Why KPI of HRBPs are linked to business performance

There has been a lot of talk around human resources (HR) as a strategic business function in the organisation. That is why, Dave Urich’s HR model introduced the strategic HR business partner (HRBP) role, which has come to be an integral part of organisational design across sectors in India.

Being a strategic partner, the HR business partner or HRBP is also responsible for the performance of the business function that it is partnering with.

Most of the HR leaders agree that the performance of the function that an HR business partner is assigned to is integrated with the key performance indicator (KPI) of the respected HRBP of that function.

“HRBPs are directly partnering with the business and its function. Their KPI is directly integrated with the performance of the function they partner with,” confirms Amit Sharma, CHRO, Volvo Group India.

“Linking the performance of a particular function with the HRBP may only be possible if somebody from that function itself is the HRBP”

Sriharsha Achar, CHRO, Star Health & Allied Insurance Company

For those who are not aware, HRBPs are assigned to each function in the organisation. For instance, the finance function will have one HRBP, who will partner with that function and will play a strategic role in dealing with the people issues of that particular function.

As per Sharma, an HRBP role is very different from other HR roles in the function. “Its scope is broader, which is why it becomes important to link their KPI with the performance of the respectful function they work with. Otherwise, it gets difficult to review their real contribution,” asserts Sharma.

Though different companies may have different ways of evaluating their HR function, based on the organisational design of the company, the most common way to evaluate a normal HR function is to ascertain the overall attrition rate and hiring goals, and track the engagement levels and the hours of productivity.

However, the evaluation of HRBP goes a little beyond this.

Sunil Ranjhan, SVP & director – HR, LG Electronics, explains how the KPI of the HRBP role is integrated with the function it is attached to. For instance, if the HRBP is partnering with the sales function, the business performance of that HRBP is calculated on the sales per labour cost. If it is partnering with the shop floor, or plant HR, it will be calculated as the ratio of productivity or working hours per labour cost. In case of a customer-service role, the ratio of the number of complaint calls attended per labour cost will determine the KPI of the HRBP role, and so on and so forth.

“Numbers can be calculated on the basis of all the human elements which directly impact the performance of the function,” explains Ranjhan.

“The scope of role of an HRBP is broader, which is why it becomes important to link their KPI with the performance of the respectful function they work with. Otherwise, it gets difficult to review their real contribution”

Amit Sharma, CHRO, Volvo Group India

The overall goal setting of the HR function is directly linked to the overall business objective of the company, but evaluation of HRBP’s contribution to different functions is done differently.

“All progressive and advanced companies will definitely link the KPIs of the HRBP with that of the respected function it is partnering with,” states Sharma.

For other HR roles in the organisation, the performance evaluation is done differently from that of an HRBP. When we talk about evaluating performance at the micro level. “Other HR roles such as HR operations roles, or a recruitment role are backend roles. Their KPI does not directly link with the business performance,” tells Sharma.

Most HR leaders state that for a recruiter, the number of positions closed in a given time period, or for an L&D professional, the number of training hours in a specified period are much more effective indicators of their performance.

“While other HR roles are pretty much enabling or supporting, the HRBP directly partners with the business,” asserts Sharma.

However, as experts point out, every organisation will have a different organisation design and the KPIs of the HRBP will differ from company to company.

“Performance metrics can be calculated on the basis of all the human elements which directly impact the performance of the function”

Sunil Ranjhan, SVP & director – HR, LG Electronics

Talking with HRKatha, Sriharsha Achar, CHRO, Star Health & Allied Insurance Company, says that such a KPI setting is not followed in their company. “Maybe it is not possible for an insurance company to have something like this,” says Achar.

Achar shares that the company has about 21 zones and with one HRBP each. Its large field force has thousands of members, and therefore, linking their performance with the KPI of an HRBP responsible for the entire zone may not be fair. “This may only be possible if somebody from that function itself is the HRBP,” feels Achar.

However, Achar does reveal that at Star Health, the KPIs of training and development professionals are linked with the functional performance. “This happens because the level of skills acquired directly impacts the performance of the individual or team,” enunciates Achar.

The majority of HR leaders agree that the HRBP role is a little different. Therefore, in addition to the basic / standard HR skill sets, the HRBP role requires an understanding of the business coupled with a strong knowledge of organisational design and workforce planning.