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Benefits Of Maximizing HR ROI

Nov 22, 2007
The work of the HR department is definitely no walk in the park. This is because there are many aspects that the department has to consider. One of these is the fact that a department has to develop all of their resources in such a way that the corporate vision of the company itself would be achieved.

The department has to view human resources, the very people it hires for the company, not just as resources that are consumable. Rather, human resources should be viewed as assets that have increasing values as long as the investments being made are managed and monitored very carefully and thoroughly. This is where the importance of HR ROI comes into play.

Needless to say, the very people the HR department hires for the operations of any company are investments. There are certain risks entailed in the process of hiring each employee. When the HR department hires a certain employee, there is no definite way of knowing that he or she would be efficient in the job at hand.

Of course, the HR department would employ certain methods in achieving this. Background checks in terms of the applicant's career path can be one of these methods. However, there are inevitable differences from one company to another. This is true, in spite of the fact that different companies offer several similar positions. However similar these job titles may be, there will always be differences in terms of job duties and responsibilities.

Even the minutest difference is reason enough for this inaccuracy when it comes to background checks. The unfortunate fact about this is that the company would experience the HR ROI of that certain applicant only when he or she has been hired. Good for the company if the applicant is deemed efficient.

The opposite, however, would render another possible increase in the turnover rate as a whole. This is what any HR department wants to avoid, which is why companies do everything that they can just to maximize the ROI that they have on all of their employees. The sad reality here is that there are actually a lot of companies all over the world that fail to maximize their ROIs, thereby missing such investments and experiencing surges in their turnover rates.

There are actually a lot of methods in the calculation of the HR ROI. One such method is to place the result itself, or the ROI, as the numerator of the equation, and the investments in human resource developments as the denominator as well. The result would then be the HR ROI figure itself.

More specifically, the denominator, or the investments in human resource developments would be the compensation for a particular employee as a whole. This would include the employee's salary, his benefits package, and the investment in human resource development. The fact that the benefits package is distributed amongst all the employees in an even fashion is the reason behind the exclusion of the package in the equation.

HR ROI is a very important concept any HR department should be very familiar with. When this figure is maximized, the performance of the HR department itself would improve as a whole, and the company itself will enjoy the benefits of this as well.
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