to calculate the cost of a
  HR intervention, such as training or an employee
  participation arrangement, and to determine the
  benefit in monetary terms or results such as
  improved productivity or a reduction in
  absenteeism, accidents and grievances.
• To calculate the ROI of an HR intervention
  programme, the manager calculates the total costs
  and benefits of the programme using the following
  formula
• ROI Net benefits
• Intervention costs

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Evaluating HR management systems HRM auditing
Approaches to Evaluating HR Strategy

• Evaluating HR management systems
• HRM auditing
• Generally accepted elements of HRM audit
  practice
• 1. independence from the subject being audited
• 2. technical work in the form of a systematic
  gathering and analysis of data
• 3. an evaluation of HR activities, policies and
  systems based on the evidence
• 4. a clearly defined object of the process
• 5. action in response to audit findings

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Fig 13.5 Benefits of a HR audit
Approaches to Evaluating HR Strategy
HRM auditing
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HRM Benchmarking
Approaches to Evaluating HR Strategy

• HRM Benchmarking
• Benchmarking involves managers and non-managers
  learning and adopting so-called best practices
  by comparing their HRM practices with those of
  other (more successful) organizations. It serves
  a number of purposes
• 1. Organizations can gauge their own practices
  against those in excellent organizations and
  can get an idea of how they compare
• 2. Managers can learn from other organizations
  about effective HR strategies
• 3. Benchmarking can help to create and initiate
  the need for change.

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Fig 13.6 The benchmarking process
Approaches to Evaluating HR Strategy
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Tbl 13.3 Benchmarking, by degree of competition
Approaches to Evaluating HR Strategy
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Fig 13.7 Performance implications of
complementary HR practices
Demonstrating the HR strategy-organization
performance link
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Tbl 13.4 The 2 dimensions of high-performance HR
practices
Demonstrating the HR strategy-organization
performance link
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Demonstrating the HR strategy-organization
performance link
Demonstrating the HR strategy-organization
performance link

• An examination of recent empirical research
  reveals that the measurement of the value added
  of HR strategy and individual HR practices across
  studies is not consistent.
• The development of reliable and valid measures of
  HR strategic practices is needed to advance
  research.
• However, recent studies have pointed to the
  positive effects of HRM practices.
• So why are HR practices not more widely used?

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Fig 13.8 A general theory of HRM-organization
performance link
Theorizing the HRM-Performance Link
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Chapter summary (1st half)
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Chapter summary (2nd half)