Five Ways For HR To Change From Cost To Profit Centre

So how does this process begin? Firstly, it starts with demonstrating the department s return on investment to the company. For the uninitiated, Return on Investment, or ROI, refers to how much the company gets back versus how much it is spending. For example, by spending $1,000 on a training programme, HR has provided new skills to an existing employee, and removed the need to spend $3,000 to hire another headcount, thus gaining a $2,000 ROI.

That’s a very basic example but the idea is there. By providing hard evidence that HR is adding value to the company, not only is the department protected during hard times, it may even result in higher budgets for future projects.

However, one of the issues with demonstrating ROIs is that very often the proof is built on correlations rather than direct cause and effect. It can be hard to prove that HR interventions definitely caused increases in productivity, which is why this is only one of the ways to demonstrate the value of this critical function.

One of the issues with any department trying to do more is the constant lack of resources. For HR however, a little investigation can unearth a vast amount of resources in the form of existing employees.
HR departments can tap on existing employees to streamline human capital management and organisational development. There are two aspects to this principle. Firstly, when recruiting for new talent, utilise an employee referral system to help identify and attract top talent.
The other aspect harnesses employees’hidden talents. The fact is that every employee harbours some lesser known strengths and talents - and sometimes these talents can be enormously useful to the organisation.

Taking a little time to conduct an employee skills and interest survey can actually yield a significant amount of promise. HR will actually have a resource catalogue from which all departments or assets can draw on for cost-effective and efficient help as needed. This is also something that benefits the employees by offering them an opportunity to learn new skills and to hone abilities that had previously been undeveloped and enhance their employability and visibility within the company.

One facet that needs to be made clear is that employee training and professional development may have a cost associated to it, but it also gives back. It is generally acknowledged that employee satisfaction and engagement lead to customer satisfaction. Now more than ever, an employee s loyalty to an organisation, as well as their performance, is dependent on their perceived job security and future employability; two crucial variables that training and coaching initiatives serve.

By coordinating and conducting in-house training, HR is providing a positive incentive that is meaningful for employees while removing the cost of bringing in external coaching experts. This can take the form of a simple mentoring programme or even a media training session conducted by the company s communications department.

 If a so-called cost centre is able to offset some of their expenses by creatively generating unexpected revenue, it would no longer be a cost centre. One way to do this is to charge back other departments for services. The trick is to be creative, think about what functions HR is providing that would otherwise cost the company money and then charge your departments at a significantly lower rate than what they would have to pay to outsourced firms/partners. This way the departments get what they need while spending less budget than expected.

The above could work in areas such as training course, succession planning for different departments, conflict resolution, compensation analysis and employee surveys. While this demonstrates that In-house HR is a better option than outsourcing in this area, it more importantly shows that the HR team is cost neutral or, arguably, profitable. While in most cases this is all virtual revenue, as it would involve the transferring of budget allocation from one department to another rather than actual cash payments, it is still income. If you can cover all your costs with offsetting revenue, You’re not a cost centre anymore!

 One way in which HR can make a significant impact on the bottom line is by cutting down on overheads. Now this may sound like a typical austerity measure, but it does not have to effect staff. Impacts can be made by streamlining a process, renegotiating terms with a supplier, or simply by adopting a more efficient method of operation. Every saving increases the value of the department.

One of the many advantages of a HR department is that it can utilise social media to fulfil functions that would otherwise cost money. HR practitioners can bring value to the work being performed by their external staffing and recruitment partners by turning to social media to ensure that they look good to potential hires.

While social media recruiting requires time and effort, it is an investment in longer-term benefits for the company. Using social media platforms like Twitter, Facebook and LinkedIn, takes recruiting back to its grass roots of networking, but for a digital age.

These are just five ways in which HR can turn the corner and go from being a cost centre to a profit centre for. It really is about shifting the perception of the department to show that it fulfils a crucial role and is capable of generating revenue.