Human Resources is the business department that is often overlooked not only by the general public but the business leaders, too! Up to very recently, the Human Resources department has been viewed as the bearers of the labor-intensive paperwork and onboarding of the newcomers to the company.
However, these are by far not the only tasks executed by the HR team. In fact, in the modern business world, more and more CEOs are currently realizing the role Human Resources managers play not only in the overall well-being of the company, but also in its economic prosperity in particular. Indeed, as the degree of involvement of the Human Resources department in the decision-making process is shifting to taking on a larger number of responsibilities, they are becoming increasing more potent in facilitating the improved profitability of an organization.
In fact, expectations of the Human Resources Department have changed in the last decade and are currently more rigorous than ever before. The general trend is that 20% of the CEOs are complying with the new role of HR and use the department as innovative business solution partners, 60% are starting to expect the HR department to cooperate with other departments within the company to enhance the core competencies and overall performance, and only 20% of the chief executives believe HR should remain as administrative overhead.
The key argument related to the matter is stated in the following question: ‘Should HR belong at the executive table?’ This implies that there is a strong correlation between the extent of professionalism of the HR staff and the performance of a company. This also further suggests that the HR department has a strong connection to the financials of an organization. Therefore, it can be stated that HR has the ability to make a valuable contribution and improve the profitability of an organization. In fact, the study called People and the Bottom Line, conducted by the Work Foundation and the Institute for Employment Studies reveals that, “If an organization increased its investment in HR by just 10% it would boost gross profits by nearly $2,000 per employee per year’. There are several ways in which this can be done.
An Improved Employee Onboarding Process
One of the prime responsibilities that the HR department is associated with is providing employee onboarding. According to the USDA’s website employee onboarding can be best defined as, “The process of acclimating and welcoming new employees into an organization and providing them with the tools, resources, and knowledge to become successful and productive.” To paraphrase, this process involves not only familiarizing the new hires with the workspace and adequately equipping them for the job, but also establishing the initial contact and setting out the friendly atmosphere of trust and respect. Employee onboarding is vital to create a strong connection between the new staff and the already existing one, make them feel welcomed as it can drastically change the attitude to the workplace and therefore the motivation to work there.
Moreover, apart from the mental compound there is also a more practical one, extensive training. It is up to the HR department to ensure that all the new hires are given the training they need and therefore are ready to dive straight into the job and perform it at the highest level possible. Controlling that such a training is received can increase the productivity and reduce the acclimatization period, which will improve the profitability of an organization.
Minimizing the Legal Consequences
Another thing that the HR department can do in order to improve the profitability of the organization is to minimize the threat of litigation. Unfortunately, discontent employees can take legal actions against their employer, which can not only be very time-consuming and damaging for the reputation of the given business, but also extremely costly. However, it is in the powers of the HR department to ensure all the problems that may arise are solved at the early stages before the conflict escalates any further. This translates into a serious profitability increase as the chance of being hit with a lawsuit against the company declines.
Reduced Turnover That Would Cut the Employee Replacement Costs
Selecting the most suitable candidates for the job out of the pool of applications coming in is the prime responsibility of the Human Resources department. They are to find the people who possess both the hard and soft skills required for the job. Moreover, it is also the HR department’s responsibility to select the candidates that are willing to stick with the company for a long time and productively work with them in the future. It is absolutely pivotal to ensure the turnover rate is kept as low as possible, as replacing employees can be extremely expensive. In fact, as the findings of the Center for American Progress study show, the average cost of replacing an employee constitutes, “16 percent of annual salary for high-turnover, low-paying jobs earning under $30,000 a year and 20 percent of annual salary for mid-range positions earning $30,000 to $50,000 a year.”
One of the prime strategies that can be employed by the HR department to reduce the employee turnover is compensation packages. By offering your hires the benefits they want and allowing them to significantly better their living standards, you can expect them to remain loyal to your organization and not only stay there for a while, but also be motivated to perform their tasks at the highest level. This is also supported by implementing a rewards system that would give your employees an incentive to do a better job. It is extremely important to recognize the accomplishments of your staff in order to keep them excited to continue to be productive and do their best.
Wrapping It Up
However, while all of the aforementioned ways of HR improving the profitability of an organization are viable, it is important to remember that it is up to the CEOs to initiate the transition of Human Resources to a profitability factor. In order to do this, the higher management needs to develop a strategy that would put an emphasis on the HR department learning how to make this valuable contribution and expanding their area of responsibilities from just carrying out the administrative work.
