Good human resources will boost your company profits, research proves

A definitive link between effective human resources and its impact on boosting business profits has been proven following a major research project into the subject.

Twenty years on from the first issue of Personnel Today, which carried research showing an overwhelming majority of bosses believed the calibre of HR directly affected the bottom line, an independent study has conclusively settled the debate.

People and the Bottom Line, an in-depth two-year study by the Work Foundation and the Institute for Employment Studies, tested a range of people management practices with almost 3,000 employers to assess their impact on organisational performance.

It found that businesses with good HR practices – from resourcing to employee engagement and skills development, enjoyed higher profit margins and productivity than those without. The study concluded that if an organisation increased its investment in HR by just 10% it would boost gross profits by £1,500 per employee per year.

Penny Tamkin, associate director of the Work Foundation and lead researcher on the project, told Personnel Today: “The report found that it was the intensity of the HR practice that makes a difference – for example, not just whether companies do employee engagement, but how much and how often.”

Tamkin stressed there was no one-size-fits-all approach to investment in people management. However, she said the key to success was HR departments working closely with managers to achieve results.

“There is a growing partnership between HR and managers. It’s not just about writing policies, but working to embed them,” she said. “HR also needs to play a more active role in making sure an individual’s job allows them the correct amount of autonomy.”

Simon Jones, acting chief executive at Investors in People, which supported the research, said: “People management must be woven into the DNA of any organisation that wants to maximise its performance.”

Profit-boosting HR

  • Succession planning
  • Personal and career development planning
  • Employees qualified to degree level
  • Profit-related pay
  • Regular appraisals
  • Frequency of one-to-one meetings
  • Who decides pace of work (managers or workers)
  • Task allocation (managers or workers)
  • Testing applicants before appointment
  • Person specification for new appointees
  • Management turnover

Source: People and the Bottom Line

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