It is important to recognise that high accountability organisations also have the language of outcomes embedded in their everyday conversation and values. They think in terms of outcomes and the language of outcomes is seen throughout their conversations and written strategies, policies, procedures and systems. (Department of Defence, 2011, p21)
HR often becomes engrossed in tactical activity and processes, rather than clearly linking to the organisation’s strategic objectives. HR can provide a valuable service but may not be providing an effective service (to achieve ‘value-for money’, an activity should be effective, efficient and economic), as HR often directs its efforts and resources to the ‘here and now’, current needs, and transactional rather than strategic effectiveness. One recent interviewee described this mode of operating as ‘the cycle of fury’; another as ‘being caught in the activity trap’.
A key paradigm of a project (HRMA) to develop national advisory standards for the professional practice of HR in Australian universities is that HR should not become enmeshed in the ‘activity trap’ where the focus is on busy-ness and volume, but rather lift the line of sight in seeking to be effective and demonstrating value-add.
Given the above premise, HR KPIs / measures are often activity-based, so that the measure and/or target, is often the completion of an activity rather than the achievement of an holistic outcome. Indicators may have been chosen because they can be (easily) measured, not because they are the right things to measure. A weakness in this approach is that the measures might not provide an indication of the impact of the activity, and often focus on how the work was undertaken. In other words, they may not answer the questions: Did the activity achieve the planned outcome? How well?
Consequently, in terms of any performance review, there can be an assessment of the extent to which resources have been managed economically or efficiently, but without an insight into effectiveness. Interestingly, KPMG (2012) found that only 17 percent of a global survey viewed HR as able to demonstrate measurably its value to the business ……its effectiveness..
Over recent years, outcome based management (OBM) and reporting have been promoted in the Australian public sector, in particular. What is OBM? It focuses on why things are done not just what is done, facilitates managing for results, and provides outcomes and Key Performance Indicators (KPIs) against which performance can be measured.
Audits have found deviance from best-practice OBM. For example, the Victorian Auditor-General’s report of June 2008 examined performance reporting by councils. “It concludes that much of the performance data reported is not useful……and that important data on the cost-efficiency and quality of council services, and on the achievement of outcomes is not being reported”. This was followed by a 2010 report which concluded that “the focus of performance reporting in Victoria has largely remained on output performance measures” so that only a few departments were able to demonstrate the extent to which objectives had been met.
In these circumstances, departments were not able to demonstrate effective use of allocated funds to Parliament and the community.
Two further examples:
(1) A NSW Audit report of Sept 2012. The 152 local councils in New South Wales spend more than $9.3 billion annually, manage over $117 billion in public assets and employ over 50,000 people. The Local Government Act 1993 does not require the Department of Local Government to monitor councils’ service delivery or their compliance with the Act or other NSW legislation. DLG has decided to monitor some areas of compliance, such as the level of rates charged. However, it does not monitor whether councils deliver services efficiently and effectively.
(2) A Victorian Audit report of Dec 2012. The monitoring and reporting systems and processes for initiatives and programs under Provincial Victoria Growth Fund (PVGF) were generally sound. However, these focused on outputs rather than outcomes. Performance measures focused on activities over outcomes, and established targets were inconsistent and unclear. Deficiencies in planning and undertaking evaluations, particularly the lack of a final evaluation of PVGF, mean Regional Development Victoria (RDV) was unable to demonstrate that the fund achieved its objectives and outcomes.
So, if the focus on HR and/or public sector KPIs is on ‘what is done’ rather than ‘did we achieve our objectives’, stakeholders are less likely to demonstrate value-for-money effectiveness.
The Australian National Audit Office (2004) proposes that a good performance reporting framework should include specified desired outcomes and measurable performance indicators for those outcomes. This proposition could equally apply to HR departments.
Audit Office of New South Wales. (2000). Reporting Performance: A guide to preparing performance information for annual reports. Sydney, Australia: The Audit Office of New South Wales.
Audit Office of New South Wales. (2006). Performance Audit: Agency use of performance information to manage services. Sydney, Australia: The Audit Office of New South Wales.
Audit Office of New South Wales. (2011). NSW Solar Bonus Scheme. Retrieved 15 Nov 2011 from http://www.audit.nsw.gov.au/News/Solar-Bonus-Scheme
Audit Office of New South Wales. (2012). Monitoring Local Government. Retrieved 12 Dec 2012.
Auditor-General of Queensland. (2007). Report to Parliament No.4 for 2007: Are departmental output measures relevant, appropriate and a fair representation of performance achievements? Brisbane, Australia: Queensland Audit Office.
Auditor-General of Queensland. (2008). Report to Parliament No.1 for 2008: Enhancing accountability through Annual reporting. Retrieved 1 Aug 2010.
Australian National Audit Office (ANAO) (2004). Better Practice Guide: Better Practice in Annual Performance Reporting. Retrieved 8 Aug 2008 from http://www.anao.gov.au/uploads/documents/Better_Practice_in_Annual_Performance_Reporting.pdf
Australian National Audit Office (ANAO) (2008). Monitoring and reporting financial and non-financial performance of Australian government organisations. Retrieved 17 October 2008 from http://www.canberra.edu.au/corpgov-aps/pub/issuespaper5.pdf
Australian National Audit Office (ANAO) (2011). Development and implementation of key performance indicators to support the Outcomes and Programs Framework. Retrieved 17 October 2011 from http://www.anao.gov.au/~/media/Uploads/Audit%20Reports/2011%2012/201112%20Audit%20Report%20No%205.pdf
Department of Defence (2011). Review of the Defence Accountability Framework. Retrieved Oct 31, 2011 from http://www.defence.gov.au/oscdf/BlackReview/black_review.pdf
Department of Finance and Administration. (2000). The Outcomes and outputs framework guidance document. Retrieved July 7, 2008, from http://www.finance.gov.au/financial-framework/financial-management-policy-guidance/outcomes-arrangements.html
HRM Advisory. National Advisory Standards for the Professional Practice of HR in Australian Universities. https://hrmadvisory.com/resources/hr_standards/national-advisory-standards-for-the-professional-practice-of-hr-in-australian-universities/
KPMG. (2012). Rethinking Human Resources in a changing world. Retrieved Nov 2, 2012 from http://www.digitalopinion.co.uk/files/documents/Rethinking_HR_in_a_Changing_World__KPMG.pdf
Queensland Government Treasury. (2003). Managing for Outcomes: Mapping Outputs to Outcomes. Retrieved July 8, 2008.
Victorian Auditor General (VAG) (2008a). Local Government performance reporting: Turning principles into practice. Retrieved 17 October 2008.
Victorian Auditor General (VAG) (2008b). Performance Reporting in Local Government. Retrieved 11 October 2009.
Victorian Auditor General (VAG) (2010). Performance reporting by departments. Retrieved 25 May 2010.
Victorian Auditor General (VAG) (2011). Revitalising Central Dandenong. Retrieved Aug 8, 2011.
Victorian Auditor General (VAG) (2012). Management of the Provincial Victoria Growth Fund. Retrieved Dec 12, 2012.