According to a survey by PricewaterhouseCoopers, human resource (HR) leaders believe that organizations that align their HR strategies with their business strategies are more profitable. HR leaders from more than 1,000 organizations in 47 countries across a broad spectrum of industry groups were surveyed.
The research points to three key organizational and people management issues that need to be addressed effectively in order to positively impact the bottom line:
– an HR strategy that is documented and integrated into the business strategy
– people policies and practices that help deliver the business strategy across the organization
– an HR function that is part of the leadership team and can influence the business.
The research identified a positive relationship between a documented HR strategy and improved revenue per employee – 35 percent higher than organizations where no such strategy exists. A documented strategy is also associated with more effective reward systems, better performance management systems and reduced absenteeism.
The research 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 organizations where HR people are very satisfied with their department’s influence on business strategy, profit margins were 46 percent higher than for those who are not satisfied with their contribution.
Additional Key Findings
– 67 percent of HR leaders are now members of the highest-ranking leadership team in their organization. It is clearly important that HR leaders have the required competencies, such as the ability to influence, to justify their place at this level.
– There is a strong link between lower absenteeism and better profit margins. For example, organizations with an average five days absence per employee per year have profit margins that are 60 percent higher than organizations with an average 10 days absence per employee per year. Despite this strong, and in some ways obvious result, only 61 percent of participants report on absenteeism, with no increase from 2000.
– Many organizations still do not measure or report on key people issues. For example, the HR community believes they make the most important and measurable contribution to business performance through increasing employee satisfaction and controlling costs. Few actually measure success in this area, with only 43 percent regularly reporting on employee satisfaction and just over half (55 percent) reporting on workforce costs.
– Only a third of survey participants have all employees completing performance reviews; 12 percent have no performance appraisal process at all.
– In its 2000 survey PricewaterhouseCoopers found that 37 percent of organizations reported on employee satisfaction. In 2002 this has risen to 43 percent.