Judy Njeri head of HR, administration and logistics at Malibu Pharmacy explains why true strategic leadership requires mastering company business models, understanding cost centres and treating profitability as a core people agenda.
When people think about HR, they often think about recruitment, employee relations, policies, performance management, payroll, leave, training and employee welfare. These are all important aspects of HR, but they are only one part of what it means to be a strategic human resources professional.
Over the years, one lesson has become increasingly clear to me. If you want to build a thriving human resources career, you must learn to understand the business beyond human resources. You cannot effectively lead people if you do not understand the business those people are working to build.
HR is not an isolated function, it exists within a business, and every decision HR makes ultimately has an impact on the organisation’s operations, costs, productivity, profitability and growth. This is why I believe the HR professional of today must also be a business leader.
Understand business revenue
One of the most important questions a human resources professional should be able to answer is how the business makes money. It sounds simple, but many HR professionals can spend years in an organisation without truly understanding its business model.
If you work in retail, understand retail. If you work in pharmaceuticals, understand how the pharmaceutical business operates. If you work in manufacturing, understand production. If you work in professional services, understand how the organisation wins clients, delivers services and generates revenue.
You must understand the customers, the products and services, the competition, what drives revenue and what drives costs. You do not necessarily need to become an accountant, but you should understand the financial language of the business. You should know the difference between revenue and profit, understand the major cost centres and know what affects the bottom line. Most importantly, you should understand where the people agenda intersects with all of these areas.
There is sometimes a perception that profitability is a finance issue, it is not. It is a business issue, and because people are at the centre of every business, it is also a human resources issue.
Payroll is a cost, and so is employee turnover. Recruitment, training, medical insurance and overtime are costs. Absenteeism and poor performance also carry significant costs.
However, employees also create value. They generate sales, serve customers, develop products, operate systems, manage branches, solve problems and build relationships with clients. The role of HR is therefore not simply to manage the cost of people. It is to help the organisation maximise the value it gets from its people while managing people-related costs responsibly.
This requires HR to understand the financial implications of its decisions. Before proposing an initiative, a human resources leader should ask what it will cost the business, what problem is being solved, what value will be created and how success will be measured. That is business-minded human resources.
Understand the budget
Another area where HR professionals need to become more commercially aware is budgeting. The HR budget should not be a document that finance prepares and human resources simply receives. Human resources should understand every significant line within its budget.
You must be able to explain why recruitment costs or overtime have increased, why the training budget has changed, what employee turnover is costing and what the organisation is spending on medical insurance. You must evaluate whether you are investing in the right capabilities and whether employee initiatives are producing measurable value.
A good human resources leader should be able to sit with finance and have a meaningful conversation about these numbers. You do not have to be a financial expert, but you must be financially literate. Business acumen and financial understanding allow HR professionals to connect people decisions with business outcomes and make stronger, more credible recommendations to leadership.
Consider a business that is experiencing high employee turnover. A human resources professional may immediately focus on salary, engagement, management or employee welfare. Those are important questions, but a business-minded human resources leader will go further.
You need to analyse which departments are experiencing the highest turnover, which positions are affected, how much the organisation is spending to replace those employees, how long it takes to replace them and what the impact is on productivity and customers. The underlying issue could be leadership, workload, career progression, compensation or recruitment.
When you approach problems this way, HR is no longer simply reporting a turnover percentage, it is helping the organisation understand the business consequences of turnover and becoming part of solving the business problem rather than simply documenting the people issue.
