Auditing the Strategic Contribution of HR

It has been my experience that more money is wasted on ineffective, ill-advised, anemic, excessively long, poorly targeted and outrageously expensive training than any other single component in HR. HR Directors will tell me I’m wrong when it comes to their organization because they get trainee surveys back that indicate the trainees liked the program. They feel justified in checking the audit box that asks “are there measures for training results”. But when I read the surveys the questions include things like “Did the program start and end on time? “Did you receive copies of all of the materials?” and “Where the muffins warm’? Who cares? There isn’t one of us that hasn’t been compelled to sit through a painfully non-applicable “training” program within the past year or two, and the least of our concerns was the size and shape of the room, and food temperature. It was all the stuff we were thinking about that we wish we could be doing during those two hours that we remember. So the non-strategic HR directors continue to repeat these training programs, content that there is value as long as attendees critique the room and condiments favorably. But this is often one of the reasons the COO does not believe HR is maximizing its contribution to the organization.

“… human resources should be accountable for the outcomes of their contribution. This is the strategic contribution of human resources that your COO is looking for.”

If I am the COO I would much rather have the money HR just spent on training than have my staff out of production while being trained on something that yields no quantifiable or even realistically subjective positive results. As noted earlier, the strategic audit compares the performance of the attendees in the areas being covered in the training before the training with their performance after. After a while you tend to only have training programs that really accomplish something. This approach also allows individuals who already know the material to “test out”, much to their delight I might add, while limiting the cost and increasing productivity.

The strategic audit should also evaluate the utilization of technology in HR specifically, but generally within the entire organization as well. If the most money wasted is on training, a close second is on software and infrastructure that becomes outdated long before the organization has figured out how to use it. The purpose of investing in technology is to increase productivity, eliminate human error, and free staff to focus on substantive issues rather than the routine. Regrettably, it is not uncommon for the new HRIS, payroll and accounting package to not only require untold hours of time in implementation and acclamation, and cost hundreds of thousands of dollars but result in no headcount reduction and only marginal productivity gains which are eroded by the scores of e-mails we are now able to send to everyone in the organizations sharing such vital information as the “refrigerator will be cleaned out over the weekend,” or “there is birthday cake in the lunchroom” or “does any want a kitten?”

There may even be a “black market” data economy made up of employees who liked the old software better. They are resisters who maintain a second system justified by the need for back-up, or to maintain data that will not transfer with full integrity. Even in these cases the non-strategic audit generally ends up with a check mark in the box for “Up-graded HRIS”. Failing to maximize the utilization of technology is a significant impediment to productivity. It generally occurs because we did not hire staff with the necessary skills/aptitude, or train them thoroughly, or spell out in their job description that this was a required responsibility, or measure their performance, or communicate the objectives etc.

The last area the strategic audit reviews is, “How does HR measure itself?” Remember the list of “things I did” doesn’t count. The measures should include productivity of the HR department, fiscal management, internal customer service and quality of outputs, but also the productivity of your entire organization. “What”? “Are you telling me HR should be accountable for the productivity of people in other departments?” Of course. If HR is instrumental in the sourcing, screening, selection, orienting, training, compensating, motivating, communicating, defining jobs and measuring performance within the organization, then HR should be accountable for the outcomes of their contribution. This is the strategic contribution of HR that your COO is looking for.

One common measure of HR productivity is the number of HR staff/number of total employees, but it can also include the number of customers serviced, calls taken, units produced, or the like. The measure should have a goal and be compared year over year. A measure of productivity that can be used for the entire organization is total revenue/total number of employees.

The measure however, is secondary to using something consistently year to year, that you feel best fits your organization and that there are no purposive distortions, i.e. “Oh their not employees anymore they are independent contractors”.

HR directors will often say, “I know I should be doing more of that but I just don’t have time with all the fires and day to day issues”. We are back to the seven page “things I did list”. A strategic audit can help. But if you want to do something today, trim you list. Stop scheduling training that produces no results, you’ll save a bunch of time and save your organization a bunch of money. Eliminate the newsletter, the handbook up-dates, the employee of the month program and the myriad of other stuff on the list that contribute nothing toward strategic outcomes. Also, cancel any training scheduled for the HR staff on the new HIPAA, FMLA, EEOC or avalanche of other “professional development” training programs for your staff. I know this is heresy. But don’t worry the new rules will change soon anyway. All you really need to know is where to find the answer when the question comes up. We are too afraid to say “Can I look into that and get back to you?” In our haste to be perceived as the HR answer person, we often end up dispensing bad information even after wasting enormous amounts of time and money trying learn legal nuances of which most will never come up during our careers.

Instead, ruthlessly prioritize. Focus on those specific tasks that you believe will have the greatest impact on your organization’s revenue, expenses, productivity, quality of service and outputs. You will be left with a short list of things to do and long list of strategic contributions, your COO will appreciate.

Jim Bastian is managing director of HR Audit, Inc. and has been providing organizational and human reource strategic audits since 1998. He has a Bachelors Degree in Psychology/Education from Michigan State University and an MBA from Cardinal Stritch University and can be reached at jbastian@hraudit.com, 262-789-3185