HR's Key Role in Profitable Business Outcomes

How to link strategies implemented by HR to key business metrics that directly enable business goals.

Which HR practices & concepts directly enable business goals?

We firmly believe that people are the single greatest determinant of an organisation’s success.

In this day and age HR now has more power than ever before to make strong executive decisions, simply because organisations are now starting to understand the business benefits of developing their people.

Also, because of this new understanding, organisations are now investing far more in people management solutions in order to better understand the metrics of exactly how their people are contributing to strong business outcomes. What we’ve learned from this trend is new adopters of Human Capital Management are surprised by their prior inability to report across their entire business.

Early Adopters of Human Capital Management
Adopters of online HCM are able to become more agile than their competitors

How can a business build employee engagement?

Innovation? Collaboration among employees? What are the key drivers of productivity within a business?

In order to understand Employee Engagement fully, we break it down into the following:

  • Empowerment,
  • Commitment,
  • Work/Life Balance,
  • Nature of the Job,
  • Career Growth,
  • Performance Management,
  • Relationships and
  • Reward.

Based on the collective data from our clients’ Engagement surveys, it’s quite apparent that the major factors driving higher engagement in employees are:

  • Visible career growth possibilities.
  • Sufficient autonomy and resources to effectively do their jobs.
  • An understanding of how an employee’s work contributes to the organisation and aligns with its strategies.

More often than not, financial reward is only the tip of the iceberg when it comes to high levels of engagement in any organisation, and engagement cannot be sustained on remuneration alone.

How does strong engagement contribute to quantifiable business outcomes?

How to link strategies implemented by HR to key business metrics that drive bottom-line numbers.

It’s important to remember that happiness doesn’t necessarily equal engagement; an employee could be very happy doing nothing...

Therefore we always view engagement in terms of productivity. An employee, who can see their future in the company, has plenty of resources to do their job and an understanding of how their work aligns with the organisation’s strategy will always go above and beyond for you. They get what their work is achieving and they feel connected to the organisation.

But how do organisations capture this information and make it meaningful in terms of quantifiable business outcomes? We recommend longitudinal reporting.

The longitudinal research we’ve gathered on the Top 50 ASX companies from 2007 to 2014 shows an average decline of Human Capital Effectiveness by -4.61% per annum. We view HCM Effectiveness by reduction of cost & growth of revenue. So at -4.61%pa, this means the Top 50 are going backwards in reducing cost and growing revenue.

Which begs the question: if the ASX Top 50 are having issues with HCM, how well are the next 5000 organisations managing their employees?

Human Capital Effectiveness Research
Research Copyright PeopleStreme 2017

How do the HR practitioners ensure that HR has a 'seat at the table' and voice within strategy-setting sessions?

Think about your own organisation for a second… Is your HR department regarded by management as a key component of the company's leadership and strategy formulation? If not, what do you think it would take HR to get there? Do HR practitioners have to keep fighting to be viewed that way by management?

Whenever we are in discussion with HR regarding a Human Capital Management project the question we keep asking is “what are the financial outcomes?”.

90% of HR initiatives fall over at the CFO level simply because the business case hasn’t shown insight into any Return on Investment. Without this, the executives will continue to push back because they can’t see value in the project. (Check our events page for our free HR Funding Workshops!)

Through our 15+ years’ experience, PeopleStreme understands the huge financial benefits that can be achieved through Human Capital Management, so we spend much of our consultation with HR analysing outcomes and building business cases that show quantifiable business outcomes.

Once a HCM platform is in place, HR then have the ability to report on meaningful outcomes that further cement them as experts and guarantees a seat at the table.

Strategic Human Resources
Human Resources are now being seen more often as a strategic asset

Significant business challenges solved by world-class HR practice

Based on our recent 2015 Human Capital Maturity Level survey, we see only 1% of organisations taking full advantage of Longitudinal reporting, 3% utilising fully-integrated & automated HCM platforms and a significant 51% still struggling with costly manual / paper-based HCM process.

Another business challenge that desperately needs addressing is the Human vs Technology investment in majority of organisations. Organisations spend an average 70% on labour costs, yet only spend 2% on technology to support and report on the effectives on this labour. The other 98% is spent on IT infrastructure, Finance, ERP, etc…

The way forward is for HR to:

  1. ‍Understand and relay the financial benefits of HCM to their executives,
  2. Achieve funding to implement these systems,
  3. Provide adequate reporting to prove ROI and boost productivity, and
  4. Finally secure their seat at the decision-making table.

The future is bright and we’re excited for businesses who take advantage of World Class HCM.

Let me know your thoughts in the comments below!

Sean Marsh | Lead Digital Designer & Human Capital Consultant

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