What would you do if you had a professional who could:

• Improve the company’s profit margins;

• Positively impact the cost of goods sold;

• Lower the days sales outstanding;

• Increase the price/earning ratio all while liquidating some overhead costs to the business;

• Deliver flawless transactional and traditional HR services.

Most CEOs would react in one of two ways:

• Why is this individual wasting his/her time in HR?

• Why didn’t I demand this level of HR performance five years ago?

The concept of human resources as a profitability contributor is fast gaining currency in US businesses and bears closer examination. Professor David Ulrich of the University of Michigan, a leading expert on HR competency models, sees the changing business world as a 20-20-60 proposition. Twenty per cent of executives surveyed currently use HR as active and innovative business solution partners and 20 per cent believe that HR should remain an administrative overhead and only perform transactional work. It’s the 60 per cent who are starting to expect HR to partner with other departments to improve the company’s core competencies and competitive advantages. And more HR people are stepping up to the plate and delivering the goods.

A continual company-wide value chain analysis is critical to the success of any organisation. Over the past decade, CEOs and senior HR executives began demanding that their teams deliver flawless functional work and become a knowledgeable partner with all other disciplines to advance the business plan of the company. Disciplines such as finance, sales, marketing, operations and HR can no longer exist as stand-alone entities. They are inter-dependent with one another and a weakness of any one of the links inhibits the other links from maximising their efficiency and productivity.

Can HR be linked to profitability metrics? Yes it can, and the following are three examples.

A well-known global company formed a group of HR professionals who developed processes and training programmes in sales, customer service, workouts, project management, process improvement and leadership development that focused on critical performance issues for their internal and external customers. By partnering with operations, sales and customer service they served as a catalyst for forging alliances, partnerships and agreements. Many of their efforts resulted in improved relationships which translated into ‘preferred provider status’, which increased sales and reduced costs. All their costs were liquidated by charging a fee for the service while creating net revenue. After two years, the group generated sales of $4 million and a profit margin in excess of 30 per cent, which was returned to the division budget at the end of the fiscal year.

Secondly, an HR team, partnering with the audit staff, discovered that the accounts receivable turnover had moved from a preferred 30 days to 45 days during the past two years. It was determined that the chief credit officer should be let go. The HR staff then began examining candidates for their ability to reduce the ratio from 45 days back to 30 days. It recommended three candidates for further interviews, from which one was selected for employment. Within six months, the company’s ratio was reduced to 35 days.

In a third case, while designing and negotiating a new health care and 401(k) plan, the HR leadership partnered with the sales and marketing team to determine if the cost of the programme would erode the company’s market share and competitive pricing strategy. The resulting benefit programme design achieved its cost/benefit objectives without jeopardising the market share and pricing metrics.

The intense and brutally competitive business environment of our global and digital world needs the help of everyone in the company. To which group of 20-20-60 does your company belong?

Professor Kenneth W. Moore is an Associate Consultant at FHRD