Estimated reading time: 4 minutes
I received this note from an HR Bartender reader. While creating value is always important, I think this is a very timely conversation given everything going on in today’s business world.
Sharlyn, this might seem like a curveball, but how do you define HR’s true value for the business? We hear all sorts of theories, but what’s the real, tangible impact? Can we truly quantify what HR contributes to the bottom line?
Part of measuring HR’s value comes from understanding what HR does and what they’re responsible for. For example, I wrote an article recently mentioning that employee retention isn’t exclusively an HR metric. Other people influence employee retention outcomes. So, if the organization is thinking that turnover is owned by HR and holding them accountable for it, that could have an impact on HR’s value. And not necessarily in a good way because … well, we don’t have control over it.
So, let’s start defining HR’s value by describing HR. I think human resources has three parts:
- HR Knowledge: This is what we think of as the functions of HR (i.e., employment legislation, talent acquisition, engagement, total rewards, learning, labor relations, etc.). Do we have to know them all? No. Do we need to know them in detail? No. We do need to understand what HR encompasses and be self-aware about our level of knowledge. That way, we can call on other resources when we need them. For instance, we might work in a non-union environment but now are faced with an organizing situation. We’ll want to contact experts that can assist.
- HR Behaviors: I consider this to be the competencies that we need to be a good leader and manager in the organization. Skills like communication, analytical skills, decision making, problem solving, etc. These are all necessary to be a good human resources professional. In fact, these skills are also necessary to be a good employee. In this area, we’re being held accountable to the same standard as everyone else. And that’s okay … we should be.
- Organizational Connection: The final component gets to what I think the reader is referring to when it comes to HR’s value. I wish I had a definitive answer. I think that HR’s value comes from what the organization values and making that connection between what HR does and organizational results. For example, let’s say we’re a not-for-profit organization and we measure results by the number of people we provide services to. Then HR’s value comes in making the connection between what we do and the number of people the organization provides services to.
If you’re unsure about what the organization values, find a way to ask the question. Don’t assume that every organization values the profit line and only the profit line. That’s not to say profit doesn’t matter. But organizations often have multiple outcomes they’re trying to achieve, and that information should be known. This provides a starting place to make the connection between HR’s role and organizational outcomes.
It’s also possible that the organization is going through a transition right now and redefining what value means to them. That can have consequences for multiple departments, including HR. Maybe HR always thought their value was in ABC and now there’s a new CEO, who feels their value should be in XYZ.
And if you already know what the organization values, but you’re trying to figure out how to quantify it, check out the book “How to Measure Human Resources Management” by Jac Fitz-enz. This book goes into great detail about how to measure HR activities. Personally, I think every HR office should have a copy for reference.
Human resources departments have a wonderful opportunity to show their value to the business. Not only through the use of employee stories (qualitative) but using analytics (quantitative). The best way to establish the value connection starts with understanding the organization’s value.
Image captured by Sharlyn Lauby while exploring the streets of Nashville, TN
