Want HR to Prove Its Worth? Just Make It a Profit Center

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There’s a global war for talent raging.

CEOs around the world see “human capital” as their No. 1 business challenge, says McKinsey.

So why don’t these same CEOs rank HR as a top function in their company? After all, HR is responsible for recruiting, engaging, rewarding, and retaining business-critical talent.

But in real life, HR gets no respect – ranking 8th or 9th in importance, according to separate studies by McKinsey and The Conference Board. The HR reputation spectrum usually ranges from being hated at worst to being ignored at best, and HR people know it.

Something’s wrong here.

Demonstrating the importance of HR

How can we demonstrate the vital importance of what HR does – or should be doing?

There’s a simple answer: Make HR a visible, responsible partner of the business it’s already part of. Challenge HR to make money and earn respect, or lose money and deserve no respect.

Those CEOs who rank HR 8th or 9th would pay a lot more attention if HR were a profit center, not a cost center. Generating revenue would quickly earn HR its rightful seat at the C-Table – alongside the CIO, COO, and CFO – and a lot higher ranking than 8th or 9th.

In the past, being given P&L revenue responsibility would scare the pants off HR. It just didn’t have the tools. But now employee-empowering HR operating systems are available, and management is waking up to HR’s importance.

As industry guru Josh Bersin says in his recent Predictions for 2016:

Two-thirds of workers feel overwhelmed by [today’s work culture], and companies aren’t sure what to do about it. So driving productivity and improving the work experience have risen to become top [organizational] priorities for HR.”

Time for HR to prove its strategic worth

The new HR performance management operating systems empower employees to get better at their jobs, reach higher to do things they’ve always wanted to do, improve leadership and management skills, make work and career more meaningful, and allow employees to make more money while increasing their professional passion and satisfaction.

Now that HR can be equipped with a powerful performance management OS, CEOs should challenge HR to generate revenue the same way, say, product development is challenged to generate revenue.

HR should embrace that challenge, eagerly. It’s about time HR got to prove its strategic worth, according to the HR leaders I talk to all the time.

Unlike the product development department, HR doesn’t create tangible products, but it does create a company’s prime sustainable advantage – its culture. At Haufe, we believe employees run companies. (Including ours – all Haufe’s leaders must run for election every year.)

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At the C-Table, the CEO leads the development of strategy. The COO expresses strategy through operations. The CIO expresses strategy through technology. The CFO expresses strategy financially. And HR expresses the company’s strategy through people. That’s equally important as the other C-Functions.

You have capital in your human capital

So here’s a solution for all those CEOs who worry about skills shortages and losing the global war for talent: Unleash HR! Give HR the right operating system to find, hire, engage, motivate, and retain the people who’ll make your company great, and HR will demonstrate its value by the most important business metric of all — how much money it’s making for the organization.

There’s a lot of capital in human capital, and HR is ready to prove it.


  • Shanil Kaderali

    Thank you for the article. it’s a fascinating topic. Do you know of any F500 companies that have HR as a profit center? I know a few that have had Talent Acquisition as a profit center but not all of the HR function.