- Bjork Group
How does great HR contribute to your organizations bottom line? What actions can you take that will have the greatest impact? How does a CFO or finance team quantify these costs and savings?
We know that great HR is critical to the success of your business, but how do you quantify where you're ahead and where you can improve? Take 5 minutes to complete this worksheet, the results may surpsise you. For the complete picture on planning your benefits in 2016 download our eBook.
How much did bad hires cost over the last 12 months? Use an average of 1:1 ratio of their annual pay. For example, an employee with a $50,000/year salary will cost $50,000.
How much did losing any good employees cost over the last 12 months? Again, use at least a 1:1 ratio.
What would be the bottom-line impact of improving total productivity by only 5%? Use 5% of total payroll. (For example: $1,000,000 x .05 = $50,000)
What is it costing you to keep poor employees? (Here’s the test: If they quit, would you be relieved or upset?) Use the impact they have on their entire team in your calculation. (For example: team payroll = $240,000 x .05 = $12,000)
What “bang for the buck” are you getting for any benefits paid? What if you improved that figure by 2%? (Use a benefits cost of 35% of payroll. For example: $350,000 x .02 = $7,000)
What added costs are you paying with your annual workers’ compensation modifier due to your risk management and return to work practices? (For example, a MOD of 1.2 means you pay more than your competition.)
Did you have to manage and/or settle even a low-level employee claim? (Statistically, 1 in 4 get sued every year with an average verdict of $250,000)
Add all of the above for your HR cost total:
Now for the fun part!
How much revenue will you have to bring in to put these HR dollars back into your pocket? Use at least a 3 to 1 ratio.
Total revenue required to cover HR costs:
This is what your HR practices are costing you at the most basic level. Roughly half of the exposure is “out of pocket” and the other half is “left on the table every day” What would you be willing to invest in time and dollars to reduce this number? Would you invest at least 1/10th this amount to start somewhere? As you consider your answer, ask yourself this question: What sales activities and work would you have to do to match that revenue total? (i.e. sell 100 new cars, build two homes, get 50 new patients, book five more installations, etc.)
Now that we've put a number to it, how can organizaitons positively contribute to the bottom line through great HR and Benefits?
