How Does HR Contribute To The Bottom Line
Everyone recognizes that people are a company’s most valuable asset. Nonetheless, HR appears to be left without a place at the table. That position at the executive table, however, is designated for those who can quantify the success of their departments, and HR is struggling to do so. Marketing, sales, product development, and even finance have many metrics that tie directly to the business bottom line. Unfortunately, the contribution of HR and operations management is considered to be supportive, and their goals are often more quantitative than qualitative. Top management and shareholders are used to thinking about ROI, numbers, and quantitative results, so it is easy to see how this mismatch makes it very difficult for human capital teams to prove their worth.
While HR can significantly impact your organization’s bottom line, it’s often burdened by manual work. For example, processes like employee records management, distributing and tracking company policies and procedures, new-hire onboarding, and incident management often involve manual labor with no centralized way to manage information. In addition, manual, paper-based HR processing directs staff time and attention away from value-driving work like creating a great employee experience and culture.
Even though numerous studies prove that investing in this department directly impacts business results, that rarely happens. Unless you are the lucky exception to the rule, you are viewed as nothing more than a necessary expenditure, which leads the department, so critical to company success, to work understaffed and with minimal tools while being in charge of numerous essential operations of the firm. Nonetheless, in the eyes of their superiors, they are unlikely to generate any meaningful profit for the organization. Of course, this isn’t always the case, but it does reveal a fundamental attitude toward the department. So, how can we possibly increase earnings by utilizing human resources?
Yes, you might have calculated the turnover rate and know that 75% of the workforce has attended training, but how do those things contribute to the business’s competitive strategy? They don’t, really.
Not all HR professionals have the same level of contribution, and there are different ways people in these roles understand their job.
The administrative type is concerned with regulations, procedures, and remuneration. Solutions-oriented individuals strive to adhere to best practices, but there is a mismatch between what is best for the market and what is best for your team. Strategic HRs seek to connect their efforts with the demands of the business. And then there is the one everyone should strive to be, the one who gets a seat at the table and is a part of the company strategy, and uses data to drive choices.
If you are hoping to get the long overdue credit, your chances are significantly higher if you are the fourth type. To get there, you have to link the investments in HR to the ROI and profit value.
Employee engagement and a positive work environment aren’t just feel-good initiatives. They have a bottom-line value, which you can prove with data. Such initiatives are a part of a strategy in which everything you do should be geared toward increasing the quality of human capital. You must develop each component of your HR system to consistently promote, support, and encourage a high-performing workforce.
The HR Scorecard book mentions their research comparing over 400 companies and their work systems. They found that high-performing businesses had double the number of HR professionals per total number of employees, used more resources for recruiting and selection, and had more robust training programs. In other words, investing in people results in a competitive advantage and bottom line value.
Suppose your HR professionals are spending hours a year just handling administrative work. In that case, they might continue to be a cost center instead of contributing to the organization’s long-term success.
With all this said, you will need leaders on board to support your new endeavor to be more integrated into the business. You’ll have to start measuring things and proving their worth to garner support. Over time, armed with your data, you can prove to the CEO that HR is not just a cost center but an essential part of business success.