Utility Analysis of HRM Effectiveness

Utility Analysis of HRM Effectiveness

José M. Carretero-Gómez (University of the Balearic Islands, Spain)
DOI: 10.4018/978-1-59904-883-3.ch132
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Abstract

Within the field of human resource management (HRM) there is a broad consensus recognizing that people is one of the key resources that impact companies’ results. During the last two decades, it is also true that HR departments have experienced a rising in its organizational status with their functions evolving from a merely operational level to a strategic one. Nonetheless, HR departments still face a disadvantage to show the contribution of their interventions when compared to other functional departments within the organization. In this article we study two particular techniques for evaluating the effectiveness of HRM, utility analysis (UA) and multi-attribute utility analysis (MAU). Particularly, we apply them to evaluate an e-training program.
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Introduction

Within the field of human resource management (HRM) there is a broad consensus recognizing that people is one of the key resources that impact companies’ results. During the last two decades, it is also true that HR departments have experienced a rising in its organizational status with their functions evolving from a merely operational level to a strategic one. Nonetheless, HR departments still face a disadvantage to show the contribution of their interventions when compared to other functional departments within the organization. In this article we study two particular techniques for evaluating the effectiveness of HRM, utility analysis (UA) and multi-attribute utility analysis (MAU). Particularly, we apply them to evaluate an e-training program.

UTILITY ANALYSIS APPROACH IN HR

Professional and academic communities recognize that the evaluation of the impact of HR interventions is extremely important to any organization with a long-term human resource strategy. First, the evaluation provides information regarding how HR interventions contribute to the achievement of the strategic objectives and to the growth of the firm value. Second, results of the evaluation determine whether or not the specific programs meet their objectives. Other benefits of periodic, formal and rigorous HRM evaluation are summarized in Table 1. One may conclude that effective evaluation processes are necessary for organizations which consider individuals to be strategic resources and sources of competitive advantage (Tsui & Gómez-Mejía, 1988).

Table 1.
A summary of benefits of HRM evaluation
Legitimacy proof: Instrument to rise HRM function status.
Accountability mean: Tool to account for the efficient use of resources in order to compete for organizational resources.
Efficacy goals router: Mechanism for promoting change by identifying needs, powering corrective actions by determining strengths and weaknesses, and defining long term strategic plans assigning resource to the most productive and beneficial programs.
Decision making aid: Method that enables rational decision making when you have to select a course of actions among several that can be taken.
Efficiency management: Program that teaches HR managers to behave like business men who have to manage a resource which return must be analyzed.

Paradoxically, there is not much systematic treatment of HRM evaluation in academic and professional worlds. The reasons for this phenomenon remain a research question. Since HR information systems (HRIS) are recognized as a key vehicle for developing and improving organizational effectiveness, is important that they incorporate appropriate instruments to show HRM effectiveness. Here we offer a review and comparison of UA and MAU techniques to assess the impact of HR interventions, which can be taken as components of a HRM effectiveness information sub-system within the global HRIS.

One reason to concentrate in those particular techniques is that a debate remains opened in the utility analysis literature regarding the level of practitioners’ acceptance of UA and MAU. Before addressing this question, we believe necessary to show how both techniques can be applied in real firms, particularly MAU, as there is no experience with this approach in the context of HRM evaluation. A second reason to focus on UA and MAU is that the field of HR needs to answer the questions of how to evaluate the impact of HR investments and how to create metrics for measuring HRM performance (Baron & Kreps, 1999, p. 390-393, 525-532; Gómez-Mejía, Balkin & Cardy, 1997, p. 274-275, 568-596), which are crucial for HRM function to show its value. MAU and UA, among other approaches, are potential candidates which deserve some attention.

Specifically, our research questions were aimed to answer three core issues in the utility analysis literature: how a MAU model for HRM evaluation can be designed; how this approach can be applied in a real world organization; and, how does it compare in the practice with a traditional UA model.

Key Terms in this Chapter

E-Learning: Refers to the use of computers and networking technology for knowledge and skill building. There are several types of e-learning ranging along two extremes: synchronous training using live instructors and asynchronous or self-paced training, being the latter the most usual form of e-learning.

Attribute: Each variable or value dimension which measures each factor that stakeholders consider relevant for evaluating the impact of an HR intervention using the MAU method.

Stakeholder: Group of people composed by individuals with any interest regarding decision making regarding the HR intervention being evaluated, individuals with influence over decision makers who wanted to consider the formers’ opinions in the evaluation process, and anyone who transmit or receive HR measures (Boudreau, 1996 AU16: The in-text citation "Boudreau, 1996" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. ; Edwards & Newman, 1982 ).

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