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HR functions often collect data on their efficiency, but not on the business impact of their programs and practices. This is a crucial point because HR organizations that collect effectiveness data are more likely to be strategic partners. If HR wants to play a strategic role in organizations it needs to develop its ability to measure how human capital decisions affect the business and how business decisions affect human capital.
Many recent articles, books, and studies argue that HR needs to become a strategic partner (e.g., Jamrog & Overholt, 2004). Recent research suggests, however, that HR is not making much progress toward becoming a strategic partner despite the belief by HR professionals that it should (Lawler & Mohrman, 2003a; 2003b).
Because of the growing importance of human capital in determining organizational effectiveness, HR can play a key role in developing and implementing corporate strategy and become a high-value-added part of organizations (Lawler, 2003). If HR can make a strong case for being an important part of strategy development and implementation because of the importance of human capital, why does HR often fall short of being a strategic partner? At least one possibility is because HR lacks the type of analytic and data-based decision-making capability needed to influence business strategy. One of the reasons for this may well be because it lacks the right metrics and analytic models. In comparison to Finance and Marketing, for example, HR often falls short when it comes to providing metrics that assess HR processes and practices from a strategic perspective. It also lacks analytic models that show the relationship between HR practices and the effectiveness of the organization.
A strong case can be made that HR needs to develop better metrics and analytics if it is ever to become a true strategic partner in most organizations. Lawler and Mohrman (2003b) identify the use of metrics as one of four characteristics that lead HR to become a strategic partner. Boudreau and Ramstad (2003) distinguish between providing more HR measures (not a strategic contribution) and providing better logic and analytics for making decisions about talent (a strategic contribution). Organizations can collect three different kinds of metrics in order to better understand and evaluate the impact of HR activities and to influence business...