HR's Impact on the Bottom Line

Guest Contributorby Dr. Christopher Lee | Posted | Business Impact

HR's Impact on the Bottom Line

The bottom line is the bottom line. If businesses do not generate revenue, they go out of business. If non-profits do not garner donations, grants, or revenue, they cease to exist.

The question for CHROs is, "How do I help my organization generate revenue, achieve its objectives, and win the war for customers?"

When HR professionals connect these dots they are thinking and acting strategically. The historic challenge has been that there are more intermediary dots in HR than they are in other departments like sales, operations, marketing, or manufacturing.

Salespeople know that if they sell more, more revenue is generated. Operations can easily see that if they do not get products shipped on time, fewer customers will buy them. Marketing tracks the increase in sales as a result of increased promotions, and manufacturing can show how producing better products increases purchases.

How then can HR demonstrate that it, too, is connected to the bottom line?

Delivering value through people

Human resources delivers value to the business through people. Our support of managers and employees, and our creation and delivery of programs and services make an impact on the business.

In a word, it is all related to productivity. When HR enables employees to do more, do more with less, or perform better or faster, we can trace our actions to business outcomes.

The buzzword that is applicable here is what is called E3. What can human resources do to help employees work more efficiently, more effectively, and with greater economy? When employees and managers are more productive, the company is more profitable.

Engineering this chain reaction shows the impact of strategic human resources on the bottom line.

HR's productivity tools

How chief HR officers help structure organizations (e.g., matrix, divisional, functional, flat, etc.), how we deploy people (e.g., teams, quality circles, assembly lines, virtually, etc.), how we hire, train, and motivate them (e.g. selection procedures, training and development programs, incentive compensation, etc.) and how we encourage their hearts (e.g., coaching, engagement activities, morale building, etc.) all matter.

How we connect what we do to the specific context of our business is the art necessary to help our organizations win the war for customers.

When we are strategic, we help our organizations gain an advantage against the competition by providing programs and services that help people perform better.

How to impact the bottom line

The best way to impact the bottom line is to first identify what the organization's revenue and performance-related goals are and then design HR solutions that will help bring them to life. Here are a few examples of HR-related actions that could be taken to help an organization increase revenue, market share, and customer satisfaction.

  • Increasing revenue could come from selling more stuff or making a higher profit on what is currently being sold-or both.
  • Sales training programs for salespersons or business process improvement courses for operations staff are options for the first objective.
  • Changing the compensation structure, the size of sales territories, the location of sales people, allowing outside sales people to work from home or training sales people on their competitor's products so that they can position our products more effectively might all affect market share.
  • Increasing customer satisfaction could occur simply by giving managers an evaluation rubric to better judge the effectiveness of call center customer relations.

A focus on employee performance

Everything that we do in HR should have the singular focus of enabling employees to perform better.

We connect to them through their managers, the organizational structure and culture, processes and procedures, and through the delivery of a tailor-made portfolio of HR programs and services designed for our specific people and organization.

The strategic value of HR

Every organization has the same major variable: one or more people.

As long as people strategies are the domain of HR, we will have a profound impact on the bottom line.

Our ability to do so is dependent upon how well we can connect the dots between the organization's revenue and performance-related activities and what we do in HR.

When we can clearly identify both the goals and our ability to influence them, we will have mastered one of the most fundamental strategic concepts-how to deliberately connect our actions to business outcomes.

Your turn: How do you connect the dots between your HR programs and your organization's financial success?

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