Is HR really just overhead?
Making a difference to the bottom line
Sep 30, 2014
By Brian Kreissl
We’ve all heard the cliché that HR is just overhead. While I suppose it is a variation of the HR bashing that seems so popular these days among executives, line managers, employees and even members of the general public, it’s a particularly difficult label to shake.
Many people believe HR is a necessary evil and some even believe the HR function should be abolished entirely or outsourced. To work in HR these days, you have to be pretty thick-skinned.
Yet, there does seem to be some truth to the characterization of HR as overhead. After all, HR isn’t a revenue-generating line function and, because of that, it’s been the target of cost-cutting in many organizations over the past few years. In HR, we truly have had to learn to do more with less.
Common sense would dictate that in tough times, functions that aren’t directly involved in selling an organization’s products or dealing directly with its customers are going to be the first ones downsized or have budgets slashed.
Revenue generation versus overhead
I read an interesting blog post by Scott Edinger in the Harvard Business Review the other day. While it was really about the sales function and how many people are afraid of selling, it was actually the first part of the post — and what it had to say about the HR profession — that piqued my interest the most.
Edinger recounts a personal anecdote from early on in his career when he was working in the HR department of a consulting firm and one of the partners compared him with one of his colleagues in audit. While the partner acknowledged the talent both employees brought to the table, he commented that his colleague generated revenue while Edinger was considered to be just “overhead.”
Apparently, everyone at the table laughed at that comment and Edinger decided right then and there to make a career change. At that point, he decided the sales function is at the heart of every organization.
I completely understand the sentiment because I had thought more or less the same thing once or twice when I was working in a corporate HR department. Although I have worked for the past eight years in revenue-generating product development roles, I haven’t completely lost sight of what it’s like to be considered overhead. After all, I’m still an HR practitioner, and companies that develop products and services for the HR market are often impacted by budgetary pressures and cost constraints in HR departments.
A self-fulfilling prophecy
Nevertheless, I believe the characterization of HR as mere overhead can be incredibly short-sighted and demotivating to HR practitioners. This can even end up becoming a self-fulfilling prophecy because it creates a situation where the HR department isn’t given the respect it deserves or the resources it needs.
There are ways to directly impact the bottom line other than peddling the company’s wares and I believe HR can have a positive impact in terms of cost reduction, risk management, improved morale and increased efficiencies. HR can also help managers and employees do their best work by helping to ensure the organizational culture and work environment remain positive and productive.
With all of the emphasis on talent management these days, HR can make a big difference to the bottom line by ensuring an organization is able to attract, retain, develop, incent, reward and deploy talent effectively. HR can also help by developing and implementing HR programs that enable managers to do their jobs effectively and concentrate on the job of managing people while also providing the type of support and advice people managers need.
Nevertheless, there is a catch to all of this. Old school personnel management isn’t going to cut it. It is a cliché, but a strategic approach is absolutely necessary in moving beyond being labelled as overhead.
But that strategic approach needs to take the needs of the organization into consideration as opposed to those of the HR department. It’s no good throwing the baby away with the bathwater by jettisoning tasks labelled as too transactional simply because HR has a desire to be seen as being more strategic.
HR also needs to be able to speak the language of business and be able to quantify the value of HR programs through dollars and cents and the use of meaningful metrics. Only then will HR no longer be considered overhead.
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Brian Kreissl is the product development manager for Thomson Reuters Legal Canada's human resources, OH&S, payroll and records retention products and solutions.