A Strategy To Increase Financial Returns For Your Business

It is the start of a new year and a new decade.  This year can be the best ever for your business.  You want to improve your financial returns and see the benefits of all your hard work.

Your employees are your best asset – you often say as much.   But do you really mean it?  And, if you do, do you know how to get the best from them?

This is where a strategic Human Resources (HR) plan comes in.

Why do I need a strategic HR plan?

You may know what your Human Resources team is employed for.  They are there to recruit people, to write policy which will protect your business.  And then to implement that policy and make sure it is followed.  When things go wrong, HR is there to help you with difficult things like redundancy or disciplinary action. Even the really bad stuff- like dismissing people.  HR will then support you if the worst happens and legal action is taken against you in the Employment Tribunal.

But what about strategic advice?  You have strategic financial plans and marketing advice.  But there is no need for an HR presence at the top table – HR is an operational, back-room function.  It is a necessary drain on the business.  It doesn’t produce any revenue, or improve your profits.  Or does it?

What difference does HR strategy make?

Human Resource planning should be at the heart of every business decision you make.  If your employees truly are to be your best asset, then doesn’t it make sense to invest in them? A strategic HR plan will help you to maximise the investment in your employees – which is very likely to be your largest investment.

A strategic HR plan will show you how to  improve your financial returns on that investment.

What are the financial returns from a strategic HR plan?

In terms of real financial returns, there are six key areas where a strategic HR plan can make an enormous difference for your business.

  • Return on Sales

Each sale is worth more if your production costs are kept down.  This includes recruiting the right people in the shortest possible timescale.  It means retaining them in the business once they have been recruited.  Strategic HR can help you manage the performance of the individual and look after their wellbeing.  All of those things make them work efficiently and effectively and reduces production costs.

  • Return on Assets

If you get the right people in place, train them properly and look after them, then your assets will be better maintained.  The use of the assets will be optimised.

  • Revenue growth

This really just means more sales, which can be achieved by better customer service and increased numbers of customers.  Again, your employees are key to this and a proper strategic HR plan can have a huge impact on this aspect of the business.

  • Profitability

Profitability is increased because of the revenue growth, as already discussed.  Again, if you look after your employees, then your expenses will be reduced (less absence, greater retention, higher work rate).  Because your revenues are up and your expenses are down, then your profitability is increased.

  • Market capitalisation

If your company is traded on the stock market, then your value per share is important.   Your employees are key to this equation, as they affect all the other financial impacts, as discussed above.  If your employees feel valued and loyal, then there is likely to be a positive effect on market capitalisation.

  • Revenue per employee

Finally, if your employees are happy and feel valued and engaged in their work, then they will be more effective and efficient.  This, coupled with reduced absence and lower turnover, can impact your revenue per employee.  This is another critical area for the business where a positive HR strategy can really pay dividends.

HR – a critical strategic business partner

This all demonstrates the fact that strategic HR has a positive impact on all of your financial measures.When your staff are happier, you spend less on absence cover, recruitment, performance improvements, and so your financial returns improve on sales and on assets.

If customer service has improved and the speed and amount of work has increased, then the obvious outcome is revenue growth and higher revenue per employee.   And because your revenues have improved and your expenses are reduced, this means that your profitability is higher.

If you think this article is useful and you would like any strategic HR support or information  on dealing with this  – or any other people-related issue in your business – contact us for a no-obligation chat.

Jill Aburrow runs an HR strategic consultancy business – JMA HR .  She provides strategic HR advice and support to businesses who want to improve loyalty, growth and profit. Why not join the JMA HR mailing list?  Jill has been a professional strategic HR advisor for over two decades. She is a Fellow of the Chartered Institute of Personnel and Development (FCIPD) and has a Post Graduate Certificate in Employment Law.

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