A quick guide to the best ways to demonstrate HR’s ROI

HR Program /Function
Over-all HR

The best way to prove it’s value – Workforce productivity comparison from last year to this year (Revenue per employee ratio or total dollar spent on employee cost compared to total dollars of company revenue).
 
2.      Any HR program
The best way to prove it’s value – Split sample differential in performance (In the same group, half utilize the program and the other half don’t).
– Another way to prove it’s value – Statistical correlation between program usage and business results.
– Another way to prove it’s value – Run a pilot program and compare/ assess the before and after results.
 
3.      Hiring
The best way to prove it’s value – Cost of a position vacant (Lost revenue and
productivity for every day that a position is vacant.
– Another best way to prove it’s value – Performance differential between hires under the "new" hiring system or tool versus hires using the old process.
 
4.      On-boarding
The best way to prove it’s value – Time to productivity (Days until new hires reach the
minimum expected productivity level for their job.
 
5.      Retention
The best way to prove it’s value – Cost of turnover including lost productivity and replacement costs.
– Another way to prove it’s value – The total differential value between low and high overall turnover rates.
 
6.      Training/ development
The best way to prove it’s value – Split sample (Half in a group are trained, and the other
½ aren’t).
– Another way to prove it’s value – New hires when surveyed, list training and development opportunities as a reason for taking the job and turnover’s (voluntary terminations) don’t list it as a reason for leaving.
 
7.      Educational reimbursement
The best way to prove it’s value – Increased performance or increased retention rates and
promotion rates after the degree is completed.
 
8.      Employee relations
The best way to prove it’s value – The value of the employee’s increased output after the
ER effort is completed.
– Another way to prove it’s value – The performance differential between the new employee (Replacement hire) and the "released" employee.
 
9.      Compensation
The best way to prove it’s value – Ratio of $ spent on compensation to dollar of firm revenue.
– Another way to prove it’s value – % increase in performance after any increase in compensation.
– Another way to prove it’s value – New hires list compensation as a reason for taking the job and turnover’s don’t list it as a reason for leaving.
 
10.  Benefits
The best way to prove it’s value – New hires list benefits as a reason for taking the job and turnover’s don’t list it as a reason for leaving.
 
11.  Coaching/mentors           
The best way to prove it’s value – Before and after performance of the coached employees.
– Another best way to prove it’s value – Split sample performance differential where half of a group is coached and the other half isn't.
 
12.  HRIT/ HRIS
The best way to prove it’s value – Correlation between HRIT usage and business results.
 
What is not an ROI measure
There are “soft” HR measures that you should avoid, if your executives demand ROI level proof.  They include:
-Performance appraisal improvement (Some will accept this)
-Satisfaction surveys (Managers or employees)
-Engagement surveys
-360 degree results
-Low turnover rates (It could because your workers are not desirable)
-Number of applications received
 

© Dr. John Sullivan 7/23/08

About Dr John Sullivan

Dr John Sullivan is an internationally known HR thought-leader from the Silicon Valley who specializes in providing bold and high business impact; strategic Talent Management solutions to large corporations.

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