How employee happiness impacts the traditional profit and loss.

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1 How employee happiness impacts the traditional profit and loss. the-happiness-index.com

2 People Analytics Building better business cases Measuring intangible assets in the boardroom If you ask any CEO or director what their company s most important asset is, the majority will say their people. Traditionally HR professionals have struggled to quickly and easily build an evidence based business case that influences their agenda in the boardroom. It s been difficult to provide metrics that can be regularly benchmarked and measured against targets. However, this need not be the case today is working to empower HR leaders by giving them the insights they need to influence key business decisions in the boardroom using bespoke pulse technology. In board meetings everywhere, the HR contribution all too often plays a minor role, compared to the perceived, more important areas such as finance and sales. This doesn t make sense. of business leaders are happy with the data HR is providing. (CIPD) of organisations thought their business was strong in the area of people analytics, despite 75% realising its importance. (Deloitte) Your people are the driving force behind all the marketing, distribution and operational elements that make up a successful business. They are the ones who create, buy into, and carry out the vision that helps businesses to succeed. In relation to the report, former Business Secretary, Vince Cable commented: It shows a poor understanding of the significance of people-related data Having a clearer view of the people in our workforces can only be a good thing; it could lift the lid on our productivity issues and the skills challenges that are preventing so many businesses from reaching their potential. To an investor, the failure to report potential threats that come from their human capital must also provide reason for concern. These intangible assets, your people and leaders, are after all the driving force behind your business. If you ask them whether they have a mechanism for measuring the impact of their most important asset, the majority will say they don t. They may have an annual employee engagement survey, but doing this once a year doesn t give organisations the ability to understand what is happening within the business at various - and possibly crucial points throughout the year. Recent research* found that one third of FTSE 100 companies, are failing to report on critical human resources issues, including all important employee turnover rates. And as such, there are key opportunities being missed by not adequately measuring a workforce s engagement, wellbeing and happiness. 14% 8% If business owners know that one of their most important assets is their people, why isn t HR taking centre stage? 8% of HR leaders are using any sort of analytics and people measurement tools. (CIPD) * Valuing Your Talent Partnership 2 How employee happiness impacts the traditional profit and loss 3

3 The link between employee happiness & organisational performance Introducing the 2nd P&L Reporting on your people and leaders Companies are becoming more aware of the business benefits associated with investing in making employees happier. A recent study from The University of Warwick shows that happy employees are 12% more productive in their work, demonstrating a direct link between happy employees and an increase in profits. By removing some of the fluff, innovations in HR technology provide an opportunity for HR departments to deliver concrete insight to the board, that can be used to create a structured and measurable approach to ensure employee happiness, and the positive impact it has on a business. The annual survey is dead it s all about real-time insights now A single snapshot of engagement once a year makes it almost impossible to take appropriate action in a timely manner, and will not help you preempt and resolve problems before they materialise. Feedback is often received and acted upon too late to make a difference to potentially unhappy employees, and an annual survey essentially leaves you working blind for the other 11 months of the year. With real-time and regular insight, you can decide what needs attention urgently, and also measure the success of your engagement initiatives as they are rolled out. In order to maximise business performance, you need to be on the pulse of your people s engagement with your company and its objectives throughout the year. Everyone that has a part to play in running a business will be familiar with the concept of the traditional Profit and Loss account, the all-important P&L. Businesses set their yearly targets and strategies around the P&L as it is a measure of the outputs of a business, and is great for tracking the financial aspects of the company. A profit and loss account is of course a recognised, tried and tested concise way of presenting the financial performance of a business. It cannot lie the truth is in the numbers. So, if it is that good why would you restrict such an excellent tool to just the accountants? Looking purely at the financial P&L to gauge the success of a business however produces a onedimensional view, and doesn t take into account the people element. To generate a 360-degree view, businesses should look at what we call the The 2nd P&L - a focus on People and Leadership and how this impacts on the more traditional P&L of a business. A 2nd P&L report looks at the performance of a key element of a business, say line management, and compares the current performance with the same period last year to provide a year on year comparison. As HR teams become savvier at implementing the insight that people analytics can deliver, this emerging concept is one that is likely to see growth in adoption by businesses. As word catches on about the benefit of incorporating people data in to profitability planning, there is no doubt HR analytics will play a larger role in boardroom discussions. The insight from The 2nd P&L generates an alternative return on investment, a concept called Return on People. By applying targets to key questions (on topics such as culture, vision and wellbeing) and tracking the performance of that question, companies are able to generate a figure that shows the Return on People. The new intelligence is starting to highlight the links between the traditional and 2nd P&L, uncovering clearer relationships between People and Profit, and Leadership and Loss. By using pulse technology to gauge metrics that shows performance in a financial year, HR teams can compare it to another year to show the percentage loss or gain. This then enables businesses to generate a second return on people figure by taking the current year s performance and comparing it with the target. 4 How employee happiness impacts the traditional profit and loss 5

4 Insights to guide strategic business decisions HR needs to lead the way in creating value and opportunities for growth With HR departments being placed under increasing pressures, how do they know their time and resource is being spent in the most effective way? That s where The 2nd P&L comes in. The 2nd P&L allows HR teams to identify where they need to spend their time in order to take advantage of opportunities and identify risks at their source before they escalate into larger issues. It allows HR teams to be proactive and achieve greater results by using their people in a smarter way. The concept of The 2nd P&L changes strategic thinking on culture and engagement. It provides the board with metrics that can be benchmarked and measured against targets which allows for prioritisation. It plays to the management mindset by being available on a regular basis and in real-time. By placing a target figure on key questions / core areas, HR professionals can remove the fluff and report to the boardroom and employees on tangible progress toward key goals. Companies need to understand (and appropriately convey to their key stakeholders) a true picture of their complete assets, including the people within the business who are at the epicentre of creating value and growth opportunities. Your people provide all your human capital and their sentiment, happiness and performance at work are most certainly linked to your organisational performance. The way you harness and retain this human capital and expertise is likely to be the core indicator of your business long-term growth. There s always been ambiguity over the true impact of staff turnover, morale and motivation in the boardroom, however the rise in instant intelligence allows companies to measure important things that haven t previously been measured including culture, leadership and vision as well as their definitive impact on the business financial performance. By developing a more holistic view of profit and loss, which includes the 2nd P&L businesses are better armed to protect themselves from risk, act faster to resolve issues that will boost performance. It will allow you to identify where you should spend the most time; focusing firmly on taking advantage of opportunities and identifying threats before they escalate. The board can combine 2nd P&L data with the traditional financial P&L to help them forecast, plan and prioritise the key actions they need to take in order to be more agile, effective, productive and make a real difference to the company performance. 6 How employee happiness impacts the traditional profit and loss 7

5 Generate a 2nd P&L for your business Tell us your thoughts on generating return on people or let us show you how simple gathering real-time people analytics can be. Contact us today to book your free demo and talk through your business employee engagement needs. Call us: us: hello@the-happiness-index.com Visit us online: the-happiness-index.com Tweet