First of all, you can ask any Manager or Business Owner what the toughest decisions are that need to be made when running a business? Guaranteed that the most common answer is the decisions that have an effect on employees. Whether it is a simple matter like moving premises, introducing new systems, placing a hold on salary reviews due to the economy or worse – a restructure that will result in redundancies, the vast majority of Managers find it very stressful to deliver a bad news story to their employees.
Then there is the cost of recruitment and making a bad hiring decision. The results of this can be highly impactful on business and the team members of the poison apple new arrival, not to mention unhappy customers, lost sales and general disruption. None of that is feel-good and fluff, I’m sure you’ll agree.
And how about managing an employee complaint? A situation that is so often fuelled by the emotion of an aggrieved employee? Feel-good and fluff? Not flipping likely.
So let’s just reserve our judgement and bias for a moment and take a look at what HR can REALLY achieve.
HR is a Highly Commercial Area of Business
The effective management of employees plays an essential role in business profitability, it just happens to be an area of business that can be difficult to measure and fraught with subjectivity between the employee and the person sitting in judgement of individual performance.
And just for the record, most of the reason for employees under-performing can generally be linked to the way they are managed or to systems and processes that disable (rather than enable) performance.
So when solid, quantifiable data comes along that shows the positive impact that HR processes can have on business, its time to broadcast them to the business community and help others to gain the same benefits.
Optimised HR Processes
Broken down to its fundamental elements across the life-cycle of an employee, HR has an impact on:
- Attracting and selecting new employees for performance and fit
- Onboarding new hires and getting up to speed as quickly as possible
- Monitoring and advising on culture? ensuring fair treatment, equality, recognition, reward and the general care and welfare of employees
- Developing systems and processes that enable performance
- Monitoring and ensuring that the work environment is a safe and healthy one
- Supporting and developing leaders to manage employees to achieve beyond expectations
- Learning and development? continuously reviewing and developing capability
There are probably a few more areas or sub-sets of those listed, but we think you will get the picture of just how broad the HR remit is.
What the Data Reveals
Those Masters of everything measurable? Google, introduced a couple of new pre-employment activities between one group of their hiring managers (group A)and newly appointed Googlers and compared the post-employment results with a group of managers who were applying their regular process (Group B). They measured how rapidly Group A performed against Group B.
Group A outperformed Group B by 25%
In a second Case Study that was conducted by a San Francisco software developer, two groups of Sales employees were analysed across the Employee Life Time Value (ELTV)? the time from pre-employment at the job application stage to exit approximately 3 years after commencement.
In this study, four critical areas were analysed:
- The quality of the hiring decision
- Preboarding and onboarding before commencement to the end of onboarding (approx. 1 ? 2 months)
- Management and development
- Management and culture
Case Study Results:
- 1 x sales person with a Budget of $50K per month
- Salary for a salesperson is $5K per month
- Optimised onboarding = 30% less time to productivity
- Quality of hire = outperform peer by 20%
- Optimised management = improved performance by 20%
- Great culture = add 1 year to tenure
- ELTV Conservative assumption = 3 years
The Million Dollar Revelation
In the case study we walked through, the difference between average and slightly optimized People Practices for one salesperson over the course of three years is $1,300,000 in net revenue or a 2.5x difference for the organization
Still think Human Resources is all feel-good and fluff?
Hopefully we have changed your mind. If you want to discuss how you can improve your HR onboarding, contact us today.
Or if you want to assess how much your business can save by optimising the preboarding and onboarding experience then try the Senza Carta ROI tool. It can help you evaluate the savings.
Full Article by Maia Maia Josebachvillin – VP Strategy & People, Greenhouse Software