Human resource management evaluation

The supreme value for any company is the people who work there, i.e.  human resources.  Very often, top managers and business owners tend to forget this axiom.

What is HR about?
What is HR about?

They mistakenly think that improved production facilities, advanced IT technologies or enormous investments alone can save business from bankruptcy.  Well, of course these are very important elements of any successful business strategy.  But these are only tools in the hands of people.  If these tools are not properly used they will do more harm than good for a company.  The recent economic crisis has proved that those companies who possessed the most well educated and efficient personnel managed to survive and even increase their revenue through innovation, implementation of creative ideas that very often come from the lowest levels of the company.

  • Nowadays all large and midsize companies have own HR departments.  Human resource management is not only about looking for the best professionals in a certain business.  HR management is about employment of people, creation of suitable working conditions, educating and coaching employees, monitoring organization climate, employee loyalty and satisfaction etc.

Sure thing, requirements to human resource management are different in different business areas.  But there is one thing in common – word of any HR department must be assessed.  Moreover, any actions of human resource managers should comply with the company strategy, value and mission.  This is where Balanced Scorecard system (BSC), created by Norton and Kaplan, comes into play.  BSC links strategic and operational management, or in other words it puts strategy into action.

How HR works?
How HR works?

So, why bother about personnel?  Statistics show that the most satisfied and loyal employees have the most satisfied and loyal customers.  What does it mean for a company?  Right!  This is regular source of income.  Making money is the goal of any commercial organization.  So, recruitment and education of personnel is inseparable part of a company action plan on its way to implementation of strategic goals.

  • As already said above, HR management uses different principles, approaches and priorities in working with personnel.  It depends on business area the company works in, specific nature of running a certain kind of business, as well as company strategic goals.  For example, approaches to working with employees at an industrial enterprise and a web design in company cannot be the same.  Working conditions, motivation are compensation system are fairly different in industrial and programming business sector, and therefore HR Balanced Scorecard tends to use different metric systems and various sets of indicators (KPIs).

This article will attempt to summarize peculiar features and key performance indicators in HR evaluation in different business areas.

1.   Accounting. In this business area the cost of every mistake may be too high. That is why it is imperative to have error free documentation and follow standards of invoice accuracy. Also, accountants have access to confidential and sensitive information, and that’s why employee loyalty is extremely important.
2.   Arts and entertainment. The realm of arts and entertainment is characterized by creativity of employees. So, it is not easy to find good photographers or artists. That’s why HR managers should track how much they spend to hire one employee. Also, artists should be 1005 satisfied with their work, otherwise they will not create masterpieces.

3.   Agriculture. This is a business sector that not everybody wants to work in, as the job may be rather difficult. Also, there is a large number of part time or season employees working in farms and ranchos.

4.   Automotive. HR managers in automotive industry are to pay attention at the absence rate as this may cause production downtime. It is also important to know percentage of high and low performing employees.

5.   Banking. Employees in the bank have access to confidential information, and thus it is imperative that they sign the business conduct and ethics policy. Banker should also spend bulk of their working time on priority tasks.

6.   Building/construction services. Trade unions are very popular among construction workers due to high traumatism rate, and HR managers need to pay a special attention to these issues. It goes without saying that job satisfaction rate should be rather high among construction workers due to tough working conditions.

7.   Customer support services (tech support). This business sector is characterized by high staff turnover rate. Also, HR managers are to pay attention to average telecom costs per employee.

8.   Call centers (sales). As a rule, sales call center operators receive bonuses for completion of sales plans. It is imperative that most employees are satisfied with existing bonus system. As personnel turnover rate is rather high, average cost for recruitment must be minimized.

9.   Education. Average tenure per employee would be a good indicator, as the longer professors work at Universities the better university reputation. Also, education specialist should always improve their professional level.

10.  E-commerce. In e-commerce most employee are working remotely, and thus average cost saving per teleworking employee must be calculated. At the same time, employees must be satisfied with remote work.

11.  Chemicals. Chemical enterprises are usually characterized by tough working conditions and health dangers. That’s why it is important to track new hire retention (freshly employed people should stay in the company). If there are many employees on long term sickness leave then working conditions at the chemical plant are not satisfactory.

12.  Electronics production. Electronic devices are constantly upgrading and developing. That’s why indicator average time employees are in same job function is very important to find out whether personnel develops as well. Also, all tech and engineering positions must be well documented.

13.  Financial services (insurance, loans etc). It is not an easy task to find a good financial expert. That’s why interviewing costs might be too high. Mistakes in financial decisions may cause serious problems and thus, employees in insurance and loan companies must be regularly assessed.

14.  Food industry. Staff with appropriate professional qualification is a relevant indicator for this industry as poor quality food products are denied at all markets.

15.  Government/non-profit sector. Government officials often contact with taxpayers. They must reply to correspondence on time and reply to all emails, if possible. HR managers are to measure relevant indicators.

16.  Health care. Number of patients with medical errors per 1000 patients is a great indicator for HR in medicine. Number of patients leaving against medical advice is also very indicative.

17.  Investment. Making money earn more money is a real talent. So, investment company should especially value talented investors with strategic vision. It would be also helpful to measure forecast errors.

18.  IT technologies. Often IT specialists require rather expensive equipment for their work, and thus HR department may measure average equipment cost per employee and average office space per employee.

19.  Marketing and advertising. There are not many marketing specialists who can even create a new category of customers. So, if there is huge turnover in the advertising company this may be quite costly. Also, effective work of HR department in marketing and advertising business is the situation when employees find vacancies by themselves, without ads and outsourcing.

20.  Military. The army needs to be always ready for defense or attack. Every soldier or officer has his tasks, so average number of sick days per employee should be as low as possible. Also, very few people want to serve in the army (because of health and personal concerns) much depends of average time to recruit.

21.  Mining and oil and gas production. Often this is a very hard work, so if employees recommend company as a good employer to other people it means that working conditions and attitude of management are OK in such a company. HR department must also measure expenses related to medical claims (because of tough working conditions at oil producing plans and mines).

22.  News and mass media (Internet, printed media, TV). Very often printed and Internet mass media, as well as TV channels cooperate with freelance journalists who work remotely and who should be satisfied with teleworking. Also, the company needs to calculate savings cost because of cooperation with remote freelancers.

23.  Police. Lack of training in police may cost officer his life. It is imperative that police officers undergo regular training sessions (gun shooting, physical exercise etc). HR department in police must measure balance between rookies and experienced officers since policemen risk their lives out in the streets.

24.  Publishing services. Various equipment is used in publishing services depending on type of printed production. Equipment cost per employee as well as turnover of new hire during first 12 months are a couple of very interesting indicators used in this area.

25.  Real estate/property. Real estate agents receive percentage from total sold property cost (bonus payout). Also, they travel a lot to show properties to potential customers and travel costs per employee are also to be measured.

26.  Retail sales business. In retail sales business employees are financially interested to sell more. So, bonus system should be constantly measured. Employee communication etiquette also plays an important role in the work of a retailer.

27.  Telecom business. In telecommunication business employees have to possess much knowledge and specific skills. That is why it is important that new hires do not leave the company within 12 month period. Employees should also improve their performance as compared to previous performance reviews.

28.  Tourism/hotels. Customers return to hotels only if they liked their stay there. This much depends on hospitability of the personnel which in its turn depends on employee satisfaction. To keep high service level employees should undergo regular performance reviews.

29.  Transportation and logistics. If a logistics manager is late for work this may cause failure of the entire transportation chain. Travel costs of logistic managers who accompany cargoes are to be tracked.

30.  Wholesale trade. Whole sale managers make hundreds of calls offering products and cargoes. Telecommunication costs per employee is an excellent indicator in this sense. Revenue per employee also shows efficiency of salespeople.

It should be noted that the above example of KPIs are not most important indicators in certain business areas, but rather suggestions to HR managers willing to use human recourse sis a more efficient way. If you need to more info on indicators in different business areas feel free to follow the above link.