HR a Profit Center? Seriously!

For years, I’ve read articles about the human resource (HR) department as a “revenue center.” They go something like, “We built this program and extrapolated some nebulous ROI and look how valuable we are – I swear.”

The issue I have is that saving money is bottom-line and making money (a.k.a. revenue) is top-line. So instead of boring you with more rhetorical strategies regarding the term “revenue” let’s use the term as intended and change the approach.

I believe the future of HR lies in the division’s ability to add actual top-line revenue and here are a few ways it could be accomplished:

Recruiting

Until the internal recruiting division of a  company begins to sell candidates to other companies  they’ll never truly understand the candidate marketplace or fully eliminate the cost of external agencies. Also, if TA  brought in revenue it could manage its own budgets and external relationships as a strategic P&L activity, i.e. it would give them the freedom to control their activities without worrying so much about their spending.

Consulting

The HR division is constantly arguing about how valuable its  service is, and I agree, but what is your department doing to bring in revenue and prove the value of this service? (Remember, value is based on what someone is willing to pay.)

There are companies right in your backyard that would pay you (or at least partner with you) to build a better, more sophisticated HR function — non-competing, complimentary, cooperative businesses. Think “open-source HR” for a fee.

Tip: Start at home. Build a beta test program and use it internally. Share the results with a neighboring company and partner for more results.

Speaking

Most large companies have chief people officer types. Today, these individuals are some of the most sought after speakers around. There are HR conferences happening all over the world. So, another option to create HR revenue is to “loan” them out for a speaking fee.

Overcoming the objections

I know what many of you are thinking: “There are big potential ethical issues” or “I don’t want my executives giving away our secrets” or “who would buy our leftover candidates?” Well, let’s take a moment to break down each potential roadblock.

Ethical Issues

There is the possibility that your HR department could exploit some of these sales opportunities to benefit themselves (from selling to another company) instead of doing their own company’s important HR work. Like any other division, the principal-agent issue is always looming. Leadership will be responsible for framing the measurements and compensation to reflect the overall business objectives.

Secrets

Ideas are barely worth the keyboard they’re typed on. Execution is everything! If your department has been attacking a certain problem and it’s working, share. You’re likely light years ahead of your competition and sharing the idea won’t hurt you.

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On the contrary, it will help. First, it helps raise the industry. Second, your company begins to become a “thought leader” and every company wants that. And last, by the time your competitors figure out what you’re currently doing, you’ll be off to the next, better idea.

Recruiting

It is a fallacy to believe that sending an applicant to a different or even competing company would be a future disadvantage to your company. Or, that the other company would reject the candidate simply because it’s coming from you.

You may have a director role available and have an absolutely excellent vice president from a competing company who’s interested. There could be some timing, location, or compensation issue which eliminates the individual from the opportunity. This hardly disqualifies his or her excellence as a candidate. Partnering with a competing or cooperative company to make an introduction for a fee is hardly unethical or detrimental to your company. You can’t keep everyone for yourself and people and organizations develop at different rates so why not help all parties?

I realize that what I’m suggesting is a giant shift from HR today and it would take a different kind of employee to handle the ambiguity of these changes. That said, I believe the HR world has developed and is developing some of the best employees around and if anyone can do it – we can.

There are still some obvious questions that need to be answered:

  • What can HR sell that can make the company money?
  • To whom can it sell?
  • And should it sell anything at all?

I’m genuinely interested in reading your comments (post tem below) about this topic and I look forward to continuing the conversation.

Anthony Caridi is division manager at QTSI, a Qualitec company, based in Houston. The company specializes in placing professionals in the oil and gas industry.

He is an ex-professional athlete turned entrepreneurial academic.

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12 Comments on “HR a Profit Center? Seriously!

  1. Anthony, these are hard facts and it will take a while for organizations to think in this direction. However, this is how things ought to be!

  2. I’m horrified. While I applaud the idea of wanting to generate income for your company, surely this will take time, effort and resources away from HR’s core function in the organisation? It will also move focus away from the organisation’s core goals. I can forsee a situation where a manager looks for support to resolve a complex staff issue, only to be told that selling the latest exec to a third party company has priority!

    1. If HR generated revenue they’d have the budget to assign resources where necessary – complex staff issue or otherwise. HR could use their budget to grow whatever department needs the most help.

      1. If my business is selling widgets or widget services, the last thing I need is my HR department putting all it’s efforts into flogging their HR services to my competitors! I want them helping me to sell my widgets or widget services. That’s why I employ them.

        1. I appreciate your reply and your enthusiasm. I’m basing my recommendation on what I like to call Effort Wake, i.e. During the process of completing some core activity – the exhaust of those activities yield some difficult-to-quantify valuable knowledge we call “experience”. The key is monetizing that experience. Most sales divisions already do this, they call it Market Intelligence, and they capitalize on it daily.

          Let me share the following real-life example to shed light on what I mean. A good friend of mine, let’s call her Sarah to protect the innocent, worked for a very large beverage manufacturer at this time. She was responsible for all logistics in the Southern United States. Her responsibilities are somewhat obvious 1) make sure the trucks are where they need to be when they need to be there and 2) reduce costs by optimizing the routes (less fuel, wear and tear, time, etc). After optimizing for a few years she found that no matter how she routed the trucks, there was always some leftover backhaul. Backhaul is when you have an empty truck on a return trip. She then began to call some of the smaller manufacturers along the backhaul route to sell shipping services. This is not a shipping company, remember, this is a beverage manufacturer. Over the course of the year, she took her logistics division from a cost center to a division that made (yes, real revenue) over $1,250,000. No flogging necessary.

          1. Thanks for the example, but this is hardly the same thing. I would be very concerned if my HR department told me they had done everything humanly possible for me with HR but wanted to ‘utilise’ their spare capacity and sell their services outside. I’d be thinking perhaps I had too much HR resource and either, look to use them elsewhere in the company, or look to making them redundant!

  3. Dumb idea. Have tried it and consulted to others thinking about it. HR is often the internal disrupter, to help create that competitive differentiation that must come from an organization’s only sustainable resource; people. Why would you want to sell that to the competition? Jax is right too – it is awfully distracting and revenues will need to be substantial for the boss to let that go. Lastly there are not too many internal HR folks that can sell either or consult and sell come to that, outside of their cozy internal sandbox.

    1. 1) Competitive differentiation is unique to the organization’s circumstances and resources. Sharing a framework of knowledge doesn’t change that, i.e. every consulting firm ever.
      2) You can split some of the functions up to be less distracting.
      3) Don’t sell HR folks short. Many I know would love the opportunity (and could do it).

      1. Hey Anthony thnx for the follow up. Here are some observation from having actually done what you are suggesting.

        An organization’s differentiation is solely what it’s people bring to it whether the co has an ore body, copyright, service or invention. Nothing exists, is discovered, made, designed without people – if you are good at it why despatch an ounce of that secret source? Sure there are process that are transferrable that may generate revenue but again any part of your secret is the thin end of the wedge that leads to just being competitive i.e. average.

        The acid test will be, come the crunch who gets priority the employer or the client. Don’t answer that – but that’s the end of your consulting relationship.

        Many HR folks would love the opportunity and do experiment while they are waiting for their next job – known as “shingle hangers” in the industry – and confuse the market and muddy the quality waters – 99% don’t stick at it because most can’t sell and/or lack the strategic currency and will never learn when they have the safety net of a 9 to 5. It takes up to five years to build a sustainable consulting practice and most employers given that pay back struggle to justify the ROI.

        Clients in my experience view internal HR departments selling services as one trick ponies selling the solution that they developed for XYZ co with no market wide or cross industry experience that they can draw on to bring us our own unique solution.

        It’s an attractive idea but in my practical experience has substantial challenges in reality.

        1. In order of viability I would rank them (easy to difficult) 1) Fee for speaking, 2) Recruiting, and 3) Consulting. To your point, HR starting an internal consulting firm would be painful.

  4. If HR shows its value, then it’s irrelevant that it becomes a profit center. When I see conversations about let’s make HR/Recruiting a profit center, generally it’s based on people not getting the traction, results and value through the eyes of business executives.

    Same with the comments we see saying HR needs a ‘seat at the table’ to be effective. If people produce the results and show the business value first, then business leaders don’t care it’s a cost vs profit center……and by default you won’t need to demand a seat, because you will be asked for your input.

  5. Hey Anthony,

    Nowadays hiring a good candidates are tough enough so using an customization ATS System one can ease the routine work. Use the relevant ATS that makes to acquire better talented candidates that will help the organization to earn more profits.

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