HR plays a major role in driving financial efficiency and profitability. Here’s how HR can ensure that your employees remain engaged and productive.
A strategic HR system not only drives efficiency within a business. It also helps your business save money and maximize profits. Constantly hiring, onboarding, and training new staff members can become an expensive (not to mention disruptive) process that drains even the most established corporations of important resources and creates a talent deficit that brings profit trajectories to a grinding halt.
In this article, we’ll look at how being more strategic about your HR system can drive financial efficiency and help your business become more productive and profitable overall. We’ll also highlight some actionable ways to embody a more strategic HR system that your business can utilize.
The Relationship Between HR And Business Profitability
As any well-established business knows, employees are the lifeblood of a company. If you fail to take good care of your employees, they will fail to take good care of your company—and that will cost you in more ways than one.
So, why is HR so often underestimated when it comes to corporate profitability?
Well, there are a few reasons. Part of what makes the connection between HR and profitability appear so superficially tenuous is that the financial benefits of a good HR system are not easily quantified.
Most of them do not relate to hard costs; they relate to the elusive costs of employee performance, satisfaction, and engagement.
In the ravenous pursuit of generating more sales and product features, businesses can often view HR as an afterthought. But without a comprehensive appreciation for the link between HR and profitability, even the biggest corporations can quickly fall victim to overspending, endangering retention, and missing out on critical growth opportunities.
HR isn’t just about handing out welcome packs and dealing with the occasional office spat. It’s about tending to both the personal and professional and often very complex needs of an entire staff body—the productivity of which your business wholly depends for its financial stability and growth.
By investing in HR, you invest in the long-term vitality and success of your company. Let’s take a look at some of the major ways in which a more strategic HR system drives financial efficiency and nose-to-tail corporate well-being.
Let’s look at a few ways in which strategic HR is able to drive financial efficiency in large corporations:
1. Enhanced employee productivity
According to a Gallup study, employees who are engaged contribute to a 23% increase in profitability. A strong HR system can help a corporation increase its revenue by encouraging employees to be more collaborative, innovative, and motivated during work hours. When HR focuses on maximizing productivity, employees become happier and more engaged, leading to more creative and energetic work that results in better products and service offerings for consumers.
2. Reduced employment costs
Onboarding processes, re-training, paid time off, communications, and engagement efforts all cost money, and a weak HR system keeps those costs high. However, turnover costs can be levied through better performance management and discipline.
3. Improves attrition and company loyalty
Engaged, motivated employees are far more likely to remain in their roles long-term. HR is extremely important to employees, and offering them good services and support in this area can significantly impact attrition. Whether this means ensuring they get good benefits, have everything they need to file their taxes, or simply perform their job to the best of their ability, HR can reduce the chances of employees looking for opportunities elsewhere.
Employee retention is a powerful way to help your company save money while cultivating a loyal and committed staff body.
4. It’s good for business
Investing in HR bolsters everyone’s success. It also reduces risk, eliminates inefficiencies, and improves productivity across your corporation as a whole. HR works as a middleman in many corporate settings and is crucial to keeping employees satisfied. Don’t make the mistake of ruling out HR as a major driver of profit, it’ll cost you in terms of productivity, sustainability, and profitability.
How To Make Your HR System More Efficient And Profitable
In order for corporations to maintain a consistent profit growth trajectory and retain a diverse talent pool of employees, investment in HR is essential. Here are some ways to make your HR system more efficient and profitable over time.
- Align HR with IT and digital transformation – you can’t change what you can’t measure. If there’s a profit leak in your HR system, IT will be able to help you identify it. HR software can also be used to optimize employee onboarding and training for better staff retention and profitability.
- Un-silo your department systems – in large corporations, there is always a risk of disconnection between different departments, a.k.a. working in silos, which can lead to avoidable inefficiencies and unnecessary costs. Allow HR to run regular off-sites to improve insights, productivity, and collaboration.
- Give your HR department more airtime – chances are, the people who work in your HR department have been aware of its financial potential for ages; they just haven’t been given the platform to share their thoughts and ideas.Provide them with more opportunities to collaborate with other departments on strategies and systems that can be financially beneficial to your company.
Big corporations that fail to recognize the true value and potential of a strong HR system are not likely to withstand the test of time. By investing in HR and, therefore, investing in the quality of life of your employees, your business can become more functional, more sustainable, and perhaps most importantly for long-term growth, more profitable.
HR Holds The Key To Profitability
The bigger a company grows, the harder it can be to keep track of employee well-being and satisfaction. But that’s not an excuse to allow HR to fade into the background.
Not only does treating HR like a vestigial organ have damaging effects on employee productivity and engagement, but it also weakens financial growth potential, makes your business more susceptible to a high churn rate, and forfeits talent that can help push your company to the next level.
HR should be a top priority for any corporation that seeks to enhance engagement and productivity, improve financial efficiency, and create a fully sustainable workforce infrastructure.
This can be achieved through investing in quality HR software, un-siloing corporate departments, and asking both HR employees and those they seek support for feedback on how to improve retention, loyalty, and tenure.