Why effective human resources practices are essential to productivity and profitability
The greatest cost of doing business is usually labor. In the June 2021 quarter, the Australian Bureau of Statistics reported that Australian organizations spent $ 295,373 million on labor costs. Yet conversations about labor costs and bottom line are typically led by the CFO and finance department or other functions considered to have a direct impact on revenue or financial performance, for example employees. sales. Indeed, it would be rare for the HR function to be perceived as having a direct impact on the bottom line (except perhaps as a cost to be managed), let alone leading the conversation regarding the cost of labor and its costs. financial implications.
So why isn’t HR in this discussion? Unfortunately, HR still has a credibility problem. Too often HR is seen as soft and fuzzy – developing and implementing programs that no one sees the benefit of, or as a policing of processes and policies, with little ability to adapt to business needs. organization and workforce. They will rarely be seen as having a good understanding of critical financial parameters.
However, HR can be done well, and when it is, it can have a significant impact on overall workforce efficiency and a positive effect on bottom lines. Human resources are above all people. people can make or break a business and therefore shouldn’t HR take a leading role in handling the financial and other implications of these people?
Effective human resource practices are essential to productivity. Let’s take a closer look at how.
HR has a critical role to play in targeting, attracting and retaining the best talent for an organization. Talent strategy should align with business strategy, and people hired should align with the culture and purpose of the organization. An article by the American talent solutions company, Apollo Technical, reports that bad hires are estimated at 30% of an employee’s salary in the first year and up to US $ 240.00 per person, in lost productivity and in hiring, retention and compensation expenses. .
Much research has been done on the causal link between employee engagement and bottom line. Research by Hay Group suggests that revenues could be up to 4.5 times higher for companies with an engaged workforce than for those without.
Skills for the future
Australia faces serious skills shortages. More than 80% of the jobs created by 2030 will be for knowledge workers. Deloitte reports that the right answer to dealing with the change in skills required can generate an economic windfall of $ 36 billion. This should be at the center of the HR plan and strategy. The implications for hiring, hiring and developing talent are significant.
Performance and compliance
Much time and effort has gone into complex and generally inefficient performance management systems and processes. However, employee performance is important for productivity and the bottom line. When non-performance is left unaddressed, it can have serious repercussions on the rest of the workforce. If high performance is not recognized, it can have a significant impact on engagement.
Likewise, disregarding employment laws, if discovered, can be costly and time consuming. The recent example of payroll non-compliance and serial employee underpayment is a good example.
Data, Analytics and Technology
HR functions have been slow to harness the power of data and analytics. The irony of this fact is glaring given the high cost of labor and its impact on the bottom line. Using automation to streamline processes and restore autonomy and ownership to employees and their workforce managers will boost efficiency, productivity, and improve engagement. Using people data and analytics will enable business leaders to quickly identify, analyze and report significant workforce issues and plan for future workforce needs .
For HR to demonstrate a tangible benefit to the organization, they must first understand the business in which they are located. The relationship between finance and HR is also essential and both teams need to pull in the same direction. It is also the responsibility of managers and leaders to involve HR in critical business discussions and decisions. Too often HR is an afterthought. In the examples discussed above, most managers and leaders will know that their HR team is focused on recruiting, talent, engagement, and compliance, what they might not know is that if done right and with the business strategy in mind, these initiatives will lead to significant improvements in productivity and a significant impact on the bottom line.
Written by Ilona Charles.
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