Human-Centric Budgeting: Putting People First in Business
Another budget season is upon us, a time when we reflect on the year in review and put virtual pen to paper for the year ahead. As we approach 2024, we must consider the most critical asset every company has: its people. It’s time to prioritize "human-centric budgeting."
Human-centric budgeting is a forward-thinking approach that places employees at the heart of budgetary decisions, recognizing their importance as catalysts for business growth and success.
Defining human-centric budgeting
Put simply, human-centric budgeting is the practice of prioritizing investments that enhance the capabilities and well-being of the workforce. It takes into account the idea that employees are not just expenses on a balance sheet but valuable assets that can amplify the organization's success when properly nurtured and supported.
As Radhika Samant put it:
"The best companies invest in ways that enable their employees to become multipliers for the business."
In other words, rather than simply viewing employees as a cost to be minimized, human-centric budgeting recognizes them as a potential source of exponential growth and value. 📈
Similarly, Charles Hough said human-centric budgeting focuses on “prioritizing employee benefits first, because people are the most critical asset companies have.” Charles concluded:
“Where businesses put their money is what they actually care about.”
The importance of a human-centric approach
For most companies, the largest expense is their workforce. Neglecting the importance of creating a people-centric culture can lead to a less motivated workforce, which in turn can impact the bottom line. Want to grow exceptionally? Start prioritizing your people. Here’s why humans should be at the core of your budgeting strategy.
Adapt to AI
With the advent of artificial intelligence and automation, focusing on human skills and productivity is becoming increasingly crucial. Already, 37% of organizations have implemented AI into their businesses. A human-centric approach ensures that your workforce is prepared to work alongside new technologies, rather than being replaced by them.
Create a high-performance culture
Companies that prioritize their employees' well-being and development tend to foster high-performance cultures. Such cultures not only improve employee morale but also positively impact customer satisfaction and business outcomes.
4 steps for developing a human-centric budget
In the face of economic challenges, HR leaders must still prioritize human-centric budgeting. Organizations may be tempted to cut costs related to human capital, viewing them as non-essential. However, this short-term thinking can have long-term consequences. If your organization is looking to adopt a more human-centric approach to budgeting, here are some key steps to consider:
1. Understand your organization
You can’t make smart human-centric budgeting decisions without understanding the current state of where and how your employees work. Begin by understanding the nature of your organization, including whether it operates on-premises, remotely, or through a hybrid workplace model. Interview and survey your employees on how your current organization stacks up in terms of people performance-driving behaviors. Use this qualitative data to ensure your budgetary decisions will yield the most impact on the largest cohort of your employees.
2. Identify performance drivers
Once you have a deep understanding of your workforce, you can identify the key drivers of performance within your organization, such as collaboration, employee recognition, and engagement. Assess where your organization currently stands in relation to these drivers. Then, create budget line items to invest in initiatives that optimize the impact on performance drivers.
3. Focus on people first
Start your budget with peer-to-peer recognition programs, benefits, and perks that improve employee satisfaction. Don't wait until the end of the budgeting process to address these critical performance levers. Focusing on your people first has a trickle down effect on all of the other metrics you’re aiming to impact, like revenue, customer satisfaction, retention, and more!
4. Involve the right team
Creating a human-centric HR budget plan is not solely the responsibility of the HR department. Leadership, including the CEO and CFO, should play a central role in the process. HR should support the leadership team in driving optimal performance from their teams, making it a leadership initiative rather than an isolated HR effort.
Quantitative inputs for human-centric budgeting
Now that we’ve addressed the steps you can take to become more human-centric, let’s look at the metrics you’ll want to measure before and after your budgetary changes. After all, you can’t create a budget without numbers.
- Employee Net Promoter Score (eNPS): This metric measures employee satisfaction and loyalty, providing insights into the overall well-being of your workforce. Pro tip: Many Bonusly customers come to us after receiving feedback about a lack of employee appreciation in employee surveys. After investing in a people-centric tool like Bonusly, customers like Andiamo saw a 10 point increase in eNPS scores!
- Performance Metrics: Assessing employee performance through key performance indicators (KPIs) and productivity metrics can help determine where investments are needed.
- Retention Data: Track employee turnover rates and retention data to identify trends and opportunities for improvement. Make sure retention data is considered and emphasized in your budget so you can directly measure the ROI of investing in people-centric programs. As Bonusly’s COO, Charles Hough puts it, “Even a slight reduction in turnover can have a substantial financial impact.”
- Customer Success Scores: These scores can indirectly reflect employee satisfaction, as engaged employees often lead to satisfied customers.
Business impacts of human-centric HR budgeting
By now you’ve realized that adopting a human-centric HR budget doesn’t only benefit the people on your team—it benefits your bottom line. Prioritizing employee well-being and development can foster a high-performance culture that multiplies business outcomes and creates long term value. Not to mention, investing in employee satisfaction and retention can lead to cost savings in recruitment, training, and onboarding. Above all, investing in your people with peer-to-peer recognition gives you a competitive advantage that helps you keep your best employees and outshine your competitors when procuring new customers.
We hope this article has helped you realize the cost of not investing in your people. By placing people at the center of budgetary decisions, you’ll create high-performance cultures, foster employee loyalty, and ultimately drive better business outcomes.
--> If you're looking to build connected, motivated, high-performing teams, look no further than booking a quick and free demo of Bonusly—the #1 recognition and rewards platform.