Return on investment and human resources

2010-10-14 00:00

MEASURING return on investment is normally associated within and across financial departments, investment boardrooms and similar financial institutions.

Viewing the words “return on investment and human resources” being linked on the same page is an intriguing, yet highly relevant and important topic.

The recessionary environment has compelled companies aiming to sustain themselves to revisit their business strategies and shift their focus to increased performance and productivity, lower costs, product leadership and increased customer intimacy.

The bottom line is that human resources will continue to play a vital and pivotal role in the manner in which companies are run.

Most often though, the role of human resources in return on investment is not measured.

If metrics are in place, they are not implemented in the manner in which finance departments measure return on investment and other decision-informing financial ratios.

The question that remains is not why to measure human resources return on investment, but rather how this can be done, given the traditional personnel transactional and reactive nature of human resources that deals with the softer skills and benefits management.

Monitoring the human resources operational budget, completing satisfaction and people surveys, and HR benchmarks are all important to adding value to the business.

The paradigm, however, has to shift to an innovative cutting edge perspective, whereby human resources’ return on investment must be seen as a methodology and delivered as a business tool.

This business tool must derive from a process that is comprehensive, especially from a monitoring and evaluation perspective, feeding into the human resources management’s portion of the organisation’s “balanced scorecard”.

Qualitative and quantitative data collection relating to costs, projects, processes and value derived is required to measure human resources return on investment.

If a human resources process is deemed to be non-value-adding, then its work cannot be converted into costs or value, leaving open the question of whether an organisation is getting a return on investment from human resources.

Human resource initiatives that result in comparisons between the value derived and the costs associated are the stairway to performance improvement and qualitative growth.

For more information, call ­KPMG at 033 347 7600.

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