The new research-backed guide from the global HR research and advisory firm offers suggestions for HR organizations who struggle to accurately communicate the value of their programs to senior leadership and the board.
As organizations become increasingly concerned with budgets and bottom lines amid uncertain economic times, HR is facing challenges in effectively measuring the value of programs and communicating the return on investment (ROI) to key players, such as the C-suite. To help HR leaders demonstrate the value of their programs both financially and beyond financial outcomes, McLean & Company has released its new resource, Guide to Measuring the ROI of HR Programs.
McLean & Company’s new guide highlights that only 28% of organizational key players are very satisfied with the value HR provides relative to their perception of its operational and staffing costs, leaving the remaining 72% feeling less than very satisfied. Therefore, it is not surprising that 65% of respondents in the firm’s 2023 HR Trends survey indicated that their HR departments were not high performing at controlling labor costs and maximizing the value of labor spend.
“The true value of an HR program exists beyond direct financial gain,” says Grace Ewles, Director of HR Research & Advisory Services at McLean & Company. “Exploring the value on investment (VOI) in addition to direct financial outcomes provides a complete picture of an HR program’s impact. Showcasing these benefits helps shift perceptions away from HR as a cost center by reinforcing the strategic value of HR investments for key players.”
Program evaluation is a resource-intensive process that requires a methodical approach and data literacy, with many HR teams currently ill-equipped to manage these obstacles. According to the resource, measuring the value of HR programs links HR investments to organizational objectives, demonstrating how HR contributes to an organization’s profitability and enabling data-driven decision making around organizational spending.
To increase satisfaction in and support for HR programs from key individuals such as senior leadership and the board, McLean & Company advises that HR needs to engage them, manage their expectations, and generate buy-in to maintain support throughout the lengthy evaluation process.
HR leaders seeking to reveal how HR contributes to overall organizational success and drives organizational objectives beyond profitability can follow McLean & Company’s three-phase plan, available in the guide. The steps are outlined below:
- Prepare to measure ROI. The first step guides HR leaders through the identification of HR programs that should be evaluated and their associated outcomes, metrics, and timelines.
- Evaluate program ROI. Step two prioritizes the measurement of the ROI of HR programs and the interpretation of the results within the larger context of the organization.
- Communicate and leverage ROI. The third and final step focuses on communication and sharing the ROI results within the broader program VOI with relevant individuals.
