If accountants ran HR...
Why do so few people understand the fundamental importance of a
healthy bottom line?
Every company needs to earn more money than it spends (even
non-profits need to produce “net capital”).
The art of managing people looks like the science of accounting
It sounds simple enough, right? Accountants understand to improve the
bottom line a business must do one of two things: 1) increase top line
revenue; or, 2) reduce expenses.
And to produce the largest and fastest positive impact, every
business should try to do both.
Nothing new here. So, why isn’t this equation more infused into the
DNA of every organization?
For a company to achieve its full profit potential, its subunits
(departments, divisions, geographical locations) should each contribute
to the whole by performing well via their own subset profit and loss
Taken to its natural extension, this thinking will suggest every
employee in the company must also be “profitable.”
Imagine for a moment that floating above the head of each worker is a
virtual screen showing his or her personal P&L statement.
This screen will show the total financial value added by the
individual minus all of the costs associated with that employee,
resulting in a personal bottom line that is either positive or negative.
Do many employees generate more financial value than they cost? Some
For example, the personal P&Ls of sales people and those whose time
is billed directly to clients would be easy to calculate - and a
chronically negative bottom line in these cases would not only be
unusual, it would be cause for termination.
With most other categories of employees the math is less
straightforward; and yet, isn’t this personal P&L concept a fair
question to apply to everyone receiving a paycheck?
When an employee we’ll call “Simon” (non-sales) was hired, it was
because management believed hiring Simon was a profitable decision.
Businesses don’t hire people and carry the attendant expenses
(especially in our current economy) just for fun.
Simon was hired because somebody concluded he would bring the company
more value than cost.
Were they right? Simon might think so, based on the fact that he is
liked by management and gets along well with co-workers, but would an
accountant looking at the bare numbers agree?
Let’s evaluate Simon’s personal P&L statement to quantify what he’s
bringing to the company and what he’s taking away. It’s important to see
a net positive impact, because just as no company can exist for long
without profit, no employee can expect to remain employed forever
without making a net positive value contribution.
Unfortunately, when we do the math Simon looks pretty pathetic; and
he’s not alone. His personal P&L is representative of the vast majority
of workers worldwide who aren’t directly involved in sales, and who
don’t bill their time directly to clients.
So how can Simon improve his personal P&L? He can uncover or even
create hidden and unexpected dollars that are commonly overlooked by
management, and are almost always missed by the average employee.
If Simon can learn what to look for and how to do his job in a
broader financial context to make more of a hard-dollar impact on his
company, then this analysis would turn out much more favourably for
him-and his employer.
Employees can no longer afford to ignore any possibility for
profit-enhancement. We must all learn and implement new methods to
further the fiscal health of our organizations, and help those whom we
manage to do the same.
The art of managing people is necessarily (in an atmosphere of
thinning profits) looking more like the science of accounting every day.
So what will become of the HR professional’s role on this new,
financially-oriented playing field?
Traditionally, HR professionals fill a role considered by their
accounting colleagues to be somewhat “touchy-feely.” Some would say
those in HR aren’t as sensible or practical in their management methods
as number-crunches would be; and that they’re sometimes too soft in
their analyses and decisions.
After all, to an accountant, most hiring/promotion/bonus/termination
decisions are just open-and-shut questions of how much value people
create versus how much they cost.
And at times it can-and should-be no more complicated than that.
In their defence, however, our friends in human resources must
consider a wider spectrum of personnel issues, including potential
employees’ background checks, their ability to communicate with others,
to be team players, to interface with customers, not to mention their
work histories and experience levels.
Attention must also be paid to the organization’s compliance with
state and federal employment laws and notice requirements.
There is a lot more to hiring, managing and especially terminating an
employee than anyone in accounting would ever want to think about.
Truthfully, you don’t want that job. And besides, these days HR
professionals already are learning they, too, must drive profitability
through people, and that they can at times do that best when they think
and manage more like accountants.
This is because, at the end of the workday, they know interpersonal
skills and impressive resumes alone aren’t enough to justify an
employment position unless those proficiencies are complemented by
If accountants ran HR-or better still, if HR professionals learned to
think more like accountants-we might well see more in the way of
decreasing expenses and increasing revenues. Your job is to help them do
Now, what would life be like if HR ran the accounting department? We
will never know, because you don’t want their job any more than they
want yours. (Sales and Marketing.com)
Larry Myler is author of “Indispensable By Monday: Learn the
Profit-Producing Behaviours That Will Help Your Company-and Yourself,”
and CEO of By Monday.