As a result of the COVID-19 crisis, many executives predict the global economy will be in a recession for the rest of 2020 and perhaps even into 2021. Consequently, many top leaders will conduct reviews of programs in an attempt to reduce budgets and save money. Are you prepared to show how your major HR programs drive the business in this new post-pandemic world? Implementing some actions now can safeguard your budgets during and after this time of uncertainty.
After the Great Recession in 2008-2009, Economist magazine conducted a study of how it changed key organizational roles and developed a list of winners and losers. The No. 1 winner was the chief financial officer. They suggested that this person will steer the organization back to financial health. The No. 1 loser was the chief human resource officer (CHRO). HR experienced the greatest budget reduction on a percentage basis. Also, the CHRO had to clean up the aftermath of all the job layoffs, restructuring across the organization. Will this recession be the same?
Cost Versus Investment
Organizational leaders need to perceive HR as an investment and not a cost. If top leaders see HR as a cost, they will control it, reduce it or perhaps even eliminate it if they can. This results in weak partnerships, diminished influence, decreased support and reduced funding. If HR is seen as an investment, leaders may maintain it, enhance it and maybe even protect it. Additionally, this helps build business partnerships, improve client relationships and increase funding. What is the best way to convince executives that HR is an investment? Measure the return on investment (ROI) of a major HR program using a standard ROI calculation. Top executives need to see HR as an investment that yields a positive return, not a necessary cost that must be accepted.
HR Value Definition
The value of HR programs is described using five levels of outcomes:
- Reaction to the HR program.
- Learning to make the HR program a success.
- Application of what's necessary to make the HR program a success.
- Impact from application, expressed as output, quality, cost, time.
- ROI, the comparison of benefits to cost.
Executives would like to see impact and ROI for expensive HR programs.
Actions to Take Now
Seven actions you can take now to protect your budget:
- Measure the impact and perhaps ROI of a major HR program now. Think about a program that has been recently conducted. Now is the time to collect data for level three (application) and level four (impact), and maybe even level five (ROI). This is not the ideal scenario because you didn't necessarily plan for the HR program to deliver the business results, but you may be surprised at the success. If it's not successful, you will know what to change to make it successful.
- Ensure that virtual HR programs are effective. With so many HR programs now shifting to virtual delivery, we need to ensure that they are working, particularly at level three (application), level four (impact) and maybe even level five (ROI). Unfortunately, there is a problem with many virtual programs breaking down at levels three and four—not delivering application and impact.
- Update your measurement and evaluation strategy. If your HR evaluation or analytics haven't focused on connecting major HR programs to the business, then it's time to make a change. Adjust your strategy now.
- Design future HR programs to deliver results. Start creating important new programs by first answering why the program is needed and making sure the "why" is a business-driven measure. SMART (specific, measurable, achievable, realistic and timely) objectives are needed, not only for reaction and learning but for application and impact as well. This provides the focus you will need to deliver results.
- Capture more executive-friendly reaction measures. Executives are interested in measures such as relevance, importance, intent to use and recommendation to others. Steer away from happiness or employee satisfaction measures that may not get them excited.
- Be prepared to forecast the impact and ROI of a major HR initiative. The only way a new program may be approved and implemented in the post-pandemic era might be to provide a forecast in advance. This will be the new normal for many, and you have to be prepared to do it.
- Share the joy of delivering and measuring business results. The effort to connect HR to the business is not solely the responsibility of the HR analytics team. The entire team—from analysts, designers, developers, program owners, facilitators, participants and the managers of the participants—has a role in this critical process.
When the crisis ends, and you face a new normal, your budget should be protected, and HR should thrive, even in a downturn.
Jack J. Phillips, Ph.D., is chairman of ROI Institute, the leading source of ROI competency building, implementation support, networking, and research. Patti P. Phillips, Ph.D., CPLP, is the CEO of ROI Institute.