Human Resources Really Does Matter. Seriously.

HR Adds Value to the Bottom Line

By In Weekly Email 5 minute read time

Human Resources Really Does Matter. Seriously.

The Problem & The Question

Weekly, we receive horror stories from our devout followers that HR is the great evil.  To some, a visit to HR is the moral equivalent of visiting the Death Star.  Employees opt for root canals rather than visiting their benefits administrator in HR. 

Some of us…okay, all of us tend to wonder what HR does and whether they really make a difference to the bottom or top lines.  Does HR exist to cause universal pain?  Or, can it be a force for good?

Professor Rosemary Batt of Cornell set out to answer these questions and to see if HR matters.  More details?  She wanted to know if high-involvement HR practices impacted quit rates along with sales growth.  If you’re curious and like even more details, check out the article here.

Her Grand Theory! 

Some definitions are in order.  First, high-involvement HR systems employ three specific strategies.  They involve hiring smart, educated people.  These HR systems also allow employee discretion and teamwork to learn and solve customer problems. Next, these HR systems are incentive based. This means that they pay well, offer job security, and on-going training while avoiding excessive micromanagement and electronic monitoring. 

The Prof says that when those types of HR practices are used, employees will know their products and customers better and will generate more sales.  Let’s give some snap-shots of her deeper logic below. 

When HR goes, specifically, after educated and smart people, there’s a corresponding belief that these people can integrate product details and features in a way that is more satisfying to the customer.  When HR allows and encourages these smart people some level of autonomy and discretion, they can respond with more immediacy to customer demands.  And, yeah, customers like that.  In addition, when HR encourages collaboration and teamwork among smart employees, everyone tends to get smarter.  This collaboration allows for better customer solutions, which, of course, impacts customer buying decisions.  Translation?!?!  More sales!

The Samples and Measures—

Professor Batt and her team focused on call centers and, in particular, customer service and sales representatives at these call centers.  Her data came from interviews and surveys of a nationally representative sample.  To get at these high-involvement HR systems, she captured such measures as: number of years of formal education, the number of years of formal and on-the-job training, wage rates, ongoing training opportunities, perceptions of job security, and the presence of performance monitoring and so on. Then, she examined how these variables and measures influenced annual quit rates at these call centers and the percent change in sales. 

Let’s Open the Kimono!

The results are in.  HR, does, indeed, matter.  So, stop making fun of them.  The results indicated that high-involvement HR practices had a direct influence on quit rates along with sales figures.  In particular, those call centers that employed high-involvement HR practices had lower quit rates and higher sales than those customer service and sales centers that didn’t put to use these progressive HR practices. 

Through a statistical test called mediation, she also found in-direct effect and it goes something like this.  Cool HR practices partially affect sales through quit rates.  Essentially, employees in cool HR systems (who doesn’t like some autonomy and independence!) feel more attached to the organization.  They don’t want to quit!  They, in turn, develop closer and more intimate relationships with their customers.  Think about it.  When someone quits, someone needs to be hired.  There’s a high learning curve and they won’t be able to sell to customers as well, at least initially. 

Now, we’re not saying that one should go and give their HR colleague a big hug.  After all, that might be sexual harassment.  But, just maybe, we should cut them all a break because they seem to matter after all. 

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Written by Jay

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