"Why Human Resources?" This is a pretty typical response when I reveal I’m an HR professional. I’m used to it after all these years. I am not the stereotypical HR person for sure, so I get it. But the truth is, I never gave the stereotypes related to Human Resources Management any consideration when choosing my career path. What I did consider was that payroll accounts for somewhere between 30%-50% of business operating costs, depending on the industry. The other thing I considered was the fact that every single business customer, was, is and will be human being. Therefore, in my naivete, I reasoned that Human Resources must be the most important department in every business…right? Well, I quickly learned the reality in most businesses is radically different than my logic. Not only is HR not seen as the most important department, in fact, it is generally seen as little more than overhead. Well, consider me naïve, stubborn, in denial or rationalizing my career choice, but I still believe HR is the most important department in every business and here’s why.
Humans are the talent in every business and every business’ goal is to please a human customer. So, if one looks past the spreadsheet and researches the benefits of a robust HR department, one that helps the company acquire, develop, engage and retain talent, the conclusions one will draw are that happy, engaged employees correlate with higher customer ratings and company profitability. As I stated, every customer is human. No machine or algorithm can drive your business’ success like a satisfied and engaged human beings. By looking at HR as an investment in organizational talent, an organization gains return on their investment in the form of higher retention of organizational knowledge, higher productivity, higher customer satisfaction and company profitability (Gallup 2013). All very strong competitive advantages! The only conclusion that makes sense is to invest in the organization's talent and allow that talent make your customers happy.
I and businesses that value HR, view HR as an investment. By investing in the talent of your business, companies will get the returns in employee satisfaction and engagement. Happier employees are more loyal and proven to have higher retention, higher productivity and lower absenteeism (Gallup 2013). Unfortunately, these benefits are cor-relational and impossible to point out on a balance sheet. The results are supported by years of research but however does not keep the HR department from posting a loss on a balance sheet. Therefore making it easy to shortsightedly conclude HR is simply overhead. And in the bottom-line world of business, sometimes apparent gains and losses are all that count.
The department designed to take care of the humans in a business (HR), is consistently undervalued for one reason – it’s difficult to quantify effective care employees and it’s even more difficult to monetize it. Because the benefits of having strong HR policies, procedures and practices do not show up on a balance sheet, many businesses view HR as an opportunity cost. Thus, the quality of their HR department's level of services is directly related to the risk of providing one level of care versus other levels (higher of lower) of care to their employees. In other words, the thought process regarding funding HR becomes – what is the amount we are obligated to subsidize HR to keep the talent minimally satisfied and not run afoul of the laws put in place to protect and nurture the talent? By approaching HR as a cost with little tangible return, companies fail to treat the organizational talent as an asset worthy of investment. Failing to consider the true ROI of a strong HR department allows companies to view organizational talent as an easily replaceable commodity not worthy of high level investment. A pretty ridiculous way to treat 30% to 50% of your "operational expenses", if you ask me.
Don't take the human resources in your organization for granted. Properly invest in your HR department by providing the talent in your organization with robust and fulfilling HR services. The resulting return on your investment will be a stronger, happier and more productive business. If you feel your HR department could use a little assistance getting your talent to the next level, contact TLJ HR Consulting and let’s determine how to make your HR department even better. We believe in the value of investing in HR. Let us help your ROI on your organizational talent.