How will HR make us better?

I had a prospect recently ask me an important question, and indeed the right question. He asked, if I'd invested in an expensive HR leader a few years' ago, how would my organization be better off today?  The reason this is the right question is that if investments in HR don't yield a positive return on investment (ROI), should they be made at all? My MBA training says, no, they shouldn't be.

The research shows that, on average, high performing small and mid-sized companies spend more on HR than their lower-performing competitors (i4cp study). So what is HR doing to make those companies more profitable?

The answer falls into several categories:

1.  Opportunity Costs - when one small company waits longer than its competitors to invest in a HR resources, it probably doesn't mean the company has no HR function. It likely means the work that is being done is being done by committee. The committee often consists of the owner or operational leader, the administrative leader and the financial leader. If those leaders could be more effective at their jobs if not constrained by HR related tasks and issues, then the company might be better off. Examples might include a business owner investing many hours creating a performance review platform or a controller researching an HR compliance issue when a trained HR professional could do either much faster.

2. Targeted Expertise - another prospect once told me he didn't need HR help because his controller was a CPA. That's like saying I don't need a dentist because I have a doctor. If my tooth is hurting, my doctor may be able to help, but a dentist has more specialized knowledge - and vice versa for a cold or flu. A trained, experienced HR professional can help reduce the time it takes to arrive at a correct organizational diagnosis and develop an appropriate prescription for organizational aches and pains.

3. Priorities - when key HR initiatives are dependent on individuals in the organization whose primary roles are in other functional areas, HR initiatives often go unfinished. Frequently when I speak with companies who don't have a true HR function, they tell me lots of good ideas they've had but haven't had time to implement. A dedicated HR professional can help push those initiatives to the finish line. If they were worth putting on the list to begin with, they are perceived to have value by the leadership team (improved retention, improved engagement, quicker ramp-up in productivity, avoiding bad hires, etc.)

4. Risk Avoidance - this is the most tenuous argument, but it's not illegitimate - how many work comp claims/EEOC claims/unemployment claims, etc. might you have had if not for the programs initiated and managed by your skilled HR leader? Car insurance only has a positive ROI if you wreck your car. For those who have never wrecked, it's easy to feel that buying that insurance was not a good investment. But those who have wrecked know its value.

At the end of the day, if your organization could benefit from having a stronger, more capable, better trained workforce with a more efficient and user-friendly platform for finding, selecting, on-boarding, retaining, managing, evaluating and inspiring those workers, an HR professional can probably help. But feel free to measure that HR professional's performance against those standards.