It’s end of year and your company’s bottom line looks bleak or, worse yet, seesaws between black and red. But, how to right the ship? Departments with obvious connections to profitability, such as sales and finance, often land in the spotlight for review right away. However, the underlying performance of all these departments hinges on the people within them, making effective human resources practices a critical component to improving your bottom line.
As human resource functions are not often perceived as having a major impact on a company’s bottom line, it is important to demonstrate where the value lies. When you break it down, the simplicity of HR’s impact becomes clear. People make up a business, and the talent and engagement of those people dictate productivity (and subsequently profitability). HR is responsible for attracting and retaining the right talent to ensure the company is performing at its peak. So, while it is important to explore direct revenue generating avenues, it is equally as important to take the pulse of your own people and identify any workforce gaps. Let’s dig deeper.
Business Knowledge and Talent Management
In order to target, attract, and hire the best talent for your company (the goal of any HR department), you need to understand your business. How does your company make a profit? What goods or services does it provide? How does your company operate? The answers to these questions drive the recruitment and talent management processes. Candidates who can perform the job well, who want to invest themselves in the organization, and who strive to ensure customer satisfaction will be more productive, positively impacting the bottom line.
In conjunction with recruiting candidates that best fit your organization and its culture, leadership talent management is critical to the bottom line. The number one reason employees quit is because of their manager and turnover is expensive. There are costs associated with hiring, onboarding and training, learning and development, and lost time/productivity due to an unfilled role. The average of these costs can land anywhere between 16% and 213% of the person’s salary, depending on their role. So, take a look at each departments’ needs and then recruit and develop a person that will lead through action and behaviours that inspire staff to perform at their best. Strong leadership can make or break your business.
Research done by the Hay Group shows that there is a causal link between employee engagement and business performance. Happy employees are more passionate and focused, which then equates to higher productivity levels. Ultimately, this means that happy employees directly impact your bottom line. In fact, Hay Group’s research suggests that firms scoring high on employee engagement had, on average, 4.5 times the revenue as those with the lowest scores. So, take a look at your workforce. Are your employees engaged (going above and beyond at work, working creatively, have high energy for their work) or do they spend excessive time at the water cooler, take extended lunches, or slip out early more often than not?
To improve engagement levels, look beyond money. Employees want to be happy at the place they spend the majority of their waking hours. Focus on some of these areas for improvement:
- Build Trust: employees must feel a level of trust in order to be engaged in their work. If they are constantly being undercut by management, the message received will be that their decision making and work is untrustworthy, which will dilute engagement levels.
- Be Flexible: work-life balance is becoming not just a buzzword, but an expectation in modern society. Giving employees the flexibility to work based on preference (from home, at night, during nap time etc.), while ensuring the work gets done and 40 hours are put in, will show that the work itself is more important than how and when it gets done. The needs of the employee are met, the work gets done, engagement levels rise, productivity improves, and the bottom-line soars. Win-win.
- Acknowledge Good Work: engaged employees will go above and beyond to ensure positive results. If that dedication goes unnoticed, a highly engaged employee will lose the motivation to continue working so hard. Publicly acknowledge accomplishments as joy can be found in praise. Frequent positive feedback and rewards will have a longer reach than a single, infrequent prize. This will also help promote a positive work environment, where everyone feels valued. A positive work environment through teamwork and communication will increase engagement. A smile and “thank you” have no impact on the bottom line, but the social currency is invaluable.
- Set the Example: if you want excellence from your staff, you must demonstrate excellent behaviours. Make employees feel important, valued, and heard through open communication, transparency, and honesty. That connection will make employees feel part of the big picture, and that they are making a difference through their work.
- Offer Extended Benefits: offering benefits beyond the basics shows employees that you care about the total health and happiness of them and their families. For example, greater life insurance can protect their income, health and wellness subsidies promote healthy minds and bodies, dental and vision coverage tap into the whole body, not just what is looked at by a general practitioner.
- Provide Growth Opportunities: if you want employees to be engaged on a continual basis, they cannot simply be assigned the same tasks day-in and day-out. Talented employees want to continuously learn. Tasks that require productivity, ingenuity, and that allow them to grow professionally will make them feel worthwhile and appreciated. This can motivate them to work at maximum capacity and capabilities.
Engagement also boosts retention levels, which improves business performance as long as the right people are in the right roles. Retention can also be seen as a component of cost savings given the high price tag associated with turnover rates. Knowing that HR is responsible for ensuring employee engagement, it becomes clear that HR can have an astounding impact on a company’s bottom line.
The same study completed by the Hay Group noted that engagement is not the only factor to happy employees. Employees may be engaged at work, but if they don’t have the right tools to complete a task, they will quickly get frustrated. Employers must enable their employees as well as engage them. HR can help make ensure employees are well-equipped with the appropriate skills to do the tasks assigned to them through competitive learning. Keep your staffs’ skills and learning as up-to-date as possible through applicable courses, training, and business travel to further their knowledge of the company. This will translate into profitability.
HR and Business Strategy Alignment
There is no one specific HR activity that will improve the bottom line for all companies, no “one-size-fits-all” solution. Rather, the success of any HR strategy will be based first in the understanding of each department’s business strategy. This link will provide the proper guidance when building a plan to achieve any organizational goal.
Remember, profitability yields from productivity, which is all about having the right people, in the right roles, who are engaged, enabled, and developed in alignment with organizational goals. As HR is responsible for all of those elements (recruitment, employee engagement and enablement, and learning and development), it is safe to say that Human Resources has a clear impact on the health of the bottom line. Focus on your people, as well as your clients, and success is at your fingertips.
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