Can HR Explain How the Business Makes Money?

Can HR Explain How the Business Makes Money?

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For a discipline that has spent the last decade trying to become data driven, HR keeps losing the language battle in the boardroom. Voluntary turnover. Regrettable turnover. Time to fill. Cost per hire. The vocabulary has grown up inside the function, and to anyone outside the function, it sounds like a foreign dialect.

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Cole Napper, recently named the world's first Chief People Intelligence Officer, joins Pulse by HRBench to walk through why HR's operating model is collapsing, why the manifesto he just published is less controversial than people think, and the question HR leaders should be able to answer without flinching.

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The Tree of Value Is Collapsing

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In his book People Analytics, Napper coined the "tree of value" framework. Four branches of HR analytics work (people analytics, workforce planning, talent intelligence, and behavioral science) feed off the same root system of human capital data. At larger organizations, these are typically four distinct functions.

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That tree is collapsing.

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"The tree is collapsing into one," Napper says. "And there's essentially going to be a data layer and an intelligence layer. And that's all that's left."

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The thesis of his People Intelligence Manifesto is that small and mid-sized organizations are positioned to benefit most from the collapse. They never built the bloated multi-function HR analytics setup in the first place. Instead of deconstructing and rebuilding, they can construct the data and intelligence layers from scratch.

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"I don't ever think another human being should have to build a dashboard," he says. "I just think that AI should be more equipped to do that. All the analytics that I've been talking about for years has been positioned more as a luxury item. When in reality, it's been a commodity for quite some time."

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He's blunt about why he wrote the manifesto. "I don't think these beliefs are controversial at all. They're shared by most of the leaders in the field. The leaders in the field are just kind of concerned to say it out loud. So I said, hey, I'll say it for you."

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Why the HR Operating Model Is Collapsing

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The most widely adopted HR operating model is the Ulrich model: HR business partners, centers of excellence, and shared services. Napper sees AI dismantling at least two of those three.

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"AI is eating shared services before our eyes. The COEs and shared services, even before AI, were kind of collapsing into one already."

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What survives, in his view, is a smaller set of data-native, AI-native HR practitioners who do the work that HR business partners were always supposed to do but mostly didn't, because they were buried in employee relations cases. Pair that group with an AI tech stack and you've replaced most of shared services and most of the centers of excellence.

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The piece that's underdiscussed in this transition is knowledge management. Onboarding fails not because the work is impossible, but because nobody knows where the answers live. Where is the laptop coming from. Who orders the swag. How does payroll get set up. "A huge part of what makes onboarding challenging," Napper says, "is just where does the knowledge reside to be able to get the information you need."

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That's the part AI is best positioned to fix, before it touches anything more analytical.

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HR Speak vs. Business Speak

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The conversation shifts from operating models to a quieter problem: how HR leaders lose credibility by accident.

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"I call it HR speak," Napper says. "These kinds of words and terms that have grown up in the HR function. If you're in kind of the cool kids club of HR, everybody kind of uses the same lingo. But when you're talking to business leaders, not only is it confusing, but sometimes off-putting, because you're not using the language in the way that they talk about how the business operates."

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Turnover is the example he keeps coming back to. There are a hundred ways to define turnover. There's also a valence problem. Business leaders right now are often talking about turnover as a positive, because they see it as a cost reduction measure. HR is usually talking about it as a negative, because they're trying to retain. Regrettable turnover, the people the company wanted to keep, is the worst kind. None of that lands if the room hasn't aligned on which definition is in play.

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Napper's coaching pattern at companies like Motive and Booster Fuels was simple. "It was always about understanding the context before trying to bring the data. A lot of HR leaders go wrong when they try to push the data out, like say, hey, we're data driven too. Here's a bunch of data that you didn't ask for. And then they don't understand the context of why this might be influencing a different outcome than what they think."

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The fix isn't more dashboards. It's getting key HR metrics into the cadence of MBRs and QBRs, tied to a specific business initiative, so the data shows up where business decisions are already being made.

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The CEO Question

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Toward the middle of the conversation, Napper poses the question that every HR leader should be able to answer.

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"Can you explain to your CEO how your business makes money and not feel embarrassed? If you're skittish about it, if you feel like you're not confident in it, you don't know the business well enough."

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It's a question that exposes a gap most HR leaders don't realize they have. The skills HR teams typically invest in (engagement surveys, recognition programs, performance management cycles) sit far away from how revenue is generated. When the board asks about people costs in the context of margin, the leader who can't trace the dollar through the business gets visibly uncertain.

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Revenue per Employee and the Benchmarking Trap

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Revenue per employee used to be persona non grata at HR conferences. Now it's standard in PE portfolios.

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Napper traces the resistance. "Financial terms sometimes made HR queasy. They didn't necessarily feel like they understood it or owned it, and therefore they didn't want to be held accountable to it. Anytime HR creates a measure, there's also a degree of accountability associated with it."

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The other reason: if you start to look at revenue per employee, the easiest way to fix it is layoffs. HR doesn't want to be the engine of layoff after layoff because the numbers don't add up correctly.

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But the pressure didn't come from HR. It came from investors, because benchmark data is easier to access than it used to be. And here's where most HR leaders stumble. They look at a benchmark, see they're below, and assume the only response is to cut.

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Napper draws the comparison directly. Take company A and company B with the same revenue and the same business model, but company B has twice the headcount. Investors will pressure company B to get with company A's program. Unless. "Unless company B doesn't have a compelling narrative about why their doubling of the number of employees is going to bring future returns to investors."

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That's the move that's available to HR leaders. Help build the narrative for the headcount. Maybe the doubled team is building an AI capability the rest of the portfolio doesn't have. Maybe the cost structure is lower per employee. Maybe the trajectory is on a steeper curve than the benchmark suggests. Without that narrative, the benchmark wins by default.

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"Benchmarking helps you get in the door. It helps you understand the lay of the land," Napper says. "But it's only the opening overture. Really the devil is in the details."

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Edicts vs. Plans

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The boardroom doesn't always operate in 90-day windows that match real business cycles. Recent research from Dreamdata put the average B2B sales cycle from first impression to closed-won at 280 days. Demanding a strategic shift on that data in a single quarter isn't a plan. It's an edict.

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"There's a difference between an edict and a plan," Napper says. "An edict is you need to fix things this quarter. A plan is how are we going to reduce our 280-day sales cycle time to 90 days to get it to where we can move on a quarter-to-quarter basis."

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Plans can be falsified. Edicts can't. That's why benchmarking, used well, can defend HR's position. The data can show that the edict is unrealistic. The leader can pivot toward a plan that actually moves the number.

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Being Reliably Wrong Is Fine

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HR data is rarely clean. Napper's response to that fact has shaped his thinking enough that he named his other podcast after it. Directionally Correct.

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"Reliability and validity are kind of these two concepts that always come into play when you're using data. If you're reliably wrong and we can track against that, being reliably wrong is fine."

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His example: turnover that's consistently 2 percent inflated. As long as the inflation is reliable, you can adjust for it mentally. The data still tells you whether things are getting better, staying the same, or getting worse.

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The version that breaks is invalid data. If one tool is measuring jaguars and the other is measuring elephants, the answer to "how are the animals doing" is unusable. The fix isn't to demand decimal-point precision. It's to know, with confidence, which direction the line is moving.

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"Most times we don't need extreme precision," he says. "Is it getting better, is it staying the same, or is it getting worse? Knowing the answer to one of those three categories is mostly the precision you need in HR. There are times where you truly do need to round to the second and third decimal point, but that's pretty rare."

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The Mindset Upstream of Every Skill

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Napper closes with what he teaches inside his Data Driven HR Academy.

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"Upstream of all of the skills is the right mindset. You've got to have the right mindset that you are a part of the business. You serve the business. You're not excluded from the business. And then it's about understanding how is the inflection point of using your human capital to drive business results."

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Skills matter. Tools matter. AI fluency matters. None of them help if the leader hasn't decided to operate as part of the business rather than alongside it. The dashboards, the benchmarks, the directionally correct estimates all become useful in service of that mindset, and not before.

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For HR leaders who tie their work to business outcomes, that decision comes first.