Certified Human Resource Professional (CHRP) Practice Exam

Disable ads (and more) with a membership for a one time $4.99 payment

Study for the Certified Human Resource Professional Test. Utilize multiple choice questions with detailed explanations to enhance your HR knowledge. Prepare thoroughly and increase your chances of passing the CHRP Exam.

Practice this question and more.

What formula estimates an organization's human capital return on investment?

(Value of output - Value of input) ÷ Total compensation costs
(Total revenue - [Operating expenses - Total compensation costs]) ÷ Total compensation costs
Profit ÷ Number of full-time employees
(Total revenue - Cost of all HR programs and services) ÷ Number of full-time employees

The correct answer is: (Total revenue - [Operating expenses - Total compensation costs]) ÷ Total compensation costs

The formula that estimates an organization's human capital return on investment focuses on assessing the financial returns generated from investments in human resources relative to the costs incurred. The chosen answer uses total revenue and operational expenses to calculate the return on investment concerning compensation costs. This calculation provides a comprehensive view because it considers total revenue, which reflects the organization's overall earnings, minus operating expenses primarily related to other business costs. By isolating the impact of total compensation in relation to the value generated, it allows organizations to assess how effectively their investment in human capital is yielding returns. This view is crucial as it links employee compensation to overall business performance, thereby demonstrating the value human capital adds to the organization. In contrast, other formulas provided do not focus precisely on the relationship between human capital investments and overall financial returns. For example, one option focuses solely on output minus input concerning compensation, which may not accurately reflect the comprehensive impact of all human resources on productivity. Another option considers profit per employee, which can be influenced by factors unrelated to human capital. Lastly, another formula introduces HR program costs against the number of full-time employees, which misses the broader link between compensation, revenue generation, and overall operational efficiency.