While one human resources professional says HR has the greatest impact on return on investment, the other says it’s a shared responsibility and a stronger measurement if the two interests are aligned.
Eric Flamholtz, professor emeritus of management and organizations at UCLA Anderson School of Management, founder and president of Management Systems Consulting Corp.
My view is that, of these two important organizational functions, HR is responsible for, contributes to and has the greatest impact on ROI to a far greater extent than finance.
HR is the function that deals with human capital rather than financial capital. Financial capital is, of course, important; but human capital can be the source of sustainable competitive advantages that money can never achieve.
Just as the character of astronaut Gus Grissom said in the classic movie The Right Stuff: “No bucks, no Buck Rogers,” one can say in business: no bucks — no Starbucks. Money therefore, is — as Grissom asserts — a prerequisite to achievement and to organizational success.
However, borrowing from Gertrude Stein, money is money is money. Money is fungible. It can be invested and earn a return, but its impact is limited, while the impact of HR is virtually unlimited.
HR is responsible for the acquisition, development, motivation and retention of human capital. There are three forms of human capital: the knowledge, skill and motivation of people as individuals; the ability of people to function in cohesive teams or groups; and the climate and culture of an organization that’s created by the efforts and methodologies of HR.
Taken together, these three forms or types of human capital comprise the true assets of an enterprise. Although people, per se, are tangible, the collective knowledge, skill and motivation of people as individuals is a true and intangible asset that can be very valuable, as is the ability of people to function in cohesive teams or groups. Finally, the climate and culture of an organization, which is created by the efforts and methodologies of HR, is also a true and intangible asset that can be very valuable.
Diana Godfrey, senior vice-president of HR at Fidelity Canada
When asked which group — HR or finance — is responsible for return on investment as it pertains to benefits and people, my answer is unequivocally both.
I firmly believe both HR and finance have vested interests in ensuring that a company’s benefits programs — and how employees are compensated and rewarded — deliver ROI for both workers and the company.
Read: 70% of global employers seeing ROI on employee well-being programs: survey
There are many different aspects to consider when calculating ROI — it doesn’t simply mean a bigger bottom line. At Fidelity, along with our finance colleagues, we look at many different factors, including (but not limited to) employee retention, employee satisfaction and vitality, our measure of employee health and well-being. These factors, along with financial measures, give us a much more complete picture of ROI at the firm.
It takes time and perseverance to build trust between the groups, but I believe it’s this shared commitment that delivers the best return for our employees and our company. For example, our HR teams are responsible for developing industry-leading employee benefits programs that consider the needs and wants of our employees. We strive to be attuned to our workforce and industry (with an eye on what the competition is doing) to ensure our offering is competitive and attractive. At the same time, finance is an active partner in helping with the financial rigour and modelling that’s required to deliver the programs as designed.
In my opinion, too often the (wrong) debate is which matters more — an attractive benefits program that’s welcomed by employees versus being cost-effective and watching the bottom line. They’re not mutually exclusive. In fact, they need to be in balance to deliver ROI for the both the employees and the company.
Read: Survey finds 60% of plan sponsors reporting increased health benefits costs