ROI-Return On Investment (HR)

ROI- the determination of how much profit is earned from investments and capital. Last week I had a great conversation with Jill Elswick. Jill is an talented free-lance writer from Roanoke, VA. She can be reached via www.twitter.com/jillelswick and she has written for trade publications about Human Resources and other business related topics.  Jill and I talked about how ROI is measured in human resources. Because HR is a non-revenue generating dept, there are several things to measure. 

  •  The competitiveness of a benefits plan to attract key talent
  •  The value of benefits in maintaining a healthy and productive workforce
  •   Employee satisfaction with benefits, to learn what to cut from or add to a budget

In this economy, ROI is even more important than it was before. EAP is another benefit that must be measured as well. What are the costs/benefits in the Employers’ EAP, and is the program being used or not at all?

My experience with ROI in the Recruitment industry has been a personal one. When the ROI at a small staffing firm was identified, it resulted in the downsizing of an office of 4 to 2 and then the office was closed. This gives new meaning to “do more with less’ To stay competitive and strong, you must have more billable hours and filled positions to support the staff doing the recruiting and sourcing. Customer service and being cross-trained in other job titles are extremely important as well. This happened to me before the economy really started to decline.

I really want to know your thoughts on ROI,and what it means to you. Please leave me your comments below…

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16 responses to “ROI-Return On Investment (HR)

  1. Glad to see that you are interested in exploring such an interesting facet of HR. Revenue generation is possible if it is run the right way. Here is an interesting post from John Sullivan at HR.com back in 2005 on how it can be accomplished http://is.gd/8rtC2. The method hasn’t really changed. I would like to hear your thoughts on it. Does it influence your statement that “HR is a non-revenue generating dept”?

  2. Karla-Thanks for the continued support of my blog and content. The John Sullivan at HR.com article was an interesting post. The Sullivan post, demonstrates that HR can be a revenue generating department… Perhaps I could be influenced to think differently, we shall see..

  3. Good post Shennee. I would also think of measuring ROI based on the dollars saved or reduced from Unemployment Insurance or Workers Compensation Premiums paid out. This would amount to showing how HR can retain company profits. With respect to a company having a good EAP program is also important. A company can not afford to lose productivity/working hours and a EAP can provide services needed to get the employee back to a point where they can be productive.

    HR also needs to be able to have the resources to provide training opportunities to the workforce to again develop skills to enhance a companies profitability

  4. Thanks Bob-I agree with the unemploymrnt Insurance premiums paid out. Affordable, pracrtical EAP is important too. Measurement with Employee surveys can be effective as well. Taking the temperature of your staff, and identifying what is important/cost effective.

  5. I”ve always seen ROI in HR as putting the puzzle pieces together to generate income. Getting the right people in the right places at the right time. Solving issues before they become problems that cost productivity. Appropriate disciplinary action that allows for transitioning out of non-productive employees, and on the safety side, effective safety programs, RTW programs and management of WC issues, that increase productivity and revenues.

    Great idea for this series, I look forward to seeing more of them. (and will be looking at that HR.com post)

  6. Tammy-Thanks so much for the comment. I think this is going to be a great series. I too am looking forward to continued dialogue about these issues, Appreciate your friendship.

  7. Shennee – this is always such an interesting subject. One of the ever-present battles with ROI for HR is trying to measure “what didn’t happen.” For example, saying we DIDN’T have any employment-related litigation, and thus the implication that it’s due to sound HR practices and policies. Now while that may very well be the case, we need to find an agreed-upon way to measure that, perhaps by starting with historical data and then measuring the impact of actions taken. For example, Company A had 15 Sexual Harassment investigations/issues in 2003, and then in 2004 they instituted a more robust training for EEs and Mgrs, with annual refresher training and SH cases dropped to 12, then 7, then 3, then none. Can then tie that back to $$ and relate it back to the investment of time, resources, staff to roll-out the training and oversight, etc.

    I look forward to more!

  8. Robin- It really is a very interesting topic. The example you used is telling of how this can work efficiently. Stay tuned to the other topics on the Blog series. Every Monday a new Post. I really appreciate you stopping by to read and comment!

  9. It’s very hard to calculate the ROI when it comes to human interaction, and yet HR Pros are asked to do so in a variety of ways. An efficacious return on investment study must be based on solid indisputable data. How many organizations can make such claims with their metrics. It is easy to make calculations on attrition numbers, and retention, but to track why people are leaving is en entirely different story. We have to quit head counting and start asking the tough questions. The cost of hire looks easy to calculate, but it really isn’t. Sure, you can look at the amount you spent on job boards,and recruitment costs. It’s difficult to calculate the value of the time your internal people send in the selection process. What about the hidden costs of onboarding, training and developing your employees. The cost of benefits is easy to calculate, but what the cost of absenteeism? You bring up a great topic. It’s one we have to examine. More importantly, we have to have the courage to look at the numbers we aren’t calculating. The hidden costs.

    Good job,

    @HRMargo

  10. Thanks Margo for the comment and support of the blog series. It is a great topic for sure, and we do need to talk about the dynamics of the issue.

  11. Good start to your series. Initiated some good smart comments. There is not much more to add. But I will say one of the problems with numbers and stats, is they can be manipulated and most people know this. So when compiling ROI’s, be careful and be as honest as possible. Otherwise, you risk losing all the credibility you have worked hard to obtain.

  12. I consider the measurement factors important in calculating these items – as well as the credibility of HR staff. The key for me is to know what can be measured and what can’t and not get so hung up on what can’t. Some of the most important work I have done wouldn’t fall into a “measurable” category.

  13. Paul-Thanks So much for stopping by to read and comment. I hope you will stay tuned to see what the rest of the series is all about. Good Stuff!

  14. Deirdre-
    Thank you so much for taking the time to read and post your thoughts. Hope you will keep reading and commenting as the series unfolds. Great conversationa and topics!

  15. Shennee, thank you for the opportunity to be featured on your blog. You have received a lot of good comments. Bob brings up the subject of training. I agree that the right training can boost worker satisfaction and productivity. It seems a reasonable claim that when companies make an effort to invest in the skills and interests of their people, the entire enterprise benefits. That return ought to be measurable, at least to some extent, in the quality of work produced after training — or in employee satisfaction indicators. Well Done, Shennee. I look forward to your next posts.

  16. Just wanted to stop by and say hi and wish you the best with your new blog series. Looks like you’ve got some great commentary; keep it up!

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