HR As Profit Center
HR As Profit Center
HR As Profit Center
The human resources function is often considered a cost centre, because technically it
does not directly generate revenue. However, remove the HR department and see how quickly
critical services like hiring, retention and staff training are challenged. No matter how strongly
other so-called profit centers are performing, without the core functions of departments like HR,
they would rapidly cease to do so. Yet due to a habit in accounting terminology that requires
certain business functions to be categorized as revenue producing, while others are revenue
consuming, HR is still considered a cost centre. As a result, despite the fact that everyone is on
the same team when it comes to the overall success of the business and everyone plays a critical
role in improving the financial performance of the company, departments like HR are often
overshadowed by the ghost of misperception.
The HR department was seen mainly as an overhead that did not directly generate revenue in
the past. Back then, HR professionals had to justify their budget needs to their executives.
However, things have changed dramatically since then. Today, HR’s budget is given.
Management has come to realize the importance of human capital management and its overall
value in driving business profitability. HR is now no longer considered to be a cost centre. In
fact, its role has evolved into one of a profit centre, where it now makes strategic decisions that
drive company’s growth and profit. Here are three key factors that have driven this change:
A company needs people, no matter what the business is. Human capital is the driving
profitability force behind any business. Without passionate employees working for the right job,
a company is practically nonexistent. HR plays an important role in keeping employees
positively engaged. Practices such as helping new employees to adapt, celebrating high
achievers, and training low performers are some of the ways HR has helped improve the
effectiveness of the company. By doing all of this and more, HR creates an opportunity for the
company to seek out new business opportunities and grow its revenue.
The way it's traditionally structured, HR is a cost center, not a revenue driver. It's
viewed as a necessary part of the business that is equipped to handle difficult personnel tasks
including employee benefits, compliance, recruiting and policy enforcement. While these tasks
are vital to an organization's operation, there is a way to shift the perception. HR can transform
from a cost center to a department that actually drives a financial return for the organization. Of
course, that can only happen by streamlining processes and creating more efficiencies.
1. Master strategist You’ll need a consultant with a rich background and extensive experience
to help you with your big-picture and how it’s affected by specific challenges. That necessitates
someone who stays current in best practices, and who will provide the best service, and who will
share concepts with you and your employees for your organization’s long-term benefit – not just
for the short-term.
2. Time savings It costs organizations money to delay improvements. It’s in your best interests
to implement the right strategies and metrics for business profits. So hire someone who can
generate results in a timely fashion to save you valuable time and money.
3. Cost vis-à-vis investment If you have any kind of human resource concerns, such as
developing non-financial incentives to motivate employees, hire a consultant who can advise you
on staff and operational costs and implement strategies. The time you spend on human resources
is usually better spent dealing with your marketplace challenges. Make sure it’s someone who
will deliver results – so it’s an investment in your future – not just an expense.
4. Adaptability In this dynamic marketplace, you can always count on change. Proverbially
speaking, employees are where the tire meets the road. Savvy consultants know how their clients
can profit from human capital to motivate employees to offer profitable ideas. Such knowledge is
a powerful weapon for high performance in a competitive marketplace. Furthermore, there’s a
correlation among excellent sales, happy customers, and high employee morale. Often, change is
rapid. You need a consultant who will anticipate a looming tsunami – someone who is flexible
with changing conditions that obstruct your profits – to help you realize your vision for success.
5. Legal considerations Perhaps you need to prevent problems, have a need for internal
investigations, to prevent unnecessary employee complaints, mediate employee concerns or to
avoid Equal Employment Opportunity Commission discrimination suits. Often, there’s a simple
strategy to prevent legal issues. When companies implement outstanding employee-engagement
programs, they’re more successful.
6. Objectivity Some challenges are difficult to solve and require an outside participant,
especially in sensitive matters. Employees sometimes fear consultants. However, an experienced
consultant handles situations adroitly and soon employees are very accepting. That’s especially
true when the employees begin to see and enjoy positive developments.
In conclusion, to get the best out of HR Department, companies need to use best
practices. When done well, these programs can have a dramatic impact on the organization.
Employees will be healthier, contribute more to the organization, lower costs, and drive more
revenue. Employers who automate their employee benefits administration will be better able to
manage their plan's complex details, deliver value to employees and reduce the demands on their
HR staff. Human Resource professionals who drive this initiative emerge as heroes in their
organizations and clear contributors to bottom line success, ultimately transforming HR from
cost center to profit center.