After all, how to measure the ROI of HR actions?

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Within organizations, it is common that some sectors, such as Human Resources, are not yet seen as objective and strategic. This is because they do not usually provide the company with a clear measure of the return on its shares.

As the statistician Edward Deming said: “You cannot manage what you do not measure, you cannot measure what you do not define, you cannot define what you do not understand, there is no success in what you do not manage.” Therefore, in today's post we are going to deal with return on investment in HR stocks. To learn how to measure ROI and how important it is to the industry, read on!

Definition of ROI

The acronym ROI stands for Return On Investment, translated as Return On Investment. This is a metric commonly used in areas such as Sales and Marketing.

As the name suggests, ROI calculates the percentage of return on a specific investment and allows you to measure how much the company gains or loses by investing in certain projects. It is the relationship between the resource used and what actually resulted: profit or loss.

Analyzes such as ROI, based on indicators that measure results, have been widely used to obtain efficient management with a focus on growth, since the data provided helps to identify bottlenecks, trends and threats.

Application in the HR area

Like other sectors of a company, HR must propose metrics for the results of its actions, in order to prioritize projects and compete for investments.

Using ROI in the HR area has become something possible and used by several companies — it is a practice that has come to consolidate this as a strategic sector within organizations.

In the Human Resources sector, the return on investment metric is widely used to support and plan People Management actions and to improve practices with a focus on results. Efficient HR management should allow tracking of talent retention rates, absenteeism, turnover, training, among others.

Calculate ROI

To measure ROI, it is first necessary to create measures that are accepted by all departments of the organization and consider all indirect and intangible benefits in the calculation. In HR, it must be calculated following these steps:

  1. measure a benefit received;
  2. subtract the total applied;
  3. divide the result by the amount invested;
  4. multiply by 100.

Consider the example:

The company invested R$ 5,000.00 in training for leaders. After a month, it was verified that this training provided a return of R$ 15,000.00 and presented another return with the reduction of monthly costs in the amount of R$ 8,000.00. In total, there was an increase of R$ 23,000.00 in revenue. According to the formula, we have:

ROI = (benefit received – total invested) ÷ amount invested

ROI = (23,000 – 5,000) ÷ 5,000

ROI = (18,000) ÷ 5,000

ROI = 3.6

Calculating the percentage rate:

3.6 × 100 = 360%

To assess how relevant this number is for the organization, it is necessary, based on a market analysis, to define a performance metric with a value that the company considers acceptable.

One of the biggest difficulties when measuring is how to calculate intangible benefits. For this, our tip is to transform them into tangible results that can be analyzed clearly.

In these cases, it is first necessary to define exactly what the business objective is, what is the organizational indicator that is expected to improve and whether training, for example, will be a support tool or an essential means to achieve the objective. With these analyses, it becomes clearer how to start the ROI calculation.

Measure return on training and development

The return on training and development is one of the main HR indicators, as it compares the amounts invested in the improvement of employees with the improvements obtained in the company's routine.

To calculate the ROI, it is necessary to have clarity of the amount invested in the processes and to measure the variations generated in the company's results after its realization.

A positive ROI indicates that the training was effective. By measuring and showing the return on the preparation of employees, it is clear to the board the importance of training the team and the impact of such actions on the corporation.

Thus, having this indicator improves the reputation of an area and its professionals, in addition to being a powerful strategy for internal investment trading.

Evaluate the return on selection processes

To ensure the success of a new hire, it is necessary to carry out a selection process focused on the objectives, culture and values ​​of the company. The most qualified professional in the market may not identify with the organization and may not be a good hire, leading to a loss of time and costs, in addition to an increase in the turnover rate.

A tip for making good hires and building a high-performance team is to use the job description, detailing the candidate's responsibilities and expectations.

When calculating Return on Investment in selections, it is important to survey all costs related to the admission process: publicity with the job advertisement, expenses with calls and the working hours of the HR professional involved in the task.

Then, calculate the effectiveness rate of hiring, if new employees remain in the company or if they are increasing turnover. A high adaptation index indicates that the ROI in your admission process is positive.

In addition to these two calculations presented, HR has many other indicators that can be measured and analyzed to consolidate itself as a strategic area and show that the company makes good investments by trusting the sector.

It is worth considering that each HR must understand the indicators that are most important for your company's reality when measuring ROI. Take advantage of our tips to improve or start using the return on investment calculation in your business.

So, did you like the information about ROI? Want to make your HR even more strategic? So, read this text and find out what are the 5 key metrics for this sector!


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