Human Resource as a Cost and Profit Center

Human Resource as a Cost and Profit Center

In a highly competitive business environment, responsiveness to disruptive changes has been the core competency in every organization, which separates losers from winners. In the same breath, the Human Resources department has been trying to balance between being a cost center and a profit center. The general responsibilities of the HR department include hiring the right people, addressing management and employee concerns, establishing a compensation structure, and ensuring workplace safety and compliance with employment laws (Kaufman & Miller, 2011). As a cost center, HR measures transactional and tangible items such as the number of trained employees, the number of days an employee has been sick in a year, cost per hire, and headcount.

In addition to the general responsibilities of the Human Resources department, the tangible assets measured by HR only reflect the amount of money the organization has invested to maintain its human assets. For instance, HR might propose to the executives the need for hourly incentives, investments towards employee rewards, and strategic training and recruiting processes as opportunities for creating the best organizational practices in favor of employees (Becker et al., 2001). By doing this, the HR department is seen as one that only spends rather than creating strategies through which such investments will increase profitability and productivity.

At the same time, the Human Resources department can change its image and become a profit center rather than a cost center by ensuring its practices focus on enhancing business results. As a profit center, HR practitioners identify work systems that could potentially create a high-performance workforce, which enables the company to compete and excel in the workplace (Bannerman, 2003). For instance, HR uses recognition, rewards, benefits, and pay practices to create a high-performance system that has both collective and independent effects on the organization’s value, profitability, and performance.

Rather than accepting the role of an overhead function, which has little measurable impact on the organization, HR leaders should employ strategies that focus on meeting and winning bottom-line results. A good example is the manager of Oakland A, a major baseball league, who used sabermetrics in the recruitment of players (Sullivan, 2016). Such strategies contribute to the organization’s revenue by adding a results-oriented focus, such as recruitment and maintenance of talent. Moreover, by retaining and recruiting qualified personnel, HR can increase the organization’s productivity while reducing costs.

References

Bannerman, B. (2003). Making HR a profit centre: current technological advancements make it possible for human resource departments to play a strategic role in managing a company’s key assets and people.(Human Resources). Financial Executive, 19(4), 60-62.

Becker, B. E., Huselid, M. A., & Ulrich, D. (2001). The HR scorecard: Linking people, strategy, and performance. Harvard Business Press.

Kaufman, B. E., & Miller, B. I. (2011). The firm’s choice of HRM practices: Economics meets strategic human resource management. Ilr Review, 64(3), 526-557.

Sullivan, J. (2016). Can HR evolve to become the# 1 business impact function? Workforce Solutions Review, 7(1), 14-17.

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Unit 3 DB: The NEW HR – Cost Center versus Profit CenterUnit 3 DB: The NEW HR – Cost Center versus Profit Center
Traditionally, HR has focused on the costs associated with each specific task section, such as advertising or filling an open position. HR has traditionally been considered the one department solely focused on how to save money. Today, HR has reordered that focus and included the HR best practices that generate profit through increased productivity and revenue.

Explain how HR can be both a cost center and a profit center. Use data and examples to prove your theories.
In response to your peers, discuss the ways HR has transitioned to the New HR Profit Center label and why that impacts an organization’s competitive advantage. Also, include examples of areas that allow HR to generate increased productivity and revenue.