Developing the human capital balance sheet
| Date | 01 March 2005 |
| Published date | 01 March 2005 |
| DOI | https://doi.org/10.1108/14754390580000606 |
| Pages | 24-27 |
| Author | Jeffrey K. Cordes |
| Subject Matter | HR & organizational behaviour |
OR NEARLY FOUR DECADES, human
resource professionals have continued to
exacerbate the perception that HR provides no
true bottom-line results to an organization. As
we continue to become embroiled in mounds of
administrivia, our peer professionals still describe us as
organizational overhead, administration, paper-pushers,
personnel managers: part of the unforsaken line on the
balance sheet called G&A (general and administrative).
There has been some progress, however, with the
support of leaders such as Jack Welch from General
Electric who has been cited numerous times, stating
that his most important executive and advisor has been
his HR professional.
The root of the bad reputation
So why the bad reputation (see Figure 1, right)? What
are we doing wrong? Why do we keep doing it? Our
collective reputations have been developed starting with
one very important mistake. We are not business
professionals. We do not run our functions based on a
balance sheet. Many of us don’t have the background
to even understand what a balance sheet is.
Human resource leadership must model new
behavior. We need to begin that process by becoming
an integral and respected part of the senior
management teams of our organizations. First, we must
hire business professionals. SPHR1vs. MBA? How
about hiring an MBA with a SPHR? Several times a
former CEO has called me into his office after
interviewing a senior-level candidate to give me
feedback. “The candidate made it a point to tell me
that my HR exec didn’t sound much like an HR
person. Why? He seems to really understand the
business inside and out.” That’s a criticism I relish and
would like to get about all of my HR professionals.
Improving ROI
Improving the ROI from human capital assumes that
there is inherently an ROI already in place. As an
executive HR and OD partner, I’ve worked with
Fortune 500 companies who wouldn’t support that
premise. It’s critical that we first establish a baseline.
Develop an understanding with key executives
surrounding how they view the human capital
function. How do they measure HR or HC
effectiveness? It’s not surprising that the people who
don’t value HR’s contribution are the same people who
fail to measure it (see Figure 2, right).
Measurement is key. What are the key triggers that
directly impact the bottom line? Recently in an
earnings call, our CEO passionately described the
critical nature of our most important asset, our
employees. He focused on the incredible growth of the
company and how the human capital recruiting team
was the key driver in helping us get there. He then
discussed the importance of retention and why
24 Volume 4 Issue 3 March/April 2005
Developing
the human
capital
balance sheet
Running the HR function as a
profitable business unit
To gain internal credibility and deliver bottom-line
value, HR must drive out “administrivia” and show the
value of every human capital initiative. Jeffrey K.
Cordes, human capital officer at Navigant Consulting,
describes how to begin the journey and shares some
insight on what’s worked at his organization.
by Jeffrey K. Cordes
Navigant Consulting F
© Melcrum Publishing Ltd. 2005. For more information, go to www.melcrum.com or e-mail info@melcrum.com
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