The HR Value Chain Model

The HR Value Chain Model is a key tool that shows how HR adds value to business objectives. It's no secret that HR professionals in most organizations struggle to prove their worth. One reason, he said, is that every organization is unique. What works for one organization may not work for another. Another reason is that it is difficult to represent values ​​in a realistic way. The HR value chain model aims to solve this problem.

The HR value chain is the process that describes how the results associated with HR activities and practices lead to organizational objectives. This indicates that the department has multiple processes and activities that lead to HR outcomes that contribute to organizational goals.

HR Activities and Processes – Key examples of HR activities include employee relations, employee forecasting, training and development, compensation, and organizational development. These activities are measured using efficiency metrics such as recruitment cost, learning budget, number of candidates per requisition, time to hire, and number of vacancies. While these metrics are great for measuring the efficiency of HR activities, the results are not expressed in terms of quality.

HR Outcomes – These activities lead to HR outcomes that are measured as KPIs. Examples include employee engagement, turnover, retention, individual and team performance, absenteeism, quality of hires, and more. Such metrics provide useful insight into employee performance.

Organizational results - HR results are not sufficient. Ultimately, companies want to influence their goals. Strategic goals are measured by productivity, profit, customer satisfaction, market capitalization, customer loyalty, etc. Such results add value to the organization and benefit the company in the long run.

 

HR Value Chain in Action – What Can we Expect?

To implement the HR Value Chain model, we need to create a chain of people and processes. These are the analyzes that tie together what your HR team is doing to create value for your business. Here are some of the actual building blocks of the HR value chain.

 

HR Enabler – Influencer within an organization who enables proper HR processes such as design, marketing, and budgeting.

HR Activities – These are HRM tasks including recruitment, development, planning and compensation.

HR Results – These are metrics like engagement, retention, cost, performance, and talent monitoring.

Strategic Focus – Analysis of HR strategy reflected in both metrics and HR performance.

Key Performance Indicators - KPIs are monitored in three different types: customer facing KPIs, financial KPIs and process KPIs. HR results help the monitoring process, and data feeds into the results.

For example, consider increasing a company's training budget as a human resource process. If it leads to better employee performance, that's HR performance. However, improved performance leads to increased sales, demonstrating the link between HR performance and organizational goals.

Another example is the fair compensation of employees as an HR process. This leads to an improvement in the retention rate, which is a human resource outcome. This can lead to cost reduction goals for your organization. A positive relationship between HR practices, outcomes, and organizational goals ultimately leads to a perceived HR value within the organization.

The HR Value Chain Template helps highlight different topics including different aspects of HR operations such as career development, retention, and recruitment. It also helps leverage analytics across different components of the HR value chain. Using these templates eliminates the unnecessary effort, time, and energy required to create the necessary framework for HR teams to implement their HR value chain model.

Reference:

 Google.com. (2023). Redirect Notice. [online] Available at: https://www.google.com/url?sa=i&url=https%3A%2F%2Ftwitter.com%2Fqandlehr%2Fstatus%2F1359003689663557632&psig=AOvVaw07S97RcK7H5LIkOnO9bYrU&ust=1692010845200000&source=images&cd=vfe&opi=89978449&ved=0CBEQjRxqFwoTCNjoxNy92YADFQAAAAAdAAAAABAJ [Accessed 13 Aug. 2023].

Morris, A. (2021). HR Value Chain Model – UPDATED 2021 – A Complete Guide. [online] Employee Experience Magazine. Available at: https://www.emexmag.com/hr-value-chain-model/.

‌

‌