Theory of HR Quantification

Theory of HR Quantification, Feedback Index

Theory of HR Quantification is an advanced theory in Human Resource Management. It states that Human Resource Management can be discussed in quantitative terminology just like other forms of management science. The said theory transforms the nature of Human Resource Management from being an independent managerial department to a strategically linked growth advancing department. Further while it was used to be believed that Human Resource Management cannot be assigned numerical values, the Theory of HR Quantification has disproved this notion. This theory has been developed by Indian inventors Pooja Jain and Pranjal Jain . The Theory of HR Quantification introduces certain concepts which deal with Human Resource Management principles in numerical terms. These concepts include Feedback Index, Organizational Feedback Index, Employee Feedback Index, HR Analytics, Employer-Employee Productivity Model etc.

Feedback Index

Feedback Index is a mathematical tool which evaluates the amount of employee empowerment present in an organization. It utilizes the concept of Feedback as a core driver for evaluating the level of employee engagement. It estimates the level of employee engagement from two sources. Firstly the organization as a whole is tested and secondly the perception of the employees is recorded. These two sources are accordingly termed as Organizational Feedback Index (OFI) and Employee Feedback Index (EFI).One of the important implications of Feedback Index is that it derives the opinion of the Organization without resorting to the method of survey or questionnaire.

Organizational Feedback Index

Organizational Feedback Index (OFI) is a tool to numerically evaluate how much employee empowerment exists in an enterprise. OFI achieves its objectives by posing a series of questions and conducting multiple tests at the organization level. As shown in the image, the OFI computation process begins with question asking whether the organization is willing to leverage its current HR system to enhance employee productivity or not. If the organization is willing to improve its employee productivity only then there will be some kind of employee engagement and therefore only in that case, OFI can be computed. If the organization is not even willing to utilize its HR systems to increase productivity, OFI will not be applicable.

If the answer is in positive, OFI poses another question which asks whether the organization believes in the concept of Feedback or not. This question is extremely important since OFI's algorithms derive their relevance from the inherent belief in feedback methodology. If an organization's vision cannot accommodate feedback mechanism, later processes of OFI become redundant. If the answer is no, then OFI accords a score of 0 and the process terminates. If the answer is in acceptance, then the OFI evaluator assesses whether the organization has installed any feedback system in the past. If organization has not installed any system then it is given an OFI score of 1 and the process terminates. A score of 1 is given and not 0 because at this stage the organization has satisfied two conditions, i.e. it believes in the concept of feedback and it is willing to leverage its HR systems to increase employee productivity.

If the organization has installed some feedback system, then two tests are to be applied. These may be applied simultaneously or correspondingly. These tests include Robustness Test and Time Test. Robustness Test evaluates the strength of the feedback framework presently deployed at the organization. It evaluates whether the feedback system installed is one way, two way, three way or 360 degree. One way feedback system is a kind of feedback system wherein there is a flow of feedback from employer to employee only. There is only one way flow and there is no other form of employee correspondence. This is the weakest form of employee engagement and therefore is receives a Robustness Test score of 1. Two way feedback flow is a feedback channel wherein feedback flows from employer to employee as well as employee to employer. This form receives Robustness Test score of 2. Three way feedback flow model entails the involvement of the top management as well in addition to the middle and lower level management. Herein the entire internal employer - employee chain is involved. This system boasts about the presence of employee engagement and therefore receives a Robustness Test score of 3. There may be a 360 degree feedback system, which receives the highest score of 4. In this model, in addition to the entire internal stakeholder chain, even the external stakeholders are also involved. This is the highest engagement model which includes the views of all the parties concerned, whether internal or external.

Time Test evaluates how much maturity has the feedback system gained over a period of time. It is built upon the convention that as time passes by, anything can be improved by gaining experience and fixing the defects. If the feedback system has been installed for more than 5 years, Time Test score will be 3. If the feedback system has been installed for more than 1 year but less than 5 year, then the Time Test score will be 2. If it has been installed for less than 1 year, then the Time Test score will be 1. Time Test evaluates two aspects. Firstly, how much maturity has the installed feedback system gained and secondly the feedback system that was once installed is whether in continued application or not. The aggregate score of Robustness Test and Time Test is termed as Phase I Score. Phase I Score has a range of 0 - 7. This portraits the historical status of employee engagement in an organization.

Phase II - Analysis, begins with conducting Motivation Test. Within this Test, the evaluator assesses whether the organization motivates its employees to participate in the feedback process or not. If it is deduced from the organizational policies that it encourages the employees to participate, then it is said to pass the Motivation Test. It is accorded a Motivation Test score of 1. Otherwise it is said to fail, eliciting a score of 0. Thereafter a Confidentiality Test is to be conducted.

Confidentiality Test comprehensively covers multiple organizational policies under the sub heading of Privacy Test and IT Test. Privacy Test is further composed of 4 tests which include:

• Transparency Test: This test evaluates how transparent are the organizational policies. Are the employees made aware about who has access to their feedbacks, how is their feedback system handled etc.
• Non Disclosure Test: This test evaluates whether the organization has explicit policies stating that employee suggestions and employee feedback will not be disclosed to any party without consulting the relevant employee
• Documentation Test: This test evaluates the orgazniational policies about recording and documenting the processes dealing with employees and stakeholders. It is a proven fact that higher the level of documentation, higher is the level of confidence amongst the stakeholders.
• Leakage Test: This test evaluates how many instances of employee response leakage have been reported. The leakages concerned include voluntary leakages as well as involuntary leakages. For involuntary leakages a threshold limit of 5 has been provided.

Each of the above mentioned 4 tests have a score range of 0 and 1. If the organization passes the test, it is accorded a score of 1 and if the test fails, it is given a score of 0. IT Test constitutes evaluation of the Information Technology Architecture of the enterprise. It has a score range of 0-4 and assesses a score on the basis of 4 parameters. Confidentiality Test therefore has an aggregate score range of 0-8.

Phase II Score has a score range of 0-9 and highlights the quantum of employee empowerment efforts being taken by the organization presently. A high score determines that organization is taking efforts to empower its employees. A low score determines that organization is presently not taking enough efforts to empower its employees.

Phase III - Conclusion is determined by evaluating Final Action Test (FAT). The said test evaluates whether the organization actually takes any corrective action based upon the feedback it has received from the employees. If the organization fails to take some action, it is said to fail the Final Action Test and given a FAT score 0. If it takes corrective action, it is said to pass FAT and a FAT score is determined on the basis of time taken to take the corrective action. It the organization takes corrective action within 30 days of completion of the feedback process, it is accorded a FAT score of 4. If it takes a corrective action after 30 days but before 60 days, it is given a FAT score of 3, if it takes a corrective action after 60 days but before 90 days, it is given a FAT score of 2. If it takes corrective action after 90 days, it is given a FAT score of 1. It is to be noted that FAT test evaluates the organization on the basis of time taken to take corrective action. It is not evaluating the quality of action taken. The type of corrective action is corroborated from the Employee Feedback Index. This is due to the fact that every organization will state that it is taking the best possible corrective action. Only the employee reaction can provide a true and fair view about the quality of action taken by the organization.

Phase III Score is the equivalent of FAT score. This determines the future efforts that organization will take on the basis of employee feedback and stakeholder's responses.

The aggregate of Phase I Score, Phase II Score and Phase III Score is called the OFI Score of an organization. It ranges on a scale of 0 - 20. Separate Score Class intervals have been established which guide whether the organization has no employee engagement, weak employee engagement, satisfactory employee engagement, good employee engagement or extreme employee engagement.

Employee Feedback Index

Employee Feedback Index (EFI) is the tool which evaluates the perception of the employees towards the amount of employee empowerment level present in the organization. EFI serves twin purposes. Firstly, it provides the direct views of the employees and secondly it corroborates the results obtained from the OFI.

EFI computation methodology constitute segmenting the workforce into top management level, middle management level and lower management level. Different sets of detailed questionnaires are prepared for each management level. Their individual responses are scaled on the basis of a mathematically derived algorithm. This algorithm states that the scaled value shall be the (alloted value - minimum value) with respect to the (maximum value - minimum value). This is called as the Level Divisional Score (LDS) Thereafter an average score is taken for all the questions. Thereafter the geometric mean of top management score, middle management score and lower management score is taken to derive the EFI value. The value is then corresponded to a Score Class Interval to ascertain the level of employee empowerment.

Quantitative Techniques

The existing statistical and mathematical techniques that have been used in different departments such as the Finance department can also be used for the HR department subject to certain modifications. Such techniques constitute Human Resources (HR) as a measurable subject and establishes correlation-regression analysis between HR and other variable elements such as sales, production, marketing, strategy etc.. The fundamental principles of statistics dealing with mean, median and mode can be applied in Human Resource Management for measuring the employee productivity. These three interlinked metrics may be applied in diverse domains. Firstly, mean employee working hours may be computed to evaluate Average Productive Working Hours. Such computation may be made for per year basis or for per month basis or even for per day basis. The Average Productive Working Hours provide a solution to the queries such as how much time does an employee spends on commutation, how much time does an employee spends in break period and how much time does an employee actually devote towards the organization. improved. Application of mean in employee working hours assists in computing Full Time Equivalent (FTE) of the employee working hours in achieving the objectives of the organisation. This FTE is used to compute the amount of Revenue earned per one employee working hour. This is called as Revenue per FTE hour. The level of Revenue per FTE hour signifies that whether the activities of employees are leading to revenue maximisation or not. Thereafter another ratio can be computed which is termed as Expenditure per FTE hour. This denotes the amount of employee benefit expenses that are being incurred per each employee working hour. By knowing all these factors adequate action can be taken and overall organizational growth can be improved. Secondly, the concept of Median, Percentile and Quartile is used to evaluate demographic characteristics of the workforce. It provides hands on information with respect to organizational demography, such as what is the median age of the employees, what quartile of workforce is engaged in manufacturing sector, what quartile of organization is engaged in sales support sector etc.. Thirdly, mode is used to identify which factors replicate the highest productivity levels of the employees.

The Theory is unique in its nature since it utilises the conventionally deployed quantitative techniques to assist the strategic growth objectives of an enterprise. By applying such kind of techniques it converts the soft knowledge into hard knowledge, i.e. it codifies the qualitative human knowledge into a citation based neural network.

HR Analytics

HR Analytics also termed as People Analytics is the application of modern technology in the field of Human Resource Management. It is the technological tool to analyze the past transactions, interpret the current trends and project the future happenings. HR Analytics have a key role to play in the modern business environment. It has the capability to provide sustained competitive advantage to the organization by not only analyzing the past shortcomings but also by predicting the expected reaction of the employee based upon the change in the organizational policies. HR Analytics acts as an advanced decision support system which aligns HR department with the strategic department. It allows the top management to frame overall organizational policies on the basis of robust algorithms.

How this Theory links HRM with Strategic Management

By adding quantitative element to Human Resource Management, strategic analysis can be made with respect to the most important resources of an organziation, its Human Resource. When organizations are equipped with the ability to predict the future happenings they are able to take strategic decisions. Hence Theory of HR Quantification transmutes HRM to Strategic HRM and HRA.</nowiki>

External Links

• http://www.academia.edu/Documents/in/Human_Resource_Accounting

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