Key Strategies for Measuring the ROI of HR Department

Many organizations are now using HR metrics in their overall business strategy as a way to demonstrate that strategic HR is taking hold in business. According to a recent survey, 82 percent of respondents say that such HR metrics are somewhat useful, or extremely useful for their organization.

The competitive economic and profit pressures have prompted organizations to carefully evaluate and scrutinize their business initiatives. Without metrics, one cannot improve.

Measurement of HR ROI can be a challenging undertaking, but it’s not impossible. Below are ways to effectively measure the ROI of HR within your organization:

1) Define Your Company Goals:

To begin measuring, you need to determine what’s most important to the leadership and to the organization. Before creating key performance indicators (KPIs) and collecting data, understand your company’s mission, vision, values, and goals. Knowing where the company wants to go and what they believe will help you ensure that any changes you make will move the organization in the right direction.

2) Collect & Measure:

Data is your best friend and key to success. Collaborate with departments to find data outliers. Determine productivity traps and inefficiencies and opportunities for improvement. Obtaining data can be a daunting task, but it can also yield some of the most significant findings.

3) Taking stock:

A clear understanding of your starting point is essential to determining the ROI of HR initiatives. A thorough audit of your current HR practices, projects, and initiatives, and how each is impacting your team and organization as a whole, will assist you in identifying gaps and benchmarking current efforts.

4) Employee retention & cost of employee turnover:

Keeping track of employee retention rates will help you gauge how well your employee retention strategies are working. Compare this metric with the cost of employee turnover to figure out how much money your organization spends on replacing employees who leave. Keeping a close eye on the cost of losing an employee will help you make more strategic decisions regarding benefits and retention efforts.

5) Training and onboarding expenses:

Knowing your new employee’s training and onboarding expenses is important for budgeting and understanding your cost to hire. An effective onboarding program reduces your hiring costs, and ongoing employee training helps keep your staff motivated.

6) Set clear KPIs:

To effectively measure HR ROI, you need to set key performance indicators (KPIs). With KPIs, you can clearly define what you’re trying to achieve with HR initiatives, and just as importantly, measure how well you’ve done. Among the most important KPIs for HR professionals are return on investment (ROI), productivity, retention, turnover, absenteeism, recruitment costs, satisfaction, skills & competencies, time to fill, and recruitment channel efficiency.

Wrapping Up:

As you can see, there are numerous ways to maximize HR ROI by supporting and optimizing the performance of your people. Onboarding, employee engagement, goals, performance reviews, and more don’t worry about doing it all at once. Start small, and if you need a system for supporting, streamlining, and automating your processes, get professional help.

Do you need comprehensive HR management software? With Infinigent’s modern HR Management Software, you can automate repetitive HR tasks and enhance the efficiency of your HR team. Thereby increasing the ROI of your HR department.