Evaluating the contribution of human resource activities to organisational change
A final, and vital, part of the equation in using HR levers for change is demonstrating what they have delivered in relation to the organisation’s performance. The organisation must be able to measure these activities, evaluate the progress and contribution they have made to the organisation, and communicate the value that has been added as a result of the change efforts, and assess whether recalibration of the change levers is needed. Also, this process is an opportunity for reflection, re-analysis and reappraisal before fine tuning the course of change, as evaluation provides useful qualitative and quantitative data to review past performance and plan for future change management. This evaluation applies to human resource activities as much as to any other change endeavour, as we will see in more detail in chapter 9.
Evaluating a human resource program requires gathering data about organisational or individual outcomes related to its change strategies, interpreting the data, and reaching a conclusion about the quality or standard of the measured outcome. Tra¬ditional individual and team performance measures may include, individual or team output, absenteeism, turnover, resignations, lost time through injury, grievances, per-ceptions of managerial practices, employee attitudes on satisfaction, commitment etc. Organisational performance measures include labour productivity, product and service quality, unit cost ratios, revenue productivity, profits, market share and return on investment (ROI).170 But appropriate multiple measures rather than single indicators are necessary and should be used with caution to ensure meaningful data.
Other approaches use benchmarking, that is, measuring not only progress against the results of the change, but also the implementation of the HRM practices, through the use of metrics such as cost-benefit analysis, opinion surveys and any other procedure that checks outcomes against goals (such as the information gleaned in the performance management process). Using industry benchmarks across a range of workforce perfor¬mance productivity measures, for example, can help managers to understand how their workforce shapes up against other parts of the organisation, how it is doing in relation to its past performance, and against similar companies or industries. It can also indicate how they can target improvement efforts to become more financially and operationally competitive.
One of the newer tools available to ensure that the HR strategies and the efforts of the employees are aligned with specific, long-term business objectives is the ‘HR score- card’, which is based on Kaplan and Norton’s balanced scorecard.171 Becker et al. recommend that change leaders take a systematic approach in assessing the strengths and weaknesses of the current change process, and also measure its progress by using a 'change checklist’ approach. They recommend specific areas to measure. These are: leading change; creating a shared need; shaping a vision; mobilising commitment; building enabling systems; monitoring and demonstrating progress; and making it last. They also support this approach with guiding questions for change sponsors and guide¬lines for implementation. (See chapter 9 for a detailed description of this model.)
More recently, out there on the horizon, there has been a great deal of discussion regarding a different approach to measuring the impact of HR and change endeavours: human capital management (HCM). As we have stated earlier, human capital is the sum of the total workforce’s skills, knowledge and experience, values and attitudes, and motivation and commitment. It is formally defined by Bontis et al. as follows:172
Human capital represents the human factor in the organisation; the combined intelli¬gence, skills and expertise that gives the organisation its distinctive character. The human elements of the organisation are those that are capable of learning, changing, innovating and providing the creative thrust which if properly motivated can ensure the long-term survival of the organisation
Human Capital Management is a movement away from some of traditional methods of measuring HR activities towards assessing the value of the human contribution and allowing management to maximise that value by aligning employee’s skills and capa¬bilities to the strategic direction of the business.173 It looks at the direct links between outcomes of the initiatives (for example, specific change levers) and the profits, prod-uctivity, market share, share price etc. It requires breaking down the boundaries between the functional areas in the organisation — for example, between finance, knowledge management and all aspects of HR — and integrating reporting mechanisms. A great deal of controversy and debate still occurs on this approach and the specific metrics to be used — as these will be firm-specific and no one set of numbers or accounting formula is appropriate to all types of organisations.174 However, the approach is being taken seri¬ously in many quarters and is being proposed as an approach for organisational reporting in the United Kingdom.175 As part of a UK government task force, the Chartered Institute of Personnel and Development (CIPD) has developed a draft framework to help UK firms to measure and communicate the value of their people policies. This framework is based on the principles that reporting on human capital requires multiple indicators: that the information should be of value to those receiving it; that it reports on factors relevant to the future performance of the company — including narrative and qualitative and quantitative information; and that it should contain information on barriers to the effective use of its human capital. The task force proposed five categories or activity areas of human capital management information that could be collected. These activity areas are: human capital strategy; acquisition and retention; learning and development; management; and performance.176 Table 6.2 (page 216) illustrates one of the activity areas (performance), and the primary and secondary indicators.