ROI measures the effectiveness of the overall investment in any organization. An ROI strategy applied to human resources tells us quantifiable the successes or failures in the actions that have been carried out in this matter within it and if the return of the applied processes has been as expected.
Objectives Of Measuring ROI In Human Resources
The ultimate goal of ROI is to discover how it can improve the profitability of companies and organizations through the relationship between human capital and its cost, and it helps us calculate the return on investment. Perhaps you discover that you need more staff, that there is a high rate of absenteeism from work or simply the performance with a few coaching sessions is enough. Other tools can be used to maximize the possibilities of our team, such as preparing career plans individualized. Likewise, promoting cohesion and a good work environment usually creates commitment to the needs and objectives of the company and increases motivation.
The ROI depends on the objective that we have set ourselves when evaluating the collaborators’ performance and the training’s effectiveness. So it will vary depending on whether it is a selection process or a productivity measurement. In other words, ROI measures the performance of a process carried out by the human resources department.
Through key indicators or performance meters called KPIs (Key Performance Indicators), it does so. They are not fixed, and there are as many objectives we want to evaluate. For example, if the objective is to assess the stability of the company, the indicated KPIs are the duration of the collaborators in the position, the retention of talent, internal promotion and rotation or the average time of hiring; if the objective is to know the effectiveness of a specific team, the key indicator is the average time in achieving objectives, etc.
ROI investment helps decision-making and establish an excellent human resources strategy, essential for an organization to be more profitable. Companies that invest more in their human resources achieve better financial results, according to the ‘Workforce 2020’ study. He also points out that the lack of metrics and tools prevents human resources departments from developing strategies to build the future workforce. Most lack sufficient data on their strengths and vulnerabilities and do not use quantifiable metrics and benchmarks to develop the workforce—labor force.