Exploring HR as a Cost Center vs. Profit Center: How Does It Impact Your Career and Company?

Some big companies (especially in IT) treat HR as an internal profit center, with inter-departmental billings and targets. Other big companies and most SMBs treat HR as a cost center where it is expected to provide services on demand, more akin to a homemaker role.

There might be positives and negatives about both approaches.

Some questions that experienced HR professionals could help with:

1. How different is the internal HRD structure in both cases?

2. Are the skill sets for jobs in both scenarios different? How easy is it to adapt from one to the other?

3. Are pay scales different?

4. Are stress levels different?

5. Is the nature, extent, and speed of personal growth different?

6. How does this difference affect the organization as a whole? Are there any case studies on an organization shifting from one mode to another?

7. How is HRD's value addition measured/estimated in both cases?

8. How different are interpersonal relations within HRD in the two modes?

9. How different are the relations between HRD and other departments?

10. How does the above affect relations between individuals?

Thanks,

A R Eclexys

Cost center is simply providing a product/service, calculating the cost of production, adding a normal profit margin to arrive at the final figure. Here one may tolerate inefficient manpower/tech/processes.

The profit center approach is more in tune with the times; "market" serves as a good correction mechanism so that people are forced to look at the good performers and strive to emulate them or perish. However, it may not fit in all companies per se.

Surya

Thanks, but they are not the answers to the questions in the above post. There are examples of HR being both a profit center and HR being a cost center in large IT companies. Their experiences, as gauged in casual conversation, are different enough to enlighten the HR community in general.