How HR can boost a companies financial success
At the centre of every successful organisation lies it’s beating heart, the HR department, driving critical activities such as recruitment, onboarding, and employee engagement and much more.
Therefore, both directly and indirectly, HR influences almost every aspect of a company’s financial performance and can have an impact that is overwhelmingly profitable. Yet it can often be hard to prove this point, as people power is a metric that’s all too rarely measured.
But this is starting to change, and HR teams that are adept at measuring the success of their people and seeing the value of developing talent are boosting profits – and their own reputation while they’re at it. But how exactly do you go about measuring what many see as an intangible asset – human capital?
The hard metrics
Some areas of HR we can easily correlate to the financials. Take recruitment as an example, the average cost to recruit in the UK is now £6,544 per employee. So, there’s no wonder most HR departments are targeted on keeping churn low.
Other statistics show a 59% reduction in turnover when employees are engaged.
That begs the question, how are HR departments measuring the financial impact of keeping talent in the business? Or are they not doing so at all?
How to measure people power
The first step in this process is to ignore the belief that human capital can’t be measured. The fact is teams hold true value, and that value can be measured.
HR Software is providing increasingly sophisticated ways to put figures to what used to be gut feeling.
Gone are the days where HR departments need to take a stab in the dark at how much unengaged and quiet quitters are impacting your bottom line. HR reports can align engagement and overall business performance in one view.
And what does that mean for HR professionals? A leg to stand on in front of SLT, data backed business decisions and a tangible business case when providing the value of their department (and what they could do with more resource.)
In HR terms, being able to clearly demonstrate the business case for initiatives such as redundancy programmes, recruitment drives, or learning and development campaigns, can be extremely valuable, and we don’t need to tell you these drives get senior backing when they can see the impact they’ll have on P&L.
The truth is things like trust, culture, vision and belief can be hard to quantify and thus can be more difficult for HR to drive these conversations further up the chain. Employee engagement surveys can go some of the way, but it’s worth noting these are a lag metric – employees want to see change before the put pen to paper.
As with anything, to really impact the bottom-line, HR need to take these insights and make decisions of the back of it to really turn the dial.
Align your HR and finance teams
To be truly successful, there must be close cooperation between HR and finance. That means finance departments should have access to HR systems, or even better, be using a platform that integrates into the software. Regular analysis and feedback loops on what’s working, and what isn’t, will open the conversation on how HR is impacting the bottom line.
In summary
The case for measuring human capital is becoming clearer – but few organisations actually do it. Some do a great job by harnessing the data held within their platforms, some don’t do it at all, whilst most are somewhere in between.
Measuring impact can start small and doesn’t have to mean hours of pulling reports and cross-referencing it all in Excel. Clever HR Software will do the hard yards for you, letting you see impact month on month and track how your changes are having an impact.
Link your analysis to business goals, introduce a proper analytical systems and processes, and develop a strong relationship with the finance department to ensure an aligned approach.
Want to demonstrate your value without spending hours in Excel and editing board slides? Book a demo of our HR Software and reporting module today!
