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What Works: Build a Case for HR's Bottom-Line Impact

May 29, 2002
Related Topics: Featured Article

The next time you’re looking for a training video about human resources,workplace culture, and the bottom line, drive to your nearest video-rental storeand pick up a copy of Jerry Maguire. That’s right, skip the usual stuff aboutparadigms and fish markets, and get the 1996 release starring Tom Cruise, ReneeZellweger, and Cuba Gooding Jr.

In the movie, Cruise plays Maguire, a high-flying sports agent who startsfeeling that his work is too self-serving. Am I "just another shark in a suit?"he asks. Things reach a crisis point while he’s out of town on business. Hestays up all night, thinking, agonizing, sucking down coffee -- and writing amulti-page mission statement titled, "The Things We Think and Do Not Say: TheFuture of Our Business."

It’s an on-paper liberation, and Maguire makes copies for his 110colleagues. They politely take it, read it, and gulp hard. The "statement"takes shots at their business and calls for people to be more caring, morehumane. All of his coworkers (except Zellweger, who goes on to team up with him)begin to ostracize him. Eventually he gets his walking papers, and is left withjust one client, a wide receiver named Rod Tidwell (Gooding).

There are plenty of studies showing that investments to improve human resources end up increasing the overall worth of an organization.

Tidwell has no shortage of self-confidence and couldn’t care less aboutemotion-laden mission statements. What he wants from Maguire is a bettercontract and a fatter paycheck. In fact, his guiding mantra is just four words:"Show me the money!" He says it on the phone. He says it in the shower. Hesays it while dancing. He practically grabs Maguire by the collar and says, "It’sall about the bottom line, stupid." Show me the money!

In all of my years working with organizations, I’ve never seen CEOs, CFOs,or accountants dancing on their desks shouting, "Show me the money!" But I’vehad the sense that they’re saying it inside, and some have grabbed me by thefigurative collar and said, "That stuff about improving the workplace cultureis all well and good, but how will it help our bottom line?" I’ve often feltlike Maguire, full of mission, pitted against the Rod Tidwells of the world.

For change agents who have a Maguire-like missionary zeal, it’s tempting topull away and let the money-minded people live in their own world. But nothingis more self-defeating. In most cases, change agents do have to show the money.It’s a necessary step in winning over fence-sitters and skeptics.

Fortunately, there are plenty of studies showing that investments to improvehuman resources end up increasing the overall worth of an organization. You’reprobably familiar with Fortune magazine’s annual list of the "Best Companiesto Work For." A group of number-crunchers took the 1999 list, sorted out the55 companies whose stocks had been publicly traded for at least five years, andcompared the results to those of the Russell 3000. (The comprehensive Russell3000 Index of U.S. stocks includes companies that are comparable to those on the"best" list.) Over the same five-year period, Fortune’s 55 best companieshad an average annual appreciation of 25 percent -- well ahead of the 19 percentgain by the Russell index.

In a similar study, consulting firm Hewitt Associates teamed up with theUniversity of Wisconsin and Vanderbilt University to analyze the average stockreturns from the "best companies to work for." Their findings made it clearthat people-friendly practices benefit the bottom line. During a measurementperiod of seven years, the data showed that companies on a 1993 "best" listoutpaced a broad market index by 87 percentage points. The top 1998 Fortunecompanies bested their index counterparts by 56 percentage points, over fouryears.

Watson Wyatt surveyed 405 publicly traded companies of all types, posing 72wide-ranging questions on everything from training to workplace culture tocommunications. In order to come up with a so-called Human Capital Index (HCI)score for each company, a statistical formula was applied. Then the subjectcompanies were sorted into three HCI-rating categories: low, medium, and high.The companies in the high-HCI group delivered a 103 percent total return toshareholders over a five-year period, compared to 53 percent for low-HCI and 88percent for medium-HCI companies.

So when someone asks you to show them the money, graciously accept theirinvitation and share one of the above studies. And if they respond with moreskepticism, mention the Malcolm Baldrige National Quality Award, which waslaunched in 1988 and is regarded by many business leaders as the top award fororganizational performance. Its criteria cover seven areas: human resources,leadership, strategic planning, customer and market focus, information andanalysis, process management, and business results. Baldrige winners haveconsistently outperformed the S&P 500 -- by a margin of 4.4 to 1, accordingto an April 2001 analysis.

Of course, these are by no means the only studies. What I’d like to do iscall this column Part One of a two-part series. If you’re aware of otherevidence that builds a case for enriching the workplace, send me theinformation. I’m interested in big research findings like the ones describedabove as well as organization-specific measures that can be publicly shared. (Anexample of the latter would be data showing how investments in training anddevelopment at a company have increased customer satisfaction and retention.) I’llsift through everything you send and feature the highlights in June.

Also, you might want to rent Jerry Maguire. Check out Rod Tidwell’s jig to"Show Me the Money." I guarantee that when you’re equipped with severalsolid studies showing the bottom-line impact of culture change in the workplace,you’ll be dancing, too.

Workforce, March 2002, pp. 22-24 -- Subscribe Now!

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