Wednesday, November 18, 2009

How Does HR Add to Profits?

Sometimes, I get asked a question that really makes me stop and think.  I have had the pleasure of teaching and speaking at least 25-30 times per year.  A few weeks ago, I was teaching an HR Essentials class.  We were discussing how HR adds value to the organization when a very smart young lady asked me, "Well how does HR add to profits?"

I believe she cut to the chase...adding value really means adding dollars to the bottom line.  So, of course I threw the question out to the class and asked for their input.  Here is what they said:

1) HR prevents lawsuits
2) HR hires good people
3) HR saves money by implementing cost effective benefits programs
4) HR makes sure salaries are competitive thus saving compensation dollars

I believe all the above are true, but with the exception on number 2, those are cost saving activities.  These activities are great, but it still doesn't answer the question of ADDING to profits.

So after weeks of contemplation, I have a few to add to the list:

5) HR adds to profits by designing and IMPLEMENTING true pay for performance systems that incent those people that are truly meeting and exceeding expectations thus adding to profits by increasing revenues and reducing costs. 
6) HR adds to profits by making sure the organizations strategy is communicated and cascaded to the lowest level of the organization.  This activity makes sure that all employees know what is important, what is expected and how they will be measured.  This focus allows employees to direct their activities that lead to goal attainment and bottom line results.

I had others but you tell me what you think.....I would love to create a good list of how HR adds to profits and then create metrics to correspond with each item, thus creating a blueprint for an HR scorecard that points to what our CEO's care about...PROFIT!

Here is a motivator....I will share the results with all of please send me your comments on this subject!
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