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What HR Can Learn from Virtuous Cycles

Virtuous cycles are one of the most important concepts in business. Here’s how...

Phil Strazzulla
HR Tech Expert, Harvard MBA, Finance and Software Nerd
January 22, 2020
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What is a Virtuous Cycle (or Positive Feedback Cycle) in business, and how can Human Resources benefit from a this phenomenon? It is an extremely powerful concept that is perhaps most easily explained using a successful company such as Amazon as an example.

In this example, We’ll begin with the Low Prices offered by Amazon. People are drawn to the value offered and become Customers, and obtaining more customers allows Amazon to have a much higher Volume of product sold. Selling a high volume of product makes Amazon valuable to Suppliers, allowing Amazon to renegotiate their cost of goods and increase their profit margins, which helps Amazon move prices lower.

The cycle continues this way, low prices attract customers who create high-volume sales on the site, allowing Amazon to re-negotiate with suppliers and lower their prices to capture even more customers. It isn’t difficult to see how quickly this can be beneficial to a company and promote rapid success and growth. The same can be applied to HR using slightly different pivot points throughout the cycle.

A Virtuous Circle in HR would begin with Outcomes. These outcomes could come from any initiative within a company’s HR department that results in a positive result.

When these outcomes are translated into a positive effect on revenue, cost, turnover rates, etc., they lead to Recognition for a job well done. When HR is being recognized for its impact on a company, they are given access to more Resources in the form of money, headcount, and general flexibility within the organization.  Resources allows HR to pursue Initiatives they are passionate about.

These initiatives could be sourcing tech designed to help attract candidates for a company, platforms that offer better access and information to employee benefits, or tools to encourage and maintain good company culture. Great tech leads to great outcomes, recognition, resources, and the ability to pursue more initiatives. Thus, the Positive Feedback cycle begins again.

A Virtuous Circle really is quite a simple and interesting concept when related to HR. Do you have any examples of the Virtuous Cycle in action where you work? Tell us about them in the comments.

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Phil Strazzulla

Phil is the founder of SelectSoftware Reviews, a website dedicated to helping HR and Recruiting teams to find and buy the right software through in-depth, expert advice. Phil started his career working in venture capital before getting his MBA from Harvard Business School.

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