The Human Resources Scorecard: Measuring the Return on Investment (Improving Human Performance)

537 Pages·2001·3.27 MB·English

by  Ron Stone

The Human Resources Scorecard
Measuring the Return on Investment

The Human Resources Scorecard
Measuring the Return on Investment
Jack J. Phillips
Ron D. Stone
Patricia Pulliam Phillips
Boston Oxford Auckland Johannesburg Melbourne New Delhi
Copyright © 2001 by Butterworth–Heinemann
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Library of Congress Cataloging-in-Publication Data
Phillips, Jack J., 1945–
The human resources scorecard: measuring the return on investment /
Jack J. Phillips, Ron D. Stone, Patricia Pulliam Phillips.
p. cm.
Includes index.
ISBN 0-87719-367-3
1. Wages and labor productivity—Measurement. 2. Labor costs
Accounting. 3. Human capital—Cost effectiveness. 4. Manpower
planning. 5. Labor ecomonics. 6. Rate of return. I. Stone, Ron D.
II. Phillips, Patricia Pulliam. III. Title.
HD 4945.P44 2000
331—dc21
00-062236
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iv
Contents
Preface, x
Acknowledgments, xvii
P a r t I
The Need for ROI in Human Resources
C h a p t e r 1
The Business Case for ROI ......................................................12
Approaches to HR Accountability, 3.
Why ROI?, 12. A Credible Approach, 18.
Barriers to Implementing the ROI Process, 34.
Benefits of Implementing the ROI Process, 36.
Final Thoughts, 38. References, 40.
C h a p t e r 2
Initial Analysis and Planning....................................................42
Evaluation: Project Requirements, 43. Levels of
Objectives for HR Programs, 46. Linking Evaluation
with Needs, 52. Planning for Measurement and
Evaluation, 57. Shortcut Ways to Plan for the
Evaluation, 62. Final Thoughts, 64.
Further Reading, 64.
v
P a r t I I
The ROI Process, Step-by-Step
C h a p t e r 3
Collecting Data During HR Program Implementation.........168
Measuring Reaction and Satisfaction, 69. Measuring Skill
and Knowledge Changes, 83. Conclusion, 98.
C h a p t e r 4
Collecting Data After HR Program Implementation ............100
Measuring Application and Implementation, 100.
Capturing Business Impact Data, 140. Selecting the
Appropriate Method for Each Level, 163. Shortcut Ways
to Capture Business Impact Data, 165. Conclusion, 167.
C h a p t e r 5
Isolating the Effects of an HR Program................................168
Preliminary Issues, 169. The Ten Strategies, 171. Using the
Strategies, 194. Conclusion, 195. References, 195.
C h a p t e r 6
Converting Data to Monetary Value......................................197
Preliminary Issues, 198. Strategies for Converting Data to
Monetary Values, 200. Converting Output Data to
Contribution, 200. Calculating the Cost of Quality, 203.
Converting Employee Time, 204. Historical Costs, 205.
Internal and External Experts’ Input, 205. Values from
External Databases, 206. Participant Estimates, 207.
Supervisor Estimates, 208. Senior Manager Estimates, 209.
HR Staff Estimates, 210. Selecting the Appropriate
Strategy, 210. Accuracy and Credibility of
Data, 211. Conclusion, 214. References, 215.
C h a p t e r 7
Monitoring the Cost of Human Resource Programs ............216
Cost Strategies, 217. Major Cost Categories, 222.
Cost Accumulation and Estimation, 226.
Summary, 232. Reference, 232.
vi
C h a p t e r 8
Calculating the Actual Return on Investment .......................233
Basic Issues, 234. Benefit/Cost Ratio, 235. ROI Formula,
236. BCR/ROI Case Application, 237. Other ROI Measures,
241. Utility Analysis, 243. Consequences of Not
Providing an HR Solution, 244. ROI Issues, 245.
Conclusion, 248. References, 248.
C h a p t e r 9
Identifying Intangible Measures..............................................249
Key Issues, 250. Employee Satisfaction, 252. Employee
Withdrawal, 254. Customer Service, 256. Team Effectiveness
Measures, 257. Conclusion, 260. References, 260.
C h a p t e r 10
Communicating Results ...........................................................261
Why Be Concerned About Communicating Results?, 262.
Principles of Communicating Results, 264. A Model for
Communicating Results, 266. Shortcut Ways to Provide
Feedback and Communicate with Clients, 298.
Final Thoughts, 299.
P a r t I I I
Important Issues with ROI Implementation
C h a p t e r 11
Forecasting the ROI ................................................................302
Why Forecast ROI?, 302. The Tradeoffs of Forecasting, 304.
Pre-Project ROI Forecasting, 306. Forecasting ROI with
Reaction Data, 314. Forecasting ROI with Learning Data,
319. Forecasting ROI with Application of Skills and
Competencies, 322. ROI at Level 4: Business Results, 325.
Shortcut Ways to Forecast ROI, 325. Final Thoughts, 326.
C h a p t e r 12
Implementation Issues .............................................................327
Planning the Implementation, 327. Preparing the HR Staff,
337. Initiating the ROI Process, 343. Management Team,
346. Monitoring Progress and Communicating Results,
350. Conclusion, 350. References, 351.
vii
P a r t I V
Case Applications
C h a p t e r 13
Sexual Harassment Prevention (Healthcare Inc.) ..................354
Background, 355. Events Leading to Program, 355. The
Program: Design, Development, and Implementation, 356.
Why ROI?, 357. Data Collection, 358. ROI Analysis, 360.
ROI Analysis Plan, 361. Reaction and Learning Data, 363.
On-the-Job Application, 363. Business Impact, 364.
Program Costs, 367. Monetary Benefits from Program, 368.
Program Costs, 370. ROI Calculation, 371.
Questions for Discussion, 372.
C h a p t e r 14
Competency-Based Pay System
(National Crushed Stone Company).......................................373
Background, 373. Competency-Based Pay, 374. ROI Drivers,
375. Development and Implementation, 376. Evaluation
Methodology, 377. Control Group Selection, 377. Evaluation
Planning, 378. Results: Reaction and Learning, 381.
Application/Use, 381. Business Impact, 384. Program Costs,
386. Intangible Benefits, 387. Forecast Value, 389.
Questions for Discussion, 389.
C h a p t e r 15
Absenteeism Reduction Program
(Metro Transit Authority)........................................................390
Background, 390. Causes of Problems and Solutions, 391.
Objectives of the Initiatives, 392. Data Collection, 393.
Isolating the Effects of the Initiatives, 395. Converting
Data to Monetary Values, 397. Costs for Initiatives, 399.
Results: Reaction, Learning, and Application, 400.
Business Impact, 400. Monetary Benefits, 401. Costs, 402.
ROI Calculation, 403. Questions for Discussion, 403.
C h a p t e r 16
Stress Management (Midwest Electric Inc.) ...........................404
Background, 404. Program Planning and Design, 407.
Program Results, 419. Questions for Discussion, 438.
viii
C h a p t e r 17
Safety Incentive Program (National Steel) .............................439
Background, 439. A Performance Problem, 440. The
Needs Assessment, 440. The HR Solution, 441. The
Measure of Success, 441. The Incentive Plan, 442.
Implementation of the Incentive Plan, 442. Cost
Monitoring, 443. Data Collection and Analysis, 443. Data
Interpretation and Conclusion, 446. Calculating the Return
on Investment, 447. Communication of Results, 447.
Questions for Discussion, 448.
C h a p t e r 18
Executive Leadership Development
(Imperial National Bank) ........................................................449
Background, 449. Initiation of the Leadership
Development Program, 450. Data Collection Plan, 452.
Reaction and Learning, 457. Application, 459. Business
Impact, 461. Program Costs, 463. ROI Analysis, 469.
Intangible Benefits, 472. Results, 474.
Questions for Discussion, 475.
C h a p t e r 19
Technology-Based Learning
(United Petroleum International)............................................477
Background, 478. Designing and Implementing the
Solutions, 479. The Technology Learning Competency
Program (TLC), 480. Measurement Methods and Data
Analysis, 481. ROI Model and Process, 482. The Data
Collection Plan and ROI Analysis Plan, 483. Levels 1 and
2 Data, 486. Levels 3 and 4 Data, 486. Isolating the
Effects, 488. Design and Implementation Costs, 489.
Levels 3 and 4 Results, 491. ROI Results, 492. Intangible
Benefits, 492. Learning Issues from the Study, 493.
Reporting to Stakeholder Groups, 494.
Questions for Discussion, 495.
a p p e n d i x
Self-Test: How Results-Oriented Are Your
Human Resources Programs?..................................................496
Index.........................................................................................505
ix