Business impact demonstrations for human resources professionals are related to, but not the same as, metrics such as ROI and retention. Actually, understanding the concept and activities behind business impact demonstration is something that you’ll only do on occasion. Still, it’s important to get it right, especially during times of disruption.
What is Business Impact Demonstration in HR?
“Business impact” describes the important effects that a particular action, decision, or event has on a company. It is an evaluation of the effects, both positive and negative, that these actions have on various aspects of the business, such as financial performance, operations, brand, and competitiveness.
In the HR department, business impact is often related to critical employee indicators such as retention, engagement, cost, and productivity. For example, HR might be responsible for a business impact demonstration when retention rates drop.
But employees are also involved in any workplace activity, and so HR’s evaluation of business impact also includes the effect that a company-wide situation has on workers. In short, when it comes to HR, business impact covers:
- The result of specific HR activities, for instance, implementing a widespread increase in salary
- The effect of an activity on employees, for example, how introducing a new product line influences engagement
Why is Business Impact Demonstration Different?
The distinct nature of business impact is that it is examined during times of change. Companies are constantly monitoring their performance in various ways, for example, through analyzing daily operations, looking at the balance sheet, and making sure that orders are fulfilled. In contrast, the process connected to business impact occurs when it is not “business as usual”.
There are two major types of business impact:
Positive Business Impact
This occurs in the case of specific initiatives that are meant to produce favorable outcomes for the organization. For example, here are some common instances of initiatives and the HR impact related to each:
- Launching a product – lack of skills for new production techniques
- Implementing drastic cost-saving measures – a need to release non-critical employees
- Expansion to a different location – hiring new employees
Negative Business Impact
This results from an incident that has the potential to harm the company. A negative impact can happen due to external factors or internal errors. Following are instances of negative business impacts and their connection to human resources:
- Cyberattacks that cause a data breach – failure of IT employees in reaction procedures
- Serious production flaws – ineffective quality assurance measures
- Natural disasters such as pandemics –employees needing to work remotely
Business Impact Demonstration vs. Risk Assessment
These two topics are closely related but not the same. Risk assessment exclusively analyzes events that can damage an organization and looks for ways to reduce the chance of these situations occurring in the first place. In contrast, negative business impact assessment assumes that the event will occur and defines measures to deal with the outcome.
The Process of Business Impact Demonstration
Explaining how a particular event will affect HR should be handled through a step-by-step procedure. Note that, in the case of a company-wide event, the process will include many organizational departments including HR. The following outlines the basic parts of a business impact demonstration:
Create a Team
A business impact is necessarily an important event. Forming a team to tackle the issue ensures that it is handled quickly and to the best of the organization’s ability. If the team functions properly, then it will only be needed for a short time.
Define the Specific Event
It’s essential to know what the root cause of a situation is. Let’s say that there is a sudden increased turnover of employees. But before declaring this as the most impactful factor, try to boil it down a bit.
This requires collecting data. For instance, you can discover underlying causes through various means such as:
- Exit interviews
- Interviews with current employees and their managers
- Analysis of external data, for instance, job boards and company review sites
Demonstrate Impact
Using the above example, the data reveals that competitors have increased their salaries. What does this mean to your organization as a whole? It’s at this point that the expertise of the team comes into play. You’ll need everyone’s advice to understand the full consequences of this event. For instance, operations will explain how the lack of employees will affect production, while finance can say how this will influence the cash flow of the organization.
Next Steps
The task of the business impact team ends with its demonstration of effects to management. Obviously, at that point, other initiatives will be implemented so as to address the challenge. A basic approach during such situations is a change management process.
Experience the Impact of Growthspace
The best way to handle many types of business impacts is to boost skills. Whether you are preparing for a product launch or scrambling during a supply chain crisis, good skills will save the day.
But not just any skills. To ensure that your teams are ready for upcoming challenges, you’ll need a personalized talent development program that delivers critical abilities to your top people. Making sure that this is done by outstanding coaches, mentors, and trainers through an effective, market-leading platform is what Growthspace is all about.
