Study: Better Measures Needed For HR Evals

July 29, 2003 ( - Because corporate HR functions are not getting the rigorous evaluation from senior executives of international firms they require, senior managers are too often making HR-related decisions on limited metrics and subjective impressions, according to a new study.

According to a study by EDS and conducted by Harris Interactive, 90% of US, Canadian and European companies surveyed evaluate their human resource functions primarily on:

  • employee retention/turnover
  • corporate morale/employee satisfaction
  • HR expense as a percent of operational expense.

About half of senior-level executives believe there are critical dimensions of human resource department performance that are not currently being adequately measured. “Developing better measurement tools will be critical to managing people costs and assessing overall HR performance more effectively,” researchers wrote in their report.

The survey reveals that while Human Capital Planning and Strategy are the most valued contribution of the HR department, HR departments’ highest performance areas are in transactional and administrative functions such as payroll and compliance.

Of those HR areas measured, methodology and data reliability are questionable, and there appears to be no real link to overall corporate performance. For instance, less than 50% of companies utilize measurements such as revenue per employee or return on human capital.

One contributor is inadequate funding and resources for ongoing administration – deemed by respondents as the least valuable contributions from HR departments.

Harris Interactive’s Strategic Consulting Group conducted a total of 76 interviews in as many different companies. Respondents were vice presidents or higher of Fortune 500 companies with 15,000 employees or more: 53 interviews were conducted in the United States and Canada while 23 interviews were conducted in the UK., Germany and France.