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“If you were designing a future-orientated review of a well-regarded, high performing HR function how would you do it?” - Dr. Chris Andrews

I was recently asked to comment on the terms of reference for an independent, external review of a Human Resources function. The function was well regarded, corporate benchmarks were being met or exceeded, employee relations were considered good to very good, and the key customer success measure was the envy of the organization’s competitors. Still, senior management wanted to review the priorities and scope of activities undertaken to aim higher and to sharpen focus.

This is the point where you should stop reading and really start thinking. Where would you start? What would you want to include or exclude? What methodology would suit this assignment? How much value could a reviewer add in these circumstances? Is there a framework for this activity? Is there software that would assist this type of review process?

My thesis topic, short title being HR Performance Auditing, had covered some of this field so I felt comfortable contributing. But the case study in that instance was part of a formal auditing program, using an experienced auditor in the lead role, conducted in accordance with the relevant auditing standards and reporting directly to an Audit Committee. The biggest issue then was a lack of standards against which to complete the evaluation. So, I would need to adapt my previous approach to these new circumstances.

For this review we don’t especially need to focus on compliance, risk or benchmarking in the first instance. The function is well regarded and performing at a high level. If these issues emerge during the review, we can purse them but it’s future performance that needs the close attention.
 
 


 

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Performance Review
Objectives should equal Outcomes at the outset
Standards need to be set for the evaluation to be credible
Metrics & measures should apply to each segment
Evidence based decision-making
People matters: especially communication
Technology & Work Systems
Organization specific criteria

 


 
 
In my opinion, points to note include:

  • The review should be future-orientated. We can learn from the past but this exercise is about doing something different in the future.
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  • There needs to be clear organizational outcomes identified and these need to be reflected in HR objectives.  HR can be good at process and output measures and metrics, but dismal at nailing outcome metrics and measures.
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  • Select the reviewer wisely.
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  • Do not restrict the reviewer by specifying the HR activities for review. We need free thinking here; have confidence in the reviewer you select.
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  • The critical HR issues that will determine the organizations success need to be identified in the review. While these issues should be in the current strategic plan, followed through with implementation plans and complementary budgets, it may not be so.
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    Dr. Chris Andrews | Contributor, HRExaminer Editorial Advisory Board

  • The critical HR issues should be selected using a combination of strategic choice and risk assessment. Identify why these issues are selected and why not others – this is a key step. This will confirm future direction and priorities. If we get this wrong, we will miss our intended targets.
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  • Consider balance issues: centralization vs decentralization, the balance between strategic and transactional activities.
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  • Consider the state of HR technology: to boost performance does technology need addressing?
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  • Consider HR team skills and experience, and numbers.
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  • Performance* has three components: effectiveness, efficiency and economy. These are overlapping terms not tight boxes. If it is affecting future performance it needs to be identified – the label is less important.
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  • HR tend to struggle with the concept of economy but are better when dealing with effectiveness and efficiency.
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  • For the critical HR activities identify objectives, inputs, processes, outputs and outcomes. At the start objectives should equal intended outcomes; risks are considered also. Are there metrics and measures in place to report on progress and serve as the basis for evaluation?
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  • Scope: the organization in this instance wanted one reviewer; a panel also works.
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  • Scope: this review is centered on the activities of the HR function rather than people management across the organization. In the review watch for scope creep and be clear on boundaries.
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Following my initial input and further senior management discussions the organization adopted the following for its review:
 
 
Terms of Reference

  1. Clarify HR’s strategic role by considering the organization’s strategic priorities and identifying areas where HR support will be critical to the ability to succeed. In particular, consider the role that HR must play in building the capacity and capability of our staff to innovate and succeed in the changing environment that we are facing.
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  3. Consider the balance between strategic and transactional activities undertaken by HR, the level of service provided by HR for line managers, and the total HR and line management workload associated with HR-related activities. Comment on the implications that a realignment of HR’s priorities towards a more strategic focus will have for their current capabilities and resources.
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  5. Make recommendations regarding HR-led projects that should be implemented in the short to medium term (1-3 years), and longer-term goals, that would materially progress the organization toward its stated strategic priorities.
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So, back to you. If you were designing a future-orientated review of a well-regarded, high performing HR function how would you do it, and what Terms of Reference would you adopt?
 
 


 
 
*Explanatory Notes – the three E’s

Effectiveness An outcome concept. It means the achievement of the objectives or intended effects of activities (doing the right thing).
Efficiency An input & output concept. It means the use of resources such that output is maximised for any given set of resource inputs, or inputs minimized for any given quantity or quality of outputs (doing things right).
Economy An economical operation acquires the right resources in appropriate quality and quantity at the right time and place at the lowest possible cost.

 
 
Aspects of Economy

Opportunity Cost Innovation presents as an alternative. Is there another way of undertaking the activity that produces a better result? These alternatives may arise, for example, from disruption via technology or work organization.

The opportunity cost is the ‘cost’ incurred by not enjoying the benefit of the best alternative choice. When choosing to do these ‘x’ HR activities in this way, we cannot also undertake ‘y’ alternative activities.

Social Benefits and Social Costs These are broader than accounting costs, including social benefits and social costs. The environment, ethics and equity examples are topical. Think ESG.

 
 



 
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