HR´s Impact on Business Performance

Friday, May 29, 2015 | Published by

Fotolia_76523293_XL_RGB (Large)Viability has become a major obstacle for business and society in recent years, assessed the fundamental way for survival and development of organizations and the life of the enterprise in general. The issue is significant because viability is a key element for the success of an organization, which is intended as the balance between economic, social and environmental performance of the firm and is an essential part of corporate business development.

In this regard, the HR department paves the way towards achieving viability, and this is highly valued as a growing issue, which HR professionals are required to manage.

The path to “HR excellence practice”

On the one hand, enterprises must combine their overall company strategy with HR strategy throughout the entire HR value chain. Recruiting, performance management and employee development – long term strategic workface planning – demands an overall approach and systematic investments.

On the other hand, enterprises must watch over and ensure that business units and different departments do not act on their own. In order to do so, they need a structured and clear HR model. Leadership for long-term HR activities in a consistent manner throughout the entire organization requires a competent use of HR communications.

Moreover, companies need to build predictable models on the basis of data that provides an accurate global estimate of the workplace, in such a way that they should continually supervise their HR activities and base their decisions on objective data. In this way, they will be able to develop their talent effectively and adjust their training and recruiting efforts to match business requirements.

HR´s Impact on Business

HR´s impact on specific business challenges. HR competencies help to develop specific organization capabilities in areas such as information, collaboration, innovation, risk management, strategic clarity, talent and change.

HR´s impact on alternative business performance measures. Business performance has conventionally been identified with financial outcomes, but today, there are new approaches which are primarily based on the internal focus of the companies and monitoring their available resources to assess their competitive edge. As a consequence, this will expand the analysis approach, because in addition to financial assets, companies must also consider human, logistical and organizational resources to meet its goals.

Enterprises could analyze HR´s impact on financial performance based on the following criteria:

  • The contribution made by the company in relation to human resources. In other words, what the company contributes with respect to training, hiring (contract types, recruitment types, and procurement types), adaptation of business hours, maternity leave, etc.
  • Interrelation measurement between the company’s human resources practices and financial resources.
  • Measuring the value of HR´s impact through productivity and increased value indicators, understanding productivity as the relationship between results achieved and resources used to achieve it; and as increased value, to gain benefits beyond costs (expenses/fees).

To conclude, in view of the above, HR´s impact on business performance is changing for the best. These changes should be carried out in a way that maximizes benefits and minimizes costs. By doing so, these new HR strategies result in improved business strategies that prepare competency-based developmental action plans for HR and the company as a whole as a means of boosting the company’s overall performance.