How to turn your HR function into a ‘profit centre’
Organisations need to create a culture that makes people give their best, but many fail to do this as they assume such a culture already exists. In reality, it rarely does. So, all organisations and HR functions need to ask themselves what do we do to change this?
Transforming the approach and function of HR into a ‘profit centre’ can produce at least 10-15% additional profit in a year. This can be achieved at virtually no cost and started within a matter of weeks, so organisations should be paying attention.
Primarily, a HR department which is a ‘profit centre’ utilises opportunities to generate additional revenue, profit or cost-savings measures for the organisation. These revenues wouldn’t be realised within the current operational focus of a traditional HR team.
There are direct and indirect benefits to this change. Initially, a direct benefit is to make an organisation’s current activities more successful and effective, therefore more profitable. HR can actively create an environment where the job is done better, such as leaders are better at aligning to strategic objectives or engaging staff who could then give up to 30% extra effort.
Indirectly, HR can create an environment where new activities can be developed to generate new revenue and profit sources, allowing the business to improve daily and incrementally. This often focuses on bringing people together who don’t typically come together in a way that can identify and deliver benefits.
For example, when I was Global Head of Talent & Leadership at UBS the Leadership Academy frequently facilitated conversations between people in different locations who were not normally in contact but where potential benefit existed. This earned the bank very significant new revenue and is now part of a Harvard Business School Case study on successful transformation into “one” firm.
How do organisations achieve these benefits? To start with, the mindset of an organisation’s leadership team must change. And interim managers are a useful tool to do so.
Bringing in an objective and external perspective, allows the innovative – and challenging – concept of HR as a profit centre to be introduced to an organisation and HR team.
Too often, the HR director and the rest of the organisational leadership team are focusing on the delivery of day to day objectives and little else. That focus stops them from realising that if they were to focus on a “building sustainable success” not just the “doing the job” agenda this would optimise resource allocation and make the achievement of current objectives much easier.
There are five steps that businesses can take in order to kickstart this new approach:
- Immediately take measures to improve core capability and quality of leadership at all levels across the organisation, evidence shows that about 70% of line managers lack core leadership skills
- Ensure those at senior level lead by example and are constantly expressing the vision, values and critical objectives of the company
- Ensure that everyone at all levels of the organisation understands what the organisation is trying to achieve, not just being told to do their job. A simple team briefing system can start the process.
- Improve and enhance communication, in a practical face-to face sense, from top-to-bottom and across the business – to minimise any siloes and create “one” aligned organisation
- Create a culture where it’s more about ‘we’ achieving success than it is about ‘me’ achieving my personal agenda, and reflect this in measures such as appraisals and remuneration
The necessary intellectual capital to execute this is likely to be within the organisation already but not effectively leveraged, which is why the above steps can be done at minimal cost.
As well as the financial gains to be achieved, as mentioned above, there is also an immediate effect at an individual and team level. With the right approach from senior leaders and HR, I would say line managers in most organisations could find themselves an extra half a day a week through more effective delegation.
Taking the recommended steps also presents a significant opportunity to improve investor relations, build brand value, boost innovation, become an employer of choice and, where they occur, help mergers and acquisitions work more effectively.
Organisations that are able to implement these type of activities, initiated by the HR function, will have a significant advantage over their competitors. The role of interim managers, in highlighting the potential gains to be made, is likely to grow even further.
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