What is Human Resources? And why is HR important for your business? Is it quantifiable? And what can you do to get it right? We give you all the answers.
Too often, human resources is looked at as the bearer of bad news; the puppets of the top dogs in the company announcing redundancies and policing bad behaviour. A bunch of bullies, really, whose jobs it is to keep the rest of the pack in line.
If that’s your idea of HR, you clearly were exposed to a company who missed the ball on human resources entirely. That’s because most founders and business owners are experts in their industry field, not in motivating staff, handling conflict and payroll legislation.
Sometimes the job of the HR team is to bring bad news. But first and foremost, the job of the HR team is to bring the best out of the employees.
We know we’re raising some eyebrows here, but ask yourself: what is the best way to do that? By whipping, threatening and shouting? Or by keeping the company strong, engaged, focused, successful, lawsuit-free, with sound policies for dealing with staff?
The problem is, a lot of business owners don’t necessarily see the benefit of HR. After all, how is it feeding the coffers? Or draining them? It’s hard to quantify the ROI.
So really, what’s the importance of HR for your business? How can the way your company approaches HR boost money coming in or stop money from going out? And can you even put a measure on that?
What is HR, really?
The easiest way to explain a successful HR team is to look at them as the business department. Their customers? Employees. The goal is to make them do the best possible job for the company.
- By making qualified and reliable hires that fit in with the company culture and needs
- Looking after the onboarding process when new members join the team
- Ensuring pay, leave, and benefits are handled correctly
- Dealing with staff training to keep the available skill set up to scratch
- Resolving conflict and mediating where necessary
- Making sure employment laws are followed
How do you know if your company is doing a good HR job?
It may be difficult to know if your company is doing a good or a bad job at HR, but there are some red flags that are give-aways. Two of the signs of poor HR are high staff turnover and high absenteeism. What both these things really tell you is that your staff isn’t motivated. If your staff doesn’t give a hoot, you have a problem.
Expensive? You bet!
Here’s how you calculate staff turn-over:
Say you have 20 staff and 6 left in the last quarter.
14 divided by 20 is 0.7
This gives you a retention rate of 70% and a turn-over rate of 30%
A retention rate of 85% and a turnover rate of 15% is seen as the limit of what is acceptable. Clearly, in this example, you have some brushing up to do in the HR department.
But there are other give-aways, like employees who avoid talking to you about HR-related issues like the plague. If employees fail to take concerns to the HR team for fear it will either not help the situation or make matters worse, you know you’ve got it wrong. So ask yourself, does staff talk to you regularly about HR related issues other than taking a day off?
And then there are other obvious hints: safety issues, lawsuits, extended time needed to fill a position, lack of benefits and training, no onboarding to speak of, to name a few.
But if you want to know the answer to the question 'Why is HR important', you need to look at the cost of poor HR?
Getting it wrong: The cost of poor HR
So let’s go back to these HR tasks we mentioned earlier and look at the cost of getting these wrong.
The Hidden Cost of poor Hiring Practices
No company can afford a poor hire. Just think about the cost that comes with it. The issue goes well beyond the impact on other team members if the new team member doesn’t fit in, or pull his/her weight.
Think about some of these poor hiring issues that will affect the company wallet:
- The financial fallout of somebody with the wrong skills
- The problems that come with substance abuse
- A criminal record and any problems that come with that
- The wasted cost of training if things don’t work out
- Accident related costs
- The pain that is performance management
- The cost of hiring and training another person
It’s safe to say the costs of a poor hire can get astronomical, if you add up everything.
Employee Expectations: Benefits and the Likes
Many words have been spoken about Millennials and how they are motivated by very different things than the baby boomers did.
Millennials are not so much tempted by a pay increase. What they want from their job is nice benefits and flexibility. They also want a job that gives them the prospect of advancing up the ladder. The same is true for Gen X.
It doesn’t make Millennials better or worse. They do things differently, and it’s important businesses adjust their sails to the changing winds. Fail to recognise the needs of Gen X and Millennials, and they’ll readily move on to bigger and better.
A Bad Rap is… Bad for Business
It’s hard to underestimate the fall-out of a toxic workplace. It’s the fastest way to see your employees run to the competition next door. But more than that; people talk and word gets out quicker than you think. And it will reach customers sooner or later.
The cause can be anything from a boss with poor people skills to workplace bullying. It takes an experienced person to tackle these problems that in essence require a look at company culture.
It takes a qualified person with a clear view and a lot of expertise to get a hand on deep-rooted problems like this.
Where do you start: Tips on how to reduce HR cost
So we’ve made our point about the importance of professionally handled HR and you’re ready to get cracking. Where do you start?
- Engage a good HR software to help you with the day-to-day stuff
- Think about company culture. What are your values and how do they translate into company policies?
- Think about your team as a whole. Their strengths and weaknesses? Consider how the individual players fit into that and what you can do to take the team to the next level.
- Get moving on the communication front. A lot of HR boils down to adequate communication.
- Consider outsourcing HR if you see the value of HR done well, but it’s all in the too hard basket.
It’s clear we’re only scratching the surface here. But you can catch our drift: why is HR important? Because it’s an investment in your largest asset; your staff. To get the best out of your team, you need to nail human resources. There’s no way around it.