Human Resources may not immediately come to mind when you think about ROI. Why not? Because HR typically falls in the “soft” category — meaning its successes and failures can’t be easily quantified in terms of financials. If you’re holding back from investing in HR because you think you can’t produce tangible results to back up your investment, think again.
Let’s take a closer look at the ROI potential of Human Resources.
In its most formal sense, ROI is a mathematical calculation which determines the financial return on an investment. This concept is applied to business performance by contrasting net profits with net worth. Additionally, ROI can be applied to smaller segments of an organization, such as departmental initiatives, projects and programs. And yes, it can even be applied to HR.
We now have access to a breadth and depth of analytics. The key to showing off the benefits of your HR services? Using these metrics.
While support services may not earn a prominent spot in your corporate mission statement, they help propel your company toward its objectives. After all, where’s your business without its people?
Ultimately, the more you can show how HR services affect your business’ bottom line, the more you can prove the worth of your programs. Rigorously tracking all human resources activity is an essential part of it. This data plays a vital role in determining and emphasizing HR contributions to corporate goals. The more data you track, the more you can isolate HR programs’ effects by converting it into ROI.
ROI and HR: Practical Applications
The fact is that ROI can be used by HR to value just about any service with a dollar cost attached. At its core, it’s a simple concept: divide the value of a program or project by its implementation costs.
For example, if your organization debuts a new workplace health and wellness initiative, ROI can be measured by calculating reduced costs related to sick days and healthcare claims and expenses.
Employee training programs, meanwhile, can be evaluated for ROI by comparing total costs to money saved through reduced turnover.
From employee orientation programs to mentoring initiatives, the list goes on and on.
Too frequently, we get trapped in the HR promises of “high employee satisfaction,” and “low employee turnover.” Unfortunately, these claims can fall on deaf senior management ears. And while they may be terrific things for your organization, they don’t offer anything in terms of ROI….unless you make them.
But calculating ROI isn’t just a technique to demonstrate your departmental worth to clients and management; it’s also an essential way for HR managers to hold themselves accountable for their impact on their organization’s success or failure.
For more information on how to put HR-ROI to work as part of your comprehensive human resource management tools, contact the WittyParrot experts today.