Human resources professionals can be excused for feeling a bit apologetic at times. They know the important work they do, but they work under the cloud of labels like “cost center” and “overhead”—labels often heard coming from the C suite. If the top executives in an organization consider the department necessary but also a drain, how can the HR department garner the kind of respect necessary to contribute to an organization’s mission in the most meaningful way? 
Patricia Mathews, owner and principal consultant at Workplace Experts in Sarasota, Florida, has some ideas, which she presented during a recent Business and Legal Resources webinar titled “HR’s Role as a Profit Maker: How to Maximize the Value of Human Capital.”
Mathews cites research showing that 60 percent of executives are beginning to see that HR can partner with other departments to increase the profitability and value of a business, and just 20 percent have the more old-school idea that HR’s main function lies in transactional services—processing new hires and departing employees as well as other paperwork functions—rather than playing a role in the strategic development of an organization.
HR can build on the progress the profession has seen in recent years by making sure the HR mission aligns with the mission of the whole organization, Mathews says. Organizations typically measure performance in terms of how they can increase shareholder value, market share, or earnings; how they can increase revenue or profit and return on assets; how they can increase employee productivity, quality, and service; and how they can increase job satisfaction thereby reducing turnover.
HR has an impact on all those performance outcomes, Mathews says. For example, HR can affect a company’s stock price by helping the organization become an employer of choice. HR can create a positive impact on customers by ensuring that employees get effective customer-service training. HR also can increase profits by workforce optimization initiatives.
In addition, HR can increase the strength of an organization’s people assets through sound hiring initiatives. And HR can boost productivity through employee engagement initiatives, improved onboarding, and managing turnover. Despite the negative connotation surrounding turnover, Mathews says HR shouldn’t be afraid of well-managed turnover—“getting the wrong people off the bus.”
Alignment is key
The challenge for HR is to align all HR practices and systems with the organization’s mission and strategic objectives, Mathews says. To create that alignment, HR professionals must understand their organizations.
“Organizations measure what they treasure,” Mathews says. So HR needs to know what the organization values and what adds value to the organization. In her webinar, she cited a company mission statement that says, “To provide first-class service and innovative products to our customers and consistently attractive returns to our shareholders.”
To align well with that mission statement, Mathews says the HR mission statement should say, “To ensure the organization has the right people in the right jobs at the right time their skills are needed in order to meet/exceed customer and shareholder expectations.”
Strategic objectives also need to be aligned, Mathews says. So the organization whose mission is to provide first-class service and innovative products as well as attractive returns to shareholders might have a strategic objective to deliver a high-quality, web-based marketing software solution within the next three years. With such an organizational objective in mind, the HR objective might be to identify and hire high-quality web-based marketing software developers within the next 12-18 months.
Making HR practices pay off
Mathews cites research showing that anywhere from 15 percent to 30 percent of the total value of a company is correlated to specific HR practices. Also, companies with high capabilities in specific HR practices tend to achieve higher total shareholder returns over a period of three to five years, and most executives at high-performing companies say that workforce issues drive strategy.
So HR must identify the right HR practices and HR systems to fulfill their organizations’ mission and strategic objectives, Mathews says. She says HR should be involved in creating strategies to drive organizational value, and six key goals are:
- A results-oriented culture and positive work environment.
- Excellence in communications transparency.
- Employee engagement and satisfaction.
- Excellence in recruiting, selection, and onboarding.
- Total rewards excellence.
- Performance management excellence.
Stigma as cost center
Often an organization’s long-held culture can be an enemy, Mathews says. “Senior management may not support HR,” she says, and there may be poor communication up and down the organization. For example, finance and accounting might be holding on to the numbers HR needs to align its functions to that of the overall mission of the organization.
That kind of poor communication and silo-building can lead to HR being seen as overhead because of the administrative paperwork required to track and report employee information—information that appears to generate no direct revenue, Mathews says.
“We’ve often said HR needs to transition, similar to what accounting did when finance was added to the mix—accounting being the transactional entity and finance the more strategic entity,” Mathews says.
Engagement matters
Even with employee engagement almost universally seen as important to the bottom line, Mathews cites research showing that the overwhelming majority of organizations cite culture, engagement, and retention among their top challenges. Yet a majority also rate their retention and engagement capabilities as fair to poor. So that represents an opportunity for HR to increase profitability.
“It pays to invest in your people, and it also happens to be the right thing to do,” Mathews says. What can HR do about engagement? She offers a “simple recipe”: Offer fair pay and good benefits, have an open-door policy, provide profit sharing and a fun and interesting place to work—all things that HR has the ability to help the organization build.