Key Takeaways:
1. HR contributes to profitability by hiring smartly to maintain consistent productivity and reduce costs related to hiring, compliance, and public image.
2. They help develop leadership from within and outside the organization ensuring strategic growth and market share.
3. HR helps build and improve organizational culture by inculcating the company’s mission, vision, and purpose into learning and development initiatives.
Human Resource (HR) management is an essential part of a business, as it helps manage people, who are among the most important resources. However, most businesses group the HR function with administrative functions rather than a strategic one.
Today, businesses have recognized that HR plays a crucial role and the strategic value it brings to the business. At Great Place to Work®, our services enable organizations to understand how the HR function will influence the company’s growth trajectory.
What Is a Broad Outlook of Overall HR Functions in an Organization?
Which HR Functions Impact Business Outcomes?
Having defined the overall functions of an HR department, let’s dive into the functions that specifically impact business outcomes. Here are some of the main HR-related responsibilities that impact business outcomes:
| HR Responsibility | What the Human Resource Department Does and How It Helps |
|---|---|
| Recruitment | The HR department undertakes this process by talking to various stakeholders and understanding their needs. With smart recruitment, HR ensures that personnel with the right skill set and attitude join the company, keeping its operations running seamlessly. |
| Training and development | As part of their responsibilities, the HR department understands employees’ changing needs and creates L&D programs to help them scale. With the right training, employees are prepared to meet challenges, and the company remains compliant with the local laws and regulations. |
| Employee engagement programs | People need to be seen, heard, and appreciated in a work environment to continue performing well. The HR department identifies employees’ needs, designs engagement programs, and implements them to keep them motivated and engaged. |
| Manpower planning | Planning for manpower requires a balance between people shortage and over-hiring to ensure continued operations and cost control. The HR department plans for manpower by understanding the business’s cyclical nature and ensuring the required staff is always available. |
| Planning and strategy contributions | Today, decisions are not based on intuition or gut instinct, especially when it comes to human resources. The HR department maintains people-related metrics to support the leadership in strategic decision-making. |
Below is a detailed description of each of these responsibilities and their impact on the company’s bottom line.
Strategic acquisition of talent
The HR department plays a pivotal role in this aspect. They use their assessment skills to glean the skills and attitude of prospective candidates to ensure they fit the role. It is a role that involves keen observation, bargaining skills, and a deep understanding of business impact.
Impact on bottom line:
- High-quality hires ensure that the business remains productive and profitable.
- The company saves on hiring costs and can serve customers seamlessly.
- Having the right talent cuts down on further hiring costs due to referrals and better retention
Learning and Development
The HR department is responsible for identifying gaps in employees’ skill sets and creating programs to fill them. The right learning and development programs enable employees to upskill and help the company reduce hiring costs by filling the skill gap. Moreover, an excellent L&D program motivates existing employees to perform better.
Impact on bottom line:
- Timely, compliance-driven training programs help protect data, improve skills, and ensure compliance with local laws.
- Employees are better prepared to deal with emerging technologies, such as AI, which helps the business stay competitive.
Engagement, motivation, and retention
In today’s hybrid work environment, with teams working across geographies, they must be engaged, motivated, and encouraged to do their best. The HR department provides the much-needed engagement to ensure that employees develop a sense of belonging and stay motivated. Employee recognition helps build a strong culture of appreciation.
Impact on bottom line:
- It has been proven that organizations with excellent employee experience attract the best, are more profitable, and innovative
- Employee engagement results directly in better customer satisfaction, increasing customer lifetime value (CLV), and repeat business.
Continuous workforce planning
Many businesses today have cycles in which they need more employees and face a slack season when they can function with a skeleton team. It falls upon the HR team to plan for such situations, creating a mix that involves full-time, part-time, and gig workers. It involves a deep understanding of the business model, collaboration with leaders, and a strategic approach to workforce planning.
Impact on bottom line:
- Ensures smooth operations across various seasons and cycles, keeping business expenses and revenues balanced.
- Proactive planning for workforce fluctuations future-proofs the business and enables it to compete.
Data-driven decision-making
Today, HR acts as the keeper of employee-related metrics, ensuring leadership makes data-driven decisions by identifying trends to plan for the future. Factors such as productivity, retention, hiring costs, and technology adoption costs can be considered when making decisions.
Impact on bottom line:
- It becomes easier to balance the workforce by using data such as revenue per employee, the cost of an outside hire vs. an internal promotion, etc.
- Data-driven decision-making removes personal biases and ensures decisions for the best business outcomes.
How to Leverage the HR Department Strategically Going Forward
It is a given that with the changing work scenario, HR will continue to play a strategic role in the growth and profitability of businesses. It is time to review the HR team and ensure they have the technology, tools, and leadership buy-in to enable their strategic contributions. Here are some steps to ensure that the business benefits from the HR department’s strategic inputs:
- Implement a culture of growth, learning, and meritocracy from the top down
- Enable frequent checks of the employees’ pulse to understand the way forward
- Invest in technology to ensure data-driven inputs from the HR department
- Understand training needs and enable the HR departments to create training material
At Great Place To Work, the team helps by conducting impartial employee surveys, providing culture consulting services, and offering tailored solutions.
Want to know how to take this forward? Click here to connect with our team.
Frequently Asked Questions
What is the role of HR in ensuring business continuity?
HR helps business continuity by recruiting, training, retaining, and developing employees at all levels. HR can also support business continuity by ensuring the business meets compliance requirements set by local law, especially when operating in different countries.
How does HR contribute to controlling costs?
HR can help a business cut costs at various levels. One is to hire the right people who will stay and grow with the business to cut hiring costs. Another way is to set a people-related budget for each department and ensure they stay within the limit. HR also regulates administrative, travel, and other related costs.
Why is it important to empower HR to contribute to business?
The HR department manages one of the most crucial and dynamic resources of the business – employees. And when the HR department is empowered, it can do a good job of hiring, training, and retaining the necessary talent to keep the business running profitably.
Can HR help businesses of all sizes?
Yes, HR is an important function for businesses of all sizes, though the way an HR department operates will vary by business type. In smaller companies, HR tends to function as administration and even finance, depending on the business.
Which departments can HR help directly?
HR helps almost all departments directly, whether through hiring, ensuring discipline, controlling costs, or L&D. HR acts as a hub in most businesses by providing a structure for employees to work within.
