HR is Key to Business Prosperity

It never ceases to amaze me how many people in business (both business owners and senior managers) still under-rate the contribution of good human resource management to overall business performance. More so, it astounds me that often HR is viewed as an administrative function within an organisation, and not as a discrete and specialised skill set that can offer a strong return to the company's bottom line.

Perhaps this occurs because the actual contribution of HR to organisational growth and profitability has long been considered difficult to measure, and is not as obvious as that of direct income-generating business units (like sales and marketing). Nonetheless, it is becoming increasingly apparent that there is a widening gap between those organisations that value the contribution of HR to their businesses and fully embrace the strategic contribution of specialist HR managers, and those businesses that opt out of focusing on HR Management. As such, there is a growing body of evidence that provides strong direct correlation between good HR management and better organisational performance.

So, what are so many businesses missing out on, and why?

Human Resource Management is more than organising employee birthday cakes and welcome morning teas. It is the practical application of a wealth of management theory into the better management of people in a workplace, providing for the alignment of people and business values, to produce a collaborative environment conducive to higher productivity. It is the point at which organisational compliance and positive culture converge that represents best practice human resource management.

At the end of the day it is a really simple formula: If people are happy and engaged in what they do, they do it better and for longer. It is in meeting this goal that so many businesses fall short by assuming that employee happiness derives from a simple set of administrative processes, rather than a considerate and ongoing exploration of what we like to call the "Workplace Human Condition".

The term "bread and circuses" was first used in Ancient Rome to express the two assumed fundamental needs for people to be generally satisfied: sustenance and entertainment. Many employers mistakenly take this same perspective to their HR Management: if you pay people a wage, and throw in friday-night drinks, people will therefore be engaged with their work, right? WRONG!

People are complex, the needs of a particular group of people (for example, Generation Y) are not homogeneous, nor do individual's needs stay the same over time, what motivates and engages employees differs from person-to-person. Businesses that manage to address the complex and ever-changing needs of their employees end up performing exponentially better than those that do nothing or following the Roman Imperial example. It is about creating a sustained competitive advantage for your business through the one element that is not easily replicable by your competition: Your People! Chairman of South-West Airlines in the United States, Herb Kelleher said it best when he said:

"Our costs are lower because our productivity is higher, which is achieved through the dedicated energy of our people. We have the same equipment as other airlines. The difference is when a plane pulls into a gate, our people run to meet it!"

I don't believe in making such grandiose statements without the research to back it up, so here are some figures for you to digest:

• The average number of employees engaged at any one time is 21%! Or put another way 79% of the workforce are not fully engaged in their work. At best this means they are coming in and just "going through the motions" (things are at least still getting done) at worst, employees are not contributing or being destructive to the business operations. And don't forget that is on average - the best workplaces have higher levels of employee engagement (meaning there are workplaces where employee engagement is in single digits). Where does your workplace fit into this spectrum?
• Accordingly to David Maister if you increase employee engagement in your business by just 20% (for the average business this means lifting engagement from just 21% to 25%) productivity will increase by 40%! That's exponential growth!
• Workplaces that have lower levels of employee engagement have correspondingly higher levels of employee turnover. When the average cost of replacing an employee is 14 times their salary, direct bottom-line benefits can be seen by improving HR performance and employee engagement!
• The book Contented Cows Give More Milk by Bill Callette and Richard Hadden examines ways of creating a positive workplace culture and the impact this will have on employee engagement and organisational performance. According to this text, organisations that focus on employee engagement rather than just their bottom-line performance, have an average net income increase of 756% compared to just 1% for other organisations; and their stock performance increases by an average of 901% compared to 74% for other organisations.

Amazing statistics like these are the reason why I wonder why so many business owners and senior managers continue to under-rate HR Management and fail to introduce comprehensive people management strategies in their businesses. Why do they risk the sustainability and future prosperity of their businesses in this way? When so much due diligence is done on suppliers and product development, why do business owners ignore their major client facing asset?

So I will leave you now with this warning: Ignore Your People At Your Peril! Stop second guessing how to make your workplace more productive and engage some professional HR Management experts with the knowledge and skills to provide you with the answers.

The EI Group can help your business grow through your people by providing comprehensive strategic and tactical people management covering:

• Training and development;
  
• Remuneration and performance recognition;
• Rewards and incentives;
• Policies and procedures;
• Occupational health and safety;
• General workplace compliance
• Culture auditing, employee surveys and 360-degree reviews

Click on the link to contact us about how we can give your business the expertise it needs to better engage your people.

It's appropriate that a man who is globally recognised as having worked miracles in the US airline industry during a time when many airlines were boarding on bankruptcy, has the last word:

"The customer is not number one, the employee is number one. Get it right with the employee and they will get it right with your customers" - Herb Kelleher

Best regards in prosperity!