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

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

    In the movie, Cruise plays Maguire, a high-flying sports agent who starts feeling 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. He stays up all night, thinking, agonizing, sucking down coffee -- and writing a multi-page mission statement titled, "The Things We Think and Do Not Say: The Future of Our Business."

    It’s an on-paper liberation, and Maguire makes copies for his 110 colleagues. They politely take it, read it, and gulp hard. The "statement" takes shots at their business and calls for people to be more caring, more humane. 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 with just one client, a wide receiver named Rod Tidwell (Gooding).

    Tidwell has no shortage of self-confidence and couldn’t care less about emotion-laden mission statements. What he wants from Maguire is a better contract 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. He says it while dancing. He practically grabs Maguire by the collar and says, "It’s all 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’ve had the sense that they’re saying it inside, and some have grabbed me by the figurative collar and said, "That stuff about improving the workplace culture is all well and good, but how will it help our bottom line?" I’ve often felt like 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 to pull away and let the money-minded people live in their own world. But nothing is 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 improve human resources end up increasing the overall worth of an organization. You’re probably familiar with Fortune magazine’s annual list of the "Best Companies to Work For." A group of number-crunchers took the 1999 list, sorted out the 55 companies whose stocks had been publicly traded for at least five years, and compared the results to those of the Russell 3000. (The comprehensive Russell 3000 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 companies had an average annual appreciation of 25 percent -- well ahead of the 19 percent gain by the Russell index.

    In a similar study, consulting firm Hewitt Associates teamed up with the University of Wisconsin and Vanderbilt University to analyze the average stock returns from the "best companies to work for." Their findings made it clear that people-friendly practices benefit the bottom line. During a measurement period of seven years, the data showed that companies on a 1993 "best" list outpaced a broad market index by 87 percentage points. The top 1998 Fortune companies bested their index counterparts by 56 percentage points, over four years.

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

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

    Of course, these are by no means the only studies. What I’d like to do is call this column Part One of a two-part series. If you’re aware of other evidence that builds a case for enriching the workplace, send me the information. I’m interested in big research findings like the ones described above as well as organization-specific measures that can be publicly shared. (An example of the latter would be data showing how investments in training and development at a company have increased customer satisfaction and retention.) I’ll sift 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 several solid 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!

Other columns by Tom:

• Eager for a Paradigm Shift? Not So Fast!
• Remember, They're Human Resources
• You Could Just Spit: Tales of Bad Bosses
• Refreshing Lessons in Empowerment
• Things to Do: Learn From LaRue