Return on benefit spend has been described as one of the most elusive goals for HR departments, but finding ways to even assess the evidence and measure results can present real problems. Seán Flynn investigates
Worryingly, 15% said senior management indifference was the problem, 10% cited organisational change, and 8% pleaded a lack of analytical skills.
Causal links
The truth is, accurately measuring ROI of abstract concepts such as staff motivation or employee satisfaction cannot be calculated using a straightforward metric, like dividing the return of an investment by the cost of the investment.
Charles Cotton, reward adviser at CIPD, explains: “I think it would be very difficult to find a causal link.
“The only way you might be able to do it would be to conduct an experiment for the organisation on a group of employees as regards a bonus or reward scheme, but businesses don’t operate in a vacuum.”
Chadwick’s approach is similarly sceptical. He says: “Let’s take a typical example – look at your pension membership and your non-pension membership; the biggest benefit in the workplace. So let’s look at turnover for pension members and turnover for non-pension members.
“But, if there is a difference, can you causally link the two; or is it also the case that a lot of the people who don’t feel attached to their employer and therefore don’t think they are planning to stay long will say: ‘I can’t be bothered to sign on for the pension’.
How do you cause-and-effect these things?” While the existence of definitive causal links between benefits and intangibles such as performance and retention is not always provable, there is still much companies can do to establish a reliable ROI for benefit spend.
Duncan Brown, reward and engagement principal at Aon Hewitt– who co-authored a book, Evidence-based Reward Management, published in 2010 – has some forthright advice.
“I think what we try to do in that situation is advise people to start simple,” Brown says. “Just think about a few key areas, get a bit of data to begin with. The other thing to remember about the kind of companies that do this well is that they are not overloaded with data. They have maybe four or five key metrics. Staff turnover or high-performer retention – these are some of the real key ones.”
The CIPD’s Cotton offers his take on this back-to-basics approach. “It is a case of looking at the business plan and then working back from there and at the same time working forwards from your employee profile,” he says.
“That obviously means trying to get closer to them through surveys, focus groups or one-to-one information, as well as looking at your future employees and trying to find out what they value. It might be that what the organisatio thinks is valuable may not necessarily be what employees appreciate.”
Perceived value
This idea of perceived value brings the debate back to the need for employee engagement, explains Brown. “When, for example, you take a bonus of £10,000, presumably the cost and perceived value are the same,” he says. “But for some areas, historically, the perceived value has been lower – with pensions being the traditional example.”
