Documented HR policies add value to bottom line

Businesses that have people policies clearly linked to a
documented HR strategy are more profitable, concludes new research by
PricewaterhouseCoopers.

Senior HR professionals from more than 1,000 organisations
in 47 countries were surveyed to investigate the relationship between business
performance, HR policy and strategy, and financial measures such as profit
margins and revenue per employee.  

The research reveals that companies with documented HR
strategies typically benefit from improved revenue per employee of 35 per cent
compared to organisations without such formal people management policies.

A documented strategy is also associated with more effective
reward systems, better performance management systems and reduced absenteeism.

Kevin Delany, partner, PricewaterhouseCoopers
Human Resource Consulting, said:

“These findings should make interesting reading
for the 42 per cent of respondents currently without a documented strategy –
and for their chief executives.  

Our research clearly demonstrates that effective people
management does add value to organisations by putting the right policy and
practices in place to create a good employment environment.  This, in turn, has a positive effect on a
range of issues, from reducing absenteeism to improving profitability.

“The link between the existence of a documented
HR strategy and employee productivity is particularly interesting.  It is reasonable to assume that the
discipline of identifying the implications of the business strategy on people
makes planning more realistic and achievable.”

The research also revealed clear and positive
links between the ‘feel good’ factor of HR people being satisfied with their
contribution to the business and profit margins.  In organisations where HR people are very satisfied with their
department’s influence on business strategy, then profit margins are 46 per
cent higher than for those who are not satisfied with their contribution.

Other key findings:

        
There is a strong link between lower absenteeism and better
profit margins. For example, organisations with an average five days absence
per employee per year have profit margins that are 60 per cent higher than
organisations with an average 10 days absence per employee per year.  Despite this strong, and in some ways
obvious result, only 61 per cent of participants report on absenteeism, with no
increase from 2000

        
Many organisations still do not measure or report on key
people issues.  For example, the HR community
believe they make the most important and measurable contribution to business
performance through increasing employee satisfaction and controlling
costs.  However, few actually measure
success in this area, with only 43 per cent regularly reporting on employee
satisfaction and just over half (55 per cent) reporting on workforce costs

        
A third of survey participants have all employees completing
performance reviews.  12 per cent have
no performance appraisal process at all

        
In its 2000 survey PricewaterhouseCoopers found
that 37 per cent of organisations reported on employee satisfaction. In 2002
this has risen to 43 per cent

        
67 per cent of HR leaders are now members of the
highest-ranking leadership team in their organisation.  However, it is clearly important that HR
leaders have the required competencies, such as the ability to influence, to
justify their place at this level

        
The 2000 survey showed that 48 per cent outsourced at least
one HR activity. In the 2002 survey 72 per cent of participants now outsource
at least one HR activity. For many organisations a mix of outsourced and
insourced activity is popular

 

By Ben Willmott

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