By Jonathan H. Westover, PhD
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Abstract: Translating HR Impact to Business Impact: A Practitioner's Guide focuses on providing human resources (HR) professionals with practical strategies and recommendations for demonstrating how HR activities and initiatives translate into meaningful business outcomes and value. Through drawing on years of consulting experience, academic literature, and real-world organizational examples, the article outlines a step-by-step framework for aligning HR priorities with strategic business goals, establishing causal links between people investments and performance through research, defining HR and business-level key performance indicators, partnering with finance on return-on-investment measurement, and effectively communicating impact through compelling case studies and storytelling. The goal is to help HR professionals earn a greater strategic role by rigorously measuring and clearly illustrating how people-focused strategies and interventions meaningfully contribute to organizational metrics valued by senior leaders.
As a long-time human resources consultant and academic researcher, I have had many conversations with business leaders over the years about the critical role that HR plays in driving organizational performance and success. While the importance of people strategies is widely acknowledged, translating specific HR initiatives and priorities into tangible business results is still an ongoing challenge for many organizations. As one chief executive recently told me, "HR keeps talking about engagement surveys and training programs, but I need to see how that actually impacts the bottom line."
Today we will explore practical guidance to HR professionals and people leaders on how to more effectively translate HR impact into business impact.
Defining Key Concepts
Before diving into specific recommendations, it is important to define some key concepts that underpin an effective approach to translating HR impact.
Business impact refers to the meaningful and measurable ways in which HR activities and initiatives contribute to business outcomes that senior leaders care about, such as financial performance, productivity, customer satisfaction, quality, and growth. These are the results and returns that senior stakeholders want and need to see from people investments.
HR impact encompasses the specific outputs, outcomes and KPIs that HR focuses on and measures within its sphere of responsibility and control. This includes indicators like employee engagement scores, training participation rates, retention levels, diversity metrics, and compliance measures. However, these people metrics alone are often not enough to demonstrate true value to senior leaders.
Causal linkages refer to the logical connections and empirically-supported relationships between HR activities, intermediate HR outcomes, and ultimate business impact. HR must be able to clearly articulate and illustrate how particular people strategies and initiatives will help achieve desired business results through impacting employee behaviors, capabilities and experience.
With these key ideas defined, I will now outline a step-by-step approach for translating HR impact to business impact.
Aligning HR Priorities with Strategic Business Goals
The first critical step is to ensure that HR priorities and initiatives are tightly aligned with the organization's strategic business goals and priorities. Unless HR activities are explicitly helping to achieve what senior leaders have defined as most important, it will be difficult to demonstrate true impact.
One biotech client of mine struggled with this until we did an in-depth review of their strategic plan with the executive team. We identified their three biggest priorities as speed to market for new drugs, talent acquisition in hard-to-find scientific roles, and culture transformation around risk-taking. With these business-critical focus areas clearly defined, HR was then able to structure their workplan and key performance indicators accordingly. Initiatives around competency modeling, a new referral bonus program, and rolling out an entrepreneurial mindset training directly addressed the identified priorities in a way that senior leaders understood and valued.
The takeaway: Start by ensuring HR strategies are tightly aligned to and helping advance the organization's strategic business agenda.
Establishing Causal Linkages through Research
With alignment in place, HR then needs to develop a strong evidence-based case for how specific people strategies and initiatives will deliver on business goals by impacting the desired intermediate HR outcomes. This involves establishing clear causal linkages supported by robust academic research and industry examples whenever possible.
For example, research shows training and development leads to a 9% increase in employee productivity on average (McKinsey, 2017). Internal research at a logistics client of mine also found a strong positive correlation between supervisor coaching and frontline worker safety. By compiling research like this, HR was able effectively argue that proposed investments in management training and a new coaching program would deliver a measurable 6-figure reduction in injury rates - a metric the CEO deeply cared about.
The takeaway: Build your case by leveraging robust academic and industry research to illustrate clear causal linkages between HR activities and desired business outcomes.
Defining Specific Key Performance Indicators
With alignment and causal linkages in place, the next step is to define specific, quantifiable key performance indicators (KPIs) that will be used to measure and evaluate both HR impact and overall business impact over time.
For example, when rolling out a new leadership development program, metrics could include participant satisfaction scores (HR KPI), supervisor ratings of leadership skills pre and post-program (HR outcome), and team retention rates and profitability measures over the following 12 months (business impact). By establishing KPIs at both the HR and business level upfront, impact can be rigorously tracked and ROI clearly demonstrated.
Some hotel clients of mine rolled out a new employee recognition program and defined KPIs around recognition rates, sentiment survey scores, and linkage analysis showing top performers receiving the most recognition also drove highest guest satisfaction and share of wallet. This multi-faceted approach told a powerful results story.
The takeaway: Define specific, quantifiable KPIs at both the HR and business level upfront to rigorously track impact over time.
Partnering with Finance for Measurement
To truly demonstrate value in the eyes of senior leaders, HR must work closely with the finance function to measure ROI and translate people investments into traditional financial metrics where possible. This often requires HR to think beyond basic HR metrics like turnover rates to their financial implications.
For example, when working with an aerospace manufacturer, we partnered with finance to calculate the recruitment and ramp-up costs of new hires versus the financial losses associated with talent shortages. This reframed retention as critical to the bottom line. We then tracked ROI on initiatives like improved onboarding, skills assessments and internal mobility using these joint HR-finance metrics, which finance was able to present to the board.
The takeaway: Partner closely with finance to measure ROI, tie people investments to financial implications wherever possible, and work together to report impact using both HR and financial metrics senior leaders understand.
Communicating Impact through Storytelling
Even with robust measurement in place, impact will only be recognized if it is effectively communicated. Here, storytelling is key. HR should develop results-driven case studies using specific examples and success stories to bring tangible initiatives and outcomes to life for senior leaders versus dry data presentation.
For instance, one aviation manufacturer we worked with shared the story of how investing in specialized safety training, coupled with a new coaching approach, helped a high-risk assembly line increase output by 15% while reducing injury rates to an all-time low - translating to millions in increased revenue and cost savings. Tying a people strategy to a recognizable business achievement told an impactful narrative senior leadership remembered.
The takeaway: Leverage compelling case studies and success stories versus reliance on data alone to communicate true impact through powerful storytelling that brings results to life.
Conclusion
Translating genuine HR impact into recognized business value requires alignment, evidence, measurement, partnership, and communication. By following the step-by-step approaches outlined here - grounded in academic research and practical experience - HR can play a greater strategic role through clearly demonstrating how people strategies deliver on what matters most to the organization and its leaders. Overall, the ability to translate HR impact into business language and line-of-sight business impact is key to gaining credibility, influence and a true "seat at the table." I hope these recommendations provide a useful roadmap and action steps for HR professionals seeking to more effectively tell their impact story.
References
McKinsey & Company. (2017, December). Closing the skills gap: Closing the skills gap. https://www.mckinsey.com/featured-insights/future-of-work/closing-the-skills-gap
McKinsey & Company. (2017). Closing the skills gap: Closing the skills gap. https://www.mckinsey.com/featured-insights/future-of-work/closing-the-skills-gap
McKinsey & Company. (2017). Closing the skills gap: Closing the skills gap. McKinsey & Company, December. https://www.mckinsey.com/featured-insights/future-of-work/closing-the-skills-gap
Jonathan H. Westover, PhD is Chief Academic & Learning Officer (HCI Academy); Chair/Professor, Organizational Leadership (UVU); OD Consultant (Human Capital Innovations). Read Jonathan Westover's executive profile here.
Suggested Citation: Westover, J. H. (2024). Translating HR Impact to Business Impact. Human Capital Leadership Review, 13(3). doi.org/10.70175/hclreview.2020.13.3.6
