In one of my last blogs, I have already mentioned that cost cutting is still one of the most prominent topics for HR departments. Cost cutting through company wide employee reductions (even when the company is doing well…), but also cost cutting through HR internal efficiency gains, automation and HR employee reduction. Ok, in many companies the HR ratio is still south of 1:100 or even 1:80, which calls for action – but this is not true for all companies.
But besides the ratio discussion, one should ask a different question: What is the effect to the companies bottom line? Too often HR departments are still and only seen as costs, but a modern HR department can (and I mean can as I haven’t seen many that perform in this way) have a positiv impact on the companies bottom line!
Within the last few weeks I had the opportunity to talk to two Bord members responsible for HR and we discussed the topic of “HR’s bottom line value contribution”. In both discussions, the value of HR was unclear. This is not only because these Bord members were not HR specialists, but also because their Business Partners were not enabled to show them the positive impact that HR can bring.
Most of today’s HR departments already contribute to the bottom line: Training for example, almost every HR department that I know does offer training to the company’s employees. And a good, target group and business focused training does have a positive impact to the companies bottom line. Why? Where? How?
This is an easy answer (however, measuring this success is a bit more tricky): each and every positive performance impact through the training is HR’s value impact.
HR’s problem though is that there is in most cases no metrics system that enables identification of bottom line contribution. HR today only measures things like training days delivered per employee or training costs per employee. These figures just show the negative contribution of HR: costs and having employees non-productive days counted. – HR of course needs to follow up on these figures, but has to market the positive figures more prominently. The occurred costs do have a positive bottom line contribution! (And if not, the wrong trainings are applied…)
And once an HR department is able to show the value and bottom line contribution, it can be much more confident when the next round of cost cuttings are coming. This is “having strategic discussions at eye level”, this is where HR should be! This is why HR should have a seat at the table and this is how HR should use it!
More about HR Analytics and HR Balanced Score Card in one of my next posts.
Chief HR Officer 