April 24, 2014

Time To Start Looking At HR As A Profit Center

Human Resources as a profit center

It’s time for senior management to stop looking at HR as a cost center. HR leaders, stand up, unite, and claim the respect that you deserve. For far too long, HR hasn’t been given any respect, and hardly any budget to work with.

If only senior management would treat HR with the same respect as they do the sales department, employees might actually start to be engaged.

This really could be the key to the employee engagement problem.

Most senior managers simply can’t make the connection between HR, happy employees, and company profits. There is definitely a correlation there, and I’ve tried to prove this in the past. HR is looked at as a cost center simply because it doesn’t directly generate any revenue, but that’s a silly way of looking at departments. They all work together, as a team, to generate revenue for the company as a whole.

I also feel like HR doesn’t get the respect they deserve, because so much of what they do is behind the scenes.

How We Should Start Running HR Departments

HR departments need to stop being so clunky and so old school, and should be run like their very own lean startup within the company. Get young, bright HR managers to lead the way to change, and start running the department like a mini startup with it’s own agile approach.

Spotify, the streaming radio service does something like this. They’re a massive company now, and scaled up very quickly to where they are currently. Of course they wanted to maintain that startup atmosphere within the company, but obviously it gets harder and harder as the team grows bigger.

The way they solved this problem is by breaking up the company into “squads”, which are smaller units, that act like their own startup.

What HR Actually Does

Like I mentioned earlier, a lot of HR functions actually go on behind the scenes. To me, this is where HR is actually most valuable.

I’ve told the HR manager at my company that I like to think of her as the godmother of the company. She walks around from team to team, person to person, making sure they’re okay, checking in with them regularly. As fluffy and silly as that might sound, I can’t explain how important something like that is. Employees need to be engaged, and need to be happy. Without the HR manager walking around my company asking these types of questions to everyone, so many problems would go unnoticed and unresolved.

  • Hiring – Literally the most important part of having a good company culture and having a successful business is hiring the right people. Let’s all remember that it’s HR who handles that. Even if a department manager assists in the hiring process, it’s pretty much being run by HR. They’re the ones putting ads online, and sifting through resumes.
  • Firing – Arguably the most delicate part of a work environment is handling the firing of an employee professionally and politely. It’s HR that handles all of this. Things like conducting a termination interview, and handling potential security issues (I’ve experienced this, it was really ugly).
  • Onboarding – In my opinion, this is the hardest thing to get right, and arguably the most important for retention. I remember how the HR manager at my office onboarded me (with a few beers), and you can tell she takes this stuff very seriously. It’s HR that comes up with the onboarding process, and again makes sure that all legal and regulatory issues are taken care of.
  • Training – Most of the time, it’s HR that does the initial training of a new employee, explaining the company policies and regulations. They also often do continuous training, making sure employees are up to date with the latest information for their roles, and for the company as a whole. They also handle the employee performance reviews, which are a great source of data for companies who do this properly.
  • Compliance – It’s the HR department’s job to stay compliant with all of the Federal and State regulations (and there are tons), and make sure that employees are aware of these as well. HR also handles disputes between employees, and any problem that an employee might be having with their manager.
  • Compensation – The document an employee signs when they join a new company is drafted up by HR. They also do things like track vacation time and sick leave. They also take care of employee benefits, and make sure to stay up to date with the latest industry salary packages to make sure the company stays competitive.

As you can see, the HR department is no joke. Let’s stop treating them like one.

It’s All About The People

When will senior management finally figure this out? Without passionate people in your company, there literally is no company. Which department do you think is responsible for molding, shaping, and training these people? I’ll give you a hint, it’s not sales.

Companies need to realize that if they want to increase employee engagement, then they need to treat every department the same.

I’ve often heard people arguing for outsourcing your HR department. I don’t have any experience in this, but I do have experience in working with outsourced software developers, and if they’re anything alike, I can tell you that this is the worst idea in the world. If you do want to outsource, you need to make sure to keep a team that will solely manage the outsourcers, otherwise it won’t work.

Do You Think HR Should Be Looked At As A Profit Center?

With the amount of stuff that HR does, and the amount of value that they add, it’s hard to argue that they’re a drain on the company’s bottom line. HR as a profit center? What do you think about all of this? Let me know your thoughts on twitter @JacobShriar or @Officevibe.

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