Transforming HRD into an Economic Value Add: A Transformation Is Taking Place in Human Resource Development (HRD). It Is Moving from Being Managed as a Cost Center to Being Used as a Source of Competitive Advantage

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How much economic value does your HRD function generate for your organization? If you do not know the answer, here's help to determine whether you are a cost center or an economic value add (Eva), as well as what you can do to increase your strategic value to your organization. Keep in mind that there are only two ways to add economic value: reduce costs of what you provide, or increase the impact HRD solutions have on your organization's revenues.

Challenges for the HRD leader

As HRD leaders, you face three major challenges to becoming a strategic source of EVA: These challenges derive from senior management, the people using your services, and within the HRD function.

Challenge 1: From senior management. The first challenge will manifest itself in two ways. First, senior management sees itself as HRD's customer. Often, what they ask for is not what they need. Senior management is not the true customer, however. The people participating in programs are the customers. To become an EVA, we must transform senior management into "investors" and participants into "customers."

The second challenge from senior management is driven by the belief that HRD is not a source of revenue or profit growth. And for good reason-historically, HRD hasn't been. But by linking HRD solutions to specific business results, such as revenue-related metrics, senior management will begin to see us as a source of competitive advantage.

Consider the following scenario: The president of International Company X asked me to conduct a Management by Objectives Workshop for its Brazil division. This assignment made the president my customer, and the Brazil division management team my targets for change.

To transform the president into my investor and the Brazil division into my customer, I spent the first week interviewing all managers to determine current functionality and problems. The second week I set aside to design and conduct sessions tailored to eliminating problems managers were encountering when managing by objectives.

Challenge 2: From program participants. In most cases, participants view programs and services as the end game rather than a means to increased business performance. For example, when participants are asked why they attend a workshop on Effective Presentations, most typically answer "to learn how to make more effective presentations." The answer we want them to give is "to improve the performance of my department by making more effective presentations."

Consider again the example of International Company X. In that case, my real job was to help the Brazil division determine where its functionality currently stood, define the business performance it wanted to accomplish, and help it identify and remove obstacles.

Challenge 3: From within HRD. The third challenge will come from within your own HRD function. HR has long looked upon itself as the group that delivers world-class HR services and views the organization as its client. In

this scenario, HR is only responsible for the quality and cost of what it does. HR colleagues may not be happy with your use of measurements that focus on how your solutions improve the organization's performance.

For example, I was recently asked to facilitate a session on performance reviews with all of an organization's HR managers, as well as discuss with them what needed to change for the appraisal process to add greater value. I initiated the session by asking the HR managers two questions:

1. How many of the managers in your division would use the performance review process if they didn't have to? The answer was none.

2. Do managers in your division believe that the performance review process adds value? The answer was no.

Then I asked HR, what value was created by performance appraisals? Their responses were typical: "so employees will know how well they are doing and where they need to develop. …