The Challenge of Proving ROI in HR

The Challenge of Proving ROI in HR 150 150 Jason Lauritsen

A few weeks ago, my friend William Tincup contacted me to ask if I would be a part of a series on the DriveThruHR show called “Convenient Conversations.”  Essentially, they are inviting HR pros to come on for a 30 minute discussion about a topic that is on our mind relative to the work of trench HR.  Thirty minutes to talk about what’s on my mind?  Where do I sign up?  It wasn’t hard to convince me to sign up.  I am thankful for the invite and my session is scheduled for tomorrow at 12 noon.  

What I’m planning to bring to the table for discussion is the challenge we face with proving the ROI for HR initiatives and projects.  Any one who’s spent any time in HR or selling into HR understands how challenging it can be to prove the ROI for people initiatives to gain the support of the CEO and other executives.  I think that there may be an argument to be made that HR is held to a different standard in this regard than other functional areas within organizations, but that discussion is going to have to wait for another day.  There’s a lot of reasons that proving ROI in HR is challenging.  Here are a few of the big ones.
1.  Isolating and measuring the impact of a single variable in human systems is really hard.  People are really complex animals and we almost never change one thing at a time.  When we go on a diet, we may eat differently, exercise more, think about different things, etc.  If we lose weight, it’s hard to know what had the biggest effect.  It could be that your ate was what did the trick, but you really can’t say because you changed multiple variables.  In the work environment, it is equally as challenging if not more so to isolate what really makes the difference in human behavior change.
2.  ROI is an art, not a science.  For any given initiative, there might be a dozen different ways you could prove a return on the investment.  Consider an engagement survey.  Employee engagement can be linked to customer service, absenteeism, productivity, retention, innovation, etc.  The trick is choosing the outcome that matters to the people who have to say yes within your organization.  I have built eloquent, even brilliant, ROI analyses in my career that have failed miserably to secure buy in because the CEO who needed to say yes to the project didn’t care about the particular outcomes I chose as most important.  When I worked in the call center world, every ROI ultimately came back to employee retention and productivity.  In other places, the same project instead was supported by the “happy employees=happy customers” analysis.  It all depends on your audience.  It doesn’t matter what you think is most important, it’s what they think is most important that will get you the buy in.  
3.  If your executives have mentally dismissed HR or they don’t care about people, the best ROI in the world isn’t going to fix that.  I can build you a dozen different ROI’s for investing in improving employee engagement.  But, if you don’t grasp the idea that treating people better will make them want to work harder for you, it’s probably not going to happen regardless of ROI.  On the other hand, if your executives already embrace employee engagement, don’t talk them out of it by beating them over the head with numbers.  Give them as much as they need, and then focus on delivering some killer, measurable results. 
These are a just a few thoughts on the subject.  If you agree or disagree, I’d love to hear from you and learn from your experiences.  I’m looking forward to chatting more about it tomorrow with you and the guys from DriveThruHR.  
1 comment
  • fit4thabo

    Jason, I really enjoyed your thoughts here and could not add anything further. You are spot on about the ROI argument here, and for me the challenge is getting HR to be ranked as Marketing is ranked in terms of priority and investment/spend. You can't measure ROI on marketing, but that budget has deep pockets. HR on the other hand has to jump through a lot more hoops. As you mention "if you don't grasp the idea that treating people better will make them want to work harder for you, it's probably not going to happen regardless of ROI.". A pity I did not hear your show.

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Jason Lauritsen