How HR Can Add to Increasing Revenue


Figure 01

 

Increasing Revenue

Many small businesses don't have dedicated HR departments because they cost money to run, and HR isn't a department that generates revenue. However, an HR department can result in cost savings for companies that decide an in-house HR department provides a return on investment. Although HR doesn't increase revenue, certain HR functions can save a small business a considerable amount of money. In other words, HR doesn't increase revenue, but it can add to the bottom line through cost-saving measures.

Hiring Decisions

Figure 02

    

Making wise hiring decisions isn't an extraordinary responsibility for HR or for various departments' hiring managers. However, choosing the right candidate doesn't just mean selecting someone to fill an immediate vacancy -- it also means selecting candidates who demonstrate a certain enthusiasm about the job, which HR experts often refer to as employee engagement. Engagement can translate into higher profits for organizations because employees who are fully engaged may be more productive. According to a Bloomberg BusinessWeek article titled, "Employee Engagement -- What It Is and Why You Need It," engagement can have a tangible impact on profit. 

Turnover

Figure 03


Turnover is costly, particularly for small businesses. Calculate the expenses associated with terminations, staff time necessary to explain continuation of benefits to departing employees and seemingly insignificant costs like transferring keys, reconfiguring passwords and collecting an employee's badge. The costs add up. When HR reduces turnover, the savings help the bottom line enormously, which adds to the company's revenue. It costs organizations billions of dollars every year to lose valued employees. Engaged employees are happy and fulfilled; they have no reason to consider leaving." Employee engagement, which is obtained through wise hiring decisions, pays off in terms of reducing turnover. (Breaugh, 2011)

Employee Relations

Figure 04


Based on some of the highly publicized settlements of employment discrimination cases, just one seven-figure settlement for a lawsuit can cripple a small business. An employee relations program mitigates the potential risks that businesses face if they become embroiled in litigation over unfair employment practices. An effective employee relations program includes steps for resolving employee issues, designating an HR staff member specifically trained to investigate complaints and mediation to restore the workplace to a fully functioning machine that produces revenue. (Ramstad, 2005)

Outsourcing

Figure 05


The decision to outsource HR functions can increase revenue for small businesses through significant cost savings. Many companies to which small businesses outsource their HR functions specialize in meeting the needs of companies with just a handful of employees. In addition, professional employer organizations, or PEOs, are a form of outsourcing companies that can handle all of an employer's HR functions. Outsourcing or engaging a PEO saves money because the fees typically are less than the cost to employ a full-time HR expert. The Small Business Efficiency Act, introduced by Congressmen Mike Thompson and Kevin Brady sought to add protections for small businesses and greater accountability for PEOs, which would improve all-around efficiency.

References

Breaugh, 2011. Recruiting and attracting talent. A guide to understanding and managing the recruitment process, 64(3), pp.203-18.

Ramstad, 2005. HR decision paradigm for a new strategy definition. Human Resource Management, 42(2), pp.129-36.

 

 


Comments

  1. Chamila Thilakaratne (LMU, ESOFT MBA Batch #24)May 6, 2022 at 6:52 PM

    As above,HR can also boost profits through workforce optimization initiatives. Furthermore, through effective hiring initiatives, HR can strengthen an organization's human capital.well written article.

    ReplyDelete
  2. MILANMay 6, 2022 at 8:56 PM

    HR may boost income by using personnel optimization strategies, as previously indicated. HR may also help an organization's human capital by conducting strategic hiring. well-written article and a very useful one  

    ReplyDelete
  3. PrasadMay 7, 2022 at 4:43 AM

    HRM can help to organization from staff. They find good peoples and enhance thier knowledge. Them directly impact to organization performance. Good article .

    ReplyDelete
  4. Arjuna Medagama MBA #24May 7, 2022 at 5:52 AM

    HR department directly can make impact on profits. Because performance analysis, Motivating employees, Appointing correct result orientated recruitment, Salary increments like most of the important decisions taking by HR personnel. Therefore HR department is one of the core section in any organization.

    ReplyDelete
  5. Dharshana MBA24May 7, 2022 at 9:15 AM

    HR doesn't increase revenue, but it can add to the bottom line through cost-saving measures. Good article

    ReplyDelete
  6. Beyond the limits....May 8, 2022 at 4:45 AM

    Currently, HR contributes to an organization's revenue by managing the employee retention, improving employee productivity, building organizational talent and workforce capabilities of the present as well as the future. All of these HR related tasks impact the revenue. Very good article.

    ReplyDelete
  7. Gayan MarasingheMay 8, 2022 at 7:43 AM

    HR helps a business generate income by maintaining employee retention, increasing productivity, and developing talent within employees.Good luck!

    ReplyDelete

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