Good HR really can improve performance

2008

Human resources (HR) often takes a lot of flak from managers for being up its own ivory tower - often with some justification. But, as a new British report suggests that firms with a comprehensive approach to people management report higher profits per employee, profit margins and productivity, do we need to start being nice to our personnel function once again?

The two-year government-backed research project by the think-tanks Work Foundation and the Institute for Employment Studies has also outlined 12 core measures that, it argued, any organisation can track to assess the impact of their people management practices on business performance.

The People and the Bottom Line study involved developing and testing a framework of people management practices with nearly 3,000 employers to assess their impact on organisational performance.

Data was collected from each organisation and performance assessed across the framework of measures.

This suggested that organisations that adopted a range of people management practices – from resourcing to employee engagement, skills development to job design – could achieve substantially stronger performance than employers that invested in just one area.

In fact, if a business increased its investment across a number of people management practices by a tenth, it could secure an increase in gross profits per employee of more than £1,500 per annum, it calculated.

The 12 core measures for tracking performance included recruitment, development plans and employee appraisals, it added.

Intriguingly, the research found that younger firms tended to score better against the key indicators than longer established organizations.

There was also no "levelling off" in terms of the business benefits that good people management could deliver. In other words, even where companies were investing in their workforce, there was evidence of the benefits of doing more.

Companies that scored highly also tended to be strongly geared towards creating a good working environment for their employees and being innovation led, it added.

Simon Jones, acting chief executive at Investors in People (UK), which also supported the research, described the study as "ground-breaking".

He added: "It delivers compelling evidence of the role that a proactive approach to people management and skills development can play in business success.

"It shows that people management must be woven into the DNA of any organisation that wants to maximise its performance – it cannot be piecemeal or tokenistic," he added.

"This is a very important report for employers of all types and sizes and it's vital they sit up and take notice," he said.