Opinion: Every business unit is a profit centre – including HR

by External07 Mar 2016
Mahadevan Natarajan outlines how HR can transform itself from the traditional cost-centre to a profit-centre - with some help from analytics.

The lifeblood of any commercial organisation is sales, revenue and profits. That's of course abundantly clear to the sales department as their goals are directly defined in those terms. However as we move down the corridor to other business/supporting departments, the link to the bottom line can become less clear.

Take HR for example. In lean times the HR department can be tasked as a cost-saver, by reducing head-count. But far better to avoid those lean times by ensuring that the HR is an effective business driver. That starts with achieving headcount and reducing staff turnover. But you need to go much deeper than that to make sure the right people are in the right place so the company is better equipped to reach its goals.

Highlighting the recent PwC Annual Global CEO Survey, Oracle's Mark Hurd noted that the talent gap is presenting CEOs with significant challenges:
  • 31 percent said they couldn't innovate effectively;
  • 29 percent couldn't pursue attractive market opportunities; and
  • 24 percent had to cancel or delay a strategic initiative.
So how does the sum total of employee effort get channelled into business value in line with corporate priorities? To tackle the problem effectively, C-level executives must have a complete commitment to accommodate transformation, and understand more about their workforce. This necessitates a willingness to become more data-driven.

Fortunately, in today’s digital world, enterprise measurement and analytics systems allows companies to gain insights into every aspect of their business, including HCM, to plan ahead, and act with confidence. And these systems are available in the cloud, meaning any size of corporation can rapidly get on board and enjoy the benefits.

According to research by MIT and IBM, early adopters of talent and workforce analytics best practices have 8% higher sales growth, 25% higher net operating income growth and 58% higher sales per employee! (Refer to Next frontier in HR Analytics)

Cloud-based performance management technologies facilitate flexible and powerful approaches to transforming HR to become more data-driven and more effective enablers of revenue.

Aaron Green, Vice President of Human Capital Management Strategy, Oracle APAC, said, “One specific area for HR leaders to look at is potential revenue leak resulting from a lack of appropriate resources at the moment when those revenue-generating resources are in demand. A professional services organisation, for example, should be able to understand availability of skills supply from employee profiles, time-tracking systems and project timeline databases, and match this with demand for resources from CRM, demand generation, and proposal generation systems. When HR has complete visibility into the demand and supply equation of talent resources, then they can appropriately prepare the workforce. Won’t that directly have a financial impact? Such visibility would make them more business savvy and help to contribute to the top and bottom line. Again, this requires an efficient performance management system that connects all the dots.”

As much as revenue leak, talent leak also is costly to a company. A good starting point for identifying potential leak of talent is to look at echo from employee feedback on compensation, work environment and work life balance. Combining this with history of turnover and exit interviews can provide more complete insights. However, this requires technologies that can combine analysis of free-text feedback and performance metrics such as quota attainment to allow a reasonable prediction of talent turnover.

A complete performance management system would facilitate:
  • Prediction of potential turnover
  • Evaluation of possible options such as career change, organizational alignment, compensation adjustment, training, and host of other HR actions to curb turnover
  • Managing and measuring the effectiveness of such action plans and linking it to financial impacts of annual operating plans and forecasts.
An integrated approach
As with every aspect of the business, cloud-based Enterprise Performance Management technologies facilitate flexible and powerful approaches to transforming HR to become more data-driven and a more effective enabler of revenue. With a clear commitment from business leaders, integrating HCM into the corporate-wide process of setting predictable business goals with constant monitoring allows companies to stay on course in today's dynamic marketplace.

About the author
Mahadevan Natarajan, is Senior Director, EPM/BI Sales Consulting, Oracle APAC