12th June 2015
Why you actually need to think about HR
As an HR professional, I got a little scared even writing that title – is it possible that some people don’t think about HR or even think it doesn’t actually add value? *horrified face*.
I’m going to say that yep, that’s exactly what some people and some businesses think, so here I am to convince you otherwise (and also have a shot at validating my own career choice).
The first thing I want to point out is that a company having ‘HR’ is not a ‘yes’ or ‘no’ thing, it’s a scale of ‘none’ to ‘heaps’. Where you need to be positioned on that scale depends on a huge amount of things including size, industry, whether you are B2B or B2C, where you are in your business life-cycle, what your growth plans look like and also the capability of the people you already have in your team. These factors, amongst others can help you evaluate how much you invest in HR, what you need to invest in and when you need to invest in those things.
Before we go on, I need to make my position clear. All companies need at least some HR. As Boston Consulting Group note in their study, “Companies that are highly capable across HR areas have higher economic performance than those less capable. In some areas this is up to 3.5x the revenue growth and 2.1x the average profit margin.”
But there’s not just an economic benefit to investing in HR, there is the long term retention and performance issue to be addressed. In a world of high-growth, high-tech, global companies, good people are hard to find, and once you’ve got them, they’re hard to keep. By getting the people basics right from the get-go you’re setting yourself up for success and avoiding chaos when you get a bit bigger or actually have report to VC’s, Boards or customers asking questions. Steve Blank gives a great analogy for how this related to technical debt in his article “Organisational debt is like technical debt but worse” .
So here comes my third persuasive point (backed by Macquarie Group nonetheless); Your people are your most valuable asset. I know this phrase is a bit of a gimmick line the CEO uses at the Christmas party so people cheer for him, but it is actually true! Macquarie’s Employee Engagement 2015 survey noted that
“… academia estimates the value of human capital is larger than that of physical capital. It is now estimated that up to 80 per cent of a company’s value is determined by intangible assets, being brand, value, intellectual property and people.”
So we’ve discovered:
- Companies that invest in HR are more economically profitable
- Companies that invest in HR from the start can increase retention and prevent spending time and money fixing things later on
- Up to 80% of your company’s value is determined by people and the intangible assets they bring
So now we’re clear; all companies need some HR so where do you start and what bits are actually going to get you an ROI? As mentioned before, this is totally unique to the company, but here are some broad ideas:
- Organisational Design: Designing your business and resourcing to it
- Recruitment: Hiring the right people and on-boarding them properly
- Managing Performance: Improving the good and removing the bad
- Remuneration: How to pay people to attract them, keep them and motivate them
- Culture & Engagement: Define and involve people in what’s unique to your business
Now I’m not saying go out and hire a Head of HR and a department to boot. What I am saying is consider your options, look at the things you can do and the things that are important for your people and your organisation now, and also what it will take to get them to tomorrow.
We support business building great HR and People practices from the get-go and then developing them for growth and performance. Get in touch for a free initial consult on how we could flesh out what this might look like for you.