What would you do if you had a professional who could improve the company's profit margins, positively impact the cost of goods sold, lower the days sales outstanding, and increase the price/earning ratio all while liquidating some overhead costs to the business - and still deliver flawless transactional and traditional HR services.
Most CEO's would react two ways:
1. Why is this individual wasting his/her time in HR
2. Why didn't I demand this level of HR performance five years ago
The concept of Human Resources as a profitability contributor is fast gaining currency in US businesses and bears closer examination. Professor David Ulrich of the University of Michigan, a leading expert on HR competency models, sees the changing business world as 20-20-60 proposition. 20% of executives surveyed currently use HR as active and innovative business solution partners. 20% believe that HR should remain as administrative overhead and only perform transactional work. It's the 60% who are starting to expect HR to partner with others departments to improve the company's core competencies and competitive advantages. And more HR people are stepping up to the plate and delivering the goods.
A continual company-wide value chain analysis is critical to the success of any organization. Over the past decade, CEO's and senior HR executives began demanding that their teams deliver flawless functional work and become a knowledgeable partner with all other disciplines to advance the business plan of the company. Disciplines such as finance, sales, marketing, operations, and HR can no longer exist as stand alone entities. They are inter-dependent with one another. Weakness of any one of the links inhibits other links from maximizing their efficiencies and productivities.
Can HR be linked to profitability metrics? Yes. Here are three examples.
A well known global company formed a group of HR professionals who developed processes and training programs in sales, customer service, workouts, project management, process improvement and leadership development that focused on critical performance issues for their internal and external customers. By partnering with operations, sales, and customer service they served as a catalyst to forge alliances, partnerships and agreements. Many of their efforts resulted in improved relationships which translated into "Preferred Provider Status which increased sales and lowered costs. All of their costs were liquidated by charging a fee for the service while creating net revenue. After two years, the group generated sales of $4 million and a profit margin in excess of 30% which was returned to the division budget at the end of the fiscal year.
Secondly, an HR team, partnering with the Audit staff, discovered that the accounts receivable turnover had moved from a preferred 30 days to 45 days during the past two years. It was determined that the chief credit officer should be let go. The HR staff then began examining candidates for their ability to reduce the ratio from 45 days back to 30 days. The HR staff recommended one candidate for hire. Within six months, the company's ratio was reduced to 35 days.
In a third case, while designing and negotiating a new health care and 401(k) plan, the HR leadership partnered with the sales and marketing team to determine if the cost of the program would erode the company's market share and competitive pricing strategy. The resulting benefit program design achieved its cost/benefit objectives without jeopardizing the market share and pricing metrics.
The intense and brutally competitive business environment of our global and digital world needs the help of everyone in the company. Which group of 20-20-60 does your company belong to?
