How will using an HR consultant add value to my business?
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At a recent event I was introduced to the CEO of a small but fast-growing company and, inevitably, we ended up exchanging stories about our respective careers.
During a natural pause in the conversation, he said: “The problem with HR is that it’s not a revenue-generating part of a business, so a lot of small businesses are reluctant to invest in it.”
I’ve heard this opinion quite a few times over the years and although this particular individual was right about one thing – smaller businesses are often reluctant to invest in an HR consultant or team – he couldn’t have been more wrong about the contribution HR makes to the bottom line.
I understand what he meant, of course, in that HR isn’t directly about sales. We don’t meet and onboard clients and customers and so there’s no obvious link between a company’s bottom line and what its HR team does.
Let me tell you – that line may not be clear, and it may be dotted, but it’s definitely there.
But the fact it isn’t obvious, that people can’t point to a number on a balance sheet and be able to say HR contributed x% to our profit last year poses a big problem for HR teams when it comes to demonstrating their value to a business.
The reason for that, perhaps, is that the HR function in an organisation is almost always seen in financial terms as a cost centre or an overhead, whereas I’ve always taken the view that if you get your people strategies right, your HR team becomes a profit-booster.
If the executive or leadership team in the business are taught through the financials to always see HR as a cost to the business, it’s understandably easy – though foolish – to look at an HR team or consultant and reach the conclusion that if they weren’t there the business would enjoy better margins.
There’s a perverse logic to that, I suppose: turnover minus HR costs equals greater profit.
But that ignores all the hidden costs a business encounters without having someone to implement and guide its HR strategy.
Here are six questions I’d ask businesses that have never invested in HR:
How much revenue do you miss out on because of underperforming staff?
How much revenue do you miss out on because staff don’t have the right or latest skills and knowledge (and how do you identify the skills you need)?
How much revenue do you miss out on because your recruitment strategy doesn’t attract the right people with the right skills?
How much revenue do you miss out on because you hire in your own image, rather than bringing in more diverse opinion that will challenge you to grow?
How much revenue do you miss out on because your staff feel undervalued or unmotivated (and how would you even know if they feel undervalued and unmotivated?)
How much revenue do you miss out on because you and your management teams are time poor through becoming bogged down in processes that an HR function would usually look after, and you don’t have the time to drive your organisation forward?
I already know the honest answer to all of them: those businesses have no idea what lack of focus on their HR strategies is costing them in real terms – and in most cases they don’t know how they would go about finding out.
I also know that with investment in HR, and all other things being equal, businesses that currently have no one to look after their people issues would have healthier profit margins.
The real risk to businesses that see HR as a purely transactional function – processing new hires and leavers and managing absence and holiday, etc. – is that they are missing a vital part of the jigsaw that ultimately delivers growth.
I would say all this, though, wouldn’t I? I’m an HR consultant and I’m slightly biased. But the thing is, this isn’t just uninformed opinion. For anyone who cares to look, there’s lots of evidence out there to prove that investing in good HR management translates into better financial performance.
So, if you’re a business leader who has no HR partner to advise you on your future strategy and approach, are you happy to write off the profit that a more efficient, better-skilled, better-valued, and better-engaged workforce can help you to deliver?
Or would you rather have a conversation about what the real-terms cost would be of hiring in the kind of HR support that would have a tangible impact on your end of year results?
If you want to know more about how we can help you to build a better and more profitable business, why not get in touch for an informal and confidential chat?
