You’ve Gotta Count the Beans: ROI and the Measurement

By Janie Warner

Everywhere we turn these days, it seems the economic outlook is in debate. Experts point to conflicting data showing exceptionally low unemployment numbers (good) while also showing stagnant wages (bad). We see inflation rates have stabilized (good) but also reports of record high credit card debt (bad). In our HR world, we have the unenviable job of balancing the needs of the business with the needs/desires of our workforce. Add to that the extreme competition for skilled talent, and the challenge becomes even greater.

As a science, the study of Human Resources typically does not include a requirement for business accounting. While it is mentioned in many undergraduate degree programs, it is almost never mentioned in graduate programs. When it comes to the business side of HR, as professionals we are not as prepared as we need to be to adequately address cost drivers, specific return benchmarks, and how to truly measure bottom line success. 

Several years ago, a business consultant created a presentation to teach non-financial managers how business leaders measured assets, liabilities, and profit. Acronyms like EBITDA, P&L, ALM were all foreign to many, and he helped explain them by using a simple method to illustrate how the “bean counters count the beans.” He used all kinds of beans in giant bowls and would move them from bowl to bowl to show how costs were allocated. He would even throw jellybeans into the audience to show how often money was wasted. It was fascinating to watch, and it drove home his point: YOU GOTTA COUNT THE BEANS!

How does HR meet this directive? We talk often about what we perceive to be the “return on investment” (or ROI) on this program or that program. But we are all too often stumped by how to truly measure this important business tool. Why is that?

First of all, not all HR initiatives can be directly tied to an investment strategy. Wellness programs are a good example. These programs are important – for many reasons – in the workplace. We know a healthy workforce is a happier workforce – but what does happiness mean to the CFO? Is there a line item that shows the value of employee happiness? Probably not. However, we have to follow the line of the employee life cycle to show true return to the bottom line. 

Wellness programs often tout a decrease in insurance premiums over time. But that is tricky since some illnesses, injuries and conditions will not be improved by any wellness initiative. Year over year, there may be reduced costs associated with medical expense claims, but there may not be a big return in the short term. Maybe we’re measuring the wrong thing!

Consider this: Healthier employees equal happier employees. Happier employees are more engaged. A more engaged workforce tends to have lower absenteeism. Lower absenteeism from an engaged workforce will equal greater productivity. Greater productivity equals higher output, improved service, and lower risk. Now wellness sounds like a great investment! 

Human Resources has long been assigned the role of the “people persons.” Somehow our profession has been relegated to party planners and paper pushers and often left out of important business decisions. HR professionals have spent endless hours trying to figure out how to get a “seat at the table” in the hope that our voice in decision-making will elevate our importance. The thing that will get us to that executive table more often is being seen as valuable as RISK managers. And RISK management after all is a keystone of all business. Everything decided at the corporate level is measured by the amount of risk exposure the company accepts when making those decisions. How much more do HR initiatives and decisions have their origins in managing risk?

Example: Recruitment has risk exposure – hiring the right people, at the right time, at the right compensation reduces the risk of loss of business continuity. But when recruitment is done poorly, the risk increases exponentially.

A second example: Retention also has risk exposure – keeping employees engaged, paying them not just fairly but competitively and giving them opportunity for career and financial growth reduces the risk of turnover and, thus, loss of business knowledge and reduced productivity.

A third example: Benefits has a tremendous risk exposure – not just financially in terms of what we pay on behalf of the employee, but what it says to current and potential employees that helps us recruit and retain our best talent. When done well, our benefits platforms can boost our ability to recruit the best and brightest and then keep them long-term to help our organizations grow.

So, what does all this mean for the HR professional and the people to whom HR departments report? It means there must be a greater focus on hiring more business-savvy HR executives who understand how businesses make money and how they measure bottom line success. There must be a push to require current HR pros to expand their business acumen through formal study (university/college/online) and through mentorship. It is no longer enough to understand only the “people business.” We MUST improve our understanding of the business of business.

Because ultimately, at the end of the day, we’ve just gotta count the beans!