Human Resoures effectiveness

Measuring Human Resource Effectiveness

Human resources' effectiveness must be measured accurately since it allows the organization to assess the costs incurred of training and development of HR while at the same time it helps them see if they should continue incurring those costs. The two most commonly used methods of measuring effectiveness are: average revenue per employee and average cost per employee. These methods are popular because they are simple to use and give a quick look into the effectiveness of HR. average revenue per employee is the method whereby it is determined as to how much revenue is being produced by one employee of the company. If revenue per employee is high, it shows that employees are productive and they are contributing significantly to company annual turn-over. This can be done with the help of such tools as performance assessment charts, scorecards, total revenues divided by number of employees etc. But this method may not be very accurate since it is not easy to determine per employee revenue without compromising the fact that some employees would always be investing more than others and there might be some whose complete removal might not adversely affect revenues. But since the company needs an overall picture, this deficiency of the method can be ignored. To complete the picture however, the firm does need the other method as well i.e. cost per employee. This should be done along with the first method to come to a more reasonably accurate conclusion. The cost per employee is determined by dividing total costs incurred with the number of employees. This allows the firm to see if it is incurring too much, too little or just the right amount. It is an important part of measurement since revenues cannot give a complete picture. For example, if a firm finds out that its revenue per employee is $10,000 which is considered high and good by the employers, but later discovers that average cost per employee is coming to $5,000, then revenues will no longer be important because it would become clear that the firm is not getting anything out of its investment.