In Australia, HR boosts corporate bottom line - Executive Briefing - Brief Article

HR Magazine, April, 2002 by Steve Bates

Companies that have an HR director serving on their executive committee tend to be more successful than those that do not, according to a survey of the 50 largest companies on the Australian stock exchange. The study was conducted by Andersen Human Capital, a division of the international accounting firm.

Firms with HR representation on the executive committee experienced more than twice the median annual growth in earnings per share than those without such an HR presence--13 percent versus 5 percent, from 1997 through 2001--according to Andersen. However, only 27 of the 50 companies surveyed had appointed HR directors to their executive committee. Four of the 50 firms did not disclose the makeup of senior management.

"These results show that when strategic HR is placed on the boardroom agenda, the business reaps the rewards," says Jon Scriven, an Andersen partner who headed up the study. However, he cautioned that simply adding an HR leader to an executive committee would not boost share values overnight.

"The key element here is that HR directors are contributing at a senior level in a strategic capacity," said Scriven. "If you have an HR director who is not a member of your executive committee, you're unlikely to see the same impact on your bottom line."

A similar survey, in the United Kingdom, found higher profitability for firms that had HR representation on their boards of directors than for those that did not.

Steve Bates is senior writer for HR Magazine.