Hi Reader,

One of the most important lessons I learned as a Chief People Officer: it's not enough to know your function.

You know how to deliver engagement programs. You know how to develop people, what the key recruiting metrics are, all of it. But the most important thing — the thing that shapes a career — is understanding how your function is driving business results.

And this isn't only an HR problem. The same goes for IT, admin, marketing — any function. Some get there. Some don't.

Today it's HR's turn. Specifically: how HR can understand the business

Income Statement Thinking

I talked about this with Ted Forbes, former CHRO and author of Making HR Matter. He came into HR from the business side, not the other way around, and it shows in how he thinks.

His point is this: if you can’t connect your HR work to the income statement, it’s worth asking why you’re doing it.

He gave me a good example — a metric he built called fixed labor cost.

Most HR teams own people costs separately. Salary in one place, benefits in another, then relocation, bonuses, perks, each in its own report. Ted rolled all of them into one number. He put it in the monthly business review, next to everything else the company tracks, and gave it a band: stay within plus or minus 2% of neutral each month. If the number goes up, EBITDA goes down — and the whole leadership team sees it.

Why it works

It solves a credibility problem. You stop reporting activity and start managing something the business already cares about. Same data, different language.

It also helps in the harder moments. Say a manager wants to hire someone above the salary band. You don't need to push back, and you don't need to protect the budget. The only thing you do is show how the hire will affect fixed labor cost and EBITDA, and ask a simple question: Do you want to discuss this with the CEO?

It's not about saying no. It's not about pushing them away. It's about being clear on how the decision gets made — which helps HR, helps the manager, and helps the whole organization.

Try it this week

Pick one thing on your agenda — a program, a hire, a policy. Ask these questions:

Which line of the income statement does this move — cost, revenue, or cost avoided?
Am I measuring the outcome, or just the activity?
Can I explain its business impact in one sentence, without HR language?

If you can answer cleanly, you have your story for the next leadership meeting. If you can’t, you’ve found where the real work is.

The mindset underneath all of it: be a business person first, an HR person second. That order changes how you design everything you do.

One line worth keeping

“If you can’t connect your HR agenda to the income statement of your company, then you need to ask yourself — why am I doing this?” — Ted Forbes.

The full episode has the stories behind the metric, how he built it with his CFO, and the traits he tells CEOs to look for in an HR leader — most of which have nothing to do with HR. You can listen to the full episode on your favorite platform.

Listen to the episode

So tell me — where’s the line for you between good HR and great HR? Hit reply, I read them.

Cheers,

Daria

P.S. Know an HR leader shaping the future of work who'd make a great podcast guest? Send them here to apply.