Businesses across the world are experiencing some of the toughest operating conditions for many decades. Currently it is difficult for many companies to maintain let alone grow their profits. What might be overlooked in some organisations is the critical role that HR can play in boosting profitability. In its simplest form: profit = revenue – expenses
The two main ways to grow profits are to increase revenue and/or decrease expenses. Focusing on profit growth is often seen to be the sole domain of accountants and operational business leaders. However this should be an aspect of a business in which HR provides leadership and makes a tangible contribution.
Think about it. Labour costs are usually the largest (or near largest) expense item for a business – and this is a cost that can be planned for and managed. Every dollar of expense that is saved goes straight to the bottom line (profits). On the revenue side of the ledger, the performance of people is a major determinant of business revenue generated. So HR, often considered to be focusing on the ‘softer’ side of business, is critical to hard business outcomes.