Cost Center to Profit Generator

Subir Verma, Head - Business HR (Generation), Tata PowerTata Power is one of India’s largest integrated power companies. The company is steering the transformation of utilities to integrated solutions by looking at new business growth in EV charging & storage, distributed generation & rooftops, microgrids and home automation & smart meters.

HR - Impacting Business Directly
It is interesting to compare the list of Fortune 500 companies of 2014 and 1955, only 61 companies appear in both the list. This means 88 percent of the companies have either merged, gone bankrupt or fallen significantly. It can also be perceived that constant turnover in Fortune 500 companies is good as it reflects dynamism, innovation, business execution and excellence displayed by the new companies.

In highly competitive and global environment; disruptive change, responsiveness, technological update and path breaking innovation have to be the core competency of any organization, which also separate the winners from the losers. Managing these are a difficult process, but indeed essential for all functions including HR.

Time has come when most of the HR professionals need to move from generic models of HR and 'best' practices syndrome to organization based customized people practices and business programs which directly impacts top line and bottom line of the company to drive excellence and command respect for the function.

HR must transition from HR partner(a cost center) to part of business(a profit center) mode. HR professionals should not pay much attention to the advice of becoming a good business partner, align with business but focus on innovation, creating & contributing through new business model, may be in small way to start with.

Besides core HR activities, here are two category of thoughts to improve top line and impact bottom line, which can help HR gain more perceived important by driving business excellence and direct growth of the company, a) Create impact with HR initiatives and b) Create impact with beyond HR initiatives.

Create impact with HR initiatives
a. Productivity improvement – Everyone knows that a good salesperson revenue generation will be more than average salesperson. HR must analyze current sales hiring process, reengineer them so that it measurably identified and hired better salespeople, which can be exhibited with data and trend. If the new hired salesperson whose revenue generation is more than 10 percent, you could (with little blessing from CFO and Sales Head), publicly state that HR played role in impacting the top line.

b. Make customized solutions – Emulating the best practices is not enough, customized practices suiting the business need must be made. For small / growing or start up, having a bench strength is not possible. Here, HR needs to work
along with business from proposal submission stage and track progress(probability of getting business by sales team) and make plan to acquire talent based on that probability. Some organization have successfully managed to achieve what can be called as “Just in Time” hiring, “Probability based hiring” and stop revenue loss due to non-availability billable resources or hiring before winning the project.

c. Prioritize revenue-generating business units, jobs, and employees — Revenue generating people /role and non-revenue generating people/role must be tracked and prioritized differently for the purpose of hiring, attrition engagement etc. All know that highly engaged employees generate high revenue. But, it must track and ensure high engagement for revenue generating andcustomer engagement role specifically.

d. Implement customized reward and recognition program — While organization level R&R is good and must continue. Some organized have worked with the CEO and CXO to implement performance management by developing a process and metrics that accurately assess an individual impact key organization parameter like revenue, sales, customer, partner, cost, delivery timeline etc. A carpet bombing approach to is not as effective as customized & personalized reward and recognition. Appreciation to and for people (including family members) who made the employee do well will be more effective in making the employee feel valued.

e. Similar focus on outsourced workers and partners — At least in manufacturing and service based organization the number of outsourced workers are many times the number of permanent workforce. Yet generally very less focus and attention has been given to them for productivity effectiveness and excellence enhancement. They are and will be an integral part of the business, hence they must be made part of the all such initiative and ecosystem to improve organizational excellence.

HR Create impact with beyond HR initiatives
a. Generate direct revenue — It can be thought to offer HR services to external clients as well (at least in similar sector) to generate direct revenue. Companies like Disney, Southwest, and Wachovia have generated revenue by offering HR services externally. By using this strategy, the business would retain the revenue made from these external services, while also making the company more visible in the community.

b. HR should act as revenue enhancer- Sales and business development is no longer restricted to sales team. Like many CEO prefer to have business people in HR role, HR too, should influence or at least provide lead/support for new client generation. HR by virtue of its role is well connected and passing the sales leads may convert into revenue generation for the company. It may be a good idea to have a nominal sales target for HR team too!

c. Convert employee innovation/idea into revenue by promoting entrepreneurship – Some companies have started innovation practice, incubating right idea to promote within company entrepreneurship. Creating new product/services should be promoted so that in future, these initiative can become new revenue generation stream for the company to fuel future growth.

HR must transition from HR partner (a cost center) to part of business (a profit center) mode

HR function at Google is effectively using operationalizing a business impact strategic approach. HR leaders at Google consistently use metrics andmathematical algorithms to scientifically improve business performance and excellence from programs like hiring, retention, and leadership. Such algorithm can general data like revenue impact of people management offerings for each HR initiatives like free food, workspace design, and collaboration practices. This helps in focusing on HR activities which has highest impact on revenue.

Gartner CEO and senior business executive survey found that growth remains a top priority of most of the CEO and technology related change is viewed as the primary tool to achieve the growth in 2020. High profit always has two elements, improving top line and reducing bottom, which is also the top agenda of any CEO. Marketing, Sales Supply chain and Finance have become corporate heroes because they have demonstrated that they have a direct and measurable impact on both or one of his critical strategic goal.

Now is the time for HR to demonstrate and prove before more experts start questioning value added by HR in a company!