Now, imagine a tool that could significantly reduce the need for such memes while simultaneously improving employee productivity. Sounds like science fiction? Or perhaps just another hollow slogan from a PowerPoint presentation? Think again! Enter HR Controlling—a concept that has the potential to revolutionize how companies manage their most valuable asset: their people.
In the latest installment of my series, "Fall in Love with Management Accounting," I take a closer look at what HR Controlling really is, why it’s becoming increasingly critical for businesses and HR departments, and how it can help solve problems that once seemed insurmountable. Is HR Controlling truly the key to HR success, or is it just another trendy term destined to fade as quickly as it appeared? Dive in and find out!
The Role of HR Controlling
You might be wondering: “What does HR Controlling have to do with management accounting?” A valid question! These are closely related fields, though not identical. Both focus on providing the information necessary for decision-making, use similar analytical tools, and are oriented toward the future. HR Controlling can be seen as a specialization within the broader domain of management accounting and controlling, with a specific focus on human resource management and the efficiency of human resource utilization. Together, they contribute to effective planning, control, and optimization of organizational processes, with particular attention to HR-related aspects.
Imagine a company as a grand orchestra, with each employee playing a different instrument. The HR Controlling expert is the conductor, not only listening to every note but also analyzing the score to create a symphony of success. By leveraging precise data and analyses, they help managers and the HR department fine-tune each instrument—that is, every employee and every process.
In professional terminology, HR Controlling is a human resource management system that monitors, analyzes, and optimizes HR processes within an organization. Its primary goal is to support decision-making in the HR domain by providing precise data and analyses on efficiency, costs, and workforce needs. It encompasses workforce planning, employee performance analysis, cost optimization, and identifying areas requiring improvement. By regularly monitoring key indicators, HR Controlling enables companies to quickly respond to changes and make informed decisions about investments in human capital. It’s not just about dry numbers and graphs but a journey into the depth of human potential. It’s the art of turning data into inspiration and analysis into action. In a world where people are the most valuable resource, HR Controlling becomes less of a tool and more of a management philosophy.
"No company has the time or resources to learn solely from its own mistakes." - James Harrington
This quote resonates deeply with me. I firmly believe that while learning from one’s mistakes is essential, leveraging proven methods to avoid them is equally, if not more, valuable.
According to Eurobarometer data, 82% of small and medium-sized enterprises (SMEs) in Poland struggle with a lack of available workforce. This forces them to focus on time-consuming and costly recruitment processes instead of driving business growth. Data from the British company Apifonica indicates that hiring a new employee can cost nearly 5,000 PLN, while a failed recruitment attempt may reach up to 15,000 PLN. Additionally, reports from Sedlak&Sedlak and PwC highlight that the total cost of replacing an employee can equal their annual salary.
HR Controlling is a proven tool for optimizing human resource management processes. It enables companies to use their existing workforce more effectively, reduce recruitment costs, and improve employee retention. Ultimately, this leads to better financial performance and enhanced competitiveness. Its methodology seems to align perfectly with the words of Piotr Śliwiński, an author of numerous management publications: "People should be a strategic investment in every organization. This cannot be just a PR stunt aimed at attracting new employees, but rather genuine support for developing competencies and a real commitment to the well-being of colleagues."
The Importance of HR Controlling
“Nothing is easier than being busy, and nothing is harder than being effective.” - R. Alec Mackenzie
I often hear statements like:
- “This isn’t for us. We’re too small to implement HR Controlling. Right now, we need to focus on sales.”
- “In our company, HR takes care of these things. Management has other priorities.”
- “Our employee turnover is high, so we’re constantly recruiting.”
However, HR Controlling plays a crucial role in organizations regardless of their size, adapting to the scale and needs of each business. In small and medium-sized enterprises (SMEs), it becomes a true “Swiss Army knife” for executives, managers, or HR professionals. Limited resources force these companies to adopt a creative approach—one specialist often wears many hats. By leveraging simple yet effective tools, this individual can extract "gold" from HR data. For example, they can identify hidden talent worth investing in or pinpoint employees who generate disproportionate costs. It’s akin to detective work—piecing together seemingly trivial information to reveal the overall health of the team.
In corporations, HR Controlling resembles a sophisticated satellite navigation system. Large HR departments are equipped with powerful analytical tools capable of processing massive volumes of data. This approach offers a bird’s-eye view of the organization, enabling the identification of global trends, forecasting challenges, and precise future planning. In such environments, HR Controlling often transcends national borders, analyzing and comparing data across multiple markets. It can, for instance, inform strategic decisions such as relocating operations to another country based on a detailed analysis of costs and talent availability.
Regardless of scale, HR Controlling is a fascinating blend of the art of managing people and the precision of data analysis. It empowers companies not only to respond to changes but to anticipate and shape their future proactively
Key Functions of HR Controlling
The main tasks of HR Controlling focus on several critical areas that directly impact an organization’s efficiency and competitiveness.
Employee Analytics and Performance Optimization
At the core of HR Controlling lies the comprehensive analysis of employee data. This includes not only standard metrics such as turnover and absenteeism but also advanced performance and engagement indicators. By utilizing business intelligence tools and predictive analytics, HR Controlling provides managers with valuable insights that enable informed decisions regarding talent development and allocation.
Strategic Management of HR Costs
HR Controlling plays a pivotal role in optimizing the cost structure related to human resources. Through detailed analysis of expenditures on salaries, benefits, recruitment, and training, it supports the creation of effective budgeting and cost control models. At the same time, it ensures a balance between cost optimization and maintaining competitiveness in the labor market.
Workforce Forecasting and Planning
In today’s dynamic market environment, HR Controlling leverages advanced predictive models to anticipate the organization’s future workforce needs. By analyzing market trends, technological changes, and the company’s strategic goals, it aids in long-term workforce planning, ensuring flexibility and preparedness for future challenges.
Evaluation and Optimization of HR Processes
HR Controlling systematically evaluates the effectiveness of HR processes, from recruitment to development programs. By analyzing key performance indicators (KPIs) for each HR area, it identifies opportunities for improvement and innovation. This continuous evaluation allows HR practices to adapt to the changing needs of the organization and employee expectations.
Support in Building a Data-Driven Culture
Finally, HR Controlling plays a crucial role in fostering a data-driven organizational culture. By delivering reliable analyses and recommendations, it supports decision-making processes at all levels of the organization, contributing to building a competitive advantage through effective human capital management.
Tools and Metrics
Delving into the tools...
Controlling employs a range of advanced tools that support effective financial management within an enterprise. Key instruments include Management Information Systems (MIS), which integrate data from various sources and provide synthetic reports and analyses. Equally important are ERP systems, which comprehensively integrate business processes, and Corporate Performance Management (CPM) platforms based on Business Intelligence, enabling advanced analytics and financial data visualization.
Specialized budgeting and planning software, data analysis tools (e.g., advanced spreadsheets), and dedicated controlling systems like Eureca are also widely used. These tools facilitate importing, modeling, and analyzing large datasets across different business areas. Increasingly popular are Business Analytics solutions such as QlikView, Tableau, or PowerBI, which allow multidimensional financial data analysis.
...and the metrics
Although HR Controlling deals with the "soft" aspect of business—people—it remains firmly rooted in measurable indicators, as it is an integral part of management accounting. These metrics help monitor and optimize a company’s HR policies. Below is a summary of the most important categories of metrics:
- Efficiency Metrics: Measure the return on investment in human capital and the value delivered by employees.
- Monitoring Metrics: Focus on analyzing salaries and HR costs in the context of the company's overall expenses.
- Employment and Work Time Metrics: Evaluate employment dynamics, workforce structure, and time utilization.
- Training and Recruitment Metrics: Monitor the costs and effectiveness of development and recruitment processes.
I will cover the topic of metrics in more detail in my next article. It’s a broad area, but one worth exploring to ultimately select two or three key indicators that best define the company’s situation. The choice should reflect the specific industry, the company's stage of development, and its strategic goals, ensuring effective support for HR in attracting and retaining top talent.
The Key to Success
Invest in employee development because people are the most important asset.
While I have a strong appreciation for processes, metrics, and numbers, I firmly believe that people are the foundation of success in any organization. They form the teams that drive a company's growth. It is crucial that these teams include inspiring leaders, skilled specialists, and innovators who can meet market challenges. All management tools, such as budgets or surveys, should be designed with these individuals in mind.
HR Controlling, often associated with hard data, plays an invaluable role in the softer aspects of HR policy. Controlling tools can support processes such as job evaluation and employee appraisals. Job evaluation, in turn, is essential for developing a transparent compensation policy that reflects the significance of various roles within the company and their value on the market.
Employee feedback, such as supervisor evaluations or satisfaction surveys, can also be effectively conducted using anonymous electronic questionnaires. The use of qualitative rating scales enables more reliable results and a better understanding of team needs. All these activities should aim for a single objective: creating an engaged and competent team. Regular reporting on appraisal outcomes helps identify areas for improvement and benchmark results against other companies in the industry.
Investing in employee development is critical to the future of any organization. People are the key to reaching customers and achieving business goals. This is why HR Controlling tools should always be designed to support and develop the company’s most valuable asset—its employees.
The article was published as part of the series "Fall in Love with Management Accounting" on the portal mitsmr.pl.