Linking HR and profitability
Strategic HR makes a company money, and foundational HR saves it money. No HR is costly to the bottom line.
Strategic and Foundational HR
Strategic HR makes a company money, and foundational HR saves it money, according to Cori Maedel, CHRP, MBA, CEO of Jouta Performance, a Vancouver-based HR consultancy she founded seven and a half years ago.
Foundational HR includes such things as regulatory compliance, benefits administration and what are often thought of as more traditional HR areas. Strategic HR looks further than immediate needs, and has a much greater impact.
Maedel can cite plenty of concrete examples of how both types of HR have affected her clients’ bottom lines; examples range from saving $60,000 by following their own recently implemented employment agreements when terminating someone, to saving a company hundreds of thousands of dollars by implementing a solid recruitment process that increased retention and decreased the substantial costs associated with hiring new staff and bringing them onboard.
“Ninety-eight per cent of the businesses in B.C. are small or medium-sized, and many of them don’t understand what HR can do,” Maedel adds. “I knew HR was important, but until I ran my own business, I didn’t realize how critical it was.” She shares what she has learned through her consulting and teaching professional development programs.
Understanding Culture Key to Impact
Regardless of the size of the enterprise or organization, Maedel says, one of HR’s most important jobs is making sure everyone understands the culture they’re working in.
“We find that often organizations are not clear on their culture. If HR is not driving that, what are they doing?” she asks. “I firmly believe that culture eats strategy for breakfast. If employees don’t share a common culture, they won’t be able to achieve the strategy.”
She recalls one company that had lost sight of its culture, enabling a counter culture to form within its workplace. As a result, half of the 1,000 employees had to be replaced to get the company back on track, a huge hit to the bottom line that could have been prevented if culture had been clearly understood all along.
In another instance, the client company had values, but had neither defined nor communicated them. When the executive group members were asked describe those values, each gave a different answer.
For Maedel, the question is clear, “If you’re not in agreement, how can you drive the behaviour you expect from employees to reach your larger goals?” If employees don’t know what they are trying to achieve, she adds, they cannot be effective. Similarly, if HR does not know the ultimate goals, it can influence neither behaviour nor results.
Culture, Protection, Productivity
HR’s work brings together culture, protection and productivity, Maedel says. Protection is foundational, and has to be done to preserve the organization from risk. Moreover, culture has to be in place and understood before an HR strategy can be put in place, “and that’s what makes you money.”
According to Maedel, organizations have to critically examine programs like their performance appraisals. “Do you want performance development or performance management?” she asks. Development can motivate staff, as can rewards and recognition. “Sometimes people get a bonus without knowing why. They want to know what they have to do to get better. They need to know what they’re working toward. If employees see how their growth and development is connected to the success of the organization, they are motivated.”
She recalls a family-run business whose owners thought HR was a waste of time. It turned out that none of them shared the same vision for their business. “Once the vision was clear, they were finally working in unison, as a team. Then it was easy to put practices in place to support them.”
An analysis of their absence tracking system revealed that it was costing them $8,000 per month in lost productivity. That effort alone not only saved them a clear $5,000 per month, but exponentially more because resources were not being wasted tracking down paper as with the old system.