HR Tag Archive

ROI falls short for evaluating human capital and HR

July 29, 2015| People, Systems|

In my previous post I discussed why ROI falls short as a tool for making business decisions. Here I address why ROI doesn’t live up to the promise it’s supposed to have for evaluating human capital and HR.

HR is often asked to show the ROI of its programs and processes. Think about how this usually plays out. When applied to human capital or HR, ROI is almost always used defensively to justify programs and policies for which there is not enthusiastic support. At the same time, there often is unwavering support for people and processes that key stakeholders “know” are critical for strategic success. So if ROI is not the preferred method for understanding how people and processes contribute to strategic success, what is? And how can organizations better diagnose what levers they need to pull to improve strategy execution and organizational effectiveness? (more…)

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The ROI monster under the bed

July 15, 2015| People|

Return on investment (ROI) is perhaps the most universally applied tool ever created in the history of finance. It is a standard measurement used to evaluate the financial return from an investment or project.

For all its power, though, ROI is a lot like the monster or bogeyman hiding under the bed that young children fear. It can seem big and scary, even at times all powerful, when we are young. But when we grow up and can see things with a broader perspective, we understand the reality and can put our youthful fears to rest. ROI today is used like a litmus test for HR—if HR cannot show a high enough ROI, then Finance will never approve what HR wants to do. And HR is like the young child fearing the ROI bogeyman under the bed: it doesn’t have the right perspective on the limitations of ROI and what should be done instead. (more…)

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Employee engagement does not cause performance

March 13, 2015| People, Systems|

We know from decades of research and practice that performance leads to job satisfaction. When people are productive, accomplish their objectives, get good feedback on their performance, and are rewarded for being productive, they usually are satisfied with their jobs.

The counter argument – employee engagement causes performance – makes intuitive sense yet does not necessarily hold empirically. The easiest way to make most employees happy is to keep their compensation the same and cut their responsibilities in half. However, doing so would completely destroy profits. Thus employee engagement does not always “cause” improved organizational performance.

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