How do You Measure Value Added?
Most business professionals rely on return on investment (ROI) as a measure of successful business decisions. However, Kearn’s suggests that it is not Return on Investment (ROI) we should concern ourselves with initially, it is value added that is specific to a particular organization that needs to be identified early by managers (2005). Although the following is not specifically targeted for the brewing industry, it is relevant in a conceptual nature.
Evaluation Versus Value Added
According to Kearn’s, Kirkpatrick’s four-level evaluation model suggests that evaluation takes place after training at which point the effects of the training are determined (2005). What is missing from Kirkpatrick’s model is critical thinking and evaluation of a training program prior to implementation, which would help determine if the training is needed to achieve specific business results. Kearns offers a relevant example of how identifying value added helped a restaurant group (which could also apply to a brewpub) identify how management’s perception of a training need was not linked to value added (2005). For example, senior management determined that servers were required to know the ingredients used in every menu item. The issue with this training standard is it could not be attributed to any specific measurable improvement such as increased sales or repeat business (Kearns, 2005).
To achieve a measurable result that could be linked to the effect of training the restaurant group implemented customer service training in order to improve customer satisfaction which led to increased sales, repeat business and referred business (2005, Kearns). In fact, due to the companies robust point-of-sale system it was possible to determine the value added for an individual employee (Kearns, 2005). Therefore, customer service training leading to improved customer satisfaction was shown to have a measurable effect of increased sales, which is identified as value added. Of further interest is the effect customer service training and the associated metrics opened the eyes of management to other areas that could be measured such as employee retention.
Due to restaurant industry standards reflecting high employee turnover it was accepted by company restaurant managers, however, the companies new evaluation practice identified how increased retention could be linked to improved financial performance by more repeat customers, customer recommendations and overall increased sales (Kearns, 2005). So, after the company was able to demonstrate to restaurant managers how improving employee retention affected financial performance and restaurant managers began to devote more resources towards improving retention.
How HR Metrics Impact Organizations
Keeping in mind the preceding example of the restaurant groups ability to measure the value added metric of an employee a logical progression would be to also know the overall impact HR functions have on business performance. Ulrich, Brockbank, Johnson, Sandholtz and Younger tell us proper focus and alignment of human resource (HR) functions has a direct effect of “27.9 percent of business performance” (2008). Further, organization (rewards, communication, organizational design, mentoring, work analysis) and talent practices (staffing, training, appraisals) are two areas in which a company should focus to be more effective in regards to the impact of the department on business performance (Ulrich, Brockbank, Johnson, Sandholtz & Younger, 2008).
Considering the amount of impact HR functions can have on business performance certain steps may be taken to help ensure HR’s contribution is considered to add value. First, HR strategy needs to be aligned with organizational strategies, which requires clear communication between HR, other departments and senior management (Ulrich, Brockbank, Johnson, Sandholtz & Younger, 2008). Next, HR’s role needs to be defined to meet organizational needs such as managing HR functions including responsibilities of HRIS, senior level HR professionals, administrative tasks (i.e. benefits, record-keeping), strategy and staffing (Ulrich, Brockbank, Johnson, Sandholtz & Younger, 2008). Finally, developing an organizational mindset that leads to questioning the operating norms and encourages questioning the status quo as in double-loop learning creates more opportunities to add value (Morgan, 1998).