What ratio shows the real added value of an HR function?

Why don't HR professionals spend more of their time trying to improve the organisation? The evidence is that most HR people spend their time on:

1. Administration, which we stopped calling "personnel" about 20 years ago because of the term's negative association with paper pushing. This accusation is a bit harsh as a lot of HR admin work is highly specialised, take pay and benefits for example, and time consuming.  And often these roles have a strategic dimension.
2. Providing employment law advice (or looking for it). This is an essential form of risk management although you could argue that there are bigger risks that HR sometimes turns its back on, eg scary employee retention trends.
3. Being strategic or "the business partner".

A glance at the annual CIPD conference programme in any given year will show many of the speakers are covering topics in the third category. The evidence, however, is that HR practitioners in reality spend the smallest proportion of their time on that 'strategic' stuff. Yet this is where they could feasibly improve the organisation. Research by XpertHR shown in this graphic indicates that on average HR practitioners spend only 10% of their time on strategy. 

Is this enough? Efficient admin and compliance can cut costs, but is there hard evidence that HR strategy can go further and actually generate revenue or improve service standards? 

One of the leading UK experts in Human Capital Management, Andrew Mayo, author of the new book "Human Resources or Human Capital" has written an article on Personnel Today addressing this issue "How can HR prove it really adds value".

Mayo prefers to use the term "adding value", he says, "because it focuses the mind on the outcome of HR's contribution." His article is part of a series on using data and statistics in HR, and earlier this year Mayo wrote on how to use HR analytics to get results. 

 Mayo says the first step is to work out to whom you are adding value, in other words HR's stakeholders. The most important are internal: senior management, line managers and employees generally. He goes on to explore first steps in defining and measuring the added value of  HR.  

For example,

"We would expect senior management  to be concerned with areas such as costs and efficiency, reputation, leadership development, culture and values, and supporting the business strategy with appropriate people strategies. We then have to ask what measures of these can we reasonably use, how often will they be measured and what is our target, or level of expectation?"

Examples of measures on each of these would be: 

• Costs and efficiency - cost of HR service per employee; process times; accuracy per 100 transactions, absenteeism levels 
• Reputation - employee brand data, league tables, awards, positive press comments and lack of the opposite 
• Leadership development - investment levels, productivity improvements, internal succession bench strength 
• Culture and values -  surveys, 360 feedback, customer perceptions, OD Interventions, training coverage 
• Strategy - senior management judgement"

But HR's relationship with its stakeholders isn't one-sided, it is mutual, says Mayo:

"What about the reverse expectations? HR has a right to expect support from senior management in its programmes and initiatives - mainly in communication and participation. Levels of these can be agreed with the senior management team."

So what is the ratio that proves how much value HR is really adding?  According to Mayo it's...

"[The] ratio of value added time to total time [i.e. time spent on HR activities] is probably the best measure of productivity in a function such as HR."

More recent XpertHR Employment Intelligence commentary on related issues: 

• HR data round-up May 2012: The changing ratios of HR to employees
• Benchmarking HR's influence & effectiveness in 2012
• How has responsibility for HR activities changed over the past decade?
• Benchmarking HR effectiveness in 2012: HR rises to the challenge
• The shrinking HR department
• Are you an HR lifer?

Andrew Mayo's article is the eighth in a series on using data and statistics more effectively in HR: 

• Maximising the effectiveness of HR data, by Nick Kemsley of Henley Business School. 
• How to use data to get results in HR, by Andrew Mayo, author of Human Resources or Human Capital? 
• A closer look at employee opinion survey results boosts engagement at Barclays, by Gordon Tinline, director at Robertson Cooper, and Hazel Hodgins, head of employee engagement and insight at Barclays UK Retail and Business Banking. 
• How HR can gain more from benchmarking, by Ray Wilkinson, director of the Best Practice Club. 
• Benchmarking - what is it? By Ray Wilkinson
• Strategic workforce planning - the challenge of moving from words to action, By Nick Kemsley of Henley Business School
• How to get strategic workforce planning right, By Nick Kemsley