"Role Of HR As A Profit Centre Instead Of A Cost Centre" - CiteHR
Dinesh Divekar
Business Mentor, Consultant And Trainer
Nashbramhall
Learning & Teaching Fellow (retired)
Leolingham2000
Management Consultant
Consultme
Agile Solutionist
Sujal_03
Performance Management, Surveys, Technical
Saurabh.shrivastav
Manaer Hr & Admn, Prexus Health India
Rajiv33
Hr Professional
Asokan Kunnathully
Senior Consultant - Hr Advisory Services
We.srinivasan
Hr Professional

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Hi folks,
I am looking for some inputs on "Role of HR as a Profit Centre instead of a Cost Centre". In case any specific initiatives have been taken by your organizations in this regard,a few lines on the same with the quantification methodology would be a great help. You need not mention the name of the organization if you do not desire the same.
Regards,
Lt Col V Srinivasan (Retd)
Reliance Fresh - HR
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This topic had been covered in 2007 at CiteHr at https://www.citehr.com/20429-hr-cost...it-centre.html and https://www.citehr.com/19793-hr-depa...t-centres.html
And no conclusion had been reached.
Have a nice day
Simhan
Dear Lt Col V Srinivasan (Retd),

To know whether HR is a profit centre or not, first use "Lev & Schwartz (L&S)" model to measure the human value. Once you do that it will be easy for you to find out whether HR is profit centre (or loss centre).

You may go through the following article:

Shyamal Majumdar: Valuing your human assets

Valuation of human assets is too advanced activity. To do that organisation requires good amount of maturity. Unless basics are set right, there is no point in going ahead with these advanced concepts.

In my last 7 years, and especially in last 3 years wherein I started working independently, I have interacted with 500+ HR professionals or Training professionals. I often find that companies continue grapple with the issues for which our good old personnel department has answers. The name of the department changed from Personnel to HR but real transformation did not take place.

The real challenge in India is "Employee Empowerment". But of course that is altogether a different subject.

Anyway all the best to you for this HR intervention.

Thanks,

Dinesh V Divekar





My own answer to Lt. Col Sir - "Its a cost centre if human beings are seen as cost centres or Profit centre if the human beings are seen as source of Profit within the organization. Saurabh
HI to all
Since customers for HR are our own employees, It would be rather difficult to technically prove that HR is a profit center. Instead if other cost center are ready to absorb a minimum charges on every employee for service provided by HR then we eye a possibility of seeeing HR as a profit center.
Regards
Rajiv Krishnan
Focus on HR's dual role - that will essentially drive HR to be a profit center.
HR Deliveries through-
Role 1 - Managing HR as a cost center, through HR related measures and transaction processes
Role 2 - Driving organizational performance, through business measures and business performance processes
The following success enablers will guide through the process:
As-Is understanding
Clear understanding of HR resources, services, costs and processes.
Clarity of where we are, with respect to regional, national or Global benchmarks
Know the Customer, Market, Business
Clarity of Internal Customer priorities on services and standards
Comprehensive understanding of available options in technology, outsourcing and HR models
Clear understanding of business strategy and its linkage with HR
Build for the future
Future HR Strategy
Future HR Structure and Operating models
Future HR processes and Technology
Future HR Capabilities
Best regards...

MR.V.SRINIVASAN
HERE IS SOME USEFUL MATERIAL.
REGARDS
LEO LINGHAM
=================================
HR INITIATIVES
To show how effective HR practices can drive financial results, in
the retail business.
We take the FRONT END of the retail business.
which includes
1.RETAIL SALES - in dollars.
2.Cash Management
-track the cash being
disbursed and collected from each POS
from the start till end of each day.
3.Complete Visibility of Inventory
-update stock positions at
the floor after every sales on a
real-time basis.
4.Secure Credit Card Authorizations
5.Support for lay-by Transactions
6. Effectively handle all Sales Promotions
7.Stock Reconciliation
8.Handling customer returns.
 
9.CUSTOMER HANDLING
10.CUSTOMER SATISFACTION.
 
HERE , WE CAN
-train / fine tune the sales skills/ product knowledge
of the retail sales staff on all aspects of selling.
-put them on an incentive for 2 months.
 
[ THE PURPOSE OF THE INCENTIVES IS
TO PUT THE LEARNING INTO PRACTICE
AND REINFORCE IT ]
 
AT THE END OF 2 MONTHS, EVALUATE
 
-TOTAL SALES.
-SALES BY HOUR / BY DAY.
-SALES BY ITEM GROUP
-SALES BY POS
-SURVEY THE CUSTOMER SATISFACTION
==========================
 
Level 3 Evaluation - Transfer OF KNOWLEDGE/ SKILLS
Evaluations at this level attempt to answer the question of whether the
training has been transferred back to the job. This evaluation is typically
performed 6 weeks to 2 months after training. The evaluator would ask
questions such as "Are the newly acquired knowledge, skills or attitude being
used in the environment of the learner"? This evaluation represents the
truest assessment of a program's effectiveness . Careful planning
decisions are needed for this level of evaluation in terms of when to
evaluate, how to evaluate and how often to evaluate.
 
 
Evaluation questions for the SUPERVISOR / MANAGER
• Did the trainees put their learning into effect when back on the job?
• Were the relevant skills and knowledge used
• Was there noticeable and measurable change in the activity and
performance of the trainees when back in their roles?
• Was the change in behavior and new level of knowledge sustained?
• Would the trainee be able to transfer their learning to another person?
• Is the trainee aware of their change in behavior, knowledge, skill
level?
• Did the representative open each telephone customer dialog using his
or her name and department?
• Was the representative able to describe to you and categorize the
customer's objections as either misinformation or valid?
• Did the representative use the appropriate model answer in response
to each objection?
======================================
========================== ==========================
QUESTIONNAIRE FOR THE SUPERVISOR / MANAGER
TO CONDUCT THE LEVEL 3 POST TRAINING REVIEW.
FOR EACH OBSERVATION, RATE THE OBSERVATION
10 =outstanding performance of knowledge/ skills.
8 = very good performance of knowledge / skills.
6 = good performance of knowledge / skills.
4= average performance of knowledge / skills.
below 4 = poor performance of knowledge / skills.
[ for scores of 6, 4 , & below, list the areas that needs improvement]
============================================
HOW DID THE EMPLOYEE PERFORM IN THE FOLLOWING:
 
1.did he/she distinguish between the three selling situations (i.e. self-service,
self selection and full personal service)
2.did he/she identify the features of full personal service.
3.did he/she greet the customers in an appropriate manner.
4.did he/she recognise circumstances where customers should be
allowed to browse.
5. did he/she use the active listening skills to identify specific customer needs
6.did he/she identify the various means of opening a sale.
7. did he/she select the appropriate method of opening a sale based on active
listening to the consumer.
8. did he/she demonstrate the thorough product knowledge when selling i.e.
benefits in use
functions
materials
origins
features
9. did he/she demonstrate the features of a product.
10.did he/she emphasis the functions/features/benefits of a product
appropriate to the needs of a particular consumer (through
information gained by active listening)
11.did he/she identify the various categories of objections (e.g. excuses)
identify appropriate counteraction to various types of objections
12. did he/she overcome the objections when dealing with personal sales
13.did he/she identify circumstances where complementary sales are
appropriate
14.did he/she present options to customers for trading up
15.did he/she recognise buying signals and the appropriate moment to close a
sale
16.did he/she select and utilise the appropriate technique for closing a sale in
a given situation.
 
17.
did he/she maintain courtesy throughout all stages of the sale
18. did he/she deal with customers in an ethical manner
19.did he/she implement the range of customer services e.g.
returns policy
delivery
cash and carry
after sales service
 
20.
did he/she use a cash register competently (including use of Bar Codes)
-use the correct procedures when handling cash transactions
-deal with the following procedures when handling cash:
refunds
voids
vouchers
floats
credit notes
*follow the correct procedures for validating cheques
*use the correct procedures for credit card transactions
*demonstrate secure procedures when handling payments.
21.CROSS SELLING/ SUGGESTION SELLING/ UPSELLING.
################################################## ####
 
LEVEL 4 ------SALES RESULTS
##############################################
NOW WE CAN APPLY TO THE BACK END
OF THE RETAIL SALES.
1.GOODS RECEIPTS.
2.INVENTORY CONTROL.
3.GOOD ISSUED.
4.STOCK TAKING.
5.COMMUNICATION
ETC ETC.
 
HERE , WE CAN
-train / fine tune the COMPETENCIES
-put them on an incentive for 2 months.
SET THE PERFORMANCE STANDARDS /METRICS.
 
[ THE PURPOSE OF THE INCENTIVES IS
TO PUT THE LEARNING INTO PRACTICE
AND REINFORCE IT ]
 
AT THE END OF 2 MONTHS, EVALUATE
AGAINST THE PERFORMANCE STANDARDS.
 
 
 
General Tips for Proving Impact
There are four basic ways to provide "dead bang proof" that a program works. Each is similar to the way a new drug gets tested or that new ads and new products are tested. The most effective ones are listed first.
1. Split sample contrast -- Use a split sample or a control group. Instead of applying a new HR program to the entire team or division, apply it to only half to demonstrate the relative impact of the program
2. Before and after contrast – Measure employee performance just prior to program implementation and again after implementation, show the contrast in performance.
3. Demonstrate a correlation -- Show a direct correlation between the increased usage of a tool by managers and employees and an increase in productivity, revenue or profit. Also demonstrate that when usage goes down, so does productivity
4. Results after implementation -- Show that employee performance is high immediately after the program is implemented (In this case you do not have "before" performance data (as in #2) for precise comparisons)
@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@
 
 
FINALLY WHAT HRM SHOULD DO
FOR A ''PROFIT CENTER '' POSITIONING.
 
1. HRM VISIBILITY --Make regular presentations about your successes/
contributions/ upcoming programs.
--------------------------------------------------------------------
2. HRM credibility – Sustain credibility by "living" the values you espouse, working
with others, establishing win-win relationships, being honest and taking initiative.
-----------------------------------------------------------------------
3. HRM Ability – Show you are able to organize, orchestrate, manage and deliver change initiatives.
which should aim at the HR objectives aligned with corporate objectives
-----------------------------------------------------------------------------------------
4. Cultivate the company’s culture – Deliberately weave the company’s values, mission,
vision and strategy into the HRM way into the business operation on day-to-day basis.
-------------------------------------------------------------------------------
5. Proficiency – Become capable in HR practices, theories and procedures. Commit to
learning and to delivering results based on what you learn from the company business.
-----------------------------------------------------------------------------------
6. Business knowledge – Understand how your company operates. Know its
technological, strategic, fi nancial, sales and marketing functions. Understand how
they interact with each other and with HR, so you can identify ways HR can help.
--------------------------------------------------------------------------------------------------
7. Strategic performance management -Identify and link the strategic ways
that HR can contribute to the company’s
overall strategy and success.
------------------------------------------------------------------------------------
8. HR SCORECARD - Identify and implement appropriate, accurate ways to measure the infl uence of
HR activities on performance drivers and corporate strategy.
----------------------------------------------------------------------------------------------
9. HRM IMPACT - Estimate the potential implications of a change in HR to identify patterns and
connections in seemingly unrelated data, and to determine the impact that this
change will have on the company’s profits.
------------------------------------------------------------------------------------------------
10.THE MOST IMPORTANT OF ALL - HR COMMUNICATION -
Communicate how HR affects overall strategy and profits, so senior management
can understand that the change in HR represents a positive return on investment.
================================================== ========
################################################## ###########
 
 


MR.V.SRINIVASAN
HERE IS SOME USEFUL MATERIAL.
REGARDS
LEO LINGHAM
=================================
HR INITIATIVES
To show how effective HR practices can drive financial results, in
the retail business.
We take the FRONT END of the retail business.
which includes
1.RETAIL SALES - in dollars.
2.Cash Management
-track the cash being
disbursed and collected from each POS
from the start till end of each day.
3.Complete Visibility of Inventory
-update stock positions at
the floor after every sales on a
real-time basis.
4.Secure Credit Card Authorizations
5.Support for lay-by Transactions
6. Effectively handle all Sales Promotions
7.Stock Reconciliation
8.Handling customer returns.
 
9.CUSTOMER HANDLING
10.CUSTOMER SATISFACTION.
 
HERE , WE CAN
-train / fine tune the sales skills/ product knowledge
of the retail sales staff on all aspects of selling.
-put them on an incentive for 2 months.
 
[ THE PURPOSE OF THE INCENTIVES IS
TO PUT THE LEARNING INTO PRACTICE
AND REINFORCE IT ]
 
AT THE END OF 2 MONTHS, EVALUATE
 
-TOTAL SALES.
-SALES BY HOUR / BY DAY.
-SALES BY ITEM GROUP
-SALES BY POS
-SURVEY THE CUSTOMER SATISFACTION
==========================
 
Level 3 Evaluation - Transfer OF KNOWLEDGE/ SKILLS
Evaluations at this level attempt to answer the question of whether the
training has been transferred back to the job. This evaluation is typically
performed 6 weeks to 2 months after training. The evaluator would ask
questions such as "Are the newly acquired knowledge, skills or attitude being
used in the environment of the learner"? This evaluation represents the
truest assessment of a program's effectiveness . Careful planning
decisions are needed for this level of evaluation in terms of when to
evaluate, how to evaluate and how often to evaluate.
 
 
Evaluation questions for the SUPERVISOR / MANAGER
• Did the trainees put their learning into effect when back on the job?
• Were the relevant skills and knowledge used
• Was there noticeable and measurable change in the activity and
performance of the trainees when back in their roles?
• Was the change in behavior and new level of knowledge sustained?
• Would the trainee be able to transfer their learning to another person?
• Is the trainee aware of their change in behavior, knowledge, skill
level?
• Did the representative open each telephone customer dialog using his
or her name and department?
• Was the representative able to describe to you and categorize the
customer's objections as either misinformation or valid?
• Did the representative use the appropriate model answer in response
to each objection?
======================================
========================== ==========================
QUESTIONNAIRE FOR THE SUPERVISOR / MANAGER
TO CONDUCT THE LEVEL 3 POST TRAINING REVIEW.
FOR EACH OBSERVATION, RATE THE OBSERVATION
10 =outstanding performance of knowledge/ skills.
8 = very good performance of knowledge / skills.
6 = good performance of knowledge / skills.
4= average performance of knowledge / skills.
below 4 = poor performance of knowledge / skills.
[ for scores of 6, 4 , & below, list the areas that needs improvement]
============================================
HOW DID THE EMPLOYEE PERFORM IN THE FOLLOWING:
 
1.did he/she distinguish between the three selling situations (i.e. self-service,
self selection and full personal service)
2.did he/she identify the features of full personal service.
3.did he/she greet the customers in an appropriate manner.
4.did he/she recognise circumstances where customers should be
allowed to browse.
5. did he/she use the active listening skills to identify specific customer needs
6.did he/she identify the various means of opening a sale.
7. did he/she select the appropriate method of opening a sale based on active
listening to the consumer.
8. did he/she demonstrate the thorough product knowledge when selling i.e.
benefits in use
functions
materials
origins
features
9. did he/she demonstrate the features of a product.
10.did he/she emphasis the functions/features/benefits of a product
appropriate to the needs of a particular consumer (through
information gained by active listening)
11.did he/she identify the various categories of objections (e.g. excuses)
identify appropriate counteraction to various types of objections
12. did he/she overcome the objections when dealing with personal sales
13.did he/she identify circumstances where complementary sales are
appropriate
14.did he/she present options to customers for trading up
15.did he/she recognise buying signals and the appropriate moment to close a
sale
16.did he/she select and utilise the appropriate technique for closing a sale in
a given situation.
 
17.
did he/she maintain courtesy throughout all stages of the sale
18. did he/she deal with customers in an ethical manner
19.did he/she implement the range of customer services e.g.
returns policy
delivery
cash and carry
after sales service
 
20.
did he/she use a cash register competently (including use of Bar Codes)
-use the correct procedures when handling cash transactions
-deal with the following procedures when handling cash:
refunds
voids
vouchers
floats
credit notes
*follow the correct procedures for validating cheques
*use the correct procedures for credit card transactions
*demonstrate secure procedures when handling payments.
21.CROSS SELLING/ SUGGESTION SELLING/ UPSELLING.
################################################## ####
 
LEVEL 4 ------SALES RESULTS
##############################################
NOW WE CAN APPLY TO THE BACK END
OF THE RETAIL SALES.
1.GOODS RECEIPTS.
2.INVENTORY CONTROL.
3.GOOD ISSUED.
4.STOCK TAKING.
5.COMMUNICATION
ETC ETC.
 
HERE , WE CAN
-train / fine tune the COMPETENCIES
-put them on an incentive for 2 months.
SET THE PERFORMANCE STANDARDS /METRICS.
 
[ THE PURPOSE OF THE INCENTIVES IS
TO PUT THE LEARNING INTO PRACTICE
AND REINFORCE IT ]
 
AT THE END OF 2 MONTHS, EVALUATE
AGAINST THE PERFORMANCE STANDARDS.
 
 
 
General Tips for Proving Impact
There are four basic ways to provide "dead bang proof" that a program works. Each is similar to the way a new drug gets tested or that new ads and new products are tested. The most effective ones are listed first.
1. Split sample contrast -- Use a split sample or a control group. Instead of applying a new HR program to the entire team or division, apply it to only half to demonstrate the relative impact of the program
2. Before and after contrast – Measure employee performance just prior to program implementation and again after implementation, show the contrast in performance.
3. Demonstrate a correlation -- Show a direct correlation between the increased usage of a tool by managers and employees and an increase in productivity, revenue or profit. Also demonstrate that when usage goes down, so does productivity
4. Results after implementation -- Show that employee performance is high immediately after the program is implemented (In this case you do not have "before" performance data (as in #2) for precise comparisons)
@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@
 
 
FINALLY WHAT HRM SHOULD DO
FOR A ''PROFIT CENTER '' POSITIONING.
 
1. HRM VISIBILITY --Make regular presentations about your successes/
contributions/ upcoming programs.
--------------------------------------------------------------------
2. HRM credibility – Sustain credibility by "living" the values you espouse, working
with others, establishing win-win relationships, being honest and taking initiative.
-----------------------------------------------------------------------
3. HRM Ability – Show you are able to organize, orchestrate, manage and deliver change initiatives.
which should aim at the HR objectives aligned with corporate objectives
-----------------------------------------------------------------------------------------
4. Cultivate the company’s culture – Deliberately weave the company’s values, mission,
vision and strategy into the HRM way into the business operation on day-to-day basis.
-------------------------------------------------------------------------------
5. Proficiency – Become capable in HR practices, theories and procedures. Commit to
learning and to delivering results based on what you learn from the company business.
-----------------------------------------------------------------------------------
6. Business knowledge – Understand how your company operates. Know its
technological, strategic, fi nancial, sales and marketing functions. Understand how
they interact with each other and with HR, so you can identify ways HR can help.
--------------------------------------------------------------------------------------------------
7. Strategic performance management -Identify and link the strategic ways
that HR can contribute to the company’s
overall strategy and success.
------------------------------------------------------------------------------------
8. HR SCORECARD - Identify and implement appropriate, accurate ways to measure the infl uence of
HR activities on performance drivers and corporate strategy.
----------------------------------------------------------------------------------------------
9. HRM IMPACT - Estimate the potential implications of a change in HR to identify patterns and
connections in seemingly unrelated data, and to determine the impact that this
change will have on the company’s profits.
------------------------------------------------------------------------------------------------
10.THE MOST IMPORTANT OF ALL - HR COMMUNICATION -
Communicate how HR affects overall strategy and profits, so senior management
can understand that the change in HR represents a positive return on investment.
================================================== ========
################################################## ###########

Dear Mr Srinivasan

Its a myth that HR is considered as a cost center. Yes manpower can be considered as an operational expense (this falls not in cost or profit center) though.
Eg House wives save a lot of income per household. cooking, washing, taking care of children and much more. This all comes at a cost if we hire extrenal agencies, eg food from hotel, sending children to creches. So she saves money and money saved is money earned. Imagine she gets paid monthly for doing all this work and a holiday on sunday which she is otherwise not entitled to.
Unfortulanetly this cost is not a part of our GDP. If included imagine the GDP no.
Similarly HR is difficult to be direct profit centeres however my research shows that they can be profit centeres in the following way
1. The income generated via employees need to be attributed to HR since they hire talent. Its an extremely difficult jo.
2. Retaining talent is a profit as its tough to hire a new candidate then make the loyalists stay.
3. ROI can be calculated in terms of HR audit to find the cost, profit and the operational HR expenses in a company. This gives a very fair idea in terms of black and white. There are companies now who add employees as a part of balance sheet.

Hope this suffices
Regards
Sonali Wagle

Prime Sponsor - Talentedge.com "Interactive Anywhere Learning". Executive courses from top reputed institutes like IIM, XLRI, MICA. View Courses
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