A new study from the CIPD highlights the importance of demonstrating and communicating the HR function’s ROI.
A new study from the UK’s Chartered Institute of Personnel and Development (CIPD) reveals a strong disconnect between HR leaders and other business leaders regarding HR’s contribution to the organisation. “There is a large proportion of business leaders who either have no opinion about HR’s contribution to the business or do not know one way or the other,” the study shows.
The report revealed that only 27% of business leaders believe the HR function helps their ‘organisation to become more flexible and agile’, while 40% disagree and 39% have no opinion on this statement. In addition, almost half (44%) of business leaders think that HR fail ‘to address the operational issues facing the organisation’ and 52% think that HR prioritise ‘what matters to HR over wider organisation issues’.
These are some of the results of the CIPD’s survey of 107 HR leaders, in businesses with more than 250 on staff, and 369 business leaders. Researchers did not interview business leaders and HR leaders from the same organisations.
The study suggests that HR could improve on demonstrating its ROI, and communicating this to the rest of the organisation. This is a point that Amanda Revis, group executive (human resources) – Suncorp, emphasised in a recent interview. “Being able to measure the ROI [of the HR function] is really important, because otherwise you haven’t got any criteria for deciding whether to invest in people vs. investing in something else,” Revis said.
For Revis, there is no ‘one size fits all’ approach for this: the HR function needs to be cognizant of their organisation’s business strategy and to measure its initiatives against this strategy. “If the business strategy is, for example, to deliver profitable growth, then the people initiatives should be aligned to the delivery of that profitable growth. You need to know what the people drivers of profitable growth and how to measure those people drivers,” she explained.
Communication of this information is also essential, although difficult to get right. Revis identified the relationship between HR and senior leadership as essential for this communication, but noted that it could be formal or informal. She also recommended having a communications specialist on the HR team.
Key HR Takeaways:
- Business leaders may not be fully aware of HR’s contribution to their organisation.
- It is, therefore, essential for HR to be able to demonstrate its ROI.
- There is no ‘one size fits all’ approach for doing this, HR needs to measure its initiatives against their organisation’s business strategy.
- Communication of these metrics is essential; consider hiring a communications specialist.