Look after people and profits follow

By JULIE MIDDLETON

Want to make more money? You'll have to spend more of it on your people before the profits start mounting.

That's the conclusion of global research by PricewaterhouseCoopers, which has found that revenue per employee was 35 per cent higher in companies with a documented human resources strategy compared with those with none at all.

Why? It's a two-way thing, says Kevin McKenna, the director of human resources advisory services for the local arm of PricewaterhouseCoopers. Written people plans are "aligned around the nature of the business and what's important to it".

"People can see you're putting your money where your mouth is, and they can see the link. It's not just words written in a document somewhere."

And, he adds, "the discipline of identifying the implications of the business strategy on people makes planning more realistic and achievable".

He says that a written strategy is also associated with reduced absenteeism, more effective reward systems, and better-run performance management.

Human resources heads from 64 organisations in Australia and New Zealand were among the 1000 companies in 47 countries that took part in the survey, done between June and August last year.

It aimed to probe the relationship between business performance and HR policy. McKenna defends suggestions that HR people aren't the best people to ask for comment on their own work by pointing out that this year's survey required financial results, bringing the influence of financial chiefs and CEOs to bear.

The survey was distributed among PricewaterhouseCoopers clients and is skewed strongly towards large corporates - for example, in Australasia, a region of mainly small businesses, 27 of the 64 companies had between 1201 and 5000 staff.

Other key findings were that:

* The average time spent in the same job is 6.7 years in New Zealand and 8.3 years in Australia, compared with 9.2 years globally.

* New Zealand and Australia reported lower average rates of absenteeism, with 4.7 days and 5.2 days respectively. The world average was eight days.

* There is a strong link between lower absenteeism and better profit margins. For example, globally, organisations with an average five days of absence per employee per year have profit margins that are 60 per cent higher than companies clocking up an average 10 days of absence per staffer per year.

* Kiwi organisations provide an average of 1.2 training days a year, half the Australian average of 2.4 days. Worldwide, however, three days was the norm.

* Just 14 per cent of Australasian companies that responded have staff completing performance reviews, compared with 40 per cent globally. Just 42 per cent of those who replied to the survey have senior management doing performance reviews, with the results for New Zealand companies falling below Australia's.

* Many Australasian organisations do not report on or measure key people issues.

For example, says the report, HR professionals believe that they makes the most important and measurable contribution to business performance through increasing employee satisfaction and controlling costs.

However just 53 per cent regularly report on staff satisfaction and 26 per cent on workforce costs, compared with 55 per cent of organisations globally.

But a written strategy isn't enough, says McKenna - it must be underpinned by practice.

The most important of these, he says, is solid performance management. "If you're trying to align people's behaviour with business outcomes, you've got to be constantly giving them feedback and guidance."

He rates rewards - money, and non-cash things such as time - as second, and third is a leave policy allowing flexibility.

McKenna says there is little to stop companies developing people policies.

"It's not rocket science - it's common sense.

"The lesson [from the study] is that some of these things are fairly uncommon."