Quantifying The Contributions Of Human Resources Management To Overall Organizational Effectiveness. (How Human Resources Can Contribute In Creating A Competitive Advantage For The Company.)

1051 words - 5 pages

Human Resource Management (HRM) is a vital part of creating and maintaining an effective organization that is able to meet its goals and gain a competitive advantage over the competition.. HRM includes myriad activities ranging from recruitment to training and even the development of compensation systems. HRM has evolved significantly since the early 1900s. The need to deal with labor unions, as well as global competition, technological advances, and the changing nature of work make it ever more imperative that companies employ effective human resource managers and maintain effective programs of HRM. (Dessler, 2008)Human resource managers must be prepared to quantify their overall ...view middle of the document...

A return on investment (ROI), cost benefit analysis is an effective way for HR managers to justify themselves and their departments, such analysis shows in financial terms, how the HR department contributes to the company's bottom line. HR has been historically viewed as a an expense, rather than investment, quantifying the contribution in financial terms helps organizations fully understand the value of effective HRM in helping achieve organizational goals and allows HR managers to become full strategic partners in terms of corporate level planning and decision making.Activity based costing (ABC), is a process that is used to identify the costs associated with each step of a given process. Just like other processes a company will use, the HRM process can be quantified in this way. Breaking down costs and tracing them to a particular activity, rather than spreading them arbitrarily across the board increases visibility and transparency and allows managers to prove the efficacy with which resources they have been allotted are being used. ABC can be used with the HRM process to show corporate level management to inform the budgeting process, help benchmark company HRM costs against industry standards, and quantify the HR contribution to overall organizational effectiveness. ("Evaluating HRM's contribution to Organizational Effectiveness", 2004)The Balanced Scorecard approach provides a way to align business activities with the overall organizational goals, by monitoring the performance of specific functions over time. This method was developed by David Kaplan and Robert Norton and outlined in their 1996 book, "The Balanced Scorecard". (Balanced Scorecard, 2008).One company that has used such an approach is the Ritz-Carlton hotels. As part of the "Internal Business Process" part of their scorecard, the hotel chain conducts daily and monthly performance reviews, an HR activity, to help measure product quality indicators within each of their hotels. Being a customer service business, with repeat business depending upon satisfied customers, an effective workforce is a top priority for the hotel...

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