NGO HR IMPACT PAPER

GOOD HR = GOOD PROGRAMMES

AbstractThispaperdescribesasampleofhumanresources(HR)impactmetricstools,withexamplesofhowtouse

them.AsystemsperspectiveofmeasuringtheimpactofHRactivitiesondeliveringresultswithinthecorporateandpublichealthcaresectorsandimplicationsforusewithinthenon-governmentalorganisation(NGO)sectorisexamined.Recommendationsaregivenfororganisationswantingtoadoptmeasuresforthe

firsttimeordeveloptheirpracticeofHRimpactevaluationfurther.

November2016

AuthorsCHSAllianceandAnnStart(StartDevelopment).

DisclaimerConsiderable carehasbeen taken toensure thisdocument is bothaccurateand relevant.However, the CHS Alliance is unable to provide any warranty concerning the accuracy,completeness or relevance to your organisation relating to any information containedherein.Thispublicationmaybequotedbynot-for-profitorganisations,inanyform(written,visual,electronic,oraudio)withouttheexpresspermissionoftheCHSAlliance,providedanyandallreferencesarefullyattributedtotheCHSAllianceandthispublication.Allother requests forpermissionmustbedirected toandapproved inwritingby theCHSAlliance.YoucancontacttheCHSAlliancebyemailoninfo@chsalliance.org.Allrightsreserved.

Table of Contents Executivesummary.........................................................................................................................1

Introductionandbackground..........................................................................................................1

Applicationoflearningfromthisproject.........................................................................................3

Measuringeffectivenessandmeasuringimpact..............................................................................5

RepresentingHRmetricsdataasadashboard.................................................................................6KaplanandNortonbalancedscorecard..........................................................................................7TheKirkpatrickModelforsummativeevaluation...........................................................................8Returnoninvestment(ROI)..........................................................................................................10CEBCorporateLeadershipCouncilL&Dmetricstools...................................................................10

Privatecompanyillustrations........................................................................................................11I.Measuringthevalueofhumancapitalinrelationtointernationalassignmentsforstaff.........11II. Talentmanagementandrecruitment:anewprogrammeforHRtoachievebusinessimpactthroughoutanorganisation..........................................................................................................12III. Telecomcompanycutsrecruitingtimebyhalfandhires100high-impactspecialistswithinthreeyears....................................................................................................................................13IV.Apublichealthsectorillustration............................................................................................14

Recommendations........................................................................................................................16

Glossaryofacronymsandabbreviations.......................................................................................17

References....................................................................................................................................18

NGOHRImpactPaper 1

Executive summary Thispaper gives anoverviewof the resultsof aproject lookingat the impactofhuman resources(HR) activity within a range of organisations. It profiles a sample of HR impactmetrics tools, andhighlights how to demonstrate the positive impact ofHR on programmes by sharing a number ofcasestudies,bestpracticeandtoolsfromtheprivateandpublicsectors,withexamplesofhowtousethese tools.Abalanceofqualitativeandquantitativemethods isdescribed.Recommendationsaregiven for organisations thatwish to adoptmeasures for the first timeor develop their practiceofevaluation further. Further literature research, the formationof informalpartnershipswith severalkeyactorsinboththepublicandprivatesectorandthepilotingofarangeoftoolsarerecommendedinordertovalidatethefindingsinthispaper.

Introduction and background TheCHSAlliancehasanumberofinitiativesinplacetosupport the adoption of the Core HumanitarianStandard (CHS) and the practice of good HRmanagement within the NGO sector. These initiativesinclude the publication of a set of guidance notes andindicators, a verification process with a CHS self-assessmenttool,provisionoftrainingworkshopsontheadoption of the CHS and publication of an HRmetricsdashboard. Successful adoption of CHS commitmentseight and nine involves the embedding of a range ofgood HR practices within NGO programme andheadquartersactivities.

Figure1:DemonstratingevidenceofCHScommitments8and9

AnQcipatedimpactofcommmitment8onorganisaQons:staffare

supportedtodotheirjobeffec_veleyandaretreatedfairlyandequitable

AnQcipatedimpactofbeRerpeoplemanagementonorganisaQons:moreeffec_veandefficientdeliveryofaid

AnQcipatedbenefitsonaidoutcomesofimprovedmanagement:desiredoutcomesforaffectedcommuni_es

AnQcipatedimpactofcommmitment9onorganisaQons:resourcesaremanagedandusedresponsiblyfor

theirintendedpurpose

AnQcipatedimpactofbeRerresourcemanagementonorganisaQons:

AnQcipatedbenefitsonaidoutcomesofimprovedmanagement:desiredoutcomesforaffectedcommuni_es

NGOHRImpactPaper 2

AdoptingtoolstomeasuretheimpactofgoodHRpracticeisimportantforthreekeyreasons:• EnsuringHRresourcesaremanagedeffectively• AssessingtheimpactofHRactivitiesonpeople,performanceandthevalueofhumancapital• Understandingtheimpactofpeopleonbusinessperformance1.

Adopting tools for measuring the impact of HR practice enables organisations to identify whichpractices have the greatest positive impact and to support decision making on which ones toprioritise. Described as human capital management (HCM), this is an approach to “managing anorganisation’s employees for them to contribute significantly in the overall productivity of theorganisation”2.BOND,theUKnetworkmembershiporganisationforNGOsworkinginInternationalDevelopment,inits 2012paper onValue forMoney states that “In order to deliver and improve value formoney,NGOs …. should look at the systems and practices in place for managing value for money”3 -examiningHRmetricsisavaluableprocessforsupportingthecarefulmanagementofdonorincomeandotherkeyresources.From the literature reviewed, it appears that most early studies identified that HR metrics wereusuallytaskratherthanperformancebased,linkingexpectedoutcomesandimpacttoactivity.Inthepaper ‘Examining approaches to HR evaluation: The strengths and weaknesses of popular

measurement methods’, (McLean 2005),i the author states that ‘HR evaluation is often notconductedsimplybecauseof its inherentdifficulties.Butwithoutmeasurement,HRwillstruggletoshakeoff its administrative image.’ In 2015, theHR function in theNGO sector seeks to justify itsposition as a business partner and a key driver in ensuring effective delivery of programmes. The

2014PWCreportii‘Anewvisionforgrowth–Keytrendsinhumancapital2014’statesthat“LeadingHR is basedon three elements: innovation in theoperatingmodel; analytics capability that bringsrealvaluetothebusiness;andtechnologytosupportreliabledata”.ThisreportidentifiesanumberofmetricsfortheimpactofHRpractice:

• Reportingonkeymetrics:o totalcostofworkforceemployed(includingcontingentlabour)o staffrecruitmentandturnovercostso totalinvestmentintraininganddevelopmento employeeengagementsurveyscores

• Asimpledashboardpresentation for seniormanagement reportingwhich informsdecisionmaking

• AdoptionoftheKirkpatrickModelforsummativeevaluationoflearninginterventions• Simplereturnoninvestment(ROI)modelling.

1TheNGOsectormightreplacethewords‘businessperformance’withthewords‘programmeeffectiveness’.2HumanCapitalManagement-MeaningandImportantConceptswww.managementstudyguide.com3BONDandITAD(2012).Valueformoney:whatitmeansforUKNGOs.www.bond.org.uk

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TheimpactofHRprocessesandpracticewasexamined,throughcollectingevidenceintheformoftoolsandcasestudies,inparticularatprogrammelevel,todemonstratethatgoodHRleadstogoodprogrammes.Aspartoftheprojectthefollowingresearchwasundertaken:

• Reading and reviewing current key research documents from outside the INGO sector,covering HR practice in leadership development; talent management and recruitment;managementtrainingandinternationalassignments.

• Reading and reviewing reports, case illustrations, tools and good practice evidence frompublicserviceandprivatesectorindustry.Examplesareincludedinthispaper.

• Collating a range of tools including current ROI theory and practice and human capitalanalytics

• Note:itwasnotwithinthescopeofthisprojecttostudyallHRimpactmetricschallengese.g.theeffectondatavalidityofvariables,orthechallengeofidentifyingattributes,correlationorcausalityforimpactonstrategicoutcomes.

Application of learning from this project BaruchandRamalhoiii(2006),intheirpaper‘CommunalitiesandDistinctionsintheMeasurementofOrganisational Performance and Effectiveness (OEP) Across For-Profit and Non-profit Sectors’,advised “caution that all conclusionspertaining to theway theOEP constructwasoperationalisedshould not be turned into a prescription of how it should be operationalised but rather as a

referential as to how it has been operationalised. The CIPDiv toolkit (2011) ‘Using HRmetrics formaximumreport’reinforcesthat“ifmeasurement,assessmentandevaluationaretoplayapart inachieving sustainable organisation performance, they should be impact-oriented, forward-lookingandfocusedontheentireHRsystem,notjustonindividualHRpractice.”

INTRAC’s Praxis paper, Monitoring and Evaluating Training: Challenges, opportunities andrecommendations focusing on metrics to evaluate the impact of learning interventions in NGOs,(Haddock2015),makestwoverypragmaticrecommendationswhichcanbeadoptedformeasuringtheimpactofallHRinterventions:

• “Decidewhatindicatorswillprovidetheevidencethatwillanswerthemain/subquestions.Howoftenwillthisdatabecollectedandbywhom?Isthisrealistic?

• Decidewhichtoolscanbeusedtocollectthedataandhowthedatawillbeanalysed.Forexample,doyouneedastatisticalpackagetodo it?Howlongwill it taketoanalyse?Whowilldoit?”

IdentifyinganNGO’sHRpriorities isthefirststepintheprocessofadoptinganHRmetricssystem.Research by Conference Board and McKinsey (2012), ‘The State of Human Capital 2012: A False

Summitv’ p.5, demonstrates that when asked about their main human capital priorities for thecoming 12months (figure 2) versus their priorities during the past 12months, the findings werealmostidentical.Inaddition,whiletheseconcernsareidentified,only32%ofthosewhorespondedare confident that the actions they are takingmeet current needs. Therefore,while learning from

NGOHRImpactPaper 4

organisationsbeyond theNGOsector, there isan indication that someapproachescurrentlybeingtakenareeitherunderutilised,underfundedormaynotalwaysbefitforpurpose,andanemphasisonevaluatingimpactbecomesevenmorerelevant.

The Australian Institute of Managementvi report, Learning & Development in the Public Sector(2013),statesthecaseformaintaininginvestmentintheeconomicallytoughtimesandemphasisesthatwithHRinitiativeslikeinvestmentinlearninganddevelopment(L&D)programmes,itiscrucialnot only tomeasureparticipant satisfactionbut alsohow the transfer of learning takesplace, thedegreeof transferof learning,and theextent towhich theprogrammes impact thebusiness, thusdirectly contributing to achieving company strategic objectives; strategic imperatives for L&D intermsofbusinessoutcomes,occuracrossarangeofcapabilitydimensions:• Human capital development(technical skills aswell as generic skillssuch as communication, managementandproblem-solving).•Customervalue(howwellthepersonunderstandstheneedsandpreferencesoftheirclientgroupsandhowtodeliverthis).•Relationship capital (this involves theknowledge of other key players acrossthe industry, particularly necessary inworkingeffectivelyacrossgovernment).

Figure2:Measurescombinetoshowaddedvaluedata

Figure3:Currentandfuturehumancapitalprioritiesarealmostidenticalvii

'Addedvalue'data

HRefficiency

HRimpact

HReffecQveness

NGOHRImpactPaper 5

ManypractitionersandorganisationsadoptthepracticeofmeasuringHRefficiency,HReffectivenessandattemptingtomeasureHRimpact.AskingtherightquestionstoensureHRinterventionsleadtoachievementofstrategicobjectivesusingHRanalyticsproducescombineddatathatisarealadded

valueforthebusinessorprogrammes.PWCviiiintheirreport‘Anewvisionforgrowth:KeytrendsinHumanCapital’(2014P25),reportmetricswhichproducedatainformingthequestions:

• Whathappened?• Howdowecomparewithpeers?• Whydidithappen?• Whatislikelytohappenifwedonothing?• Whatactionsshouldwetaketoimprovethings?

Measuring effectiveness and measuring impact Metric areas commonly used in HR focus on the following people management or workforceplanningactivities:

• Recruitmentandretention • %spendonHRrelatedbudgets• Employeeturnoverorchurn • Salarybenchmarking• Diversity/equalitymeasures • Skillsmix• Trainingopportunitytakeup • Employeeaudit• Sickness/otherabsenteeismratesandattendancerates

Theresultingdatafrommeasuringtheseareasofactivityisgenerallyhistoric,butgivesnorealsenseofhoweffectivetheprogrammesofactivitywere,noranymeasureofthepartthatthoseactivitiesplayed in achieving the strategic objectives of the organisation, with the exception of skills mixanalysis.Theymaysimplymeasureefficiency.

The following brief review of the CIPD documentix ‘Shaping the future: Using HR metrics formaximum impact’ (2011) demonstrates that effectiveness and impact can be measured if theappropriatemetricsandtoolsareadopted.TheCIPDisan internationalUKbasedmembershipandnetwork organisation which champions better work and working lives by improving practices inpeople and organisation development for the benefit of individuals, businesses, economies andsociety.CIPDisaleadingorganisationinthefieldofHRandL&D,settingstandards,supportingcareerdevelopmentandprovidingarangeofresourcesandexpertise.

The CIPD documentx ‘Shaping the future: Using HR metrics for maximum impact’ (2011), is acomprehensive toolkit, with online evaluation instruments. CIPD believes that “impact measuresfocusonthevalueandtheworthofHR interventions…andcloselyalignedtothemost importantstrategicHRdriversfor…organisations’’(p.20).Itsaimisto:

• ‘identifymeaningfulmeasuresofHRperformanceinthecontextofyourorganisation• clarify the role of measurement, assessment and evaluation within an aligned HR

function• enhance decision-making and direction setting through effective use of measures,

assessmentandevaluation.’

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Thetoolkitcoversthefollowing:

• Using HR metrics for maximumimpact.

• Identifying where HR can make astrategicimpact.

• Selecting appropriate metrics fromwhich organisational insight can bedrawn.

• Effectively communicating insightfrommetricsformaximumimpact.

• The HR function and measurementcapability

• Action plan and related resources.

For many NGOs, this is a valuable additional toolkit to use as a key resource for an HR team ormanagementworkinggroup in supportof a changeprocess for theadoptionof anewHRmetricssystem.

Representing HR metrics data as a dashboard An HR metrics dashboard is a useful way to represent key HR trends and link HR metrics to anorganisation’sstrategicandoperationalobjectives. Italsoprovidesanalysis toenablemanagementdecisionmaking.TheCHSAlliancehaspublishedatoolkitwhichmaybeusedasasupportdocumenttothispaper,providingfurtherguidanceonhowtographicallyrepresentsomeofthefindingsofHRdata analysis for management use. Based on the principle that “what gets measured, getsmanaged”4,thedashboardcan,ataglanceindicatehow:

1. AdoptionoftheHRstrategyensurescommunitiesandpeopleaffectedbycrisisreceivetheassistancetheyrequire.

2. Current capacity and capability of staff and volunteers in the organisation is sufficient todeliveragainstobjectives.

3. Appropriatelyskilledemployeescanmanagechangeandbeinnovative.4. Resourcesaremadeavailable,andusedcosteffectively,tosupporttheHRstrategy.

TheCIPDmetricsbelowarerecommendedasaminimum:

RationaleTotal cost of workforceemployed (includingcontingentlabour)

Discussionsoverthecapacityofsomefirmstoobtaingreaterreturnthanothersontheirinvestmentinpeoplecannottakeplacewhenwedonothave the denominator with which to work out the ‘people equations’(thatis,commondefinitionsofheadcountmeasures).

Recruitmentcosts Theextenttowhichemployeesremaininorleavetheorganisation(theirstaff‘churn’)providesanimportantlensonthe‘operationalmomentum’ofabusiness.

Total investment intraining anddevelopment

Winning the war for retaining talent requires greater line of sight forstakeholders into the scale of investmentmade in the development oftalent.

Employee engagementsurveyscores

Figure4:FourkeymetricsxiHumanCapitalReporting:InvestingforsustainableGrowthp.9

4UsuallyattributedtoPeterDruckerbutactuallysourceunknown.

NGOHRImpactPaper 7

KaplanandNortonbalancedscorecard

KeyresearchersHuselidandBecker,KaplanandNortonandPhillipsandPhillipsxiihaveallexplored

the scorecard approach. Huselid and Becker’sxiii book ‘TheHR Scorecard: Linking People, StrategyandPerformance’(2001)providesaprocessofmappingorganisationalstrategy,peopleperformanceandHR systemsand linkingeach toorganisational success.Withbotha rangeof case studies andtools, this book continues to be a helpful resource linking the HR function with HR systems andemployeebehaviours.

Abalancedscorecard-whybalanced?Becausethekeyperspectivesinanorganisation:customersorclients,internalprocesses,learningandgrowthandfinancearemonitored,evaluated,recordedandactedupontoresultinabalancedapproachtoachievingorganisationaleffectiveness.Ithasalreadybeennotedthatorganisationswantingtobeintentionalaboutachievingstrategicobjectivescommitto improving the impact of HR interventions at strategic and organisational level, building andsharing knowledge, expertise and capabilities across teams and developing individuals. Financial,accountingandothercurrentauditmechanismscannotalwaysprovidetoolsontheirownwithwhichtomeasuretheimpacteffectivenessofmanyHRinterventions.

Abalancedscorecard(BSC)approachprovidesaframeworkfordevisingtheorganisation’sstrategicplan, used internally to track the progress of data collection, review the metrics and the resultsacross a range of organisation functions, and adapted for use externally as a series of visuals inannual reports, to shareholdermeetings and for other external reporting. For the purpose of HRmetrics,itcan:

• Identifyperformancemeasureswhichillustratethesuccessorfailureofaprocess.• DemonstrateunderstandingthatallHRenablersshouldemphasiseresults.• Identifyhowresourcescanbedeployedtoaddvalue.

FordetailsofthestrategicplanningprocesstoresultinastrategymapseetheManagementCentre

=mc document ‘Strategic Planning: The BSC & Strategy Maps – an introduction’xiv. ManagementCentre=mchasglobalexpertiseinworkingwiththeBSCmodelinthenon-profit,publicandprivatesectors.Oneof the clearest scorecards is thatof the INGO,Sightsavers International, illustrated inthedocumentandavailableinaninteractiveversionontheirwebsite.Examplesfromthecorporatesector are in the same document. The following is an edited web extract from theManagementCentre=mcwebsite:IndicatorsareanimportantpartoftheBSCperformancemanagementprocess.Theytrackthe impactof initiativestodeliverobjectives.KaplanandNortonarguethatonlyoneortwo indicators should be set for each objective to ensure that focus stays on themost importantmeasures.

Therearetwotypesofindicator:leadandlag.Aleadindicator iswhatismeasuredtodetermineifyou are heading in the right direction to achieve the objective. A lag indicator measures if theobjective has been achieved. The implication is that it will take some time – the lag – until theobjectiveisachieved.

NGOHRImpactPaper 8

Indicators are really only useful when targets are set to show specific improvements. The keyquestionis,isdataalreadybeingcollectedonissuesthatcanbeusedasaBSCindicator?Anindicatordefineswhatwill bemeasuredto assess achievement of an objective. A target defines howmuchimprovementisrequiredovertime.HRenablerswhenunrelatedtoperformancedrivers HRenablerswhichemphasiseresultsPersonal development plans (PDP) reflect intendedoutputs

PDPsreflectintendedoutcomes&impact

Appraisalandrewardreflectoutputs Appraisal and reward reflect outcomes andimpact

Recruitmentprocessreflectsservicecompetency Recruitment practice identifies resultspotential

HRviewedasanoverhead HRviewedasastrategicassetFigure5:PerformancedriversandenablersStrategicdrivers HRdrivers HRdeliverables Leading and lagging

indicators1 Increasethe

numberofcustomers

Attractandretainkeyskilledstaff,increasingbenchstrengthandplanningforsuccession

Recruitmentanddevelopmentprogramme

(lag)%ofprojectteamsdemonstratingrequiredstandardofskillsinrolerelatedcompetencies(lead1)%ofprojectteamdevelopmentplanKPIsortargetsthathavebeenachieved(lead2)levelofinvestmentinHRas%oflocalsalaryscale

2 Increaserevenue

Increasemanagerialandfunctionalcompetencyatalllevels

Enhanceteambasedbehaviours

3 Reducecostsperemployee

Organisationaldevelopment

Strategybasedperformanceassessment

Figure6:HRenablersemphasiseresults

Oneofthis field’s leadingresearchersandpractitioners,MarkHuselidxv,asksfivekeyquestionsontheHRscorecard:

1. Workforcesuccess:havestrategicobjectivesbeenachieved?2. RightHRcosts:haveweinvestedintheworkforceintherightway?3. Right types of HR alignment: do our policies, processes and practice align with strategy

acrossallfunctions?4. RightHRpractices:haveweimplementedthemintherightway?5. RightHRprofessionals:doourprofessionalshavethecompetenciestodeliver?

TheKirkpatrickModelforsummativeevaluation

In1975,DonaldKirkpatrickfirstpresentedafour-levelmodelofevaluation: • Level one: Reaction, staff member

satisfaction• Leveltwo:evidenceoflearning

• Levelthree:behaviouralchangeintherealworkenvironment

• Levelfour:resultingbusinessbenefit

NGOHRImpactPaper 9

AddingafifthlevelofevaluationforROIhascreatedwhatisknownastheKirkpatrick/PhillipsmodelforevaluatingHRdevelopmentandtraining.ROIisfurtherexplainedbelow.

TheCEBCorporateLeadershipCouncilxvi ‘provideson-demandaccesstobestpractices,easy-to-useanalyticandimplementationtools,andtailoredadvisorysupportsoHRexecutivesandHRbusinesspartners can benchmark their performance and execute effectively by applying insights frompeercompanies’.

WhenplanningatoolforL&Dimpactevaluation,caremustbetakenthattheactivitycanclearlybeattributed to the intervention. It is important to measure the relationships between ranges ofvariables and be wary of assumed correlation and causality. Heidi van ’t Riet, Associate DirectorHumanResources,MarketingEMEAatProcter&Gamblecomments:

“Fundamentally, I think it’s a bit of a fallacy to think that we can measure the impact of L&Dinitiatives. So many things go into the development of people such as coaching, training, formal,informal, good luck, good genes, etc. Knowing the impact of any of the individual leadership anddevelopment interventions, and trying to develop ROI cases seems far-fetched. Keeping peoplefocusedontheideaofdevelopmentbeingamulti-facetedandcomplex’eco-system’isamuchbetterapproach,lesttheythinkthatonegoodtrainingcancompensateforpoorcoaching.”

Anexample:Levelfour,businessresults(Impact)

The fourth level in the Kirkpatrick model is an evaluation of the business impact of the trainingprogramme. The only empirical approach to isolate training as a variable would be to isolate arepresentative control group within the larger staff population, and then rollout the trainingprogramme or learning intervention, complete the evaluation, and compare against a businessevaluationofthenon-trainedgroup.Unfortunately,manyorganisationswouldfindthistoodifficultatpresentbecauseofthedifficultyofgatheringthebusinessdataandthecomplexityofisolatingthetraining intervention as aunique variable.However, anecdotal qualitativedata isworth capturing.Thefollowingquestionsmaybebuiltintoatoolandcombinedwitharesultsbasedevidencechain:

1. Beforethe learningevent:whatareyour learningobjectives;howdoyouanticipate itwillbenefityourorganisationandyourself?

2. During/immediatelyafter:whatnewknowledgeorskillshaveyougained;whatactionshavebeen planned for putting the new knowledge or skills into practice; what will you dodifferently; how will it impact any behaviour changes identified? Identify two KPIs’addressed.

3. Cascadeoflearning:howwillyoushareknowledgewithinthewiderorganisation;haveyouhadaccesstoa‘trainthetrainer’sessiontoenableyoutodothis?

4. Shorttermimpact:3-6monthsaftercompletion,havetheactionsidentifiedabove(point2)been achieved? If not,why not?What difference has itmade in terms of overall learningobjective?Howhasitaddressedbusinessneeds,teamororganisationalobjectives?

5. Longertermimpact:6-12monthsasabove.Criticismof thismodel in the literature identifies that therearevariables inmeasuring impact thatthismodeldoesnot involve.Therecent INTRACpaper,PraxisPaper30:MonitoringandEvaluatingTraining (2015 p.14) cites amodel of Kaufmann’s five levels which “include the need to evaluateinputintermsofhumanandfinancialresources,aswellas‘reaction’oflearnerstothecourse.”FororganisationswhichalreadyhaveabasicevaluationofL&Dimpact,theINTRACpaperwillprovidean

NGOHRImpactPaper 10

additional valuable rangeofmodels toadopt. For thoseorganisations looking to formallyevaluateL&Dinterventionsforthefirsttime,Kirkpatrickisagoodplacetobegin.

Returnoninvestment(ROI)

“Unless anNGO canmonitor costs andmeasure outcomes itwill struggle to engagemeaningfullywith value for money” (BOND, 2012). ROI tools based on value for money principles producemeasuresofeffectivenessandaccountabilityfordonors,communitiesandNGOsthemselves.

TheROIInstitutexviistatesthatROImethodologyis‘asystematicapproachtoevaluatingalltypesofprogrammesandprojects;capturessixtypesofdatafromreactiontoROI;isacredibleandscalableprocessandthemostwidelyusedevaluationsystem,withglobaladoption’.

Themethodologyusesfivelevelsofevaluation:

• Reactionandplannedaction• Learning• Applicationandimplementation

• Impact(tangiblesandintangibles)• ROI

The process ensures that all activity within the company is ultimately aligned with their businessstrategicobjectives,makingthecaseforL&Dinvestmentandmeasuringtheimpactofmanagementtraining and leadership programmes. As with the Australian Healthcare case study, the toolsillustrated in ‘Measuring Leadership development: Quantify your program’s impact and ROI on

Organisationalperformance’Phillipsetal(2012)xviiihavegreatpotentialforuseacrossarangeofHRareas.

CEBCorporateLeadershipCouncilL&Dmetricstools

The CEB Corporate leadership Council provides on-demand access to best practices, easy-to-useanalyticandimplementationtools,andtailoredadvisorysupportsoHRexecutivesandHRbusinesspartners can benchmark their performance and execute effectively by applying insights frompeercompanies.AnL&DMetricsIdentificationTreeTemplateisattachedseparately.CEBstatesthat:

‘’ThistemplateguidesyouthroughidentifyingmeaningfulmetricsbyaligningdetailedmeasuresandrawdatatoeachL&Dobjective’sassociatedactivities.Thistop-downmetrics identificationprocessensuresthattheselectedrawdatameasuresaremeaningfulandrelatetobusinessgoals.UsingthistoolwillhelpL&Dachievethefollowing:

• AssociateeachL&DstrategicobjectivewithquantifiablemetricstomeasureL&Dsuccess.• Limit focus to only themost important specificmetrics and quantify L&D’s impact on the

businessstrategy.• Monitor and communicate L&D’s progress against the function’s strategic objectives to

stakeholders.”

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Activitiesformingthebasisofthemetricsidentificationtreeare:liststrategicobjectives;determinefactorsthatinfluenceobjectives;listthespecificmetricsthatwillbemosthelpful;identifysourcesofrawdata.

Private company illustrations I. Measuringthevalueofhumancapitalinrelationtointernationalassignments

forstaff

Thepaper‘AreAccountingMetricsApplicabletoHumanResources?TheCaseofReturnonValuing

Assignments’,SteenandWelch(2011)xix,looksathowaROIapproachmaybetakenwhenevaluatinga range of HR issues for staff - and for the company - who have been assigned to an overseasassignment with their company and subsequently return home post assignment. The researchconcludesthatitisextremelydifficulttoisolatecausalityandeffectivelyadoptmetricsusingonlythismethod and they recommend further research into the field of using accounting metrics for HRimpact.Thefollowingisanextractfromthepaper:“The importance of accounting for human resources has long been recognised by the accountingprofession. Until recently, human resource accounting (HRA) literature has been dominated bydiscussion as towhether humans fit the traditional definition of assets, and how tomeasure andreportthem.WeinvestigatetheconceptofhumancapitalanditsmeasurementthroughareviewoftheHRAliterature,aswellastheliteratureinhumanresources(HR).Thispaperthendrawsonthefindings of a small exploratory study into the measurement of return on investment (ROI) forinternationalassignments.Interviewdatarevealsthatintangiblecostsandbenefitsareproblematicwhenapplyingsuchametric;thatmuchoftheoutcomefromtheassignmentisintellectualcapital,initsbroadsense,andthereforedifficulttoisolateandeffectivelymeasure.”The study reveals that it is difficult to apply anROI principle tomeasuring tangible and intangiblecostsandbenefits.Nevertheless, one set of metrics useful for this activity is looking at the tangible and intangiblebenefitstoboththecompanyandtheemployeeandher/hisfamilywhererelevant.Fromacompanyperspectivethereareanumberofindicators,ifidentified,whichwouldbedirectlyrelatedtoimpactonachievingorganisationstrategicobjectivese.g.

1. Doesthebenefittothecompanyoutweighthecostofconsiderablefinancialinvestmentintothetraining,development,overseasassignmentpackage,lossofexpertiseandhumancapitalatthedeployingendortheloss(outoftheorganisation)experiencedthroughturnover?

2. How is the knowledge, skills and new (positive) behaviours of the returning expatriate,knownasthehumancapital,appropriatedintoorganisationalcapital?

They recommend:“AstartingpointcouldbeHRscholarsandpractitionersworkingwith theirHRAcolleagues to develop ways in which the employee component of intellectual capital could beincluded in company reports in a meaningful way, consistent with the balanced scorecardxxapproach.”

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COMPANYPERSPECTIVE(HRmanagers) INDIVIDUALPERSPECTIVE(Repatriates)Theadministrativecostsofrunninganinternationalassignment(IA)programme

The effect of notworking on the accompanyingpartner’sowncareer

Recruitingasuccessor(insendingunit) AdjustmentdifficultiesparticularlyforthefamilyTurnover of returning staff who leave postcompletion

Relocationstress

Disruption at the host unit caused by culturalinsensitivityoftheIA

Lack of a social life for those who were singlestatus

Opportunitycostofemployinganexpatriateoverthecostofalocalhire

Lossoffamilyback-upandsupport

COMPANYPERSPECTIVE(HRmanagers) INDIVIDUALPERSPECTIVE(Repatriates)Knowledgeandskillstransfer Personalgrowth

• Improvedlanguageskills• Greaterinterculturalunderstanding

Relationshipbuilding Work-relatedpersonalbenefits• Developingcompanynetworks• Insightsintootherpartsofthebusiness

Supportingcompanyobjectives:• Building attachment to the global

organisation• Transferofcorporateculture

Familybenefits:• Exposuretoothercultures• Opportunitiesfortravel

Figure7:IntangiblecostsofInternationalexperience

II. Talentmanagementandrecruitment:anewprogrammeforHRtoachievebusinessimpactthroughoutanorganisation

The McKinsey Global Talent Institutexxi estimates that by the year 2020 there will be a worldshortage of skilled workers who have successfully reached tertiary education. With effectiverecruitmentstrategiesandprocessesinplace,thefollowingcasestudyillustrates:

• Efficiencymeasures-recruitmenttime• Effectivenessmeasures-managementcontributiontothebusiness• Impactmeasures-relationshipwithclients/customersandcompanyprofits.

TheStateofHumanCapital2012:AFalsesummit(2012)xxiiwasajointprojectbetweenConferenceBoardandMcKinseyexaminingwhatwasneededtoensurethatfocusonarangeofhumancapitalinitiativesreallymakesadifferencetoorganisationalsuccess.Researchersasked:“whycan’thumancapital achieve the tangible results it so keenlywants todeliver?Onechallenge identifiedwas ‘aninabilitytorelatetheROIorbusinessimpactoftheirfunctionneeds’”.TheHumanCapitalAnalytics

ResearchWorking Groupxxiii identified four overarching guidelines to consider as an organisationimplementsanalytics.Humancapitalanalyticsmust:

• drivestrategicoutcomes.• drivemultipleperspectives.• balanceanalysiswithinformationneeds.• besustainableandtransferable.

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III. Telecomcompanycutsrecruitingtimebyhalfandhires100high-impactspecialistswithinthreeyearsxxiv.

The challenge:A few years after its privatisation, a major European telecom company sought tocompete with global media and IT players by embracing the internet telephony revolution andbuilding businesses in bothmobile networks and digital television. But the company recognised itwouldhavetorecruitanddeveloplargenumbersofhighlyskilledmanagersandspecialiststodeliveronthisvision.TheHRdirectorthereforeaskedMcKinseytohelpshapeacomprehensivetalentandleadershipstrategy.

Discovery: The work began with a detailed diagnostic, which revealed that the company faced aserious shortage of both leaders and technical talent such as IT specialists. Further, silo thinkinghamperedthecross-divisioncollaborationneededtofostergrowthanddeveloptalent.Finally, linemanagers doubted the HR function’s credibility and were likely to resist any talent initiative itproposed.

McKinsey worked with the HR director to create a three-year programme to turn the telecomcompanyintoapeopleleader.Theprogrammerefocusedthecompany’srecruitmentprocesstohirebetterpeoplemorequicklyandatlowercost;deployedthebesttalenttothemostcriticalpositions;madepeopleakeyfocusofboardmeetingsandbusinessreviews;andintroduceda“successorkeyperformance indicator (KPI)” by which line managers were evaluated for their effectiveness inmentoringfutureleaders.

To close the leadership gap identified in the diagnostic, McKinsey helped the company shape an“action-learningintervention”rootedinthebusiness(proventobeamuchmoreeffectiveapproachthan traditional training). This approach was built around intensive forums to develop the skillsmanagersneededtodrivegrowth,andfieldworkwheretheyputthislearningintopracticethroughrealprojectstoshapestrategy,tapcross-divisionsynergies,andgrowrevenue.McKinseyalsoguidedtheboardinmentoringhigh-potentialmanagerstobuildfutureleadershipcapabilities.

Finally,theprogrammebuilttheeffectivenessoftheHRfunctionbyfocusingitonachievingbusinessimpact as a strategic advisor to the board and the line. Solutions to key talent issues were co-developed byHR andmanagers of particular divisions, thus overcoming historicmistrust betweenthelineandHR.

Impact:Theprogramme’simpactwasdramatic.

• Recruitingtimewashalved.• InthecriticalareaofITtalent,100newrecruitsweresignedonduringthethreeyearsofthe

programme.• With thecompletionof theprogramme, thecompany’s talentand leadershippipelinewas

sufficienttofuelgrowthforthefollowingfiveyears.• The action-learning intervention had strongly impacted top managers’ effectiveness: a

participantreported:“Theprogrammehashelpedmetobecomeabetterleaderofpeople,ratherthanjustamanagerofresults”.

• TheprogrammealsohelpedHRboostitsimpact:initscustomersatisfactionscorerelativetopeers,thefunctionmovedfromthelasttothefirstquartile.

Thetalentandleadershipstrategymadeasignificantcontributiontothecompany’soverallsuccess,withitssharepricedoublinginfiveyears—evenagainstthebackdropoftheeconomicdownturn.

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IV. Apublichealthsectorillustration

In its report, Learning and development (L&D) in the Public Sector: The case for maintaininginvestment in the tough time (2013), The Australian Institute of Managementxxv states that thetendencytoviewL&Dasacostcentretobeminimised,ratherthananinvestmenttobemanagedisunderpinnedbyanumberofpressures:

• InsufficientL&Dplanningalignedwithagencies’strategies.• A focus onwhat is being spent on training rather than the relevance and effectiveness of

trainingbeingundertaken—thatis,afocusoninputsratherthanoutcomes.• Insufficient data on theROI of L&D accruing to either organisations or individuals and the

valueofL&Dmorebroadly.The following case study reviews a programme that addresses both talent management andleadershipdevelopmentissuesintheNewSouthWales(NSW)publichealtharena.‘EvaluationoftheClinical Excellence Commission Clinical Leadership Program (CLP) Final Report (Conway 2009). TheNSWgovernmenthasamajorcommitmenttotheimprovementofhealthcare.Criticaltothesuccessofitsleadershipdevelopmentprogrammeismeasuringtheimpactthatthishasonthebeneficiariesofitsservice:thepatients.Aformativeandsummativeevaluationoftheprogrammewascarriedouttoassesstheoutcomeoftheleadershipprogramme.MembersoftheClinicalExcellenceCommission(CEC)wereseekingevidencetocorroboratetheirbeliefsthat:

• leadership is a process – and that harnessing the leadership qualities of a number ofindividualsrequiresprocesseswhichdeliverimprovedorganisationaleffectiveness

• leadershipdevelopmentofsmallnumbersof individuals, in isolation, isunlikely toresult inmarkedimprovements,andmaylargelybeawasteofresources

• acompellingcaseexistedfortakingacohortofleadersthroughaprogrammethatisalignedwithorganisationalculture,contextandgoals.

The study looked at efficiencymeasures (a rangeof programmeattendance and completion ratesand effectiveness and impact measures (perceived accountability and transparency in a publicinstitution).

Desiredleadershipcompetenciesformedthebasisofthemetrics.CECfurtheradaptedthemfortheiruse (Hughes2013): “TheCEC initiated theClinical LeadershipProgram (CLP) in2007asa two-yearseedinginitiative.InlinewithitsmissiontomakehealthcareinNSWdemonstrablybetterandsaferforpatientsandamorerewardingworkplace,itskeyaimwastoenhancepatientsafetyandclinicalqualitybyenhancing the leadership skillsof those in clinical leadershippositions.Data sources forthe (program) evaluation included documents pertinent to the program evolution andimplementation, interviews with key informants, survey, submissions, portfolios of learning andreflectionsofstakeholders.”L&Dprogrammesaredesignedtobringaboutchangeinclinicalstafftofacilitatetheirleadershipofimprovedclinicalpractice.Issuesaboutthecontributioneducationandtrainingcanmaketoachievingchangeinpracticewithinorganisationshaveinevitablybeenraised.Theevaluationthereforeseekstodeterminetheextenttowhich theCECCLPhasbeen aworthwhile investmentof financial andother resources, given that“quality,efficiencyandeffectivenessarechallengedbystakeholdersand fundingresources” (Ochs,2001,p.3)whenpublicfundsarecommittedtoprogrammessuchasthis.

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The framework for the evaluation is Guba and Stufflebeam’sxxvi (1970, pp.47-49) Context InputProcessandProduct(CIPP)model.Stufflebeamxxvii(1983,p.122),indescribingtheevolutionofCIPP,statesthatthebasicframeworkis:

• contextevaluationtoinformplanningdecisions• processevaluationtoguideimplementingdecisions• inputevaluationtoservestructuringdecisions• productevaluationtoserverecyclingdecisions.

Therewas general agreement that actionwas required inorder toprogress the clinical leadershipcapability in NSW Health and that, given the relationship among patient safety and systemsimprovement and clinical leadership, the CEC was well placed to drive a state-wide strategy forclinical leadershipdevelopment.Abusinesscase for thedevelopmentofaCECCLPwasdevelopedand put to the CEC Board. Key to this business casewas the underlying belief that strategies forsustainable patient safety and system improvement are dependent on strong clinical leadershipcapabilities. In the evaluation framework, for each of the elements: context; input; process andproduct,thefollowingcellsarecompleted:evaluationobjective;superordinateevaluationquestionand example data source with collection method. Within their own context, the CEC frameworkreportedonimpactmeasuresoftheroleoftheclinicalpractitioner,managerorleader,projectbeingevaluated,goalormissionofthatprojectandtheoutcomebeingmeasured.

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Recommendations The 2015 CIPD document ‘Human Capital Reporting: Investing for Sustainable Growth’, concludesthatbetterreportingonhumancapitalmanagementisinitselfnotsomethingthatisseenashavingvalueforstakeholders,probablybecausestakeholdersareunawareofthevaluethatthisdatabringsandhowthevalueisdirectlyconnectedtooperationalsuccess.Theyrecommendclearerexplanationandreportingexternallyoftheaddedvalue,improvingqualitystandardsinHCMreportingand“thatmaterialHCMmattersshouldbediscussedwithinannualreports”.For non-profit INGOs, the value lies in evaluating the impact of HR, L&D and organisationaldevelopment (OD) interventions, and theprocessesandpracticewhereby these functionsoverlap,ontheorganisation’sperformancewithachainofevidencethatrecordsimprovementofprogrammeeffectiveness.ThekeytoolswhichshouldbeconsidereddependonthescaleandsophisticationofthesystemsoftheNGO,howeverwithinthecapacityandcapabilityofallbutthesmallestteams,shouldbe:

• Reportingonkeymetrics:o totalcostofworkforceemployed(includingcontingentlabour)o staffrecruitmentandturnovercostso totalinvestmentintraininganddevelopmento employeeengagementsurveyscores

• Asimpledashboardpresentation forseniormanagement reportingwhich informsdecisionmaking.

• AdoptionoftheKirkpatrickModelforsummativeevaluationoflearninginterventions.• SimpleROImodelling.

It is recommendedthatsomekeycorporatepartnership relationshipscouldbedevelopedtoallowgreater access to toolkits, expertise and other resources that would otherwise remain out of thereachoftheNGOsector.

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Glossary of acronyms and abbreviations BSC:Balancedscorecard

CEB:Corporateexecutiveboard

CEC:ClinicalExcellenceCommission

CIPP:Contextinputprocessandproduct

CLP:ClinicalLeadershipProgramme

HCM:Humancapitalmanagement

HR:Humanresources

HRA:Humanresourceaccounting

INGO:Internationalnon-governmentalorganisation

IT:Informationtechnology

KPI:Keyperformanceindicator

L&D:Learninganddevelopment

NGO:Non-governmentalorganisation

OEP:Organisationaleffectiveness/performance

PDP:Personaldevelopmentplan

ROI:Returnoninvestment

SCM:Successcasemodel

CIPDDefinitionsxxviiiWhile therearevariousacademicunderstandingsof thedefinitionofhumancapital, the followingbroadlyestablisheddefinitionswereusedduringtheinterviews:

•Humancapitaldescribesthevalueofpeopleatworkandtheircollectiveknowledge,skills,abilitiesandcapacitytodevelopandinnovate.

• Human capital management enables organisations to make more productive use of peoplethroughmeasurements,analysisandevaluationratherthanguesswork.Itprovidesguidanceonthedevelopment of HR and business strategies that enable improvements in levels of employeeengagementandbusinessperformancebysuchmeansasbetterselection,trainingandleadership.

•Humancapitalmanagementreportingaimstoprovidequantitativeaswellasqualitativedataonarange ofmeasures (for example labour turnover or employee engagement levels) to help identifywhichHRormanagementpracticesdrivesustainablebusinessperformance.

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