The Financial Advantage of HR in the C-Suite

As companies battle for every available bottom-line dollar, new research finds that placing the top human-resources executive within the highest management ranks can help a company reach its financial goals.

The research, from SAP-owned SuccessFactors, included an analysis of the 2012 annual reports of all Fortune 500 companies. The minority of companies that did not list an HR executive as an officer of the company had an average 21 percent lower net profit margin than did their industry-peer companies.

“We think what that says, based on this analysis and some other studies we’ve done, is that a chief human resources officer can drive an agenda within the executive board about aligning people to goals, and they can insure that performance appraisals are done,” says Karie Willyerd, vice president of learning and social adoption for SuccessFactors.

And having a CHRO is correlated to a company’s bottom line, demonstrating the important connection between effective talent management and business performance, said Shawn Price, president of SuccessFactors.

“But simply having a CHRO is not enough,” he said. “Today companies equally benefit from leveraging the insights that only come from advanced, connected HCM solutions that manage the entire employee lifecycle — from recruit to retire — taking the role from transactional to strategic and even predictive. The true value of our applications is in how they support HR in understanding tomorrow’s needs before it’s too late to proactively address them.”

The SuccessFactors research shows that organizations are indeed acknowledging the value of employees as their key resource, as well as the fact that a CHRO can hold the key to unlocking that key resource.