Does HR contribute to the bottomline?

hr-contribution, human-resources

by Homerun Nievera | via HomerNievera.com |

Growing companies, especially those coming from SME status find it hard to rationalize the important role of Human Resources, more so, an HR department.

But companies such as call centers and others in the business process outsourcing industry see HR as a vital cog in the organization. The question remains — does HR have a positive impact on a company’s bottomline?

A good place to start looking for answers looking into the role of the Human Resource department in coordinating a plan that to increase productivity and also increase job satisfaction. It is a fact that by maximizing job satisfaction, turnover of employees is minimized. In some BPOs, for example, turnovers of as high as eighty percent can be experienced.

The scope of HR’s functionality spans across the areas of recruitment, training and development, rewards and retention, productivity, redeployment and retirement, and the working environment. usually, HR’s role starts with something as simple as a mentoring program, wherein junior associates are allowed to meet with senior executives once a month to exchange stories and ideas. HR may also allow employees paid time off to attend a seminar or lecture in their area of focus. Showing employees that the company will invest in their career success will motivate them to contribute to the organization’s success.

Where to start looking

Any fast-growing company knows that the first step toward improving the bottom line is to manage costs and while increasing revenues. The role of HR is to outline and analyze the various personnel costs. It is looking beyond just wages and benefits, while considering every aspect of personnel cost, such as:

  • Direct and indirect costs
  • Fixed, stepped, and variable cost
  • Ongoing and onetime costs

A snapshot of personnel costs will allow management to allocate resources more effectively.

Efficiency is not just about reductions but also about strategic investment and making do with what is available. Another approach as to how HR can contribute to the bottomline is through staff development. It is a given that the company’s staff are the lifeline of the organization and its biggest investment. Beyond salary and benefits, this means maximizing employees’ potential and furthering their job growth to benefit them along with the organization over the long term.

Controlling turnover is essential to growth

Innovative and robust organizations usually attract a steady flow of top talent into their fold. However, some top performers still leave to chase new opportunities. Many may choose to stay while some alumni also come back. How does management of staff — especially the top performers — impact on the company bottomline?

In many sales organizations, handling the superstar sales people is a large task for HR. They have to be happy so they can stay. It is thus, a huge challenge for HR to craft ways beyond the usual monetary incentives to keep the company’s top performers from leaving.

Every employee who leaves an organization also trigger expenses associated with the turnover. Advisory firm Baker Tilly says in its blog that “For a typical employee, the organization will typically pay 150 percent of their salary to replace them. For management or sales, expect to pay 200 percent of their annual salary. With these figures in mind, it is even more pertinent for the organization to mark-up a plan that will reduce turnover.”

Some organizations pay temps or temporary replacements. The learning curve for these people is long and thus, incurs cost related to performance levels and the potential revenue attached to the position. The same thing happens when the position is permanently filled. According to Baker Tilly, “the new hire will typically reach 25 percent of his/her productivity capability within a month, 50 percent within three months, and 75 percent within five months.”

Thus, the role of HR here is to balance the costs and investment in human capital during turnovers, and of course, in limiting turnover.

The importance of improving talent commitment

In his book Authentic Leadership, former Medtronic CEO Bill George makes an obvious point that business leaders rarely say out loud:  “Missions motivate, dollars don’t.” Employees may not necessarily leave the company to have a negative impact on the bottomline. It is the employees’ lack of commitment that does the slow damage.

An article posted on ClearDocs.com reveals five key practices that make a significant positive impact on employee commitment:

  • Training
  • Sharing information
  • Decentralized decision making
  • Rewards 
  • Job security

The above key practices fall under the HR department. Each are large tasks in themselves that simply cannot be neglected.

Each department in an organization contributes to the company’s goals. Since organizations are run by people, management this vital resource is of utmost importance. Machines and computers won’t run by themselves as goods and services won’t sell on their own without top talent.

Thus, aligning strategies and leadership goals should be done with the HR team. In the end, good leaders and profitability go hand-in-hand.

On August 1-2, know more about the impact of HR Management in a company’s bottomline, during the 9th Philippine HR Summit, at the Crowne Plaza Hotel. Convergys chairperson, Marife Zamora and Ayala Foundation President Ruel Maranan will facilitate the discussion. Click HERE for more information or to register to the event.

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