The Methodology for Determining and Evaluating the Effectiveness

of Innovations in Human Resource Management

G. K. Abdurakhmonova

, M. Sh. Khaydarova

, T. Rakhmonova

and Sh. J. Kabilova

Tashkent State University of Economics, Uzbekistan

Karshi State University, Uzbekistan

Keywords: Environment, Economic, Renewal, Innovation.

Abstract: The In today's economic environment, renewal, continuous improvement, and innovation are essential not

only for development but also for the survival of economic systems. Despite this, the primary focus tends to

be on product and technological innovations, while the implementation of management innovations, such as

those in HR management (HRMI), significantly lags behind. This disparity in the adoption rates of production

and management innovations is known as organizational lag in innovation management. Nonetheless, the

importance of HRMI for the successful implementation of product and technological innovations is equally

critical, even though predicting their impact and efficiencies is more complex. This article aims to describe

and categorize contemporary approaches to implementing innovations in HR Management (HRMI) and

evaluate their efficiencies. The practical value of the article lies in its detailed examination of HRMI, which

can be utilized to enhance and develop economic systems and create algorithms for assessing process

efficiency. The findings of this article are beneficial for managers and organizational leaders in making

decisions about adopting HRMI, selecting alternative organizational development strategies, developing

performance measurement systems for HR management, and modifying HR management systems.

Additionally, the article advances the scientific field by systematizing and evaluating organizational

innovations.

1 INTRODUCTION

Any innovation implemented within an organization

represents a complex process that affects many

internal subsystems and has an indeterminate

measure of implementation effectiveness. Currently,

neither economic literature nor the legislative and

regulatory framework provide universally accepted

terminology in the field of innovation activities.

Similarly, there are no universal indicators that allow

for the evaluation of the effectiveness of any

implemented or ongoing innovation. The definition of

innovation, as stipulated by the International

Standards in the Statistics of Science, Technology,

and Innovation, is as follows: "Innovation is the

outcome of innovative activity, embodied in the form

of a new or improved product/technological process,

introduced to the market, applied in production, or in

a new approach to the provision of social services."

The concept of intra-organizational innovation,

therefore, essentially encompasses all products,

processes, or approaches to social services that are

new to a particular organization, regardless of

whether they have been applied in other

organizations. The goal of implementing any

innovation is to improve the overall performance of

the organization. As a result, the functioning of

individual subsystems within the organization

undergoes significant changes, while the activities of

other subsystems are either partially affected or

remain unchanged. HRMI are classified as

managerial innovations with specific properties that

influence the methods and possibilities for calculating

their effectiveness. A managerial innovation is

defined as any organized solution, system, procedure,

or management method that significantly differs from

the established practices within the organization and

is being used by it for the first time.

The foundation for this article is contemporary

domestic and international scientific literature,

represented by the works of P. Drucker, N.P. Zavlin,

E.A. Utkina, M. Armstrong, R. Dornbusch, S.

Fischer, K.X. Abdurakhmanov,

100

Abdurakhmonova, G. K., Khaydarova, M. S., Rakhmonova, T. and Kabilova, S. J.

The Methodology for Determining and Evaluating the Effectiveness of Innovations In Human Resource Management.

DOI: 10.5220/0013424800004654

Paper published under CC license (CC BY-NC-ND 4.0)

In Proceedings of the 4th International Conference on Humanities Education, Law, and Social Science (ICHELS 2024), pages 100-106

ISBN: 978-989-758-752-8

specific

aspects of

application for

innovations

technical

and

economic

organizatio

nal and

economic

legal

socio -

psychologic

G.K.Abdurakhmanova, A.B. Khaitov, I.Bakirova,

A.B.Irmatova, S.B. Gaibnazarov and others.

The main reason for the need to distinguish

management innovations as a separate category of

innovations is the sociality of innovations of this type,

which determines the presence of a set of aspects

(Figure 1) specific to this type of innovation, which

must be taken into account simultaneously when

implementing and evaluating such an innovation.

Such aspects include:

- technical and economic;

- organizational and economic;

- legal;

- socio-psychological.

The technical and economic effect in the

sphere of management is achieved by reducing the

labor intensity of performing procedures related to the

direct implementation of management functions,

including possible benefits from choosing the most

cost-effective management methods. The economic

effect in production arises as a result of the

improvement in productivity and quality of labor

associated with the implementation of a management

innovation and being its indirect consequence.

The evaluation of the effectiveness of managerial

innovations, therefore, requires consideration of both

types of economic effects that arise. This poses

certain difficulties due to the large number of non-

production and production factors that these effects

can influence, as well as the complexity of converting

all components of economic effects into a unified

measurement system to calculate the overall effect.

When assessing any managerial innovation, it is

necessary to account for the synergistic effect.

Managerial innovation primarily impacts the

intangible aspects of a company's activities and is

weakly linked to the financial outcomes of the

organization's operations.

The analysis of scientific literature, including the

aforementioned sources, shows that the majority of

works primarily focus on narrowly specialized issues

directly related to personnel management processes

and lack results with practical value for evaluating

effectiveness. Studies addressing the evaluation of

personnel management effectiveness and the

effectiveness of innovations in personnel

management predominantly do not differentiate

between these categories. Moreover, it is important to

note the actual absence of works that primarily aim to

address the evaluation of the effectiveness of

innovations in personnel management.

Overall, theoretical approaches to defining

the effectiveness of innovations in human resource

management can be classified according to two

criteria.

Criterion 1: According to the Type of Calculated

Effectiveness

- Economic effectiveness

- Social effectiveness

Economic effectiveness of innovations in human

resource management is assessed as the resultant

change in the company's financial indicators (profit,

cost, etc.) expected or actualized after the

implementation of the innovation in human resource

management. This type of effectiveness is relatively

under-researched in the theoretical literature. The

primary obstacles to calculating this type of

effectiveness are considered to be:

- The impossibility of translating changes in

qualitative indicators into a monetary equivalent

- The difficulty of accounting for all

consequences of the innovation implementation when

determining the overall impact on financial results.

Analyzing scientific concepts, two approaches to

evaluating the economic effectiveness of human

resource management can be identified.

Figure 1

Specific aspects of application for innovations

The Methodology for Determining and Evaluating the Effectiveness of Innovations In Human Resource Management

101

The first approach suggests considering the entire

organization's workforce as a single "aggregate"

worker. The second approach involves differentiating

labor by products and types of work. Social

effectiveness of innovations in human resource

management is viewed from the perspective of

assessing the potential to achieve positive and

eliminate negative (socially) changes within the

organization, as well as attaining any goals not aimed

at changing financial indicators.

Thus, positive changes associated with the

implementation of innovations and measurable

through the calculation of social effectiveness may

include:

1. Providing personnel with a proper level and

quality of life (favorable working conditions, decent

wages, necessary social services, etc.);

2. Offering employees conditions that allow them

to realize and develop their individual abilities;

3. Granting a degree of autonomy (decision-

making opportunities, determining task

methodologies, establishing work schedules and

intensity, etc.);

4. Developing a positive socio-psychological

climate (communication opportunities, information

access, increasing the degree of conflict-free

relationships with management and colleagues, etc.).

Social effectiveness of innovations in human

resource management also considers the prevention

of negative changes, including:

1. Damage caused by unfavorable working

conditions (occupational diseases, workplace

accidents, etc.);

2. Harm to individuals (due to intellectual and

physical overloads and underloads, stressful

situations, etc.).

Several authors, including G.K.

Abdurakhmanova, note the positive social outcomes

formed outside the organization as a component of

the social effectiveness of implementing innovations

in human resource management.

Such social outcomes may include:

1. Improvement of the organization's image;

2. Creation of new jobs;

3. Establishment of stable regional employment

levels;

4. Enhancement of the safety of production results

for consumers and reduction of negative

environmental impacts.

Depending on the goals of the innovation

implementation, social outcomes of improving the

system and technology of human resource

management are considered separately for each

component of the human resource management

system:

i. Subsystem of Personnel Planning and Personnel

Marketing (improving the utilization of the

organization's employee potential, achieving

alignment between employees' individual

abilities and interests and their job content,

reducing negative consequences of employee

layoffs, ensuring personnel stability, and

enhancing the organization's favorable image);

ii. Subsystem of Recruitment and Personnel

Accounting (hiring personnel who quickly adapt

to the organization, justifying personnel

decisions regarding staff movements);

iii. Subsystem of Working Conditions (compliance

with psychophysiological, ergonomic, and

aesthetic requirements, implementation of

occupational safety and health standards, level

of work humanization, reduction of negative

environmental impact);

iv. Subsystem of Labor Relations (timely

identification of problems in team relationships,

raising ethical standards in relationships,

positive influence on organizational culture,

improvements in interaction mechanisms for

resolving issues in social and labor relations);

v. Subsystem of Personnel Development

(organizing employee adaptation, enhancing job

content, improving professionalism and

competitiveness of personnel, achieving

alignment between employees' and managers'

goals in career management);

vi. Subsystem of Motivation and Incentives

(creating a link between work efficiency and

remuneration, personal development of

employees, creating conditions for managing

business careers, professional advancement of

personnel, improvements in the personnel

motivation system);

vii.

Subsystem of Social Development (increasing

the level of satisfaction of personnel needs,

fostering a favorable socio-psychological

climate, positively impacting feedback with

employees, providing opportunities for

employees to socialize outside of work and

participate in public life, positive changes in

employees' living conditions);

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viii. Subsystem of Organizational Structure

Development (improving the ability to

restructure organizational structures in response

to environmental changes, clear articulation of

goals and objectives to support decision-

making, ensuring clear definition of employees'

rights and responsibilities);

ix. Subsystem of Legal Support (personnel

decisions compliant with labor legislation,

justification of personnel decisions, legal

protection of employees);

x. Subsystem of Information Support (providing

management with information necessary for

managing the HR system, successful

management of information quality, timeliness,

and justification, equipping employees with

technical tools).

Criterion 2: By Approach to Evaluating the

Effectiveness of Innovations in Human Resource

Management

Based on the analysis of scientific literature, two

approaches to evaluating the effectiveness of

innovations in human resource management can be

identified:

Approach 1: The effectiveness of innovations in

human resource management can be measured as the

increase in the effectiveness of the entire HR

management system or its individual subsystems. In

this case, the effectiveness of an HR innovation is

calculated as the difference between specific

indicators used to evaluate the effectiveness of the

HR system at reporting dates before and after the

implementation of a particular innovation. The

number of methods for calculating the effectiveness

of HR innovations is quite large, as it is derived from

the numerous methods for assessing the HR

management system and its individual subsystems.

The effectiveness of HR innovations is determined

through the construction of econometric models that

relate the company's final financial result (profit) to

changes in specific HR management system

indicators.

The most relevant work on this topic is the

dissertation by M.A. Mitrofanova

, where the author

proposes the following methodology for evaluating

Alberg, V.F. (1993). *Formation of a Personnel

Management System at an Enterprise Using Functional

the effectiveness of innovations in human resource

management:

1. Conduct regular quantitative and qualitative

assessments of HR management subsystems. The

assessment method includes calculations (for

quantitative indicators) and surveys (for obtaining

qualitative indicators);

2. Convert the obtained qualitative results using a

developed expert scoring system;

3. Develop an econometric model, where the

endogenous variables represent changes in the

obtained indicators, and the exogenous variable

represents changes in the company's financial results;

4. Identify the quantitative relationship between

changes in profit and changes in indicators reflecting

the results of implementing innovations in human

resource management.

Approach 2: The effectiveness of an innovation

is determined by its impact on specific,

predetermined indicators of the organization's

success. In this case, the effectiveness of the

innovation refers to the organization's achievement of

its strategic and tactical goals—both at the

organizational level and at the departmental level.

This approach is developed in the scientific works

listed in Table 1.

The concept of evaluating the effectiveness of

human resource management, as found in the works

of both foreign and domestic authors, shares common

features: it is proposed to determine the effectiveness

of human resource management by comparing the

costs and benefits of applying specific working

methods in the HR management system.

The components of economic effectiveness in

human resource management, according to L.

Vodachek and O. Vodachkova, include:

1. Ratio (economic result/costs) as the central

component of HR management, viewed as the

determination of the degree of the organization's

strategic goals.

2. Degree of achievement of long-term

components of economic effectiveness in the HR

management system, reflecting the contribution of

employees to the company's activities and

development in the long term, including:

System Analysis: Organizational and Economic

Aspect* (Ph.D. dissertation, Moscow).

The Methodology for Determining and Evaluating the Effectiveness of Innovations In Human Resource Management

103

Table 1: The methods for assessing the effectiveness of innovations through organization performance indicators

Assessment

Method

Description Advantages Disadvantages

ROI (Return on

Investment)

Calculating the return on

funds invested in innovation

Clear financial metric,

easily understood

Only considers financial

aspects, doesn't show long-term

impact

KPI (Key

Performance

Indicators)

Measuring key

performance indicators

Flexible, applicable to

various fields

Can be difficult to select the

right indicators

Balanced

Scorecard

Balanced assessment o

financial and non-financial

indicators

Comprehensive, linked

to strategic goals

Complex, time-consuming

Patent Analysis

Studying the number and

ualit

atents

Clearly shows

innovative activit

Not all innovations are

atente

Customer

Satisfaction

Studying customer

opinions and satisfaction levels

Shows market

relevance

Can be subjective

Employee

Productivit

Measuring employee

efficienc

Shows internal impact

of innovation

Difficult to isolate from other

factors

Market Share

Chan

Tracking changes in the

com

's market

osition

Indicates

com

etitiveness

Can be heavily influenced by

external factors

- Stability, ensured by smoothly running

personnel-related processes (succession planning,

reliability in task performance without tension and

conflicts within the team);

- Flexibility, indicating employees' ability to

adapt their work to new conditions in response to

changes (e.g., the ability to develop new solutions to

emerging problems and implement them, actively

participate in organizational changes, and be prepared

for conflicts when necessary to implement innovative

concepts).

It is impossible to achieve complete stability and

flexibility simultaneously, so the task of HR

management is to find a balance between them,

considering the dynamic conditions.

Thus, methods of evaluating the effectiveness of

HR innovations based on calculating changes in

individual performance indicators of the HR

management system as a whole carry the same

drawbacks as the methods of evaluating the HR

management system from which they are derived. It

is also important to note that evaluating the

effectiveness of the HR management system is

typically a process based on assessing a significant

number of factors through expert evaluations.

Calculating innovation effectiveness by comparing

expert evaluations from different time periods can

lead to substantial distortion in the resulting

assessment due to differences in the subjective views

of the experts conducting the evaluation at different

times.

In European countries, so-called "assessment

centers" are common. These centers utilize experts

and a specialized set of indicators to identify the

potential abilities of management employees. When

using such services, a company implementing an

innovation conducts preliminary consultations with

the assessment center experts. This allows for a

qualitative preliminary measurement of the

indicators, which are later compared with similar

indicators calculated after the innovation has been

implemented.

The national practice of evaluating the

effectiveness of innovations in human resource

management is still in its early stages, as evidenced

by the limited amount of information available in

open sources. This information deficit is partly due to

the relatively small number of implemented

innovations in human resource management in our

country.

Conducting applied research on HR management

processes based on the comprehensive use of

statistical methods has recently become challenging

in Uzbekistan. This requires the availability of long-

term time series with simultaneous comparability

across individual time periods/dates. However, most

Uzbek companies have relatively short operational

histories and are not inclined to disclose data

regarding their HR management systems.

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In analyzing innovations in HR management, it's

crucial to employ econometric modeling to determine

their effectiveness and impact. This section will

conduct an econometric analysis to measure the

efficiency of applying innovative approaches in HR

management. We offer using statistical methods to

identify the factors influencing the success of these

HR innovations.

Variables: Include economic indicators such as

employee productivity (production metrics),

employee satisfaction (based on surveys and

interviews), employee turnover, and financial

outcomes.

Data Sources: The article's sources, surveys,

interviews, company reports, and statistical data used

to measure HRMI variables.

Descriptive Analysis: Describing the innovations

being applied in HR management.

Regression Analysis: Using multiple regression

models to identify key variables that influence the

effectiveness of innovations.

Performance Indicators: Utilizing various metrics

to evaluate the efficiency of innovative approaches.

A general form of regression model can be

studied as follows:

E = HRMI + EE + Tr + Mc + ε (1)

Where

E- Employee productivity indicator;

HRMI- Indicator of innovations applied in HR

management;

EE- Employee training;

Tr- Employee training courses and sessions;\

Mc- Model coefficients;

Ɛ- Error term.

By analyzing data with this regression model we

can identify which innovations are effective in HR

management. Using the above mentioned

methodology and econometric analysis, we can more

precisely evaluate the efficiency of innovations in HR

management and their positive impact on the

organization’s overall performance. This aids in

further refining HR strategies and accurately

pinpointing the implementation of innovations.

Thus, this article examined modern approaches to

defining, classifying, and evaluating the effectiveness

of innovations in human resource management.

1. Innovations in human resource management are a

type of managerial innovation, which implies their

close connection with the social environment and the

necessity of considering the synergistic effect when

evaluating the results of implementing such

innovations.

2. The scientific literature notes the existence of two

main concepts underlying the evaluation of the

effectiveness of human resource management, which

are found in publications in this field:

 The effectiveness of human resource

management is assessed from the perspective of

the unity of management and production

processes; according to survey participants, the

direct contribution of human resource

management to production efficiency cannot be

measured and is not measured;

 The effectiveness of human resource

management is assessed as the determination of

the contribution of human resource management

to the overall effectiveness of the organization’s

activities.

Quantitative evaluation of such a contribution is

challenging because reporting indicators that would

allow for regular measurement have not been

developed.

Thus, most methodologies for evaluating the

effectiveness of human resource management are

based on the first concept, i.e., they assess not so

much the contribution of the HR management system

to production efficiency, but rather its qualitative

impact on such efficiency.

Effectiveness at the company level as an integral

indicator can be transformed into many others at

lower levels, reflecting the performance of specific

HR management systems/subsystems.

In practice, organizations encounter difficulties

when evaluating the effectiveness of innovations in

human resource management. Existing methods are

perceived as ineffective in establishing causal

relationships between the innovation and its final

result. There is a need for indicators that clearly

reflect the impact of the implemented innovation in

HR management on the company's performance

indicators or that clearly demonstrate the extent to

which the organization has achieved its goals as a

result of implementing such an innovation.

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