How Can HR Revive a Sluggish EBITDA?

By Simona B Lombardo

You may ask yourself what does HR have to do with my financial results? The answer is simple. Everything.

That is a bold statement to make, but if you think about it, in business the only constant is change, from technology to globalization, it’s a truism that today’s companies must adapt and embrace rapid change. Your business is driven by your greatest asset; that is your intellectual capital – the people that make it all possible. Having the right knowledge at the right time gives you a competitive edge.

Partnering with your HR executive in all stages of the strategic planning process can provide different perspectives on challenges and help devise the most appropriate solutions to meet today’s business demands.

Identifying operational opportunities for EBITDA improvement begins with an assessment of each functional area of your business. This process will help reveal indicators of opportunity that can be further analyzed for financial impact to justify additional action. Once the opportunities are defined, the root cause of diminished earnings is established; you can then develop a plan for improvement and establish a timeline for implementation. I will explore the opportunities for improvement which will be organized into six pillars, this will help to provide a structure to the assessment. I will then dive deeper into each of those areas by exploring the common indicators for each.

There are six supporting pillars that help HR executives drive the strategy design of HR solutions. Those pillars that will enhance operational effectiveness are throughput, variable costs, fixed costs, asset utilization, order to cash and risk reduction. These outline the key areas that are instrumental in providing guidance on how HR can drive long term performance for your organization. For each of the operational effectiveness pillars HR can assess, capitalize, and drive performance through alignment, leadership, engagement, balancing short and long term horizons, agility and capability building.

Until recent years much of this work went on in the boardroom and HR only got involved in the later stages of implementation. Today HR has become a key business partner, armed with an arsenal of business tools to help you take your business to the next level.

You can start to revitalize a sluggish EBITDA by engaging your HR into your operational effectiveness conversations. You will discover that it is not enough to perform well in the short term; you will need to sustain your performance over time, even through testing economic periods.