How Strategic HR Planning Can Improve Corporate Profits
HR Planning and it’s link to profits
The leaders of most organizations are unaware of the link between human resources planning and profits. Accordingly, many organizations faced with dwindling profits will take a knee jerk approach and lay off hundreds, if not thousands, of employees to increase their profits.
Unfortunately, however, this tactical reactive action can lead to irreversible damage to the organization’s future performance if the remaining employees cannot compensate for the productivity losses. More often than not, they can’t, and at least 10% of remaining employees will quit in the six to twelve months following a layoff.
Losing valuable employees to layoffs (and putting their talent and skills out in the marketplace) can lead to the loss of business because the level of expected services can decrease giving competitors the opportunity to cut deals and steal business. Moreover, sudden human capital shifts, such as layoffs, can negatively impact morale and decrease productivity. According to Becker, Huselid, Pickup and Spratt, “Executives that fixate their objectives on profit and share price may achieve short-term success but are prone to long term costs if their objectives are achieved at the expense of productivity and customer satisfaction.”
HR Planning means investing in your employees and being careful with your strategy
Both the employee and the customer’s needs change with time; therefore, an integrated workforce strategy is essential to helping the organization adapt to shifting goals and trends. The forward thinking, proactive and strategic HR function that addresses employees’ professional needs as the organization grows add value to the organization. Employee’s that have a high degree of job satisfaction are able to drive customer loyalty as well corporate profits through their consistency and quality of service. Moreover, an HR strategy that translates business goals into individual accountability creates long term value for the organization.
One successful method for creating and sustaining a high performance culture that’s been proven to enhance productivity and improve profitability is to target an organizations performance management philosophy with increased training of managers, as well as new state of the art tools and instruments. Investing in employees’ performance confirms to shareholders that you are concerned with growth and not minimizing costs, which provides a smaller competitive advantage than innovation and expansion. Subsequently, increased shareholder value results from the value created by your human capital.
For additional information on how to create and sustain a high performance culture through the adoption of new performance development standards and processes, please see this Author’s previous blog entitled “Performance Appraisal Systems – Best Practices for Creating and Maintaining a High Performance Culture”
Mike Russell is a seasoned professional with three decades of experience in the fields of HR and OD. In addition to having a career trajectory of HR Generalist to a VP within ten years, Mike also has a long and successful background as a Consultant/Business Partner to CEO’s, Presidents and Executive Directors in both the private and non-profit communities across a wide spectrum of industries.
As the sole-proprietor and owner of Organizational Development Solutions (ODS), Mike partners with business leaders committed to insulating their organization(s) from potential liability, increasing organizational effectiveness and adding shareholder value.