How HR evaluation helps gain competitive advantage

What makes an effective HR dept?
What makes an effective HR dept?

Some business owners and managers are not giving due attention to human resource management.  This is a very common mistake which may have negative consequences for the company.  Also, some business owners think that their business is money, real estate, production facilities, offices and computers.  However, they forget that all this is put into action by people.  People working for the company should know that they are valued and they are getting fair compensation.  At the same time the company expects its personnel to work as efficiently as possible.  The goal of human resource management is to use these people with a maximum profit for the company, at the same time providing them with convenient working conditions and good compensation.

Performance of human resource department should be constantly measured and controlled.  HR department must make sure that all positions in the company are filled with the best professionals will well trained and educated.  Of course, in order to find efficient employees the company should spend a certain amount of money.  It may happen that the company is overpaying for recruitment or educational employees.  That’s why, use of balanced scorecard system is highly recommended for managers and business owners who are trying to optimize the work of HR department and reach strategic goals set in this area.

One of the greatest advantages of balanced scorecard system is that BSC serves as an intermediary tool between operational management and strategic goals.  This system measures indicators split into four categories: financial, customer, internal processes, learning and growth.  In case of HR department we should rather talk about internal processes, learning and growth and of course financial indicators.

Effective HR department contributes to overall company success
Effective HR department contributes to overall company success

As to financial indicators, the following KPI is the most important – Cost per hire which includes all fees, costs and expenses related to hiring one employee.  These are advertising costs, agent’s fees, administered if costs etc.

Logically, the last time the company requires to find an employee the less it spends.  Thus, time to fill is known as another important KPI.  Average employment time represents the time and employee works for the company.  If it happens that people do not work more than for example one year for a company it means that something is wrong with a company policy towards its personnel.  The longer people work for the company the more professional they are.

Sure, human resource metrics includes many more indicators that choice for which depends on strategic goals of the company or HR department.

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