Following on from last week’s discussions about the faults of recruiters, this week columnist Dawn Clarke discusses another very topical point to the world of HR, namely the commercial ability and understanding of HR professionals. (Ed Scrivener)
How Does HR Contribute To the Bottom Line?
There has been a move over the past few years towards the use of HR as business partners although I’m not convinced that some of these ‘business partners’ are anything more than HR Advisors with a new job title. A real business partner will most certainly understand value in a business.
I also get frustrated with companies that want to sell me training, management development or other HR related services. Many talk about the ‘investment’ (read cost) and yet are not able to quantify the return the Company would get from this ‘investment’. Many of those who sell to HR could be more successful if they were able to talk about value and not just investment.
In the early days of my career I used to get fed up reading the theory of value with very few practical examples to show me how I could do it myself. I knew it was important but the theory was very vague when it came to implementation. I really struggled with something that is now second nature to me. The more that HR people understand value and can implement value focussed initiatives, the more valuable HR becomes to the business.
Some years ago, I worked for an IT consultancy. We employed about 200 consultants and charged them out to clients at between £600 and £1000 per day. Every day that these people were not on client sites they were not generating income. At one point consultant utilisation was standing at just under 80%. This meant that some 40 people were not generating income and were being paid to hang around the office doing very little. It’s not hard to work out the potential cost to the Company.
At the same time, the sales team would be out selling projects with little understanding of the skill sets of the non utilised consultants. Consequently they would often be acquiring projects for which we actually had to go out and recruit people whilst we still had people in the office not generating income. This had gone on for quite some time. The key seemed to be that the sales people had no view of available skill sets and there was no real way of producing reports to give to the sales people. The HR team spoke with the sales team and proposed compiling a comprehensive view of skill sets within the Company.
When we started this exercise, we soon realised that many of our consultants were multi skilled however, over the years, they had been slotted into roles using only one of their skill sets. We therefore adapted the data collation to record primary skill sets and then secondary and tertiary skill sets. This data was then discussed with the sales people so that where possible, the sales focus was on projects that could utilise the skills of the non working consultants. It also enabled us where necessary to take an individual out of one project if that person had a secondary skill set which was needed on another project and a non utilised consultant could replace the person on the first project. It took some time and initially met with some resistance - ‘Oh is this just HR finding something to make itself look busy by asking us to fill in forms about our skill sets’.
Within a twelve month period, consultant utilisation had been increased by 12%. That meant an additional 24 people were generating income for the business. Go back to the rates of £600 - £1000 per day and multiply those by 24. And that was per day. Now work that out over a month and a year and you won’t be surprised to hear that the HR team were given a one off bonus. Of course that wasn’t all profit because costs were taken out of those day rates however it was a significant increase. This was seen as real value.
My MD was only interested in measuring pounds, shillings and pence (yes I know that dates me) so when I talked about headcount turnover I told him how much it would cost to replace those people so that when that same turnover was reduced the following year I could show how much had been saved. Incidentally one of the reasons for some of the turnover was consultants who got fed up not being utilised and once we had higher utilisation, this also reduced the number of consultants wanting to leave. That’s value too.
More recently I worked for a Company with fluctuating workloads. There was far more activity in the winter than in the summer. Consequently employees were hanging around trying to look busy in the summer months and then the Company was paying huge amounts in overtime during the winter months. This was a very traditional blue collar environment and this had been a pattern for many years however the market had been changing with more and more competition from the Far East. The Company had to become more cost effective. Flexible working wouldn’t work because the Company needed to have control over when the employee was required at work. Annualised hours wouldn’t work for the same reason – it just wasn’t flexible enough. The HR team designed an approach to match requirements to resource which we called ‘variable hours’. This was projected to save £200k in the first year. However it wasn’t just the cost savings, there was greater customer satisfaction in terms of on time deliveries due to the fact that the resource was more clearly aligned to operational requirements. There was incredible resistance to this from the employee base initially and this was where the influencing skills of a good HR team come into play. I don’t have space to outline the detail of the approach in this article however I would be happy to provide details to anyone facing a similar situation.
I’m sure that many of you have better examples than the ones I have given here and maybe as HR professionals we need to share our value generation examples. I personally would love to hear how those of you who are members of this group have added value to the businesses in which you work. By sharing this information, we raise the profile of HR as a value driven function. Forget the theories of value, what we need to talk about is how it’s actually done. When we use real examples to show that we add value to non HR people, then it’s more likely they will see us as valuable. There are too many business people who still see HR as the people who write and interpret policies or tell them what they can and can’t do.
I would urge you to share your own examples with this group. Please feel free to email me if you would prefer not to comment within the forum.
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Discuss HR is the blog for Human Resources UK, the leading LinkedIn group for those involved with HR in the UK. Next week’s Discuss HR will be published on Thursday 21st April and will see two of our columnists go head to head, Dorothy Nesbit versus Sheena McLullich.
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