A note from Professor Dr.

HHDNP Opatha

Evaluation of the Success of HRM and the HR

Scorecard
Evaluation of HRM refers to appraising the degree of success of HRM being performed in
an organisation. In the first Chapter, HRM was defined as the efficient and effective
utilization of human resources to achieve goals of an organisation. Viewing from this
definition, the major question to be asked in the context of evaluation of HRM is as follows:
What is the degree of efficient and effective utilisation of human resources in order to
achieve goals of the organisation?

For a good evaluation, it is important to assess how well and how far employees of the
organisation have been utilised in achieving the organisational goals. A model of HRM was
presented in the first Chapter. In order to achieve the organisational goals, it is possible to
theorise that objectives, strategic goals and generic purpose of HRM need to be achieved
respectively through successful performance of specific HRM functions. Ideally each of the
HRM functions needs to be performed successfully and then objectives of HRM will be
achieved. Achievement of the objectives of HRM will lead to achievement of the strategic
goals of HRM that will lead to achievement of the generic purpose of HRM. If the generic
purpose of HRM, i.e. to generate and retain an appropriate and contented human force,
which gives the maximum individual contribution to organisational success and progress of
success is accomplished, the organisational goals can be achieved.

Why is it important to do an evaluation of the HRM function? One reason is to know

whether HRM functions are performed in good way. If HRM functions are performed in
good way, HR professionals can be happy as they perform professionally. Another reason
(perhaps the most important reason) is to ascertain whether the HRM schemes being
implemented contribute to achieve the strategic objectives, mission and vision of the
organisation. HRM exists for realisation of the strategic needs of the organisation. What is
the impact of HRM on achieving the strategic objectives of the organisation? Is there a
significant impact? If so, how much is it? Is the degree of impact increasing over the past
years? Answers for these questions can be obtained by evaluating the HRM function.
Another reason for evaluation is to promote the importance of HRM within the
organisation. If results of the evaluation are positive and significant, it will increase the image
of the HRM department and its professionals. Also it will lead to develop a positive attitude
within the CEO and other managers with regard to HRM. Justifying the costs involved in
implementing HRM programmes is a reason for HRM evaluation. Also evaluation results
can be used to identify strengths and weaknesses of the HRM systems and then take
remedial actions to improve the efficiency and effectiveness of the HRM systems. Glueck
(1979) presents four purposes of evaluating the HRM function. They are:
1. To justify HRM’s existence and budget.
2. To improve the HRM function by providing a means to decide when to drop
activities and when to add them.
3. To provide feedback from employees and operating managers on HRM effectiveness.
A note from Professor Dr.HHDNP Opatha

4. To help HRM make a significant contribution to the organization’s objectives.

Ivancevich (1992, p. 772) writes: “There is an old motto in HRM that, if you can’t measure it, forget
it. The premise of this saying is that, if you can’t show what contribution you are making, there is little hope
that anyone will pay attention to your requests. Therefore, measurement in terms of evaluation is a high
priority need in any HRM unit. For that matter, showing a contribution in any unit in an enterprise should
be a top priority.” Thus, evaluating the success of the HRM function is a work that requires a
high priority by the HR Department of the organisation. With the increasing emphasis
placed on strategic contribution, competitiveness, and cost control, there has been a greater
need to justify the existence of human resource practices, activities, and programmes (Greer,
2001).

Dimensions of Evaluation
There are three aspects or dimensions of evaluation of HRM. First dimension focuses on
evaluating the quality and the quantity of each HRM function. Ideally each HRM
function is to be performed systematically and formally. Under this dimension, central
question is whether each function has been performed in the appropriate way. Second
dimension is attainment of the HRM objectives and strategic goals. This dimension focuses
on evaluating the degree to which the HRM objectives and strategic goals have been
achieved. Third dimension is evaluation of the department for human resources in the
organisation. It focuses on how well and how far the HR Department of the
organisation has performed. For evaluation, there must be a period that may be one year
or six months or four months. Doing an evaluation is important for at least one time per
year.

What are the criteria for evaluation under each dimension? Basically evaluation criteria are of
two types, i.e. subjective criteria and objective criteria. Managers’ opinion of HR Department
success is a subjective criterion. Average time taken to fill job vacancies is an objective
criterion. Exhibit 21-11 presents some useful criteria for evaluating the efficiency and
effectiveness of HRM by function. As per the Figure it is possible to have objective criteria
and subjective criteria as well for each function of HRM. Exhibit 21-12 presents some useful
criteria for evaluating the efficiency and effectiveness of HRM by objectives and strategic
goals of HRM. By using several objective and subjective criteria it is possible to evaluate the
degree of achievement of the objectives and strategic objectives of HRM. Some useful
criteria for evaluating the efficiency and effectiveness of the HR Department are given in
Exhibit 21-13. Evaluation done under the three dimensions will be more comprehensive
though it is more rigorous and time-consuming. As benefits of evaluation exceed costs of
evaluation, a sufficient amount of evaluation of HRM needs to be done.
Exhibit 21-11 Criteria for Evaluation of Efficiency and Effectiveness of HRM
Functions
Function Objective Criteria Subjective Criteria
Job Design Number of complaints about Employee satisfaction about
job design behavioural elements of job
design
A note from Professor Dr.HHDNP Opatha
Job Analysis Number of jobs covered by
job description and job
specification
Number of times of up-
dating the job descriptions
and job specifications
Human Resource Planning Difference between forecast
job vacancies and actual job
vacancies
Number of job vacancies not
forecasted
Number of current employees
not considered for
replacement but competent
Any surplus or shortage
happened
Recruitment Cost per recruit (total
recruitment cost /number of
recruits)
Ratio of qualified recruits to
unqualified recruits
Selection Percentage of employees
selected based on validated
selection methods
Number of tests validated
Availability of more objective
evaluation scheme for
employee selection
Hiring Complaints about lapses of
the employment
appointments
Induction Percentage of new employees
inducted
Number of hours of induction
Performance Evaluation Availability of different PE
schemes for different
categories of employees
Percentage of employees
whose performance is
Employees’ satisfaction about
the contents of the job
descriptions
Managers’ satisfaction about
usefulness of job descriptions
and job specifications
Top and Departmental
Managers’ satisfaction about
having the right employees at
the right time at the right
place.
Top and Departmental
Managers’ satisfaction about
having suitably qualified job
recruits
Top and Departmental
Managers’ satisfaction about
quality of selection schemes
Rigor in selection
Top and Departmental
Managers’ satisfaction about
contents of the appointment
letters and other related
documents
Managers’ satisfaction about
induction programmes of
their new subordinates
Rating of quality of induction
received by inductees
Managers’ satisfaction about
quality of PE schemes
Rating of quality of PE by
employees
A note from Professor Dr.HHDNP Opatha

evaluated formally

Percentage of employees who

Training and Development
received performance
feedback from multiple
sources
Number of hours of training Rating of quality of training
received by employees per received by trainees
year
Rating of quantity of training
Number of training by managers
programmes developed per
year

Number of training
programmes implemented per
year
Career Management Number of career
management programmes
developed and implemented
Pay Management Percentage of jobs evaluated
as per point method
Complaints about wrong
calculations of pays
Number of delays in paying
Rating of quality of career
management perceived by
employees
Top and Departmental
Managers’ satisfaction about
pay management
Employees’ satisfaction about
pay management

Number of pay surveys done

Number of cost of living

Welfare Management
surveys
Percentage of employees Employees’ satisfaction about
received welfare quality of welfare
management
Value of welfare cost per
employee

Complaints about welfare

administration
Management of Incentives Percentage of employees Rating of quality of
eligible for incentive pay management of incentives

Number of incentive
programmes implemented

Percentage of workforce
whose merit pay is tied to
performance

Employee Movement
Percentage of difference in
incentive payments between a
poor employee and an
excellent employee
Percentage of jobs filled from Top and Departmental
A note from Professor Dr.HHDNP Opatha

within Managers’ rating of

management of employee
Availability of a scheme for movements
each type of employee
movement

Percentage of requests for

transfers settled

Amount of delay in finalizing

movements
Health and Safety Number of health and safety Employees’ rating of quality
Management programmes implemented of health and safety
management
Number of occupational
accidents occurred Rating of propensity to suffer
from employee stress
Percentage of employees who
suffered from occupational
diseases

Discipline Management
Cost of accidents
Number of rule violations
Percentage of employees who
have not violated a single rule
of discipline
Number of disciplinary cases
settled
Managers’ rating of quality of
management of employee
discipline
Employees’/trade unions’
rating of quality of
management of employee
discipline

Number of legal cases filed

against the organisation

Number of legal cases failed

Grievance Handling Number of grievances Employees’/trade unions’

presented rating of quality of
management of employee
Number of grievances settled grievances

Number of grievances settled

Labour Relations
to the satisfaction of the
grievant
Number of industrial actions Perception of quality of LMR
occurred by managers
Number of industrial actions
settled amicably Perception of quality of LMR
by union leaders
Duration of industrial actions

Number of cases forwarded

for arbitration or similar way
of settlement
A note from Professor Dr.HHDNP Opatha

Percentage of the employees

covered by collective
agreement

Exhibit 21-12 Criteria for Evaluation of Achievement of HRM Objectives and

Strategic Goals
Objective/Strategic Goal
Procure right people at the
right time to do the right jobs
Objective Criteria Subjective Criteria
Number of complaints about Managers’ satisfaction about
job placements procurement of right people
at the right time to do the
Complaints about right jobs
appointments

Retain the most appropriate Percentage of retention of Excellent Employees’

employees within the high-performing key Intention to retain-average
organisation employees survey score

Rate of quits (excellent) as a

percentage of the employee
force
Get and improve Percentage of resigned
organizational commitment of employees over number of
the employees employees worked
Number of attempts to resign
Generate and enhance job Absence rate (all stay-aways
involvement & organizational from work/total possible
citizenship working days × 100)
Absenteeism rate (all absences
on unauthorised leave
(including sick leave)/total
possible working days × 100)
Number of occasions of
Tardiness (average)
Average survey score of
organizational commitment
(the summated rating
received on a 7-item, 5-point
Likert scale)
Average survey score of job
involvement (the summated
rating received on a 7-item,
5-point Likert scale)
Average survey score of
organizational citizenship
(the summated rating
received on a 7-item, 5-point
Likert scale)

Percentage of employees who

are chronic late comers

Percentage of employees who

are helpful

Percentage of employees who

worked more than they were
supposed to work

Motivate employees and Percentage of employees who Average survey score of job
enhance job satisfaction are enthusiastic to work motivation and satisfaction
A note from Professor Dr.HHDNP Opatha
Control the cost of employees
Improve employee
productivity
Employee development
Increase quality of work life
Ensure legal compliance
Ensure customer compliance
Number of complaints about
dissatisfactions/frustrations
Average rewards cost per
employee
Total employment cost
Profits per employee
Sales value per employee
Production value per
employee
Number of units produced
per employee
Number of units sold per
employee
Number of new customers per
employee
Percentage of employees who Rating of quality of employee
were promoted development effort
Number of hours of
development programmes for
employees
Number of innovations
Number of suggestions made
Percentage of employees
making suggestions
Number of suits against the
organisation
Number of violations of
labour law requirements
Cost of litigation per
employee
Number of violations of
customer requirements
relating to labour
management
Number of customers lost due
to mal HRM practices
(the summated rating
received on a 10-item, 5-
point Likert scale)
Managerial perception of
controlling the employee cost
Average employee
performance evaluation score
Average performance
evaluation score for quantity
of work
Average performance
evaluation score for quality of
work
Average survey score of
quality of work life (the
summated rating received on
a 10-item, 5-point Likert
scale)
Average survey score of legal
compliance (the summated
rating received on a 10-item,
5-point Likert scale)
Perception of the legality of
the HRM practices
Customer perception of HRM
practices-average survey
score
A note from Professor Dr.HHDNP Opatha

Exhibit 21-13 Criteria for Evaluation of the Effectiveness of the HR Department

Objective Criteria
Efficiency-HRM department budget/ population
of employees served
Complaints about weaknesses or defects of the
HR Department
Praises about service rendered by the HR
Department
Number of employees per HR professional
Subjective Criteria
Line Managers’ satisfaction about the
services of the HR Department-average
survey value
Employees’ rating of quality of service
provided by the HR Department
Perception of efficiency (quickness) of
responses to each request/problem
brought to the HR Department

HR Department cost per employee The CEO’s rating of the roles played by the
HR Department

HR Scorecard
Does HRM contribute to achievement of strategic goals of the organisation? HR scorecard
is an evaluative technique that attempts to get a more quantitative answer for the question. It
is a framework that links HRM with strategic objectives and shows the causal link between
HRM and strategic objectives in a quantitative way. Management ultimately judges the HR
function based on whether it creates value for the organisation, where “value creation”
means contributing in a measurable way to achieving the organisation’s strategic goals
(Dessler, 2005). Hence HR scorecard is an evaluative approach showing how HRM creates
value for the organisation.

The HR Scorecard derives from works of Robert Kaplan and David P. Norton on balanced
scorecard perspective. Greer (2001, p. 307) writes: “Kaplan and Norton explain that satisfaction is
a prerequisite for improvements in productivity, quality, responsiveness, and customer service. They note that
the relationship with customer service is straightforward, as satisfied employees tend to have more satisfied
customers. They also endorse annual surveys of employee satisfaction or monthly rolling surveys of samples of
the workforce. Similarly, they endorse the measurement of employee retention for its importance in preserving
the organization’s investments in intellectual capital.” This explanation presents two major criteria
for HRM evaluation, i.e. job satisfaction and employee retention. Dessler (2005, p. 87)
defines: “The HR Scorecard is a concise measurement system. It shows the quantitative standards, or
“metrics” the firm uses to measure HR activities, and to measure the employee behaviours resulting from these
activities, and to measure the strategically relevant organizational outcomes of those employee behaviours. In so
doing, it highlights, in a concise but comprehensive way, the causal link between the HR activities, and the
emergent employee behaviours, and the resulting firmwide strategic outcomes and performance.” Dessler’s
definition stresses that the HR Scorecard is a concise measurement system highlighting the
causal link between the HR activities, and the emergent employee behaviours, and the
resulting firmwide strategic outcomes and performance. Also he has used a term called HRM
metrics. According to him, metrics are statistics used to measure the activities and results
A note from Professor Dr.HHDNP Opatha

involved in a field and HRM metrics are a set of quantitative performance measures HR
managers use to assess their operations.

There are seven steps to be followed to develop an appropriate HR Scorecard so as to

evaluate the linkage between HRM and the Strategy and the impact of HRM on the strategy.
Each step is described as follows:

1. Ascertain the Strategic Needs of the Organisation

The strategic needs of the organisation are vision, mission and strategic objectives of
the organisation established in the act of strategic planning. Strategic needs are the
most important needs and they should get the highest priority. All other needs of the
organisation are subordinate as far as the strategic period (time of the strategic plan)
is concerned. Strategic objectives derive from mission and vision. Hence it is essential
to study and understand the strategic objectives of the organisation before doing
other steps. Assume that our organisation is a medium size hotel name of which is
Hotel Kandy. Vision of the hotel is to become the best hotel in Kandy and one of the
best hotels in Sri Lanka. One strategic objective is to attain a 90% customer
‘excellent’ satisfaction rating of the hospitality service of the hotel Kandy by 2007.
Another strategic objective is to increase the total profit by 50% for the three years
(2005-2007).

2. Identify Strategic Metrics

Strategic metrics are defined as statistics used to measure the degree of success of
accomplishment of the strategic objectives of the organisation. They focus on
measuring strategically required organisational outcomes. There must be at least one
strategic metric to measure the degree of achievement of one strategic objective.
Continued example: Customer satisfaction index (the summated rating received on a
20-item, 5-point Likert scale) is a strategic metric with regard to the strategic
objective- to attain a 90% customer ‘excellent’ satisfaction rating of the hospitality
service of the hotel Kandy by 2007. Percentage increase of the annual profit is a
strategic metric with regard to the strategic objective- to increase the total profit by
50% for the three years (2005-2007).

3. Identify Strategic HR Metrics

Strategic HR metrics are defined as statistics used to measure the degree of success of
accomplishment of the strategic goals and objectives of HRM. They focus on
measuring quantity and quality of human resource requirements needed to achieve
the strategic objectives of the organisation. They cover the strategically relevant
employee competencies, work-related attitudes, employee behaviours and results.
Continued example: competency inventory index is a strategic metric that can be used
for measuring the availability and quantity of competencies. Measures given in
Exhibit 21-12 are considered as strategic HR metrics.

4. Identify Functional HRM Metrics

A note from Professor Dr.HHDNP Opatha

Functional HRM metrics are defined as statistics used to measure the degree of
successful performance of functions of HRM. They focus on measuring the degree of
systematic usage of each of the HRM functions. They attempt to measure intensity of
each HRM function being applied in the organisation. Measures called criteria which
are given in Exhibit 21-11 are examples of functional HRM metrics.

5. Determine Values of the Metrics at the Outset

There must be values at the beginning with regard to each of the metrics decided to
be used. Without values at the beginning it is not possible to do a meaningful
evaluation (no possibility of doing a comparison). What is to be done is to collect
data and calculate values under each metric. Proper recoding is a must for performing
this step successfully. Continued example: a study was done and values at the
beginning were as follows:

Table 21-3 Values of the Metrics at the Beginning (Year 2004)

Types of Metrics Specific Metric Value at the
beginning
(Year
(Year 2004)
2004)
Strategic Percentage of customer excellent rating 60%
Percentage increase of the annual profit 20%
Strategic HRM Competency Inventory Index 3.00
Job Satisfaction Index 3.2
Job Involvement Index 3.3
Organisational Commitment Index 3.1
Organisational Citizenship Index 2.2
Rate of Tardiness 45%
Rate of Absenteeism 35%
Rate of Employee Turnover 30%
% Increase of Sales Value per Employee 15%
% Increase of Profits per Employee 10%
Number of New Customers per Employee 20
Overall Employee Performance Evaluation Score 58%
Functional HRM Overall Intensity Index of HRM Practices 3.3
Number of complaints about job design 20
Number of jobs covered by job description and job 20%
specification as a percentage
Number of job vacancies not forecasted 80%
Ratio of qualified recruits to unqualified recruits 0.25
Percentage of employees selected based on validated 10%
selection methods
Complaints about lapses of the employment 20
appointments
Percentage of employees inducted formally 10%
Percentage of employees whose performance is 40%
evaluated formally

Percentage of employees who received performance

feedback from multiple sources 20%
Number of hours of training received by employees 30
per year
Number of career management programmes 01
developed and implemented
Complaints about wrong calculations of pays 34
A note from Professor Dr.HHDNP Opatha

Number of delays in paying 04

Value of welfare cost per employee Rs. 20000/-
Percentage of workforce whose merit pay is tied to 70%
performance
Percentage of jobs filled from within 50%
Percentage of employees who suffered from 15%
occupational diseases

Number of accidents 11
Percentage of employees who have not violated a 57%
single rule of discipline

Number of legal cases filed against the organisation

04
Number of grievances settled as a percentage 70%

6. Determine Values of the Metrics at the End

There must also be values at the end with regard to each of the metrics decided to be
used. Without values at the end it is not possible to do a meaningful evaluation. What
is to be done is to collect data and calculate values under each metric as done for
getting the beginning values.

7. Compare and Determine the Link and the Impact

The values at the beginning need to be compared with the values at the end in order
to determine variances. These variances may be negative (showing a decline) and
positive (showing an improvement). If HRM is done in better way, variances will be
positive. In fact the organisation is supposed to formulate and implement good HRM
strategies (courses of actions). All systems of HRM may be modified or discontinued.
New schemes of HRM may be introduced. If new and/or modified HRM
schemes/systems have worked successfully during the period of concern, variances
regarding the metrics should be positive. Otherwise they will be negative. Correlation
analysis, multiple regression analysis and other types of statistical analyses can be used
to determine the link and the impact. Continued example: assume that calculations of
the values of the metrics were done accurately at the end of the three years of the
strategic plan, i.e. 2005, 2006 and 2007. Relevant values are given in Table 21-4.

Table 21-4 Values of the Metrics (Years 2005, 2006 and 2007)
Types of Metrics Specific Metric 2005 2006 2007
Strategic Percentage of customer excellent 70% 80% 90%
rating
Percentage increase of the annual 30% 38% 45%
profit
Strategic HRM Competency Inventory Index 3.4 3.9 4.2
Job Satisfaction Index 3.6 3.9 4.5
Job Involvement Index 3.7 4.4 4.7
Organisational Commitment Index 3.6 4.0 4.5
Organisational Citizenship Index 2.7 2.9 3.5
Rate of Tardiness 40% 30% 18%
Rate of Absenteeism 30% 28% 24%
Rate of Employee Turnover 27% 23% 18%
% Increase of Sales Value per 20% 32% 45%
A note from Professor Dr.HHDNP Opatha

Employee
% Increase of Profits per Employee 20% 40% 50%
Number of New Customers per 30 45 50
Employee
Overall Employee Performance 67% 75% 85%
Evaluation Score
Functional HRM Overall Intensity Index of HRM 3.8 4.4 4.8
Practices
Number of complaints about job 10 06 02
design
Number of jobs covered by job 50% 70% 100%
description and job specification as a
percentage
Number of job vacancies not 50% 20% 10%
forecasted
Ratio of qualified recruits to 0.40 .60 .70
unqualified recruits
Percentage of employees selected 40% 70% 100%
based on validated selection methods
Complaints about laps of the 10 07 03
employment appointments
Percentage of employees inducted 50% 80% 100%
formally
Percentage of employees whose 70% 90% 100%
performance is evaluated formally

Percentage of employees who

received performance feedback from 50% 80% 100%
multiple sources
Number of hours of training 50 60 77
received by employees per year
Number of career management 05 10 14
programmes developed and
implemented
Complaints about wrong 20 15 07
calculations of pays

Number of delays in paying 03 02 01

Value of welfare cost per employee Rs. 22000/- Rs.25000 Rs.

30000
Percentage of workforce whose merit 80% 90% 100%
pay is tied to performance
Percentage of jobs filled from within 60% 70% 80%
Percentage of employees who 11% 08% 05%
suffered from occupational diseases

Number of accidents 07 04 02
Percentage of employees who have 68% 75% 90%
not violated a single rule of
discipline

Number of legal cases filed against 03 02 00

the organisation
Number of grievances settled as a 80% 90% 100%
percentage

As per the Table it is possible to see that there are considerable changes (positive)
with regard to each metric. It indicates that the hotel took a very serious effort to
A note from Professor Dr.HHDNP Opatha

improve its HRM resulting positive results under the functional HRM metrics and the
strategic HRM metrics. Then how to determine the linkages? Correlation analysis will
show the relationships. For example, take competency index (a strategic HRM metric)
and number of hours of training received by employees per year (a functional HRM
metric). Correlation coefficient will be .98 showing that both variables are very highly
significant and positively related. Then, consider competency index (a strategic HRM
metric) and percentage of customer excellent rating (a strategic metric). Correlation
coefficient will be .99 indicating a very high significant positive relationship. In the
same way a meaningful statistical analysis can be done to show linkages between
functional HRM metrics and strategic HRM metrics and linkages between strategic
HRM metrics and strategic metrics. Thus it is possible to ascertain how HRM
contributes to business strategic needs quantitatively.