What if HR actually made you money?

If you listen to the commentary and murmurings of the start-up community, HR is handy when you have conflict, have administrative burdens in payroll and benefits administration or have to manage someone out.

Have a skip through Fast Company and the likes and you will hear a constant reinforcement of the necessary evil of HR. Many refer to HR as this thing you need when you get too big, when culture needs to be managed, when conflict has to be handled and when the admin becomes all too much.

Really though, is this what HR should be? Just a cost centre that you have to have when scale gets the better of performance and people become higher maintenance?
We are not really certain how HR got to this dark corridor as a business function nor how the start up community continually pays the price for not getting out in front of the people element of the business.

Here’s an interesting exercise…Google the term “Business Definition” and see if you can find any reference to ‘people’ in the mix.

It seems profound to us that Business is so often defined as being this entity that exists almost exclusively of people. Furthermore, when we talk about HR, Human Capital (we dislike this term for the record) or People, we describe it as an element in business, a variable or factor that you need to keep your eye on, kind of like inventory or pricing.

What is interesting about this is that we are treating a fundamental building block of success as simply an element or variable when in fact it is the people who make or break a business’ results.

We would posit that if your business has a Strategy without an integrated view of how people will create, deliver or execute that strategy, you don’t have a strategy at all; you have what is more commonly known as a fantasy.

It seems to us that it takes so much more than renaming HR to People & Culture or some other alternative (which is a futile and sometimes harmful exercise when done in the absence of any fundamental change to the role of the function itself). If HR, doesn’t change what it actually does and delivers and if leaders do not ask more of it, then we could accurately forecast more and more fantasies driving the fall of shareholder value.

So when will we come to ask more of HR? When will we realise that HR isn’t there to manage or even avoid problems but create opportunities for business growth and success to be accelerated?

Here are some basic building blocks for turning the “people element” of a business into a money making function of the business:

When a vacancy arises in an organisation, the pressure is usually on to get “backsides on seats”. This can lead to rushed, ill-considered hiring that costs the organisation dearly in terms of lost productivity, the opportunity cost of revenue and direct costs. When recruiting new people there are a number of areas that can quickly add value to the bottom line:

• Ensuring a true fit for new team members to the role, the team, the line manager and the desired ‘culture’ of the organisation. This starts with a really good job and person analysis, so there is a clear understanding of what is required for the role and what the right candidate will need to have in terms of skills, experience and most importantly, attributes to succeed in the role. As the old adage goes, “If you don’t know what you are looking for how will you ever find it?”. Creating a really clear benchmark for the role to compare candidates to will improve your chances of hiring someone that will not only perform in the short term but stay long enough to create real value.
• Interviews are a very unreliable form of talent assessment yet most organisations rely on them exclusively for hiring new talent. Incorporating more reliable and sophisticated assessment tools into your selection process and training line managers on how to use and interpret the outputs are essential for success. • Not settling for second best. Be exacting about the quality of talent you are looking to attract to the organisation. Great people love working with great people. The more ‘compromise hires’ you make, the more you dilute the performance of your organisation and your attractiveness as an employer to future talent.
• Once you’ve hired someone, set them up for success. Many People and HR Managers assume that because they are paying a new hire so much to do the job, they should be 100% productive right from the beginning. The reality is that if you have hired well for talent and potential, the ideal candidate will have room to grow and develop in the role, otherwise, they are likely to bet bored quickly and move on. So planning for their success through effective onboarding and focus on development needs from the start can dramatically increase a candidate’s likelihood of success and therefore increase the likelihood of business success.

When we are charging toward a goal, its import to make sure that everyone is in the boat and paddling in the same direction. How often do you hear business leaders, particularly in the start-up community, complain that energy or engagement is cramping growth?
 
Making sure that everyone is clear on where the business is headed and what they can do to get it there is one of the most profoundly important actions for growth. The HR function can and should significantly fuel efforts for clarity, cohesion and collaboration.  From aligning incentives to drive collaboration and the right commercial outcomes to helping teams to understand how to leverage each other and establish effective team operating rhythms and processes to drive accountability, execution and transparency can fast track performance and results and enable the scalability of a business like few other investments.

Commercial pragmatism from the HR function can have a significant impact on the performance and profitability of a business.  Many high growth ventures have missed valuable commercial opportunities due to an inability to resource new projects. By HR understanding the growth plan for the business, developing a strategic workforce plan and implementing some creative solutions to skill shortages, organisations can ensure they have access to the talent they need to take advantage of commercial opportunities.

Similarly, by understanding the commercial dynamics of the business, HR can make a business case for moving on poor performing talent fast and painlessly through negotiated exits, rather than long, painful and costly poor performance procedures. The opportunity cost of poor performers usually outweighs the additional costs of a negotiated exit by a factor of 10 when you consider lost productivity, revenue and collateral damage to others in the business. Some simple financial modelling usually demonstrates a strong business case for fast firing and careful hiring.

Are you asking them to deal with the “tricky” matters, the administrative nightmares or are you asking them to make you money?

What if we took a different view, that HR (whatever it’s name) can be the oil that keeps the machine of connected people performing? What if we asked more of HR? What if we asked it to be a trusted source of clarity and energy, rather than a destination for problems? What if we asked HR to be commercial, allowed HR to engage in the success of the team, and required that as a KPI the machine was well oiled and well-coordinated in its efforts?

If you redefine the role of HR to ‘enabling the performance of the whole business through people’, then you get an entirely different result.

The challenge will now be to breed a new generation of HR people who are commercially savvy and are more than just good ‘people people’. The new breed of commercial and profit generating HR people need to understand the financial dynamics of the business and drivers of performance as well as the CFO and CEO.

Craig Taplin
Managing Director

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