Cost-Benefit Analysis / Metrics for HR Professionals

To do a cost-benefit analysis, you must find, quantify, and add up all the positive factors or the benefits. Then, to find the costs, you must identify, quantify, and subtract all the negative factors or limitations, including missed opportunity costs. The difference between the two indicates whether the planned action is advisable or worth pursuing. The real challenge is to be able to not only determine the real benefits and the real costs, but also to properly quantify them. When managing people, that has and will continue to be a particular challenge for HR professionals.

Some calculations can be fairly straightforward. For example, should we hire an additional salesperson? If the total compensation of a salesperson is $100,000 per year, but the average sales of our current sales staff is only $80,000 on a good month, it may not be worth the cost at the present time. This seems fairly straightforward until the picture is complicated. Suppose there is a performance driver to build a more qualified sales department, and suppose that the marketing staff is projecting business to increase in the last 6 months of the year. Taking time in March through May to find highly talented salespeople might then make sense from a strategic perspective.

Metrics for HR Professionals

Collected data can be qualitative, quantitative, or a mixture of both. Qualitative data are often associated with words or perspectives and are often collected through ways such as interviews. For example, an organization might conduct exit interviews to ask previous employees why they decided to leave and to better understand these employees’ general perspectives on their experiences while at the organization. That would lend itself to developing common themes learned from the interviewees. Those themes could be reported on in some detail and could provide fairly in-depth information for qualitative data analysis related to HRM.

Quantitative data are typically associated with numerical calculations and are gathered from sources such as surveys. For example, an organization might calculate the average turnover rate for the organization by counting how many people have resigned over the past year. The organization might compare this figure to previous years, and the result could help them understand if they have experienced an increase or decrease in turnover.

When you want to understand “why” people do something, qualitative data collection is better. When you want to know “what” they did, quantitative data is more appropriate. Using a combination of the two can sometimes paint a better picture in understanding organizational issues overall.

Respond by Day 7 to three or more of your colleagues’ postings in one or more of the following ways:

Ask a probing question.
Share an insight from having read your colleagues’ postings.
Offer and support an opinion.
Validate an idea with your own experience.
Make a suggestion.
Expand on your colleagues’ postings.
Classmate 1: (Cost-Benefit Analysis) (Barbie) –

“Financial Competency

HR professionals who do not posses financial competency place themselves at a disadvantage when approaching departmental leaders in participation of the needs of the organization when placing an idea and not having the knowledge of how much the development plan will cost and how effective and profitable the strategy will be for the specified department or organization. As suggested by Becker, Huselid and Ulrich, “…HR managers need to familiarize themselves with the concepts of finance and accounting, especially the process of capital budgeting.” (2009). Through financial competency, HR strategic partners will understand the process of the investment and realize the length of the investment before indicating the ROI. Strategizing programs through HR provide many benefits; however, it is the cost analysis indicating the ROI if the strategy is or was to be worthwhile and in the proper alignment of the organization. For example, one oil company did not realize the value of the workforce management; rather the value was placed on the product itself. However, when it was explained to the senior management through HR deliverables such as training development, the company realized how the human capital impacted the overall success of the company. (Becker et al., 2009). ”

Classmate 2: (Cost-Benefit Analysis) (LaTanya) –

“HR Competencies

I believe that is very necessary for HR professionals to have financial competency for a few reasons. One, it would allow them to pro actively determine what actions to take in case of any financial risks. For example, if an HR professional working with McDonald’s Corporation know that they are about to lose three employees due to then finding better jobs, he or she should begin the recruitment process immediately to find new employees to ensure that the company is able to deliver the best customer service experiences. “Determining which elements of your work should be costed is essentially a strategic task; thus you should tie it to the firm’s competitive strategy and operational goals” (Becker, et al., 2001, p.1416). Moreover, by having financial competency, this would allow HR professionals to have access to all of the company’s finances so that they could analyze the risks, financial competition, and possess the skills and abilities needed to pursue the best solution.”

Classmate 3: (Metrics for HR Professionals) (Tammie) –

“Qualitative Method

Since Occidental acquired Anadarko, HR is in the spotlight for ensuring employee engagement. Benedict (2019) asserts, “engaged employees are critical to a company’s success under any circumstance”. Employee commitment and loyalty ensures continued success. The world is watching how Occidental handles employees, customers and shareholders, mainly because the deal was negotiated by a woman. Therefore, core values must be the guide to extend the cultural reach to Anadarko. HR must lead and govern integration in every aspect. Administering a survey can be useful to learn what employees need, include them in decisions and offer the opportunity to serve on a transition team (Benedict, 2019). A limitation of this method is that senior leadership may want to hold off on surveying to gather data due to confidentiality.

Transparency in communication is vital because employees know decisions are being made that will affect their families. Communicating and reinforcing organizational values in visible means by senior leaders, managers, HR and the CEO will cause a smooth transition. It’s important that communication and information is given to employees from both CEOs, other executives and HR. Special consideration must be given to employees who may be leaving as a result of the acquisition. This is an opportunity for HR to measure the number of employees leaving each organization and measure appreciation, concern employees and families and provide support for through an open-door policy for anyone (Benedict, 2019).”

 

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