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Your 2016 annual report: Link every HR initiative to financial impact

Published: December 15, 2016
Updated: June 11, 2019

reports You probably accomplished a lot this year. Make sure your boss and your boss’s boss know exactly how valuable HR’s contributions were.

It’s not enough to just report what you did—that won’t cement your role as a strategic partner in your organization. The top brass needs to know how much your HR initiatives were worth. Ensure they understand the financial impact of the many things you did in 2016.

Connecting strategy to returns

Here’s the general formula for strategic HR:

First, determine which regularly reported HR activities your top executives consider most crucial.
Then create and implement programs to improve those activities in ways that increase revenue or profit, or cut expenses.
Finally, develop credible metrics to measure the financial impact of HR activities.

Consider these examples of how to establish the linkage between HR programs and their real value.

Example 1: Orientation

Say your department took several steps over the past year to improve the new employee orientation process and make it more efficient.

As a result, turnover declined and new employees spent less time in orientation, enabling them to start productive work sooner.

Financial impact: HR conducted 30 employee orientations since making the process more efficient a year ago. During that period, turnover decreased by 10%, saving the company about $16,000 in hiring costs. New employees spent 25% less time in orientation, adding 90 hours worked. Managers report 20% fewer mistakes made by new hires in the first month.

Example 2: Safety

Say you launched a safety education program a year ago. Since then, the number of accidents, safety violations and injury-related days off have declined.

Financial impact: Accidents, injuries and incidents last year fell from 40 to 25. Injury-related days off decreased from 70 to 30, saving the company $8,400 in paid time off.

Example 3: Turnover

Six months ago, HR took several steps to reduce turnover. The department replaced the pre-employment screening company, implemented job skill and temperament tests, and standardized exit interview questions. It also started a low-cost staff recognition program.

Financial impact: Turnover and cost per hire decreased by 15% over the past six months, saving the company $29,000 in recruiting and administrative costs.

Bottom line: Unless you can back up HR gains with clear, verifiable numbers, you risk weakening your credibility with management.

Make the most of HR metrics

1. Ask execs which factors help the organization and its departments run more smoothly, satisfy customers and turn a profit. If you hear the same thing from many people, chances are you should be tracking a related HR metric.

2. Provide information, not just numbers. As you identify what’s important to your organization’s strategic success, the metrics that matter most should rise to the surface. Your goal: Give information that enables better business decisions.

3. Learn more about HR metrics. Demystify metrics by reading up on the topic and networking with other HR pros to find out how their organizations use metrics.