1. 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

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

3. © 2016 Michael Walters

4. Financial Fundamentals
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5. Income – Expenses = Profit
What is Profit?
Income – Expenses = Profit
© 2016 Michael Walters

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

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15. 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
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16. Other Financial Thoughts for HR…
Hiring Impact
RIFs
Fixed vs Variable Costs
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17. Marketing/ Business Principles
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18. Differentiation: The 4 P’s
Product
Price
Place… or Production
Promotion
© 2016 Michael Walters

19. 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
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20. 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

21. Developing an HR Strategic Plan
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22. 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

23. How to Determine Biz Needs
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25. Name of Company: __________________
Biz Challenges
People Implications
HR Action Plans
Measurements
Groups of three… pick one current company & design to present out.
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26. Conclusion
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27. Any Questions? Michael Walters mwalters62@aol.com
© 2016 Michael Walters