Honey Anyone? A Strategic Look at the People Numbers
Whether or not you like honey, you probably know that honey bees live in large well-organized groups. As social (versus solitary) insects, they engage in complex tasks like delegating their workload, communicating clearly, building a nest, keeping a (compound) eye on environmental changes, collecting food, rearing the brood and defending against invading forces.
That’s a lot of work… so honey bees develop a hierarchy comprising workers, drones, and a queen – an organizational chart. Each member has a definite task to perform – a job description. Still, surviving and reproducing take the combined efforts of the entire colony.
Honey bees don’t have to keep a set of accounts. But your business does which means you have valuable data on your people, their roles and your organization. Leaders are charged with managing the challenges and opportunities associated with your team and it’s smart to make use of that data.
In fact, business leaders are increasingly making personnel decisions based on ‘the numbers’. Accountants are uniquely positioned to help leaders access and interpret those numbers. Here are some business opportunities arising from personnel data:
1) Human Resource (HR)
An easy place to start. How much are you currently investing in HR? On the face of it, this refers to the payroll costs but training and HR systems should be included. HR investment can be expressed as a percentage of revenue or profit. And how is it changing? A large increase in HR investment while revenue stays the same implies a decrease in productivity.
2) Human Resource Structure
We can drill deeper into the components of the workforce. What proportion of HR spend is on middle management? Or factory labor? Or sales? Or marketing? Or customer relations? Are you satisfied you are getting value for your HR investment in these areas?
3) HR Budgeting
Businesses need to figure out how they invest in HR in the coming months and years. How will you fill critical vacancies and at what cost? Filling roles through internal promotions can have very different financial implications than hiring from outside. Modelling this will help management to make critical decisions.
4) Retaining Talent
It is easy to calculate employee churn rates, that is, the number of employees who leave voluntarily as a percentage of the total workforce. Is management comfortable with these numbers and what is the trend?
5) HR Risk Analysis
A large workforce implies some business risk which will vary based on certain contractual terms. Some of this risk can be mitigated by hiring contractors. What is the breakdown of employees / contractors and what is your risk profile?
6) Professional Development Investment
How much are you investing in training and what are you getting in return? Does this vary by employee group? What would happen if you doubled your investment? Or halved it?
Accessing this information may take some time at first but can then be rolled into periodic reports for further analysis. That will result in formulation of sensible HR strategy.
Here’s the irony: almost all leaders will say that ‘our people are our most important asset’ or words to that effect. But many have no sense of how to measure the impact of changes in HR strategy. How many public company annual reports have you seen with a lot of information on human capital?
We recommend clients get serious about understanding their workforce based on the numbers. The businesses who do so will taste sweet success … just like those honey bees!!