Human Resources (HR) is the unsung hero of any thriving business.
Day in and day out, it’s HR leaders that are there to navigate the maze of workplace efficiency. However, HR teams have a lot to juggle every day, and not all of it has strategic value.
For example, HR teams can spend around 50% of their time just processing information and answering questions. Add this tedious busywork to the pile of other administrative tasks they’re responsible for, and you can see how difficult it is for HR to commit any time to insights and strategies that can benefit the business as a whole.
HR inefficiency affects your employees too. From errors or inconsistencies in areas like payroll, benefits, and performance evaluations, to a lack of communication and transparency, employees can become confused, or feel disconnected from the business.
So, how do you increase efficiency for both your HR team and your employees? In this article, we will discuss the importance of HR efficiency and effectiveness, ways to improve both, the impact of HR efficiency in the workplace, challenges faced in improving HR efficiency, and best practices to implement for HR success.
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HR efficiency and HR effectiveness are two key metrics that can help measure the success of HR management. But don’t get them twisted, as they are two distinct concepts.
Differences Between HR Efficiency and Effectiveness
Let’s start with the concept of efficiency, which refers to the ability to achieve a desired outcome with minimal waste, effort, or energy. When applied to HR, we get HR efficiency, which involves managing employees, administrative tasks, and other HR functions without wasting time, effort, or energy.
Let’s move on to effectiveness, which is the degree of success in achieving a desired result. When we apply this to HR, we get HR effectiveness, which relates to the degree of success in achieving HR functions and strategies, such as employee satisfaction, retention, and other desired results.
Why it’s Important to Balance Both for HR Success
Achieving a balance between HR efficiency and effectiveness is essential for HR success. While efficiency helps human resources departments handle their workload, effectiveness ensures that HR practices lead to improved business outcomes. Focusing solely on efficiency can lead to ineffective HR practices that ultimately damage the business while focusing solely on effectiveness can slow down HR processes and increase costs.
Bottom line: these two aren’t mutually exclusive, and work better together.
Ways to Improve HR Efficiency and Effectiveness
There are plenty of ways you can improve HR efficiency and effectiveness, to name a few:
- Invest in HR Software: Most HR software is built to help automate HR processes and free up HR staff to focus on strategic initiatives. It can also help with employee data management and analysis, which can support HR strategies and data-driven decision-making.
- Streamline processes: Determine HR processes you can streamline, such as onboarding, applicant tracking, and performance management, to eliminate inefficiencies and reduce the amount of time spent on administrative tasks.
- Develop HR metrics and KPIs: Establish HR metrics and KPIs, such as cost-per-hire, time-to-hire, turnover rate, and absence rate, to track HR efficiency and effectiveness.
- Develop an HR strategy: Develop a comprehensive HR strategy that includes initiatives to improve HR efficiency and effectiveness and aligns with the organization’s goals and HR objectives.
- Invest in employee development: Investing in employee development can improve HR effectiveness by enhancing employee skills and productivity. Providing training opportunities and career development paths not only helps employees and teams be successful but can also increase employee satisfaction and retention.
- Outsource non-core HR functions: Consider outsourcing non-core HR functions, such as payroll processing, to free up HR staff to focus on strategic initiatives.
Implementing these initiatives may seem daunting, but try adding them in slowly, and see the results follow.
So, you’ve sprinkled your HR magic throughout operations, but how will you know if it’s working like a charm?
HR Metrics and Key Performance Indicators (KPIs)
There are four types of HR metrics: descriptive, diagnostic, predictive, and prescriptive. In order to start measuring HR effectiveness, you’ll need to know what you’re measuring first. And if you’re not sure which to measure, here are a few you can consider:
- Cost-per-hire: By figuring out the cost of each applicant and new hire, you can make informed investment decisions, set appropriate referral bonuses, and eventually cut down on company expenses. The average cost per hire is nearly $4,700.
- Time to hire: By leveraging this metric, recruiters can determine if they are dedicating too much or too little time to securing the right candidates.
- Turnover rate: It’s important to monitor employee turnover rates to identify and address any underlying issues that may be contributing to it.
- Turnover cost: Turnover cost is a result of the turnover rate. And with the average cost per hire being nearly $4,700, this means if the turnover rate is high, so is turnover cost. High turnover rates also have non-monetary costs, including decreased employee engagement, lowered morale, and increased workplace gossip.
- Absence rate: By utilizing this metric, you can gain a better understanding of how employee absence is affecting productivity, morale, and temporary labor costs.
Please note that the above metrics are not an exhaustive list. Additional metrics can include the ratio of HR personnel to employees, the average number of paid time off (PTO) days an employee uses in a year, and more. You also can choose specific metrics you’d like to measure that aligns with your organization’s goals.
Choosing the Right Metrics for Your Business
Choosing the right metrics for your business helps ensure that you are measuring the aspects that align with your unique business needs, organizational goals, and objectives. The metrics you choose to analyze should be relevant to your industry, number of employees, and specific needs. For example, a small startup may have different metrics to track compared to a large corporation, such as headcount, manager effectiveness, and scheduling metrics.
Aligning metrics to your unique business goals is a critical component, and should be a key determining factor in which you decide to track. For instance, if your goal is to increase employee retention, you may want to focus on measuring turnover rates and implementing strategies to reduce them. Similarly, if you want to enhance the productivity of your employees, you might track metrics like time to hire, absence rates, and employee engagement levels.
Take a look at the following strategies and tips to get on the right path to improving HR efficiency.
Strategies to Improve HR Processes and Workflows
There’s a notable quote by Alvin Toffler that states, “If you don’t have a strategy, you’re part of someone else’s strategy.” The word ‘strategy’ seems to be thrown around a lot, but take a moment to recognize its true purpose: To create a vision and direction for your organization.
One HR efficiency strategy to note is automation. Routine tasks such as data entry, employee record updates, and benefits administration, can be simplified using automation, and free HR teams and reducing the risk of errors. Automation can also improve data accuracy and accessibility, providing HR teams with the information they need to make informed decisions.
Another strategy to consider for improving HR efficiency is streamlining the recruitment process. In order to do so, you can invest in pre-screening tools to assess candidate qualifications before scheduling interviews, implement an applicant tracking system to manage the hiring process and utilize online recruitment platforms to reach a wider pool of candidates.
You can certainly come up with your own unique strategies, but these examples should help ignite some creativity.
Tips for Automating HR Tasks
Implementing HR automation can be a game-changer, but the hardest part is often knowing where to start. Here are a few tips to help you get started with HR automation:
- Start small: As much as you might want to, there’s no need to take every single HR process you have and figure out a way to automate it. Start with a few routine tasks that are time-consuming and prone to errors, and focus on those first.
- Leverage technology: There are plenty of software tools on the market, such as human capital management systems, human resources management systems, or applicant tracking systems, that have automation and workflow capabilities. Look for opportunities to leverage these tools to automate HR tasks.
- Involve stakeholders: Automation requires some communication. Involve stakeholders from across the organization, including HR team members, IT staff, and business leaders. This will help ensure that the automation is aligned with business goals and that all stakeholders are on board.
- Monitor and refine: As with any new initiative, it’s important to monitor the effectiveness of HR automation and refine processes as needed. Regularly reviewing and optimizing automation processes will help ensure that they continue to drive HR efficiency over time.
It may be clear at this point that HR efficiency can have a significant impact on the workplace. However, it is essential to understand the benefits of improving HR efficiency for both employees and businesses.
Benefits of Improving HR Efficiency for Employees
Efficient HR processes can make it easier for employees to access information about benefits, compensation, and company policies. Additionally, efficient HR processes can ensure timely and accurate payroll processing, leading to more satisfied employees. Happier employees tend to be more productive, which can help businesses achieve their goals.
Benefits of Improving HR for Businesses
An efficient HR department can save companies money in the long run by streamlining processes and reducing the time it takes to make an impact. In other words, automating HR tasks can save time and resources, enabling the HR team to focus on more critical tasks such as employee engagement and talent acquisition. In addition, efficient HR processes can lead to improved retention rates, which means businesses spend less on hiring and training new employees.
Benefits of HR Technology for Efficiency
The benefits of HR efficiency may seem endless, especially when HR technology is added to the mix. Here are just a few ways HR technology adds more bang for your buck:
1. Reduced calls and employee questions
Typically, when an employee has a question or request regarding their own HR-, payroll- or benefits-related information, they have to contact an HR administrator. But a seemingly quick question can turn into a lengthy process if the administrator is consumed with a lot of other responsibilities or has to hunt through multiple systems to track down an answer. The employee then gets stuck in a waiting game until the administrator can help.
An HCM system that centralizes employee information in one place and includes an employee self-service portal, accessible from desktop computers and mobile devices, means HR no longer has to get bogged down with employee requests. Instead, employees can quickly and easily access their own information and make updates to it as needed — anytime, anywhere — reducing a significant portion of the calls and questions your HR team gets.
And because this type of system makes employees responsible for their own information, it can even help you avoid certain penalties for inaccurate or incomplete data. Employees ensure the accuracy of their data instead of administrators, thus reducing the chance of errors or duplication that can impact reporting and compliance.
2. Increased employee engagement
No one wants to be at the mercy of another team or department, but that’s often how employees feel when they have to rely on HR to do even the most basic things. Not being able to look up their PTO balance, update an address, or track down a pay stub on their own eventually erodes employee satisfaction, since, from their perspective, they constantly have to jump through time-consuming hoops just to get simple things done.
With self-service and mobile capabilities, employees have much greater control over the HR data and processes that directly involve them. They don’t have to wait until an administrator has time to fulfill a request. Instead, they can log in to the portal, and see all their related data and records — using the devices they prefer. When employees are empowered this way, they don’t have to depend on others and can take an information-on-demand approach that they’re accustomed to in other areas of their lives.
This type of regular interaction with a flexible self-service portal ultimately boosts employee engagement by giving employees a stake in their own workplace success. When employees are invested and engaged, businesses tend to thrive and can see as much as a 23% increase in profitability, an 18% increase in productivity, and an 81% decrease in costly absenteeism.
3. Spend less on paper and postage
All that paper routinely used for HR administration comes with costs: aside from the paper itself, there are printer and ink, postage, equipment maintenance, and other office supply costs. If your HR team is still reliant on traditional, manual, paper-based processes, you have to budget for equipment and supplies every year — begging the question: could the money be better spent on modern, more effective tools?
When you run a cost-benefit analysis of a mobile app for employees, for instance, you might see that the initial price of the investment is similar to the money you’d otherwise have to spend on printing, mailing, and filing hard copies of critical HR forms, reports, and communications. But over the long run, you can see a sizable return on your investment with the time and costly headaches it saves in HR administration.
An HCM with self-service capabilities that enables mobile employees eliminates the need for paper systems since all employee information can be entered, stored, accessed, updated, and shared in one digital place. No one has to search through a filing cabinet, risk the wrong version of a form, deal with the fallout of mistakes, or continue to waste money on outdated processes, tools, and methods.
Challenges With Improving HR Efficiency
While there are several benefits to improving HR efficiency, it certainly does not come easy. Many employees are used to the way things have always been done and may resist new processes or technology. To combat this, HR professionals need to communicate the benefits of change and ensure that employees receive proper training and support to make the transition as smooth as possible.
Another challenge is keeping track of HR metrics and KPIs. While it’s critical to measure for success, the added task of having to monitor data can seem overwhelming. Investing in data management tools and technologies can help HR experts streamline their processes and make better use of the data available.
And of course, there’s always an HR compliance element. It’s critical for HR professionals to navigate legal and regulatory requirements. Compliance with laws and regulations related to hiring, benefits, and employee relations can be complex and time-consuming. HR professionals must stay up-to-date on changes to laws and regulations and ensure that their processes and workflows are compliant.
Lastly, budget constraints can be a challenge for HR departments looking to improve efficiency. Implementing new technologies or processes often requires a significant investment, and HR professionals may need to make a strong business case for the investment to secure the necessary funding.
The bottom line is improving HR efficiency requires careful planning, effective communication, and a willingness to adapt to change. While there may be challenges along the way, the benefits of improved efficiency for both employees and businesses make it a worthwhile investment.
Now that we’ve covered everything from the basics of HR efficiency, why it needs to be balanced with HR effectiveness, ways to improve, how to measure, and the impacts, let’s leave you off with some best practices.
Successful HR Practices Examples
First, let’s take a look at some successful HR practices examples. One company that has seen success with HR efficiency is Netflix. Aside from things like unlimited vacation time, no set work hours, and the freedom to make your own decisions, Netflix leans on the feedback of its people to ensure HR efficiency and effectiveness. They’ve found that giving people more flexibility has enabled them to be more efficient and effective.
Another example is Google, while it may offer its employees perks like free gourmet meals, on-site fitness classes, and even on-site doctors, they do a good job at analyzing workforce metrics. For example, it’s mentioned that Google analyzes metrics like terminations, voluntary exits, and retirements, the number of promotions, and more. They also focus on diversity and demographics to help foster a diverse workforce.
Tips for Implementing Best Practices
So how can you implement these best practices in your own HR department? First, it’s important to start from within and assess your current processes to identify areas that could benefit from improvement. Then, look outward, starting with successful companies in your industry to see what HR policies they have in place. Don’t forget to gather feedback from employees to see what they value most in terms of HR policies and benefits.
Once you’ve identified areas for improvement, it’s important to have a plan in place for implementing changes. This includes setting goals, defining metrics for success, and establishing a timeline for implementation. And of course, communicate these changes to employees and ensure they are trained on any new processes or policies.
Why Evaluating HR Practices Should be Ongoing
So you’ve got your strategy figured out, and a plan to measure its effectiveness. That’s great! But this is only the beginning. It’s important to remember that evaluating your HR practices should be an ongoing process. Just because a policy or process is successful now doesn’t mean it will be in the future. By regularly assessing and adjusting your HR practices, you can ensure that your HR department is always operating at maximum efficiency.
Make the Leap Towards HR Efficiency and Effectiveness Today
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