Ten years ago, Bloomberg published an article focused on the top issues facing the human resources function of a business. A few issues listed: economic uncertainty, curbing healthcare costs, rewarding top performers, federal government actions, talent management and employee engagement. Well, as the saying goes, the more things change the more they stay the same.
So where do we go from here for the rest of 2023? With all the “stuff” that is coming at executive leaders, do we really have time to take a step back and be anything more than reactionary? How can we possibly think beyond the tactics of the day to begin elevating the importance of HR? If you want to raise the HR performance bar for your organization and you wonder whether HR is more than just a cost center, then ask yourself the following question: What would it mean to have a real competitive advantage from my human resources function?
Executive leaders should be tired of hearing that the HR function is just a cost center. Why is that? Because HR adds value, and value can drive profit. HR supports internal clients, often is proactive on business strategies to help other profit centers succeed, can be responsible for payroll administration, administers benefits, ensures workplace safety, provides training and on and on and on.
So how can an HR function be a profit center? To begin, it is important to understand everything that HR may be responsible for and how it affects the bottom line. This thought process applies to any organization, regardless of size or scope. HR is about people and process and both can affect every single area in business. Small HR improvements can dramatically increase profits, just as small HR mistakes can devastate the bottom line.
In his book, “Life Focus,” Jerry Foster wrote about a concept called the Vector Principle. The idea illustrates how small mistakes can take you off course. He uses the example of an airplane leaving New York City bound for Los Angeles. Somehow, the pilot sets his instruments ever so slightly wrong. As the plane crosses the United States, little by little the plane begins to veer off course and ultimately ends up in Seattle. The Vector Principle can work the opposite way as well — a series of small improvements can create a very positive outcome over time.
So let’s get a little more granular with an example:
Excessive employee turnover has been a significant challenge for senior living operators for years. It can negatively affect many business strategies — revenue growth and protection, expense management, long term cost containment, lawsuit avoidance and business productivity — impacting the ability for an organization to maximize profitability. The responsibility of HR to effectively design and administer HR tactics such as, recruiting, hiring, compensation, benefits, performance management, workplace liability management, recordkeeping and separation, greatly contributes to reducing employee turnover. Within these tactics are hundreds of functions, products and processes that when properly designed contribute to maximizing profitability.
In summary, to have a competitive advantage in HR, you may need to shift your paradigm. Consider the direct line between HR functions and profitability, clearly connected by business strategies, HR strategies and tactics. Assessing the effectiveness of your HR function may be the best thing you can do to maximize the profitability of your organization. Remember the Vector Principle: a series of small improvements can have a dramatic effect on an outcome.
Frank Accurso has been with Paychex, a national human resources services provider, as a thought leader on the senior living team for 18 years and currently is a senior strategic business consultant. He received his Bachelor of Science degree in business, with an emphasis in human resources and management, from the University of Nebraska – Kearney. He is a board member of the Iowa Assisted Living Association and on the advisory council for the Iowa Healthcare Collaborative.
The opinions expressed in each McKnight’s Senior Living marketplace column are those of the author and are not necessarily those of McKnight’s Senior Living.
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