Showing the Strategic Value of HR – Part 1

From “necessary evil” to business partner: seeing the value-add in HR

Quick question: Is your human resources (HR) department considered overhead or a valuable business partner?

If you answered overhead, then we need to talk.

Is HR really overhead?

The short answer to “is HR overhead?” is “yes” because HR is not a profit center. The truth is, however, that HR can do a lot to help the overall health of the company and the bottom line. As a long-time HR consulting firm, we know that when people default to terms like “overhead” or “necessary evil” or “company police department” to describe the HR department, it’s almost certain that departmental policies, procedures and overall mindset could use some fine tuning. It starts with leadership.

Just take a second to consider the impact a few basic HR functions can have on the overall business:

  • Recruiting—HR practices influence the quality and number of candidates who apply for open positions; and landing the right people starts with having intimate knowledge of strategic company needs. Recruiters not only evaluate job descriptions for validity, clarity and compliance, they put them out for prospective candidates to hook onto. Then the recruiters serve as the face and voice of your organization, waving the “culture flag” as they vet candidates. A seat at the table gives HR and the recruiter a clear understanding of what a business unit or department does in the context of overall business goals and objectives. Without this understanding, the recruiter may be overlooking key personality traits or technical considerations that could affect job performance and employee satisfaction.
  • Hiring—HR helps in the selection process of job candidates and provides the first impression to new hires during the onboarding process, setting the tone for company culture.
  • Compliance—HR provides guidance on complex federal and local regulations that could lead to costly legal challenges.
  • Benefits and compensation—HR is responsible for making sure pay scales and benefits packages are competitive, which is critical to attracting and retaining good employees.
  • Managing people—HR can help guide performance management, including how to conduct unbiased reviews and set performance expectations. HR can also give managers guidance for proposing effective training and development programs, and providing clear job roadmaps for long-term opportunities, which are all key to job satisfaction and retention. Effective management is especially important because a company’s greatest asset is its people. When you stop investing in your people, you risk losing knowledge capital to your competitor.

Achieving bottom-line cost savings through more strategic HR practices

Ultimately a strategically aligned HR department that understands the business and provides valuable services to internal customers can be game changing and have a potentially sizable impact on the bottom line. Just like hiring, training and developing new people after you lose good employees is a big hit to productivity, things like appropriate hiring, value-added training and development and competitive compensation can translate into a positive influx of cash for the business.

Recognizing the potential value of HR is only the beginning, however. To begin driving more value for the business, the HR department needs to shift its mindset and begin doing things like taking time to understand the business culture, making sure employees see a future with your company, building and nurturing key relationships, and facilitating companywide communication.

About Teresa

Teresa Foltz is a Senior Human Resources Consultant for vcfo’s HR consulting practice, which provides HR outsourcing solutions and interim HR consulting. As one of the top human resource consulting firms in Houston, we provide services such as human resources compliance, M&A due diligence and strategic HR guidance. For more information or to contact Teresa, please email her at tfoltz@vcfo.com.