Utilizing Cost-Benefit Analysis in Strategic HR Decision-Making

Utilizing Cost-Benefit Analysis in Strategic HR Decision-Making

In the era where organizations are required to have complex initiatives within limited budgets, it is necessary to quantify all the functions’ effectiveness, hiring is one of them. For healthcare human resource teams, hiring metrics are a proven method of ensuring performance measurement. There are five key metrics applicable in the hospital setting to give indicators of where to allocate resources and the areas that need to be worked on (Gatto, 2020). The time to fill metric is broken down into components: time to slate and hire and time to hire and fill. It is a useful way to hold people accountable as the broken-down components have different people controlling them.

Benefits of Metrics

Foremost, the quality of hire metric helps in balancing costs and quality. To evaluate the quality of recruitment, the hospital human resource team assesses aspects like the length of time it takes recruits to get to the speed of their peers and the duration the recruits stay on the job (Meyers et al., 2019). It also measures the value of return on investment the recruits brought to the company, and whether the job positions facilitated their professional growth.

The cost per hire is ranked as one of the top helpful metrics in hiring healthcare professionals. Calculating the costs per hire metric is done by dividing the total costs incurred by the number of recruits (Lawler, 2020). It is a crucial metric as it links the recruitment efforts to the organization’s costs and is easily interpreted by those outside the recruiting team. This metric helps ensure that the efforts are feasible for the business and at par with the location and size of the industry.

The sourcing channel metric helps the hospital identify the sources of its applicants. The hospital needs to have multiple channels from which it sources its applicants. The data gives insight into the efficiency of the tools and the recruiters’ productivity level (Mitchell et al., 2020). The hospital recruiting team also understands the main sources of their applicants, allocates more resources to those platforms, and stops wasting resources on those who are less productive.

The retention metric measures the turnover rates of the employees by determining the numbers that stay longer than one year after recruitment (Radant & Stantchev, 2020). The costs of turnover in healthcare professionals do not just come from direct costs of hiring recruits, but also from loss of productivity during the resignation period, the retraining and rehiring processes. Retention rates are better viewed from a cross-sectional perspective, and the cost of losing one employee may translate into three times their annual salary.

The use of job board Return on Investment metrics quantifies the performance of advertisements. It helps determine the jobs that deliver high-quality applicants and the posts that can be easily sourced via online media. The data obtained helps the hospital human resource team justify the media spending to the finance department (Gatto, 2020). The cost of vacancy metrics help organizations determine the costs associated with positions filled temporarily by personnel or agencies. Quantifying these costs supports the healthcare facility in deciding whether to maintain or add recruitment sources to reduce the overall costs.

Nurse Recruiting Strategy for a Hospital

There are different metrics used in recruiting nurses in a hospital, and they include the qualified candidates metric, which is the number of applicants selected after an interview. They are compared to the offer and acceptance rates over time. The offer acceptance metric is calculated by dividing the number of acceptances by the number of offers (Pillai & Sivathanu, 2021). The cost-per-hire metric is determined by dividing the total value of costs incurred in the hiring process by the number of hires. The retention metric is determined by calculating the total number of employees still employed in the hospital for a given period, say one year, over the total employees at the beginning of the period.

To select effective metrics, the hospital needs to consider its culture and listen to the existing healthcare practitioners. It also needs to take into account the feedback it gets and understand the shortcomings of its system, work on them in areas it can, and be upfront about those that are beyond its control (Rauf, Gulzar & Baig, 2017). In addition to that, the hospital can effectively select effective metrics by maintaining honesty with the applicants and acknowledging the issues it is working on. The applicants can give the facility the benefit of the doubt. Moreover, recruiting early in the education process, having the interest of potential candidates before they graduate, and maintaining contact with their educational institutions are critical in selecting effective metrics (Mitchell et al., 2020). Using a variety of channels like recruiting agencies and other online media creates a pool for applicants.

The hospital uses ineffective recruitment sources, as it uses 15 sources to select 292 applicants and spent $ 14,367.00 to carry out the recruitment process. Some of the sources have low yield ratios and are not efficient in recruiting nurses. For instance, the applicants from state nursing association meetings and hospital-based schools have low applicants and zero survival rates at the end of the first year. The hospital should keep using sources like walk-ins, newspaper ads, and the Internet. This is based on the number of applicants, job acceptance yield rates, and survival yield rates. The walk-ins, for instance, have an acceptance rate of 10 and a survival rate of 40. The internet has an acceptance rate of 5.22 and a survival rate of 9.40. the newspaper ads have an acceptance rate of 11 and a survival rate of 22. Considering the costs and yield rates, cutting down the recruitment sources will help reduce the direct and indirect costs.

How HR Metrics Are Used to Lower Costs

The finance department can use Human Resource data to minimize labor costs within the hospital. For instance, human resource metrics can be used to identify steps to minimize the costs incurred to assign and recruit staff (Rudhramoorthy & Sarkar, 2019). The data can also be used to indicate declining productivity and ensure that the compensation is linked to productivity. The human resource metrics can also reveal the retention ratios of employees and help the hospital develop methods of retaining employees, hence reducing the costs incurred in hiring and training recruits who may be required in the hospital due to the high turnover rates.

How HR Metrics Can Be Used to Create Value for the Organization

Human resource metrics quantify the impact and costs of the recruitment processes, post-recruitment initiatives, and programs to manage talent. Measurement of relevant information from initiation posts, the hiring procedure, and existing employees is done (Lawler, 2020). The metrics also give management insight into the link between hiring, policies and procedures, and the business’s success. Data on the retention ratios and linking it to the sources of the applicants enables the hospital to invest more resources in the sources whose applicants have a longer retention ratio at the workplace.

The stages in the recruiting procedure with the greatest problems are the follow-up stages. The human resource department must assign one of the employees to make follow-ups with the applicants. In addition to that, the hospital needs to change the recruiters so that the new personnel is well trained to carry out the recruiting process and ensure it is only the HR department tasked with the recruiting process.

References

Gatto, A. (2020). A pluralistic approach to economic and business sustainability: A critical meta‐synthesis of foundations, metrics, and evidence of human and local development. Corporate Social Responsibility and Environmental Management, 27(4), 1525-1539.

Lawler, E. (2020). HR Metrics and Analytics: Uses and Comprehensiveness. In Effective Human Resource Management (pp. 70-84). Stanford University Press.

Meyers, T. D., Vagner, L., Janoskova, K., Grecu, I., & Grecu, G. (2019). Big data-driven algorithmic decision-making in selecting and managing employees: Advanced predictive analytics, workforce metrics, and digital innovations for enhancing organizational human capital. Psychosociological Issues in Human Resource Management, 7(2), 49-54.

Mitchell, M., Baker, D., Moorosi, N., Denton, E., Hutchinson, B., Hanna, A., … & Morgenstern, J. (2020, February). Diversity and inclusion metrics in subset selection. In Proceedings of the AAAI/ACM Conference on AI, Ethics, and Society (pp. 117-123).

Pillai, R., & Sivathanu, B. (2021). Measure what matters: descriptive and predictive metrics of HRM-pathway toward organizational performance. International Journal of Productivity and Performance Management.

Radant, O., & Stantchev, V. (2020). A Critical Assessment and Enhancement of Metrics for the Management of Scarce Human Resources. In Handbook of Research on the Role of Human Factors in IT Project Management (pp. 472-500). IGI Global.

Rauf, A., Gulzar, S., & Baig, J. (2017). Measuring the effectiveness of HR metrics on return on an investment-an empirical study on pakistani organizations.

Rudhramoorthy, K., & Sarkar, S. (2019). HR metrics and workforce analytics: it is a journey, not a destination. Human Resource Management International Digest.

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As strategic HR professionals, calculating the costs and benefits of their activities will be a function they perform on a regular basis. The cost-benefit analysis is a financial tool that has been used in organizations for decades to determine the potential value of an activity, such as training employees on new software tools.

Based on the cost-benefit analysis, the difference indicates whether the planned action is advisable for the organization to pursue. HR professionals consider costs and benefits on a regular basis and you will have the opportunity to examine a case study using cost-benefit metrics in this Assignment.