Reprinted from November 10 2006 More than cost center by eel12052


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									                                                                                                  Reprinted from November 10, 2006

                 More than cost center
                     HR departments must demonstrate their value
Question:                                       ing work that supports macro-level matters
                                                that the organization is pursuing. In doing so,
                                                                                                  labeled a cost center. Why is it, for example,
                                                                                                  that in the “Vest Pocket Guide to Business
                                                HR will improve its visibility and become         Ratios,” all 300 pages of it, the only refer-
I found your article in the Oct. 13             more of a driver of organizational success.       ences to HR are as costs? Time to start iden-
                                                    “Easy to say, hard to do,” you might be       tifying and using some positive indicators
issue of SBT very interesting. I
                                                thinking.                                         along the way, I would think.
have over 20 years of HR experi-                    Yes, that it is true. But, what’s the             After all, as Tom Peters has observed
                                                alternative? More of the same? When has           regarding today’s obsession with data,
ence in various roles and settings,
                                                more of the same ever produced a differ-          “What gets measured gets done has never
including retail, banking and                   ent result?                                       been so powerful a truth.”
                                                    No, the prescription here is to chart a
health care. Your comments about                                                                  HR’s charter:
                                                bold, new course. Aim high. Pursue a dif-
HR not being included at the exec-              ferent strategy.                                  human capital
                                                    The perspective of Jac Fitz-Enz, a                For most organizations, merely having
utive table hit home for me. I’ve
                                                noted HR strategist, is germane along             people on the books can account for 40
come to believe that HR is per-                 these lines. Fitz-Enz has long argued that        percent or more of operating overhead.
                                                HR professionals must craft a new vision          Having people on board, therefore, can be
ceived the way it is because we’re
                                                for themselves. To do so, he has suggested        costly, especially if they are poor fits, under-
beating ourselves. It’s too easy to             that four ideas are central:                      perform, are disengaged, etc.
                                                1. HR exists in an organization because               The charge for HR, accordingly, is to
view us as a cost center. Adminis-
                                                    it adds tangible value by providing           do all that it can to create an environment
tering the health insurance plan,                   necessary services at a competitive           of peak performance and maximum moti-
                                                    cost.                                         vation. To do so, people professionals must
the compensation plan, etc. are
                                                2. HR’s charter is to enhance the produc-         be “ARMED.” That is, they must concern
viewed as costs. We need to pro-                    tivity and effectiveness of the organiza-     themselves with pursuing “best practices”
                                                    tion from the people — the human              related to:
mote the positive contributions we
                                                    capital.                                       – Acquiring (i.e., employee selection)
make. If we don’t, I have a hard                3. HR should drive the organization’s              – Retaining (i.e., job satisfaction, organi-
                                                    management with regard to “people                 zational culture)
time seeing how what you talk
                                                    issues.”                                       – Managing (i.e., performance manage-
about (i.e., HR becoming a strate-              4. HR is a professional function staffed by           ment)
                                                    professionals who are dedicated to the         – Educating (i.e., lifelong learning)
gic partner) will happen. Your
                                                    development of people in ways that are         – Developing (i.e., coaching, career
thoughts would be appreciated.                      satisfying to the individual and benefi-          development)
                                                    cial to the organization.
                                                                                                  HR drives: people issues
                                                   Let me briefly comment on each of                  HR is the guardian and custodian of the
Answer:                                         these.                                            organization’s most precious asset – its
    Let me begin by noting that I received                                                        people. HR, by adopting a strategic stance,
similar messages from others who read the       HR adds tangible value                            also has the potential to be the advocate for
article you reference. Evidently, I touched a       You allude to this in your question when      pursuit of a new psychological contract
chord. As you will recall, my basic message     you reference HR being viewed as a cost           between the organization and its employees.
was that HR needs to stop engaging in           center. Well, if the only data that are offered       What I mean by this is that in an Infor-
micro-level transactions and start undertak-    are costs, it seems to me you stand to be         mation Age characterized by frequent
change, greater employee mobility, chang-      in his statement, in my opinion, is the            I could offer other example for the
ing conceptions about what “work” is and       need to measure HR practices more             other parts of “ARMED,” but you get the
is not, etc., the traditional contract         robustly. Note that he emphasizes the         idea.
between an employer and its employees          need to engage in practices that are satis-       Let me conclude by underscoring that
which tended to be some variation of a         fying to the individual and beneficial to     measurement is the crucial tool for HR to
quid pro quo (e.g., “We’ll give you pay for    the organization.                             use if it wishes to be viewed in different
the labor you offer to us”) needs to evolve.       Here is the opportunity to be proac-      terms. To shake off the negative moniker,
    Paternalistic thinking and behavior        tive in showing positive returns. Let me      HR must project a different image. It
must give way to self-directed and collabo-    show you what I mean. Remember the            must show how it adds value to the orga-
rative thinking and behavior. Partnerships     “A” (i.e., Acquiring) in the “ARMED”          nization. Measurement is the key.
must be pursued in a variety of ways.          acronym? An HR professional might                 For, as organizational strategist Geary
Information must be open and accessible.       more broadly measure activities related to    Rummler has observed, “Measurement is
Compensation must reward contribution,         acquiring people by identifying addition-     the pivotal performance management tool.
learning, and performance. And so on.          al aspects that might be studied, in addi-    As such it deserves special treatment.”
                                               tion to cost.
  From my way of looking at things,                For example:
HR can lead on this initiative.                • Cost – Financial investment to
                                                   fill vacancies.
HR is a                                        • Time – Length of time to get new                             Daniel Schroeder,
                                                                                                              Ph.D., of Organization
professional function                              hires on-board.
    In many ways, this is the most impor-      • Quantity – Number of people hired.                            Consultants, Inc. (ODC) in
tant of Fitz-Enz’s observations. It is foun-   • Error/Performance – Number of                                 Brookfield provides “HR
dational. It addresses the basic notion of         people who succeed or who are                               Connection.” Small
what the HR function is, who the people            “stars” as a percentage of number of                        Business Times readers
                                                                                              who would like to see an issue addressed
are that populate it, how the work is              people hired.
                                                                                              in an article may reach him at (262)
done, etc.                                     • Reaction/Satisfaction – Feed-                827-1901, via fax at (262) 827-8383,
    I believe that Fitz-Enz’s statement can        back from hiring managers. How             via e-mail at or
serve as a call to action for HR. Implicit         well were their needs met?                 via the internet at

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