Compliance

Dear Workforce What Areas Could Be Easily Measured in a Pay-for-Performance Structure For HR Managers

By Staff Report

Sep. 7, 2011

A Dear How to Pay HR:

Measuring performance is one of the most challenging issues HR has had todeal with during in the past 20 years. It includes not only figuring out how companies and the individuals in them should be evaluated, but how HR as anorganization should be measured. This is a critical issue, because it determineshow companies add value to the bottom line, as well as how it is perceived andrespected by senior management. And it is obvious that there have been no easy answers, since most companies still have incredible difficulties with quantifying HR measures. In some companies, pay-for-performance means verylittle, since measures are not really assessed and everyone receives the same average increase.

Fundamentally, HR needs to quantify performance, which means defining and assessing its impact on the company. HR’s natural role in any organization isto provide those services that effectively meet business needs. HR’s focus is to provide added value by supporting fully competent individuals and teamsoperating at a sustained level of high performance. This in turn creates competitive advantage for the organization. The challenge: figuring out ways toappropriately apply these concepts within our companies, and make themmeaningful through actual, measurable achievements. Performance measurement andprocess improvement must go hand in hand for any organization intent uponcreating competitive advantage.

One of the ways to implement this is to identify the outcomes we seek in anyprocess or project. Some companies use a balanced scorecard approach as a framework for identifying these outcomes. Many times, such as with retention, costs are hidden and need to be identified within other expense items. Simply telling top management that an HR initiative will save X amount of dollars intraining or recruiting costs, without being able to really measure those savings, isn’t good enough. Real dollars need to be brought to the surface, identified, tracked, and reported on. Start with the outcome and work back through the process to identify the measurement tools that will guide your progress. Once you have a vision for human resources, defined outcomes for your initiatives, and a series of specific, quantified internal measurements, you can develop an effective pay-for-performance program.

SOURCE: Bob Fulton, Project Consultant, The Pathfinder’sGroup, Chicago,Illinois, April 19, 2002

LEARN MORE: See Realignment Ties Pay to Performance

The information contained in this article is intended to provide usefulinformation on the topic covered, but should not be construed as legal advice ora legal opinion. Also remember that state laws may differ from the federal law.

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