HR Management & Compliance

HR Impact on Profit Margins

HR costs are often viewed as necessary to keep the company in compliance and ensure hiring needs are met. But HR teams have been fighting for years the view that the entire group is a cost sink. HR professionals know there are ways the department can be utilized that are not costly but rather a source of good return on investment and even an enhancement on organizational productivity.

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Here are some ways HR can have an impact on organizational profitability:

  • Providing data to help drive smart decision-making within the organization.
  • Ensuring there are no costly compliance-related fines or lawsuits by implementing processes that keep the organization compliant and by staying on top of changing legislation.
  • Keeping turnover low by:
    • Selecting the best employees for each role
    • Providing a great recruiting experience
    • Creating and implementing an employee development program that keeps employees engaged and loyal to the organization
  • Ensuring the onboarding and training process minimizes time to profitability for new hires.
  • Using analysis and market knowledge to create total compensation packages that will drive talent acquisition strategies in alignment with business objectives.
  • Ensuring employee compensation is appropriate to keep pay-related turnover low.
  • Helping to create and hone the employer brand, which can drive talent attraction and retention.
  • Utilizing skills gap analysis in conjunction with robust employee development initiatives to help ensure the organization remains competitive as skill set needs change over time.
  • Implementing and communicating the policies and procedures that keep the organization operating smoothly.
  • Implementing software solutions that make the HR experience more seamless and thus more cost-effective.
  • Assisting with cultural change initiatives.
  • Helping to translate the organizational vision, mission, and objectives into actionable employee goals and key performance indicators (KPIs).
  • Assessing and improving employee engagement levels.
  • Working with management teams to craft effective incentive programs to drive employee behaviors.
  • Encouraging leaders throughout the organization to proactively assess employee workloads and work/life balance to help reduce the incidence of employee burnout.
  • Proactively using data to assess where there may be problems in the organization and taking steps to mitigate whatever those issues may be.
  • Implementing benefit programs that help both employees and employers. A good example would be employee wellness initiatives, which help to drive down health-related costs and absences.

With these ideas as a starting point, the entire HR team can be involved in helping their organization increase overall profitability. By lowering turnover, decreasing costs, and proactively finding ways to improve efficiencies, HR can be an integral component of overall business strategy.

The team may need to work to communicate this value to the C-suite to be seen as a profit-enhancer rather than a cost center, but that work is worthwhile when it results in enhanced HR stature in the organization.

Bridget Miller is a business consultant with a specialized MBA in International Economics and Management, which provides a unique perspective on business challenges. She’s been working in the corporate world for over 15 years, with experience across multiple diverse departments including HR, sales, marketing, IT, commercial development, and training.