3 Ways HR Adds Value and Impacts Your Profitability

A big myth in business is that HR doesn’t contribute to a company’s profitability. Keep reading to see what we think about that. (Hint: it’s totally false)
3 Ways HR Adds Value and Impacts Your Profitability

Did you know that HR is responsible for a huge amount of every company’s success?

HR provides great value to any organization by hiring, keeping, and empowering the best people.

There’s a business principle called “The 3 P’s of business” that illustrates why that works. 

"For a company to succeed, it has to have a good product, good processes, and good people."

Marcus Lemonis, a billionaire entrepreneur, evangelizes the 3 P’s and explains that for a company to succeed, it has to have a good product, good processes, and good people.

Without a product that customers want to buy, you can’t succeed; without effective internal processes, you’ll be a mess; without great people running the company, you’ll be stagnant.

HR probably doesn’t impact the product your company offers, but it has some impact on the processes and a huge impact on the people.

If you understand the principle of the 3 P’s, it’s obvious that HR provides a lot of value to the company. At the end of the day, this value is measured in dollars and cents.

In this article, we’ll make the connection between the value HR adds to a company and actual money.

Let’s get started.

1. Hiring great people

One of the principal responsibilities of HR is hiring great people. To do that well, they have to know how to find great candidates and if they’re actually talking to one. Once they’ve done that, HR has to convince their top choice that you’re their best option.

This is one place where HR influences company processes. The better the process, the more smoothly it will run, the cheaper it will be, and the better talent you’ll win.

Finding candidates

In order to hire a great employee, you need to grow a good talent pool. Your HR people have to know where to find these people, and how to get them to apply.

Popular job boards make this easier, but even those have to be attractively written and optimized to be found. 

Job boards are an easy way to find candidates, but building a referral program will get you better results. You’ll find that your referred candidates are higher quality, your time to hire is faster, your cost-per-hire is lower, and your employer brand will improve.

"Referred candidates are higher quality, your time to hire is faster, your cost-per-hire is lower, and your employer brand will improve."

Evaluating candidates

Once HR has established a talent pool, they have to evaluate each candidate to find the best one. 

There’s more to interviewing a job candidate than asking them a list of questions and listening to the answers. Interviewing candidates is a skill that has to be developed.

Interviewers have to see past the facade that job candidates put up and actually get to know the candidate in that short timeframe.

Winning candidates

Throughout the whole hiring process, the recruiter needs to convince the candidate that this opportunity is better than the rest. The labor market is tight. Quality candidates are in high demand and most likely have multiple offers.

Winning top talent is certainly easier with an incredible salary and benefits package, but if that’s not something you can offer, your HR team will have to get creative. 

This is where culture comes in. HR is generally responsible for creating an attractive company culture or employee experience, and that is what will attract great candidates.

Skilled, productive, and knowledgeable employees earn revenue. HR contributes to earning company revenue by hiring more skilled, more productive, and more knowledgeable employees.

They do this by building an excellent talent pool, figuring out which candidate is the best for your company, and convincing them that you’re the best company for them.

"Skilled, productive, and knowledgeable employees earn revenue. HR contributes to earning company revenue by hiring more skilled, more productive, and more knowledgeable employees."

2. Keeping great people

The game is not over once you’ve found your dream team. HR pros have to constantly make the employee experience incredible for their people

Employee experience

Employee experience is a very broad term. Here’s a list of some of the things that affect your employees’ experience:

  • Company culture: Is fun a key part of your organization? Are you competitive? What’s the social environment?
  • Relationship with management: What’s your leadership style? Do managers and employees clash, or disagree and figure it out?
  • Workspaces: Do you have an open floorplan, or are you a cubicle kind of place?
  • Activities: Do you take time out of the workday every now and then to have an activity?
  • Benefits: You pay them well, but do you 401-k match? Hows your PTO policy? How generous is your insurance package?
  • Workload: Are your people constantly slammed, consistently challenged, or frequently bored?
  • Stress levels: What’s the balance between job expectations and resources for your people?
  • Work-life balance: Do your people come to work, work hard, and go home, or is the balance off one way or the other?
  • Feedback: How do you give feedback in your company? Is it frequent and constructive?

Keep in mind that when it comes to employee experience, there’s a whole lot of gray area. The above questions aren’t necessarily about what’s good and bad. They’re questions about what works for your company and the people you want to hire.

Here’s one way to get an idea if your people are getting the experience they want: 

Do your people come to work happy, and go home happy? (Not just because they get to leave.)

"Do your people come to work happy, and go home happy?"

There are two heads to the coin of creating a great employee experience. 

If your employees are happy with all (or most) aspects of what they get out of working for you, then they’ll be more productive.

"By reducing employee turnover, HR can save your company the costs that come with job vacancies, replacing employees, and training new hires."

If, on the other hand, your people are not happy at work, then their productivity will sink, and you’ll run into turnover, which has its own costs and headaches.

By reducing employee turnover, HR can save your company the costs that come with job vacancies, replacing employees, and training new hires.

Here is a turnover calculator that can help you figure out your employee turnover rate.

Turnover Rate Calculator


3. Empowering great people

A big part of workplace satisfaction (with the associated benefit of employee productivity) is workplace empowerment. The Balance Careers does an awesome job of defining it.

They argue that empowerment isn’t a gift that managers give to employees. Empowerment is “the process of an individual enabling himself to take action and control work and decision making in autonomous ways. Empowerment comes from the individual.”

"Empowerment comes from the individual."

Even though HR can’t just give your people empowerment, there are things they do to help employees on their way to feeling empowered. Here are a few ideas:

  • Avoid micromanagement. If an employee can handle a task, let them do it without you over their shoulder.
  • Encourage trial and be okay with error. Make your people feel safe to try new things even if they don’t always work out.
  • Express trust. You hired this person because you thought they could do a good job. Let that show.
  • Have high expectations and show confidence. If your people don’t feel challenged, they won’t grow, and growth is empowering.

By helping employees have an empowering experience at work HR can help create a culture of high-achievement. It’s not hard to see that high-achieving employees and teams bring in more revenue.

Conclusion

Excellent employees are a huge part of what makes a company successful, and you can’t have excellent people without somebody hiring, keeping, and empowering them to do great work.

Successful people are responsible for the success of a company, and human resources is responsible for filling the company with successful people. If you track HR’s efforts in these three areas, you’ll find that they truly do have a significant impact on company profitability.

Helping HR find, hire, retain, and empower people is what EddyHR was created to do. So if you are looking for a tool that helps HR make more money, look no further than EddyHR’s time-saving and efficiency-building platform.

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