Best practices in HR linked to better business performance

Can lead to higher stock prices, faster revenue growth: Report
By Liz Foster
|Canadian HR Reporter|Last Updated: 05/02/2016

A recent report brings good news to the HR profession in finding best practices in HR are linked to better business performance — measured by higher stock prices, faster revenue growth and improved employer brand reception. 

Emerging Evidence: Business Performance and the Validation of HR Best Practices from the Top Employers Institute and HR Certification Institute (HRCI) suggests HR practices drive improved business performance and financial results.  The study listed several leadership capabilities as having the strongest correlation to revenue and profits, including the devotion of significant time to nurturing leadership and talent, the encouragement of leaders to foster employee engagement and the development of pipeline successors for leaders and top talent. 

“The correlation was so clear, so strong,” said Heather Combs, Washington, D.C.-based chief business development officer at HRCI, which certifies human resources professionals on an individual level. 

The study found companies with HR practices certified on an organizational level outperformed the stock prices of relevant indices by 51.17 per cent over five years. Those same companies showed growth rates of revenue increasing by 20.9 per cent while the relevant industries increased by 6.9 per cent in the same period. 

Similarly, organizations employing more than five certified HR professionals outperformed the stock prices of relevant indices by 57 per cent over five years, found the study. Those same companies showed growth rates of revenue increasing by 32.9 per cent while the relevant industries increased by 7.9 per cent in the same period. 

Organizations with certified human resources professionals were more favourably rated on employer review and assessment platforms such as Glassdoor and Kununu, the study found, and also showed stronger stock performance and compounded revenue growth rates. 

“We needed to find quantitative proof of the profound impact HR best practices and HR practitioners have on the results of companies,” said David Plink, CEO of Top Employers Institute in Amsterdam, which certifies HR practices on an organizational level. 

The quantitative correlation between HR best practice and improved business performance is not surprising, said Bill Greenhalgh, CEO of the Human Resources Professionals Association (HRPA) in Toronto. 

“That’s really what HR is doing these days, not just providing HR services but providing services that improve the success of the company,” he said. 

“When you look at successful companies, it comes down to people. People, at the end of the day, are the only sustainable differentiator. Anybody can buy technology and you can copy other processes, but what you can’t really do is buy people’s commitment and engagement.” 

The ability to harness the energy and innovation of employees is the surest path to success, said Greenhalgh, and human resources policies and programs are necessary tools in that process. By incorporating HR best practices into its strategies, a company can increase engagement to push business performance. 

“The only way companies can survive and prosper is when the people they employ see themselves as partners in the organization,” said Greenhalgh. 

“You can buy people’s time but you can’t buy their engagement. It has to be something else. People are the sustainable advantage and if you can’t keep them, if you can’t retain them, you’re just not going to succeed.” 

The fact that the study from Top Employers Institute and HRCI focused specifically on certification — both at an organizational and individual level — did not surprise Greenhalgh. 

“It comes down to training,” he said. “Certification means you have to keep up-to-date, and so you’re always learning new tools and techniques, new skills. It requires a commitment to a lifetime of learning.” 

In fact, research conducted by the HRPA in the past — as well as the organization’s experience working with human resources professionals — “totally” supports the study, said Greenhalgh.

Unfortunately, the results of the report don’t include a step-by-step program to improve business performance, said Plink.

“Organizations must have the initiative to improve their policies, the ambition to be the best employer they can be and to have the best people on staff,” he said. 

And while a focus on human resources best practices can lead to the hiring and retention of quality employees, it is important an organization never becomes set in its ways, said Madeline Avedon, associate partner, talent, rewards and performance at Aon Hewitt in Toronto. 

“There’s the sense, right now, that a lot of organizations — especially from an HR perspective — are looking to simplify, they’re looking to streamline and they’re looking to create consistency in the employee experience,” she said.

“And HR is having this challenge right now in ‘How do we create consistency and align to best practices but, at the same time, how do we innovate and how do we differentiate ourselves?’ Because those two concepts can be very opposing.” 

Blindly adhering to best practices without considering the individual needs of an organization can often lead to stasis, said Avedon.

“In some ways, best practices lock in what we thought was the right thing to do in the past,” she said. “There is this idea that it can kill innovation because it doesn’t give you the leeway to think differently. We need to break through that wall because you have to think differently.” 

The first step to thinking differently, she said, is to understand what makes an organization different. By gathering as much information as possible, employers and human resources professionals can create strategic best practices that address what needs must be met in order to propel the business forward and then adapt employment value propositions to be in alignment with those needs. 

“It’s really about helping leaders understand their teams and their workforce needs,” she said. 

“That’s why there is so much excitement around big data. It’s really about HR stepping up and helping the C-suite understand that it can make fact-based talent decisions if it has the data and it’s not about a hunch, it’s not about intuition, it’s really about the facts. Data and analytics are changing the dialogue between human resources and the business. That evolution could bring about more best practices, and more strategic best practices.” 

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