Money Talks

Image courtesy of Flickr/401(K)

The perennial issue of human resources not being accepted as a part of the business is solvable — but not in the way you think.

Typically, HR attempts to obtain resources it feels are necessary to fulfill its mission. And in more cases than not, HR fails because its argument to line management isn’t convincing. 

Talent managers expect management will accept the goodness of people. Line managers aren’t philistines who dislike people. Most of them are open to seeing how HR can add value. But they demand a convincing business-based argument.

When HR doesn’t obtain what it wants, it goes back to doing what it has always done — and no one outside of the department feels any loss. This confirms management’s view that HR isn’t vital to theorganization’s success.

There is the core of the problem.

It’s not that a company will be competitive with or without an HR function. It’s a question of how well it will prosper with a typical vs. highly engaged HR function. 

The function isn’t seen as contributing measurable financial value. The self-imposed barrier seems to be that many in HR don’t understand and communicate how it can make money for the company.

Most businesses have limited resources to invest. One of those is money, and all functions are competing for a piece. When functions like sales make a case for additional budgets, quite often their arguments rest on unprovable but long-accepted beliefs — add a salesman and increase sales. But how does a staff function such as marketing get a larger piece of the budget? It, too, makes broad and seldom provable claims.

The difference between marketing’s and HR’s pitches is that marketing talks in terms of short-term sales increases or customerretention. HR talks in terms of indirect, often long-term quality of the workforce. 

A grasp of business acumen should help HR couch an argument in financial terms. Just what is business acumen? Synonyms for acumen are insight, judgment, wisdom, expertise and intelligence.

Where HR leaders fall down is thinking business leaders will someday fullyunderstand HR’s perspective. If HR were a language, business leaders would not bother to learn it. 

Management is not going to come to HR. 

HR must take the initiative to learn management’s language. In other words, business acumen demands that HR talk money.

Many HR people have no interest in learning that language or in thinking of their work in terms of financial return. Yet, isn’t it logical that when a person is employed, the quid pro quo for a salary is, directly or indirectly, income generation? 

When I started at The Saratoga Institute in 1980, I didn’t hire people because I wanted to spend money. Acknowledging that administrative tasks are necessary at some level, management still looks for ways to monetize their value, either through process cost reduction, productivity improvement or customer retention and spending.

In the opening line, I indicated a solution to the perennial HR image problem. It’s that HR must gain business acumen — the ability to use the language of business and to make its case for resource investment. 

Requiring management to support HR’s proposal on its inherent “goodness” will never work.

Consider an example. Predictive analytics is the new tool that management is applying to make resource decisions. I had a hand in introducing analytics to HR by leading a 2008 modeling experiment. Since then, most of the early predictive analytics projects I’ve seen have been applied to recruiting and retention.

It’s rather easy to study your company’s record in recruitment methods and match them to subsequent employee performance profiles, thus finding ways to hire people who perform well and stay with the organization. 

This is business acumen, linking HR services, processes and systems to employee performance, hence revenue generation or cost reduction. It’s more than just running your service. It’s making a financial contribution to your organization.

If HR doesn’t add financial value, it has a limited future. If it does, the sky is the limit.