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The Strategic Importance of Investing in the HR Department

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HR department lives at the heart of the organization and often determines the success or failure of an organization. The Human Resources team plays a vital role in attracting, hiring, developing, managing, and motivating talent at a company. They are also the glue that holds the company together, ensuring that correct processes are being followed – and that’s why the investing in the HR department is essential.

For that reason, investing in your HR department is a strategic decision that can unlock advantages that drive growth and ensure long-term profitability. Ensuring not only that the department is staffed with top talent, but also has enough resources for professional development and the programs they need to run – as well as being heard within the organization, is vital to your company’s success

At Wishlist, we get to partner with HR professionals from various types of organizations, so we know a thing or two about the key role they play in company growth and competitiveness. Let’s look at some of their biggest areas of impact.

Attracting And Retaining Talent:

If you give a good idea to a mediocre team, they will screw it up. If you give a mediocre idea to a brilliant team, they will either fix it or throw it away and come up with something better. - Ed Catmull, Creativity, Inc.

Your Human Resources department often determines the level of talent that joins and stays at your organization. This, in turn, determines the quality of the output of your workforce, which directly affects the bottom line.

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HR professionals are the very first touch point your job candidates have with your company. They create first impressions, set expectations, represent the team culture, and curate an experience that either makes the candidate excited about this opportunity – or results in being their plan B.

Human Resources are also the ones who work on programs that engage and retain that talent, saving the company hundreds of thousands of dollars because employee churn is expensive and disruptive. Research shows a strong relationship between talent retention & development programs and employee motivation, job satisfaction, and loyalty to the company – which results in higher productivity, customer satisfaction, and ultimately, profits.

Driving Innovation:

2007 study by Paladino on what drives innovation and product success, suggests that investing in Human Resources is an important factor in that equation. It argues that it has more effect on innovation and the bottom line than direct investment into the provision of customer value.

This isn’t surprising given the significant impact HR can have over the company’s talent. The better the talent, the more innovation the company should expect, and the better the level of products and services – and therefore true, sustainable customer satisfaction, again proving why investing in your HR department necessary. 

In fact, this study demonstrates the essential role Human Resources play in either encouraging or obstructing corporate entrepreneurship. A better-resourced HR department is more likely to create a creative, innovative environment – boosting the company’s competitiveness.

Enhancing Firm Performance And Competitiveness:

Research shows a relationship between Human Resources capital and company performance. A better-staffed and resourced HR department is more equipped to improve employee engagement and productivity, affecting the bottom line. Company performance is also linked to efficient process design, which we will explore in the next section.

There have also been studies demonstrating the link between Human Resources quality and how competitive its workforce is – therefore, affecting company performance too. This is also not surprising as better-rated workplaces attract (and retain) better talent, making their employers more effective and competitive. 

This could be one of those chicken and egg problems if it wasn’t for HR. Investing in that department and providing them with more resources drives the needle for both.

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Governance Design:

A key function that cannot be overlooked is the creation and optimization of corporate governance mechanisms. Without strategic alignment – or the ability to adapt to the changing work landscape (e.g. hybrid and remote workplaces), companies end up wasting time and resources on inefficient processes.

Research demonstrates that relationship: better corporate governance mechanisms lead to increased company efficiency and performance. Investment in the HR department is a strategic move into the agile, well-oiled machine territory – resulting in optimized resource allocation.

Informed Decision-Making:

Investing in the HR department enables data-driven decision-making. By tracking and analyzing HR metrics, companies can identify areas of improvement, align HR strategies with business objectives, and make informed decisions regarding talent acquisition, development, and succession planning.

All of this trickles down into effective and optimized resource allocation, better company performance and innovation, increased competitiveness, and ultimately, a boost to the bottom line.

Investing In Your HR Department: What That Looks Like

Investing in your HR department  can mean different things to various people, so let’s explore the different avenues here.

Investing In The Team:

1. Headcount

Make sure that the team is adequately staffed.

2. Hiring the best talent

It may seem like it goes without saying but…better HR talent will hire better talent.

3. Professional development

Provide the resources and opportunities for your existing team to level up their skills.

Allocating Budget To HR Initiatives:

As we’ve already discussed, employee churn is expensive: the cost of hiring a new person and training them, the loss of productivity, the opportunity cost of distraction for the team, etc. 

Employee retention programs can help not only engage your employees (reducing churn) but also make them more productive and satisfied with their jobs. For this reason, it’s important to allocate adequate funds toward these money-saving and bottom-line-affecting initiatives.

One of the most value-for-money programs you can start for your company is to implement an equitable rewards and recognition program. Studies show that these programs tend to be the most cost-effective with significant ROI.

Wishlist Can Help You Design An Effective Recognition Program For Your Organization

We provide employers with personalized rewards and recognition options for every employee, helping build stronger bonds between managers and their teams. Our goal is to help you drive business outcomes by creating a sustainable shift in employee engagement – while relieving the administrative burden of such programs.

We will help you align the structure of your employee recognition program with company objectives, designing it for success. Ready to invest in your HR solutions and take your employee engagement to the next level? Click below to get your free demo!

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