More HR makes companies higher profits, survey finds

The greater the number of HR practices built into a company, the more profit per employee, research has confirmed.

David Guest, professor of organisational psychology and human resource management at Kings College, London, said his research project had found that investing in HR practices leads to improved financial performance.

"Having few HR practices is damaging," he warned at the conference last week.

The study – The Future of Work Programme on HRM and Performance, funded by the European Social Research Council and the CIPD – also found that the number of grievance procedures a company faces has a negative effect on financial performance.

But he said that despite a swelling body of evidence of the benefits of investing in so-called high-performance HR practices in areas such as recruitment, training, job security, involvement and team-working, the message was not being taken up by businesses.

Only 13 per cent of private-sector workplaces had eight or more HR practices while no company in a sample of 610 companies had more than 14.

Ron Collard, UK human resource operations partner at PricewaterhouseCoopers, said, "Not doing things for cost reasons damages the business more than playing around with innovative experiments."

According to John Purcell, professor of HR Management and director of the Work and Employee Relations Centre at Bath University, who is working on 12 case studies for the project, said companies which invest in HR tend to have "a big idea at the top".

He said, "They have a vision that is simple, clear and binding. They know the relationship between the way people are managed and financial performance."

Dina Gray, director of intellectual capital at Henley-based software house AIT – one of Purcell’s case study companies – said investment in HR involved consultation with multiple teams, tai chi, poetry readings, charity work, singing and an emphasis on "fun" at work.

By Stephen Overell

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