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. Development 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 firstname.lastname@example.org or serve as a call to action for HR. Implicit well were their needs met? via the internet at www.odcons.com.
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