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HR as Profit Center
The NEW HR – Cost Center versus Profit Center
Human Resources (HR) departments are often viewed as either a profit center or a cost center within an organization. This distinction can significantly impact how HR strategies are developed and implemented.
How would you define HR as a profit center and HR as a cost center? What are the key characteristics and differences between these two viewpoints? Provide an example for each.
Keep in mind, all departments are responsible for controlling or reducing unnecessary costs. This means, controlling and reducing costs does not make HR a profit center.
Reading Resources to use and add into discussion board
As HR responsibilities related to HR analytics take on increased importance, it’s critical to stay updated with any trends in technology. Human Resource Information Systems will be a valuable tool to use in the competitive advantage tool kit.
Cadigan, S., Card, D., & Will, K. (2019). 2019 industry trends in HR technology and service delivery. ISG.
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In the traditional view, Human Resources (HR) is often seen as a cost center. This means that HR is responsible for managing expenses related to hiring, training, employee benefits, and other administrative functions. As a cost center, the HR department focuses on ensuring efficient use of resources, controlling expenditures, and minimizing waste. The main objective is to support the organization by maintaining a productive workforce, yet the department itself is typically not seen as generating direct revenue.
In contrast, HR can also be viewed as a profit center when its strategic initiatives contribute directly to the organization’s revenue generation and profitability. A profit center is expected to not only manage costs but also actively contribute to the organization’s financial success. In this context, HR is responsible for fostering talent, improving employee performance, and aligning the workforce with organizational goals in a way that leads to higher productivity, innovation, and ultimately, increased profits. For instance, HR can create programs that focus on developing high-performing teams, increasing employee engagement, and reducing turnover, which directly impacts the bottom line by…