What is Human Resource Management?

Let’s start with a brief definition. Human Resource Management, or HRM, is the practice of
managing people to achieve better performance.
For example, if you hire people into a business, you are looking for people who fit the
company culture as they will be happier, stay longer, and be more productive than people
who won’t fit into the company culture.
Another example is engagement. Engaged employees are more productive, deliver higher
quality work and make customers happier. This means that if we can find ways to make
employees more engaged, we help the company.
This is what Human Resource Management boils down to: optimizing company performance
through better management of human resources. The next question is, who are these Human
Resources?
What is a Human Resource?
It may feel a bit weird to refer to people as ‘human resources’. Human Resources are all the
people that in one capacity or another work for or contribute to an organization.
These people make up a company’s workforce. They can be regular employees, for example,
but also contractors. Especially with the rise of the gig economy, more and more people are
starting to work for an organization on a contract basis without having a traditional labor
contract.
These people include independent contractors, workers provided by contract firms, on-call
workers, and temporary help agency workers.
An independent contractor can be under contract for years at the same organization, while an
agency worker can work at 20 different companies throughout one year. Because these
people are all involved in the company to a different extent, the way they are managed and
involved in the organization should also be different.
In addition, there are increasingly non-humans at work at the company.
In this case, we’re talking about the increase in robotization. Robots are increasingly involved
in day-to-day work and the interaction between man and machine is becoming increasingly
essential to the success of the organization. Although these machines are not considered
‘human resources’, there is a case to be made that they should be included in some way as
they are part of the workforce.
The seven HR basics
When we talk about Human Resource Management, there are a number of elements that are
considered cornerstones for effective HRM policies. These cornerstones are:
1. Recruitment & selection
2. Performance management
3. Learning & development
4. Succession planning
5. Compensation and benefits
6. Human Resources Information Systems
7. HR data and analytics
In the following section, we will cover these HR basics one by one.

#1. Recruitment & selection

Recruitment and selection are arguably the most visible elements of HR.
Recruiting candidates and selecting the best ones to come and work for the company is a key
HR responsibility. People are the lifeblood of the organization and finding the best fits is a
key task.
The request for new hires usually starts when a new job is created or an existing job opens
up. The direct manager then sends the job description to HR and HR starts recruiting
candidates. In this process, HR can use different selection instruments to find the best person
to do the work. These include interviews, different assessments, reference checks, and
other recruitment methods.
Sometimes, when there are a lot of candidates, HR may deploy preselection tools. These tools
help to separate the wheat from the chaff when it comes to suitable candidates. The
candidates that are successful then continue to the next round, where they are interviewed and
receive a more in-depth assessment.

#2. Performance management

Once employees are on board, performance management becomes important. Performance
management is the second HR basic. It involves helping people to perform better in their
jobs.
Usually, employees have a defined set of responsibilities that they need to take care of.
Performance management is a structure that enables employees to get feedback on their
performance – with the goal to reach a better performance.
Examples are formal one-on-one performance reviews, 360-degree feedback instruments that
also takes into account the evaluation of peers, clients, and other relations, and more informal
feedback.
Usually, companies work with an annual performance management cycle, which involves
planning, monitoring, reviewing, and rewarding employee performance. The outcome of this
process enables the categorization of employees in high vs. low performers and high vs. low
potentials.
Successful performance management is very much a shared responsibility between HR and
management, where usually the direct manager is in the lead and HR supports. Good
performance management is crucial, as employees who consistently underperform may not be
a good fit with the company and/or culture and may have to be let go.
This is also one of the basic responsibilities of HR.

#3. Learning & development

If employees struggle to perform well in certain areas, learning and development can help to
improve their performance. Learning & development (L&D) is led by HR and good policies
can be very helpful in advancing the organization towards its long-term goals.
Many organizations have pre-defined budgets for L&D efforts. This budget is then
distributed amongst employees, with trainees, future leaders, and other high potentials often
receiving more training opportunities than others.
A well-known framework that connects performance management with L&D activities is
the 9-Box grid. Based on people’s performance and potential ratings, different development
plans are advised.

#4. Succession planning

Succession planning is the process of planning contingencies in case of key employees
leaving the company. If, for example, a crucial senior manager quits his/her job, having a
replacement ready will guarantee continuity and can save the company significant money.
Succession planning is often based on performance ratings and L&D efforts. This results in
the creation of a talent pipeline. This is a pool of candidates who are qualified and ready to
fill (senior) positions in case of someone leaving. Building and nurturing this pipeline is key
to good people management.
#5. Compensation and benefits
Another one of the HR basics is compensation and benefits. Fair compensation is key in
motivating and retaining employees.
Compensation can be split up in primary compensation and secondary compensation. Primary
compensation involves directly paid money for work, which often is a monthly salary and
sometimes performance-based pay.
Secondary benefits are all non-monetary rewards. This can include extra holidays, flexible
working times, day-care, pensions, a company car and laptop, and much more. The goal here
is to reward people in ways that motivate them.

#6. Human Resource Information System

The last two HR basics are not HR practices but tools to do HR better. The first is the Human
Resource Information System, or HRIS. An HRIS supports all the cornerstones we discussed
above. For example, for recruitment and selection an Applicant Tracking System, or ATS, is
often used to keep track of applicants and hires.
For performance management, a performance management system is used to keep track of
individual goals and put in performance ratings.
For L&D, a Learning Management System (LMS) is used for the distribution of content
internally, and other HR systems are used to keep track of budgets and training approvals.
For compensation, a payroll system is often used, and there are also digital tools that enable
effective succession planning.
All these functionalities can often be done in one single system – the HRIS. Sometimes,
however, the management of these functionalities is split up into different HR systems.
The bottom line here is that there is a significant digital element to working in HR which is
why the HRIS is the final element when we talk about the HR basics.

#7. HR data and analytics

The last of the HR basics revolves around data and analytics. The last half decade, HR has
made a major leap towards becoming more data-driven.
The Human Resource Information Systems we just discussed is essentially a data-entry
system. The data in these systems can be used to make better and more informed decisions.
An easy way to keep track of critical data is through HR metrics or HR KPIs. These are
specific measurements that answer how a company is doing on a given measurement. This is
referred to as HR reporting.
This reporting focuses on the current and past state of the organization. Using HR analytics,
HR can also make predictions about the future. Examples include workforce needs, employee
turnover intention, the impact of the (recruitment) candidate experience on customer
satisfaction, and many others.
By actively measuring and looking at this data, HR can make more data-driven decisions.
These decisions are often more objective, which makes it easier to find management support
for these decisions.

Conclusion
You now know the 7 Human Resource Management basics. The work in Human Resources is
varied and includes many more topics. However, after reading this article, you know the
basics.
There is a lot more to learn when it comes to HR. For more advanced HR reading, check our
articles on HR best practices, talent management, employee experience, and HR innovation.
These are amongst our most popular articles.

What are workforce planning tools?

Workforce planning tools are instruments that help analyze current capabilities and future
needs for the employee population.

These tools are data-driven instruments that help identify the gap between current capabilities
of the workforce and its future needs. In addition, they help you come up with ways to fill
this gap.

In this article, we will discuss five strategic workforce planning tools.

1. Strategic workforce planning map

2. 9-Box grid
3. HR dashboarding
4. Compensation and benefits analysis
5. Scenario planning
Most of these tools help to identify the current workforce capabilities. Some, especially the
compensation and benefit analysis and scenario planning, help to identify the future needs of
the workforce.

All workforce planning tools we´ll discuss in this article fall somewhere along this spectrum.

1. Strategic workforce planning map

The first workforce planning tool is the workforce map. This map shows how workforce
planning activities align with the bigger picture, like the organizational strategy.

An often heard critique about HR policies is that it doesn’t follow organizational strategy.
The beauty of workforce planning is that it offers tools to add value to the latter.

The model below shows this very clearly. You don’t start with strategic workforce planning
(SWP, which is step 3). No, strategic workforce planning is the result of organizational
strategy (step 2).

The board of directors sets a strategy for the organization. This strategy is not made up – it is
derived from three key factors:
 What’s happening in the market? E.g. trends in demand and supply.
 What products and/or services are we already producing?
 What is the competition doing? You don’t want to just copy your competition. No,
you want to outsmart them through process, product or business model innovation.
These factors influence the strategy that the board sets. This forms the beginning point of
strategic workforce planning as it helps us determine where the organization wants to go in
the next 3-5 years. This is the target.

The next step is to identify where we are now. This is step 3 in the model: the quality and the
quantity of the workforce. An excellent tool to do this is the performance-potential matrix
that we will talk about next.

Based on these insights, the HR strategy is created. This strategy is executed in all the
different functional HR areas, like recruitment, performance management, rewards &
promotions, etc.
2. 9-Box grid
The performance-potential matrix, also called 9-box grid or HR3P matrix, maps employees’
performance and potential in one model.
As you can see, the matrix maps employees in different categories, ranging from “talent
risk”, which are low potential and low performance, all the way to “consistent stars”, who are
high potential and high performance.
This is just one of the models (source) out there that visualize performance and potential. An
advantage of the model is that it’s easy to understand. However, this is also a disadvantage
because this lower complexity has a reduced usability. Take the following matrix as an
example. This is not a 3×3 9-box grid, but a 4×4.
This model divides potential and performance in four categories. Using these categories,
employees can be managed very effectively. Let me give you an example.

 Phase 1: Yellow. When new employees join the company, they don’t perform
optimally yet but have a lot of growth potential. They fall in the left bottom corner of
the model.
Effective talent management policies are training and coaching, performance based pay
(PBP) to increase productivity and a growth in base salary to retain them (they are your future
stars).

 Phase 2: Dark green. After working for a year or two, these employees perform well
and are still bursting with potential. In this case, they are in the right bottom corner of
the model.
In order to capitalize on their potential, they need more learning and development,
challenging assignments that help them grow and a salary growth to retain them.
 Phase 3: Light green. After a few promotions, these employees may start to hit their
ceiling. They are at full potential but are performing excellently!
You want to further develop the competencies they need for their roles and focus on
performance based pay so they stay focusses. You don’t want to grow their salary
much further as that may become a burden over time.
 Phase 4: Red. In the final phase, these employees may become disengaged and
performance may lower (left top corner).
In this case, a development plan to get their performance back on track is the best
 solution. Salary shouldn’t increase for these people as you don’t necessarily want to
retain them.
To create such a four-by-four, you need to assess people on their performance and potential.
The performance-potential matrix is thus a great strategic workforce planning tool, not only
to assess talent but also to manage it.

3. HR Dashboarding
A third workforce planning tool that a lot of companies are actively investing in, is the HR
dashboard. The HR dashboard is a very effective instrument to show current workforce
capabilities.

There’s a lot to tell about the HR dashboard. On a conceptual level, the dashboard is filled
with information from different source systems, like a payroll system, applicant tracking
system, and other Human Resources Information Systems. Based on this data, metrics are
calculated and displayed.

The model below shows this process. Systems are extracted, data is transferred and loaded
into a data lake or data warehouse. Reporting software uses this data to report on it.

Not all organizations have fully automated this process. If there’s no data warehouse present,
data can be extracted from different systems and aggregated manually. This is slower, manual
reporting.
However, the goal is always the same: to create an overview of the current status of the
workforce. This can be in terms of a workforce dashboard, diversity map, performance
dashboard, etc.

4. Compensation & benefit analysis

We haven’t written a lot about compensation and benefit analysis yet. However, it does
provide a number of great opportunities for data analysis. For two reasons.

First of all, compensation and benefit data is highly structured and accurate. Secondly, it is
directly related to a financial outcome and thus bottom line performance.

The simplest analysis has two elements:

 Set an internal pay benchmark and group people in (severely) overpaid and (severally)
underpaid categories
 Retrieve performance data and categorize people in over performing or
underperforming

You want your over performing people to be overpaid and your underperforming people to be
underpaid. If there’s a difference in the two you either run the risk of losing top performers
because of underpay or not losing bad performers because of overpay. The latter is referred to
as the golden cage.
This data can be enriched by labour market statistics. You can use payment benchmarks from
outside your organization to adjust for internal payment discrepancies.

You can also use job market information to control for external demand and projected
demand for certain jobs. These kind of numbers are available for any industry and can be
very beneficial in anticipating and adjusting to future workforce needs.

5. Scenario planning
Scenario planning is the ultimate workforce planning tool. It helps to anticipate multiple
possible futures so that you won’t be caught off-guard. In the words of futurist Peter
Schwartz: “if you haven’t thought about it, you’re unlikely to see it in time”.

In scenario planning, you imagine different potential futures that have a severe impact on
your business and that you will be unlikely to see coming. These scenarios can involve
technological innovation, new legislation, natural disasters, changes in attitudes of the general
public, etc.

By thinking about these scenarios, analysing them and describing how they will make an
impact on day to day business, you can develop a strategy for unlikely but impactful events.

One of the early pioneers in this approach was Shell. According to Schwartz´s book the art of
the long view, Shell used scenario planning to develop strategies for dealing with the 1973
energy crisis, the 1979 oil price shock, the fall of the Soviet Union, and the increasing
pressure on companies to address environmental issues.
If you think about the figure that we started with, scenario planning is really about imagining
the future – or imagining multiple possible futures.
How does scenario planning work as a workforce planning tool?

 First of all, you want to analyze the focal issue of concern for the workforce. This is
the issue that the planning exercise centers on.
 Secondly, you want to identify driving forces of change. These can be external and
internal. Examples are the specific demographic driver, environmental drivers, socio-
political drivers, market drivers, and so on. The challenge is to make these drivers as
specific as possible. For example, don’t use ‘global warming’ as drivers but define it
as the increasing of drought periods in California (or any specific region).
 Thirdly, you want to rank these specific driving forces on their importance and
uncertainty. Importance refers to the impact the driver will make on the workforce.
Uncertainty refers to the uncertainty of your estimation. This step is required to select
the most relevant and divergent conditions.
 Next, the two most uncertain and important driving forces are selected and two polar
opposites are selected. These are mapped on a 2×2 grid.
 This creates four distinctly different and impactful workforce challenges. For each of
these scenarios, a name and story are created related to how they will play out and
impact the workforce. In the final step, strategies are created to resolve these
challenges.

HR metrics are indicators that enable HR to track and measure performance on

different aspects and ultimately predict the future. However, not all HR metrics are
created equal.
Even though this list provides some essential HR metrics, you might come up with a great
number 15! You are welcome to suggest additional HR metrics.
HR metrics examples in recruitment
1. Time to hire (time in days)
An important metric for recruitment is the ‘time to hire’. This is the number of days between
a position opening up and a candidate signing the job contract. It’s an excellent way to
measure the efficiency of the recruitment process and provides insight into the difficulty of
filling a certain job position.
There’s also the time to fill metric. This metric takes the same starting point but takes the date
the candidate starts working as the end point.
2. Cost per hire (total cost of hiring/the number of new hires)
Like the time to hire, the ‘cost per hire’ metric shows how much it costs the company to hire
new employees. This also serves as an indicator of the efficiency of the recruitment process.

3. Early turnover (percentage of recruits leaving in the first year)

This is arguably the most important metric to determine hiring success in a company.
This early leaver metric indicates whether there is a mismatch between the person and the
company or between the person and his/her position. Early turnover is also very expensive. It
usually takes 6 to 12 months before employees have fully learned the ropes and reach their
‘Optimum Productivity Level’. According to a 2014 Oxford Economics report, the lost output
cost over this period averages £30,000 ($43,700) for new hires.

4. Time since last promotion (avg time in months since last internal promotion)
This rather straightforward metric is useful in explaining why your high potentials leave.

5. Revenue per employee (revenue/total number of employees)

This metric shows the efficiency of the organization as a whole. The ‘revenue per employee’
metric is an indicator of the quality of hired employees. Check this Business Insider article to
view how the top 12 tech companies in the world score on this metric.

6. Performance and potential (the 9-box grid)

The 9-box grid appears when measuring and mapping both an individual’s performance and
potential in three levels. This model shows which employees are underperformers, valued
specialists, emerging potentials or top talents. This metrics is great for differentiating
between, for example, wanted and unwanted turnover.

.
7. Billable hours per employee

This is the most concrete example of a performance measure, and it is especially relevant in
professional service firms (e.g. law and consultancy firms). Relating this kind of performance
to employee engagement or other input metrics makes for an interesting analysis.
Benchmarking this metrics between different departments and managers/partners can also
provide valuable insights.

8. Engagement rating
An engaged workforce is a productive workforce. Engagement might be the most important
‘soft’ HR outcome. People who like their job and who are proud of their company are
generally more engaged, even if the work environment is stressful and pressure is high.
Engaged employees perform better and are more likely to perceive stress as an exciting
challenge, not as a burden. Additionally, team engagement is an important metric for a team
manager’s success.

9. Cost of HR per employee (e.g. $ 600)

This metric shows the cost efficiency of HR expressed in dollars.
10. Ratio of HR professionals to employees (e.g. 1:60)
Another measure that shows HR’s cost efficiency. An organization with fully developed
analytical capabilities should be able to have a smaller number of HR professionals do more.

11. Ratio of HR business partners per employee (e.g. 1:80)

A similar metric to the previous one. Again, a set of highly developed analytics capabilities
will enable HR to measure and predict the impact of HR policies. This will enable HR to be
more efficient and reduce the number of business partners.

12. Turnover (number of leavers/total population in the organization)

This metric shows how many workers leave the company in a given year. When combined
with, for instance, a performance metric, the ‘turnover’ metric can track the difference in
attrition in high and low performers.
Preferably you would like to see low performers leave and high performers stay. This metric
also provides HR business partners with a great amount of information about the departments
and functions in which employees feel at home, and where in the organization they do not
want to work. Additionally, attrition could be a key metric in measuring a manager’s success.

For a deep dive into how to calculate employee turnover, click the link!

13. Effectiveness of HR software

This is a more complex metric. Effectiveness of, for instance, learning and development
software are measured in the number of active users, average time on the platform, session
length, total time on platform per user per month, screen flow, and software retention. These
metrics enable HR to determine what works for the employees and what does not.

14. Absenteeism (absence percentage)

Like turnover, absenteeism is also a strong indicator of dissatisfaction and a predictor of

turnover. This metric can give information to prevent this kind of leave, as long-term absence
can be very costly. Again, differences between individual managers and departments are very
interesting indicators of (potential) problems and bottlenecks.
So, what are HR metrics exactly?
Before you start to work with HR metrics, it’s important to make sure you understand how
metrics can work for you. What are HR metrics? Human Resource metrics are measurements
that help you to track key areas in HR data. The most important areas are listed below. In this
list of HR metrics, we included the key HR metrics examples associated with those areas.

1.Organizational performance

 Turnover percentages
 % of regretted loss
 Statistics on why personnel is leaving
 Absence percentages and behaviour
 Recruitment (time to fill, number of applicants, recruitment cost)

2. HR operations

 HR efficiency (e.g. time to resolving HR self-service tickets)

 HR effectiveness (e.g. perception of HR service quality)

3. Process optimization

Process optimization helps to analyze how we do what we do in Human Resource

Management. The HR metrics and analytics in this area focus on changes in HR efficiency
and effectiveness over time. These HR metrics and analytics are then used to re-engineer and
reinvent what is happening in HR. This helps to optimize the Human Resource delivery
process. Process optimization metrics are next-level. They are still very rare in modern
organizations as they require a very high level of both data maturity and analytics maturity.