Jun 14, 2008

HR's relevance to the business

Rohit has an interesting idea:

While sales are accountable for top line, finance is accountable for funds flow and capital management, they need to take charge of a P&L or Balance Sheet linked item. The item that they could logically look at picking in my view is ‘Employee Productivity’: Revenue Per Employee and Cost Per Employee. If they could go to boards with performance plans having target numbers on the above 2 items, whatever they would do in order to achieve that will start having completely different dimensions, both for them and for the CEO.

You would then start looking at Performance Management Systems from the point of increasing productivity and not just ‘high performance environment’, you start looking at compensation decisions in light of controlling cost per employee and not just ‘benchmarking at certain percentile’, you start looking at hiring from efficiency of manpower numbers and talent model at various levels and not just ‘meeting business requirements. So on and so forth we could see the beginning of a change….beginning of HR creating some value for the business and for itself.

Interesting but as I commented, who would take the call on final people decisions? if HR feels that a person should be fired because they can hire a person who can ensure higher return on employee cost (ROEC) and the reporting manager is not in agreement, then what happens?

So let's take an assumption that managers give off the irritating 'people management' decisions to HR. What then? What about initiatives like succession planning and talent development.

Would HR then say "Oops we are spending too much on training, increasing our Employee Costs. Let's scrap all this"

What do you say?