Taking the Fear out of the “Business” Aspect of Being an HR Business Partner March 18, 2016 Michael Walters Senior Vice President, Human Resources Genoa Healthcare Instructor, University of Washington © 2016 Michael Walters

What we’re talking about today… Importance of business fundamentals Financial basics Marketing basics Building an HR strategy © 2016 Michael Walters

© 2016 Michael Walters

Financial Fundamentals © 2016 Michael Walters

Income – Expenses = Profit What is Profit? Income – Expenses = Profit © 2016 Michael Walters

What is an Profit & Loss Statement (P&L)? A financial statement that indicates how revenue (money received from the sale of products and services before expenses are taken out) is transformed into net income (the result after all revenues and expenses have been accounted for). The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported. Income – Expenses = Profit © 2016 Michael Walters

Common Terms Sales Revenue. Often called the "top line" this represents the amount the company has sold during the period. When there is more than one line of revenue shown above the Total Sales Revenue it provides detail as to which products or services are major revenue producers. Cost of Goods Sold or COGS. This is what it cost the company to generate the sales shown in Total Sales Revenue above. © 2016 Michael Walters

Common Terms (cont) Gross Profit or (Loss). This is the difference between Sales Revenue and COGS. If the difference is positive, (the goal), it is profit. A negative difference is a loss and is shown in brackets. © 2016 Michael Walters

Common Terms – Typical Expenses Operating Expenses expenses associated with running the organization beyond the COGS. Typically these include expenses for Sales & Marketing, G&A, and R&D. © 2016 Michael Walters

Common Terms – Typical Expenses General & Administrative expenses are called G&A. These are the costs associated with running the company as opposed to the costs of making or buying the products (COGS above). Sales & Marketing expenses. These are other costs not directly related to producing the product or service to be sold. © 2016 Michael Walters

Common Terms – Typical Expenses (cont) Research & Development (R&D) expenses. This is the part of its income a company is re-investing in the business to find and develop new products. Operating Income. This is what's left when you subtract all the operating expenses from Gross Profit. © 2016 Michael Walters

Common Terms Profit Margin. Net profit divided by revenue. A good measure of profitability to compare similar companies, from either an investment or a benchmarking perspective. Net Income. This is what the company has left after subtracting all its expenses from its total revenue. If the difference is positive it is profit. For a company to remain healthy and in business, this number needs to be positive most of the time. © 2016 Michael Walters

Microsoft Corporation Yearly Income Statements   Yearly Income Statements (In millions, except earnings per share) FY136 FY146 FY15 Revenue $ 77,849 $ 86,833 $ 93,580 Cost of revenue 20,385 27,078 33,038 Gross margin 57,464 59,755 60,542 Research and development 4 10,411 11,381 12,046 Sales and marketing 15,276 15,811 15,713 General and administrative 5 5,013 4,677 4,611 Impairment, integration, and restructuring 127 10,011 Other expenses Operating income 26,764 27,759 18,161 Other income (expense), net 288 61 346 Noncontinuing items Income before income taxes 27,052 27,820 18,507 Provision for income taxes 5,189 5,746 6,314 Net income before accounting change 21,863 22,074 12,193 Cumulative effect of accounting change Net income © 2016 Michael Walters

© 2016 Michael Walters

Revenue - COGS GROSS PROFIT - Operating Expenses OPERATING INCOME P&L Mechanics Revenue - COGS GROSS PROFIT - Operating Expenses OPERATING INCOME Grow through volume or price increase Drive down costs Also impact through product mix Decide: Invest or Optimize Maximize © 2016 Michael Walters

Other Financial Thoughts for HR… Hiring Impact RIFs Fixed vs Variable Costs © 2016 Michael Walters

Marketing/ Business Principles © 2016 Michael Walters

Differentiation: The 4 P’s Product Price Place… or Production Promotion © 2016 Michael Walters

What Differentiates Your Business? Tip: Let this differentiate your talent practices High volume Great marketing Premium product Strong operations Two groups I love more…… 1) R&D and 2) Sales channel Genoa Healthcare Example © 2016 Michael Walters

SWOT ANALYSIS Strengths Weaknesses Threats Opportunities What you do well? Any unique resources/ traits? What do others view as your strengths? Weaknesses What could you improve? Where do you have fewer comparable resources? What do others view as weaknesses? Threats What trends could harm you? What is your competition doing? What threats do your weaknesses expose you to? Opportunities What good opportunities are open to you? What trends could you take advantage of? How can you leverage your strengths? © 2016 Michael Walters

Developing an HR Strategic Plan © 2016 Michael Walters

An HR Strategic Planning Framework Business Objectives People Implications Actions for HR Measure Re-evaluate Ex: Verathon…. More product innovation, global growth People implications… solve for bonus plan. But people implication could be incentives AND objectives. © 2016 Michael Walters

How to Determine Biz Needs © 2016 Michael Walters

© 2016 Michael Walters

Name of Company: __________________ Biz Challenges People Implications HR Action Plans Measurements Groups of three… pick one current company & design to present out. © 2016 Michael Walters

Conclusion © 2016 Michael Walters

Any Questions? Michael Walters mwalters62@aol.com www.linkedin.com/in/mwalters62 © 2016 Michael Walters