Effective HR Practices Benefit the Bottom Line

Feature originally appeared in September 2006 HR Magazine.

Small businesses that invest in formal employee selection, management and retention strategies see direct, quantifiable results on the bottom line, according to a recently completed study.

A two-year study conducted by Cornell University associate professor Christopher Collins and sponsored by the Gevity Institute found that companies that implement such practices-categorized as workforce alignment-show 22.1 percent higher revenue growth, 23.3 percent higher profit growth and 66.8 percent lower turnover than companies that do not. Overall, companies with a well-aligned workforce perform 39 percent better than companies with less effective strategies, according to the study.

The workforce alignment strategies identified as most effective for small businesses are:

* Hiring based on organizational fit, not just job fit.
* Giving employees greater discretion, trust and empowerment.
* Creating a family-like environment.

Implementing even one of these strategies brings about significant improvement, researchers found.

"The study is groundbreaking because we've proven that specific human resources strategies have a meaningful, and statistically significant, impact on small business financial performance," says Collins, who is on the faculty at Cornell's Industrial and Labor Relations School and the Center for Advanced Human Resources.

"So much of existing research concerns large companies," says Collins. "However, the relative impact of a single person leaving a small business can be an even greater setback" for small companies than for large ones, he says.