HR has embedded itself in business culture as a profession that supports and promotes softer skills, championing initiatives that ensure the effective motivation, management and development of employees. The challenge lies in measuring the effectiveness of these programmes when harder skilled areas such as finance, technology or legal are much easier to calculate and therefore more likely to have vision and strategy supported by the Board and key investors.
Proving the HR function’s return on investment is one of the biggest challenges HR Leaders face in today’s market yet statistics have shown that softer skills are becoming more predominant in terms of measuring an organisations market value. Dave Ulrich has written a report that states how up to 90% of market value was determined by financial performance between 1960 and 1990. This has now dropped to just 50%.
These figures suggest that over the past twenty-five years’ focus has shifted to acknowledge the important role people’s emotional skills have in the work place. What hasn’t shifted is the prevailing need for these skilled to be measured and their value rigorously proved. Boards and shareholders still lack confidence in supporting softer skilled initiatives into the wider business strategy without cold, hard facts to back them up.
So how can HR Leaders begin to approach the challenge of proving HR’s RoI? The good news is that some areas of HR are easier to calculate in terms of organisational worth. They include things such as Health and Safety programmes, employee induction schemes, diversity programmes or implementation of new HR Information systems, where cost savings can be measured by obvious results such as a reduction in workplace accidents or an increase in employee retention following hire.
Whilst these all hold significant value, the challenge lies in that they only form a small part of the HR Leaders remit. Other areas such as talent, adaptability to change, shared values, accountability, collaboration, learning and leadership are all integral to the HR offering but are far less quantifiable. Ulrich has described them as ‘Intangibles’ but offers HR leaders guidance in proving their worth to the Board and gaining support in their implementation, much of which comes down to personal credibility.
Ulrich describes how it is vital to deliver on promises and build a reputation among both internal and external stakeholders for accomplishing what you have said you will achieve. This will enhance your authority and ensure you gain the support you need to have your vision or strategy realised.
The next step is to look at the areas of the business that will need investment from intangible initiatives such as leadership training, talent attraction or collaboration. Engage with the Board to explain how this investment will enable you to deliver upon future goals.
Once you have developed the core competencies needed you will be enabling your organisation to achieve its full capabilities. When this has been achieved the intangibles will become tangible as business output inevitably increases.
An organisations intangibles are the backbone of its success and the responsibility for delivering them sits with HR. To find out more about how HR can deliver genuine, measurable RoI to the Board, business and investors we recommend attending the HRM’s networking event taking place on Thursday 5th May at the Southampton Solent University Conference Centre:
Founder and Director of HR Heads. Passionate about the innovative and successful recruitment of HR talent and creating strong, lasting networks built on trusted relationships. Industry specialist for the Hampshire region.
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