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Many organizations acknowledge that the source of their competitive advantage has its roots in their people and their human resource practices. Despite this, few measures exist to assess the value of these assets to an organization. In recent years, the financial community has placed overwhelming demands on Human Resources (HR) to demonstrate its accountability and this has launched the evolution of human resource performance metrics. (Holton and Naquin, 2004) Many have taken the easy way out and said, “It cannot be done”, but in order to become and remain a respected part of an organization and take an integral role in the boardroom, it is incumbent on HR professionals to think creatively to produce metrics that advance the accountability of the human resource function as a whole.

The recent increase in the importance of measuring human resources has created a problem for HR professionals. In order for HR to maintain its place in the strategic apex of an organization, it is demanded that it (HR) provide a sustainable competitive advantage to the organization. By definition, we understand this to mean that it is difficult to copy. (Becker et al, 2001) This presents a catch-22 for those responsible for initiating, managing and measuring these ‘strategic assets’. If this process is, in fact, difficult to copy, it should as a result be difficult to measure. If it is measured accurately and with ease, it should be relatively easy for competitors to mimic. How do we generate practices and processes that are strategic, sustainable and core to the organization and accurately measure them? I believe we must realize that measuring HR is not a perfect science. It may be equally as important to measure how HR initiatives support and contribute to the overall strategy and vision of the organization as it is to measure the success of any facet of the HR function in itself. Developing the perfect measure that is designed for a process that is not aligned with the overall strategy of the organization is a waste of money.

The full version of this article explores the importance of measurement, outlining limitations and suggestions to minimize these limitations in the context of an HR department in a retail firm. I explain my personal philosophy of measuring that is grounded in theory, provide a detailed description of the measures I intend to use for the simulated retail company and the benefits of these measures. Measurement has to go beyond assessing HR’s output to focus on HR’s impact. Understanding the impact HR is having on the execution of the business strategy is critical in order for HR to continue to build a strategic function. There are still critics of human resources that believe the function should be, “blown up and the activities should either be outsourced, allocated to the legal and finance departments, or given to line managers.” (Jamrog and Overholt, 2004) The onus is now placed squarely on the shoulders of HR professionals to fill the role of business partner and strategic thinker and, equally as important, be seen as filling that role in the organization. Effective practices and measures of these practices can help to demonstrate exactly that.

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