Which HR function ranks No.1 with the highest impacts on two critical business success indexes – revenue growth and profit margins?

The Boston Consulting Group researched the answer to this question conducting a study interviewing 4’288 respondents from 102 countries across a broad range of industries. The report of this study entitled: „Realizing the Value of People Management: From Capability to Profitability“ was released in July 2012.One of its conclusions reveals that recruiting is the most impactful HR function on companies‘ profit growth.

In many years, only a few HR leaders quantified the business impacts of recruiting, except for Google, Apple, and sports and entertainment industries, for which it is well established that recruiting is the most impactful people management function on business results.

Top level Rankings of HR Functions

HR functions with the highest impacts on business are:

1. Recruiting
2. On boarding and retention
3. Managing talent
4. Employer Branding
5. Performance management and rewards.

Leadership development reaches the sixth position. As you can notice, other HR functions with the highest impacts are related to recruiting, such as it is the case for employer branding which is meant to support recruiting activities.

Bottom performing HR Functions

For the following HR functions or processes, the BCG has found very low impact. For some of them no impact on business results has been found at all. These functions are: transforming HR into a strategic business partner, health and security management, managing flexibility and labor costs, restructuring the organization, managing work-life balance, managing an aging workforce. For the latter, it even has been found that it had a negative impact on profit growth.

Great HR impacts on Stock Price

Caroline Mancioppi, Author

The Boston Consulting Group study also researched the stock price gains produced by highly capable HR departments. In order to select companies with the very best HR departments, BCG looked at Fortune magazine’s list of “ 100 Best Companies To Work for „. The group picked “ repeater companies “ (companies that have appeared at least three times in this list during the last 10 years). Then they compared the stock price growth of these “ best companies “ with the stock price growth of the S&P 500’s. Results are amazing. Companies with great HR departments saw their stock price rise 109 % while the S&P’s increased only 10 % over the last 10 years.

In conclusion, taking measures to improve the quality of the HR department performance makes perfect sense in this context.

As seen above, investing in recruiting teams enabling them to reach high level of performance appears to be essential to increase business growt

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h. However market volatility often impacts on recruiting needs, interrupting recruitment campaigns with hiring freezes. In this case, an RPO partnership can be the most efficient and flexible solution.

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