The human resources function is often not given the same level of support, funding, and priority by business leaders, especially those at early stage startups, yet there is ample evidence of its positive impact on businesses.
In this edition, I’ll provide evidence that proves investing in HR is good for business. I’ll also leave you with a set of questions to ask that will help position HR as a growth enabler for your business.
The Common Misconception about HR
Throughout my career, I’ve noticed that many startup leaders don’t fully appreciate how HR can contribute to business success. Founders and CEOs are usually laser-focused on product development, revenue generation, and financial health. It’s understandable—these elements directly impact your startup’s sustainability. But here’s the kicker: neglecting HR could be a costly oversight.
Why HR is Often Overlooked
There are three main reasons why HR doesn’t get the attention it deserves:
1. Myopic Vision from Leadership
Business leaders often concentrate on areas that directly impact revenue, like Sales and Product Development. In such environments, HR is frequently under-budgeted and relegated to administrative tasks.
2. HR’s Inability to Impact the Business
Unfortunately, many HR professionals lack the business acumen required to influence critical decisions. A 2017 study by Korn Ferry showed that 41% of Chief HR Officers (CHROs) struggle with business acumen. Without understanding the business, HR can’t contribute meaningfully to the company’s strategy.
3. HR Silo Thinking
A 2024 Human Capital Trends report by Deloitte revealed that only 10% of workers believe their HR department meets their specific needs. This disconnect often stems from HR focusing on its own agenda rather than aligning with business objectives.
The Cost of Ignoring HR
Ignoring HR can have dire consequences. A 2019 study by IBM and Josh Bersin found that companies with strong HR capabilities are:
- 2 to 2.5 times more likely to be profitable
- 1.5 to 4.5 times more likely to achieve revenue growth
- 1.8 to 6 times more likely to be innovative
Furthermore, companies with weak HR capabilities are 10 times less likely to innovate and rarely grow revenue faster than their competitors!
How to Build Strong HR Capabilities
Throwing money at HR isn’t the solution. The key is hiring an empowered HR leader who can hold themselves and others accountable. This leader should report directly to the CEO to ensure HR is aligned with the company’s strategic goals.
HR as a Growth Enabler
To position HR as a growth enabler, ask the following critical questions within your company
- What is our HR strategy, and how does it help the business meet its goals?
- What organizational structure is needed, and how can HR support it?
- What skills and behavioral profiles are required, and how can HR attract and retain these individuals?
- How can we build an efficient HR infrastructure that scales with growth?
- What data does HR need to provide valuable insights?
