Demonstrating the Value Contribution of HR
By Redaktion techport.ai, HR-Beratung · Last updated on
When Sales wants more budget, they show pipeline and conversion rates. When Production wants to invest, they show scrap rates and lead times. When HR wants a position or a system, it usually shows effort. This is why HR loses budget discussions, not a lack of appreciation.
The value contribution of HR can be measured, but not with forty key performance indicators in a quarterly report that no one reads. It can be measured with five to eight metrics that directly link to business objectives, are clearly defined, and can be compared over time.
How You Can Tell
- The HR report contains workforce figures, but no statement on the impact of HR.
- Attrition, time-to-hire, and sickness rates are calculated differently in each department.
- Senior management asks about the costs of the HR department, never about its benefits.
- Investments in HR systems are justified by time savings that no one subsequently verifies.
Why This Happens
Three causes. Firstly, there are no defined key performance indicators: Without consistent formulas, any comparison is vulnerable. Secondly, there is a lack of data: What lies in five systems cannot be reliably linked. Thirdly, there is no link to strategy: HR measures what it can easily measure, not what drives the business.
Our Approach
- Translate business objectives. From the corporate strategy, we deduce which HR questions determine its success: speed of hiring in growth areas, retention of critical roles, pace of qualification for new technology.
- Define key performance indicators. For each question, we define a KPI with a formula, data source, target value, and responsible person. Our KPI catalogue provides the templates.
- Connect data. We set up data flows from the HR system, time management, and recruitment so that KPIs are generated automatically. Manual work is the death of any scorecard.
- Report and decide. The scorecard becomes part of the executive committee meeting, with one page and a clear statement per KPI: on target, off target, action required.
What You Gain
- HR conducts budget discussions using the same means as Sales and Production.
- Managers see the personnel impact of their decisions in figures they do not question.
- System investments can be justified beforehand and verified afterwards.
From Our Projects
In scorecard projects, we observe that it is not the selection of KPIs that takes time, but agreement on definitions. Attrition, sickness rates, and time-to-fill are calculated in several variations in almost every company. As soon as a definition is established and automatically retrieved from the system, the budget discussion changes, because no one questions the figures anymore, but rather discusses their meaning.
Frequently asked questions
Which key performance indicators are the most important?
That depends on the strategy. Almost always included are time-to-fill for critical roles, early attrition in the first year, attrition in key functions, proportion of internally filled leadership positions, and personnel costs in relation to value creation. Our KPI page contains the definitions.
Do we need a Business Intelligence tool for this?
Not necessarily. Many HR systems provide the required analyses, provided the data is clean. A BI tool is worthwhile if data from multiple systems needs to be combined or if departments need to perform their own analyses.
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Further reading
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