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If you think Human Resources (HR) is your highest sunk cost, you are right. If you think HR is your number one driver, you are right. What gives?
You are leaving HR what you put into it. And it's not just about budgets, staff, and perks (i.e., sunk costs) either.
In the simplest sense, business performance is directly related to how well the HR department empowers employees to do their best work every day, week, and year. In the absence of schools and colleges teaching basic life skills (career, finance and business management, communication and resilience to start with) and a government unwilling or unable to fund continuing education, because of their inevitable, insatiable ability the last resort talent needs.
But beyond the platitudes, suffice it to say that HR is like the Cinderella of corporate departments. Everyone knows it has great potential, but nobody wants to invest the time and money to make it really stand out.
Related Topics: 10 Ways To Rebuild Your Human Resources Department To Support Rapid Growth And Happy Employees
Most founders are either top salespeople, product, finance, or marketing professionals, but rarely are HR professionals. The vast majority have never built HR departments from scratch. Most still follow the "body in seat" approach to talent acquisition, throwing money on software instead of coaching, cutting costs, saving on quality benefits, and having annual reviews for effective performance management. As if in a daydream, the founders await the mere mission to change the world (with some ramen noodles and free coffee) to support their young employees through 80-hour weeks, low wages and worthless equity. Call me back in six months when they've left you, dear CEO.
People are the lifeblood of every company. Don't care about them and they don't care about your business. Even so-called enlightened founders and CEOs know that it is important to treat their employees well. You're generally resigned to paying through the nose for it and expecting little to no ROI – a big mistake.
First, you can't change what you don't measure. The service costs are straightforward. However, these values are less easy to quantify
Employee Lifetime ValueAcregate the cost of employee turnover and usage rates in teams with toxic managers. Low productivity and laid-off employees. Employee absenteeism and impaired work performance. Real total compensation costs. Bad internal communication
In pursuit of more sales and product features, marketing campaigns, and the mere punctual operation of the proverbial trains, HR is an afterthought – and often the final key hiring long after the critical need period.
Before I worked in HR, I worked in finance and operations for one startup and in products for another. I've seen companies, without linking their people, performance, and hiring plans to finances, are either quick to overspend, jeopardize the runway, or remain too conservative in hiring and talent development and miss out on critical growth opportunities.
Related topics: Planning for organizational changes: Personnel strategies to support your company in navigating the new "normal"
Qualified HR function as a profit driver. It will not be easy to destroy old thinking, as agile, business-minded and analytical-driven HR is still a relatively young invention. However, once you realize the inherent value of Human Resources that enables employees to be healthy, covered by excellent insurance, given the tools of physical and mental wellbeing, trained and dedicated, productive and the best job of their lives now and for your business instead of later and for someone else it will click suddenly.
Here are nine ways HR can finally take its rightful place in the sun and at the C-suite table to increase profitability.
Related: Millennials and Upskilling: The Changing Role of Human Resources
1. Link your hiring plan, benefit costs, and related expenses to your financial model
By linking these HR responsibilities together, you can make quick hiring decisions based on your runway, cash flows, and predictive analytics. If you haven't created one yet, creating a financial model should be your top priority. That way, you can save many hundreds of thousands of dollars on transfers and future layoffs and can hire quickly to take advantage of the market opportunity.
2. Organize the digital transformation together with IT
Start prioritizing digital communication by improving internal communication: the number of open and anonymous channels, as well as the cadence, centralization and connection of different apps via APIs. Remote working has accelerated this process for many organizations, with HR being at the forefront of implementation and communication. The result is faster and more efficient business processes, more productive and engaged employees, and more cash flow for growth.
3. Ensure mental health awareness and care for employees
Help your employees maintain good mental health through regular check-ins, employee surveys, and early intervention. Remote work brings strong teams closer together, but drives weaker teams further apart. You cannot fake real concern and caring for the 2020 employees. Burnout is real, with significantly longer working hours despite or due to a lack of commuters.
Related Topics: How Can Human Resources Help Companies With Coronavirus Uncertainty?
If you can't save an employee from being burned out, they'll likely leave quickly and find another remote job that they feel supported with. It's about 150 percent of their salary – plus the hidden cost of sales.
4. Interview employee engagement anonymously
Learn how employees feel about everything from office paint and groceries in the stocked kitchen to conflicts with managers, feedback on training, and the need for personal and professional development. Instead of guessing or hoping that employees will respond with more engagement and productivity, hear from the employees themselves and act quickly to give them what they need.
5. Have HR publish internal projects for the entire company to see
Transparency helps companies use internal resources and limits outside hiring, which is usually riskier and always more expensive.
6. Empower HR to deliver training
Let HR host internal hackathons, learning and development training, lunch and learn, and help employees start side projects that can lead to groundbreaking products and new lines of service and revenue. Google and other companies have taken this approach and resulted in hugely profitable creations like Gmail, Google Maps, Twitter, Slack, and Groupon.
7. Create internal mobility programs
These can be rotation programs, secondments from other companies, and cross-functional roles that span departments. These programs result in a more agile exchange of ideas, better targeting of talent on projects, higher engagement and a longer average tenure.
8. Create an internal gig economy
Hire talent and show potential and fitness – not just skills. Then create flexible roles so that the best talent can be filled with the right teams and projects, and create a positive cycle of high engagement and productivity, increased exchange of ideas, higher profitability and a better employee brand to attract more top talent.
9. Have the HR department work outside the company on a regular basis
Offsites introduce people from different departments to each other and their work, show them how their work affects the larger mission, and reaffirm the company's vision. This silo process helps people feel more connected to a higher purpose and mission, and increases engagement, productivity, and tenure.
Related: How the COVID-19 Crisis Made Human Resources one of the most important jobs today
Notice how Perks didn't make this list? That's because they don't move the needle.
Agile hiring (and firing), tied to your finances and based on a skilled (and unleashed) HR department that always comes first and is consistently committed to employees, will help you build a top employer brand, an enthusiastic crowd of Employee fans and ambassadors. It will also attract more top talent, resulting in more great products and services, and even more talented people to join the missile ship.
The HR department itself is changing by leaps and bounds from the firm fortress of compliance and the status quo. As more and more top talent from other disciplines join the HR department, empirical, analytical decisions, systems and human-centered design thinking, as well as best practices from different functions and departments are widespread.
The biggest change makers and tools are often much cheaper than expected or free. Great advantages can be achieved for less money through a professional employer organization or a manufacturer-independent broker. The employee survey and internal communication, the drivers for employee-controlled changes, can be carried out free of charge or at no additional cost for existing tools. HR can coach and train employees in a variety of skills and topics, resolve conflicts, make better decisions and, among other things, clarify career paths without the need for expensive software.
If you are guilty of seeing HR as a holdover, take another look. If you do not appreciate or make the most of its true value to your business, you have lost your greatest ally and a lightning rod for change.
Now let Cinderella collect her glass slippers.