How Can HR Drive Revenue Growth in a Small Auto Parts Company? Seeking Practical Advice

Dear Seniors,

I am looking after the Training and Development Department at a small automobile parts company. The Recruitment Head asked me to share how HR can generate revenue for the company.

HR's Role in Revenue Generation

I mentioned that HR can contribute to revenue generation by providing training to employees, implementing motivation training, capacity enhancement, and other development initiatives.

He has requested to measure production, sales, and revenue within a 2-3 month timeframe. How can I accomplish this task? I highlighted that trained employees tend to stay longer with the company. We have a timely performance evaluation system in place, which empowers employees. I create a training calendar based on identified training needs. Please provide your suggestions.

Regards,
Ashish

Conducting training in itself does not save revenue. You should have outcome-based training. For this, you need to study the systems and processes of each department, find out what costs are involved, and measure them. Any training program conducted should aim at cost reduction or maintaining costs at a certain level. It appears that numbers were not included in your reply. When I say numbers, I do not mean to ask how many training programs you conducted or how many persons were trained, but rather what the result of the training was within a specific timeframe.

Training on Motivation and Team Building

Training on motivation and team building is at times questionable. You need to integrate all these aspects into the systems and processes. These elements should also be ingrained in the company's culture.

Cost Identification in Supply Chain

Whether you are from an auto company or an auto component manufacturing company, have you identified the costs involved in the upstream and downstream supply chain? Are your training efforts aimed at reducing these costs?

Encouraging Self-Learning

Another way to generate revenue is by encouraging employees to self-learn. Many things can be learned by employees on their own. Why do they need someone else to train them? The role of the HR or Training Department is to measure competency and provide accreditation. Self-learning can save a lot of revenue for the company. However, implementing this is easier said than done. It requires significant organizational maturity and the availability of appropriate knowledge assets.

Examples of Outcome-Based or Cost-Based Training

Examples of outcome-based or cost-based training include:

- Sales: Sales training is conducted to improve the strike ratio from ____ to ____.
- Production: Production staff are trained to improve/maintain OEE from ____ to ____.
- Purchase: Procurement staff are trained to improve Inventory Turnover Ratio from ____ to ____ or maintain at ____ level.

In India, HR does not take much initiative in organizing outcome-based training. When I say outcome-based, I mean conducting training to reduce some cost. They may use a lot of HR jargon, but when it comes to operational costs, they fall short.

Just yesterday, I spoke with the Head of Training at a prominent FMCG company. We discussed training for FMCG salespersons. I mentioned that FMCG salespersons are part of the downstream supply chain and do not engage in direct selling. If you tell me the costs involved in the downstream supply chain, I can provide a training solution to reduce those costs. However, the training head did not agree with my approach. He preferred the idea of conducting simulations for the participants. HR professionals sometimes fail to understand that case studies, role-plays, games, and simulations are all training techniques, not the ultimate goals. The immaturity of HR becomes evident when a country like India does not have any company ranked in the top 25 supply chains worldwide.

Jai Ho India's HR!

Regards,
Dinesh V Divekar

The Role of HR in Revenue Generation

HR stands for Human Resources, similar to finance, equipment, raw material, etc. The HR department plays a crucial role in generating revenue, albeit indirectly, through the recruitment of a competent workforce. It implements rules and regulations to avoid manpower-related expenses and leaks, and truly acts as a neutral force between management and the workforce. Like electricity, one rupee saved is equivalent to one rupee earned!

Many a time, we lose sight of our goals, whether it is generating revenue or resources, by indulging in complex thinking instead of confining ourselves to simple basics or trying to innovate new concepts without verifying their relevance to the environment in which the business is operating.

Identifying the Right Talent

There may be many ways of generating revenues. You cannot make every employee go through a training program that reels off grand strategies of generating revenues and expect them to fill the sacks with money once they are out. Training cannot be the answer to every challenge if done mechanically or pedantically. Not every horse can be trained to run the race; only a few can. They are a breed apart.

Therefore, the first and arduous job of HR is to identify those with flair, aptitude, natural inclinations, and special skills, with a keen eye and ear to be able to put their mouth where the money is. Recruiting the right talent and relevant talent is the first step to begin the journey on the road that leads to revenues.

Steps to Generate Revenue

The second step may be identifying the means, methods, and tools of generating revenues, and the third step may be to hone the special talent of the identified class of employees, to harness these means, methods, and tools.

Regards,
B. Saikumar
HR & IR Advisor

HR as a Cost Center or Revenue Generator

HR in an industrial concern is generally perceived as a cost center unless it takes continuous steps to position itself otherwise. From a recruitment/retention perspective, two clear parameters are sometimes used: a year-to-year comparison of attrition rates at different levels and a similar comparison of the cost of recruitment. These, of course, are interdependent and also depend upon other HR initiatives as well as external factors.

But if you want to give figures, and such analysis supports your case, shout out! If it doesn't, not only HR but the whole company should be worried .

I thank Dinesh Divekar for answering your question to the point, especially with the emphasis on outcome-based training.

HR's Role in Revenue Generation

Traditionally, HR has been historically focused on cost-cutting. Lately, organizations are waking up to the fact that HR can contribute to revenue generation. This is because anyone can cut costs using arbitrary numbers during budget meetings. However, this can be a short-sighted measure as it can impact the culture of the organization in the long run.

HR has to understand what and who are the revenue generators of the organization. We all know average salespeople produce sales, and outstanding salespeople give much better results. If HR analyzes this well and implements measures, it can have an impact on the corporate goals.

As Dinesh pointed out, the Training & Development function must target its offerings so that they cover all aspects of revenue generation. In this light, Wal-Mart routinely makes it a part of pre-shift store meetings to ensure all employees are aware of which specific products produce the highest margins and revenue. This awareness allows employees to focus their sales and customer service efforts.

Another example is onboarding training for new joiners. On the first day, they clearly need to understand the importance of revenue generation, no matter what job they have. They also need to be informed about how their revenue generation/impact will be measured and rewarded.

HR must proactively use surveys and interviews, and define metrics for revenue generation. Additionally, they should have a process for rapidly identifying current problems and the barriers that restrict revenue generation.

Best Wishes,

Rajat Joshi

Outcomes of the technical (production in your case) training areas are easily measurable. You need to fix the problems or improvement areas, measure the current status, provide the training, and then measure the status after about 4-6 months. Though not directly related, a reduction in absenteeism saves revenue for the company. So, HR can organize suitable training/counseling for concerned employees to reduce absenteeism.

Outcomes of Managerial Training

Outcomes of the training in managerial areas can take longer for measurement. For example, training in Managing Employees. Now, one of the outcomes after such training could be a reduction in the attrition under the trained managers. That is a saving.

Outcomes of Behavioral Training

Outcomes of the training in behavioral areas are not measurable and by definition, outcomes are 'felt'. For example, training in presentation skills or in leadership or change management.

Regards,
Ketan T Bhatt

I fully agree with you when you say all the training needs to be outcome-based and cost-based. This is possible to some extent when you train the sales staff and measure the strike ratio, as well as with respect to production/inventory, etc.

Measuring Effectiveness of Management Development Programs

How do we measure the effectiveness of management development programs for senior management team members, given the significant costs involved in conducting these off-site programs such as leadership skills and change management? These programs may not directly contribute to the bottom line immediately, but as HR professionals, we need to be mindful and measure both the cost and efficacy.

Do advise.

Regards,
Vineeta

Management Development Programmes: Are They Effective?

Sometimes Management Development Programmes (MDP) are nothing but humbug. These programmes serve no purpose but to cater to the needs of HR or Training Managers who do not wish to study the operations of their organization and come up with research data. Each training program must be backed by organizational research data.

Prioritizing Measurable Trainings

Why conduct those trainings where it is not possible to measure their effectiveness? It is better to prioritize trainings with measurable outcomes. Measure the direct and indirect costs associated with each department and tailor each training program to reduce these costs.

The Necessity of Soft Skills Training

Many soft skills training can be learned on one's own. Why train engineers or diploma holders in communication skills or personality development? Is it a subject that needs to be taught?

Public Workshops and Cost Management

If public workshops are organized on subjects like leadership or change management, you may nominate senior management personnel for any workshop, but require them to pay the training charges themselves. Reimburse the training charges only if they can prove the learning effectiveness after six months to a year.

Cost-Saving Strategies in Training

To save on training costs, have managers present on topics like how teamwork helped in a project or how they handled conflicts in their departments. Each presentation should include the savings accrued by the company. With a library of presentation videos, a person with an average or above-average IQ should be able to grasp the particular skill being discussed.

Thanks,

Dinesh Divekar