The human resources profession is at a crossroads. As the global economy grows and technology has made organisations highly interconnected and transparent, what HR does has to change.
We recently completed a series of major research studies on the organisation and structure of HR and found that HR teams and their leaders are undergoing tremendous stress. While more than 90% of them claim to have a good handle on their budget, only 30% believe they have a 'reputation for sound business decisions', only 22% believe they are 'adapting to the changing needs of their employees' and only 20% feel they are 'adequately planning for the company's future needs'.
What happened is simple: over the last few years talent has become the number one issue on the minds of most CEOs, so the HR function is being asked to lead the transformation of most companies towards a more engaged, high-performing, well-aligned and highly capable organisation. And the number one issue CEOs still cite is a weak leadership pipeline – so HR must take ownership for this as well.
Over the last 30 years HR organisations have gone through several transformations, moving from an operational role (the 'personnel department') to one of 'HR as a service centre' to one focused on 'driving talent outcomes'. Most companies we talk with are somewhere between phases two and three in Figure 1, so they are heavily focused on building integrated programmes to attract and retain top people, drive a compelling employment brand, improve and align the performance process, and better manage and transform L&D.
Our research shows that as companies move from phase to phase, their purpose and mission changes. As companies move to phase 1 to 2, they focus on efficiency. Here they set up service centres, rationalise the generalists and assign business partners to reduce inefficiency in service delivery. 'Service delivery efficiency' and effectiveness is the focus.
As companies move from phase 2 to 3, they focus on effectiveness of driving talent programmes. They now look at measures such as 'quality of hire', 'time to fill', 'training utilisation' and 'leadership pipeline' as measures of success. Here the focus is on building world-class talent programmes and embracing new technologies (often social and network based) to extend the company's brand, connect people, facilitate learning and collaboration, and build leadership.
At phase 4, however, something different happens. The 5–10% of companies we talk with who have reached this new phase are focused on something different. They have built a strong HR service delivery capability and they have spent three to five years optimising their talent programmes. And these programmes don't sit still; they are continuously improved. For example:
- Recruitment, for example, is shifting entirely towards 'network recruiting', where the drivers of success are employment brand, candidate relationship management, the use of analytics to determine who are the best candidates, and strong and local relationships with hiring managers.
- Learning is shifting towards a 'self-learning' digital learning environment, where individuals can learn on-demand, decide between formal and informal learning, and their training is integrated into their career management and professional goals.
But as these various talent strategies are improved, and more analytics are applied to each, the company must also do something else: they must move HR back into the business in a more local way. This is the essence of high-impact HR – it is a focus on changing the operating model to be less centralised and more 'co-ordinated but distributed' into the business.
High-impact HR: focused on specialised skills in the business
The core of high-impact HR today is creating more specialists and locating them closer to the business, where they can drive the most value. Recruiting, for example, is a highly specialised problem – recruitment teams manage the brand, they source, they assess and they 'sell' the company to strong candidates. In order to be effective, they must understand the precise jobs, management styles and culture of the team they support. In other words, they should be 'local' – or as 'locally assigned' as possible.
The same is true in learning. While it's terrific to have a strong corporate university and lots of online assets and content, each part of the company has its own particular learning problems. Rather than force all the programmes to be centralised, we want local learning specialists to help each local group build their own learning solutions.
Does this mean HR has to move back to a model of 'anarchy' with lots of distributed groups embedded in the business? Not at all. Today, unlike ever before, HR can rely on standard technology platforms, standard frameworks and standard tools to help HR professionals close to the business solve their problems. Our research shows that the highimpact HR organisations actually do some unique and powerful things, very similar to how the military manages its distributed operations:
- They have more specialists and fewer generalists. They do this by implementing well-designed self-service systems to let people manage their own HR 'transactions' and put more of HR's budget into specialised skills. High-impact HR teams are almost 65% specialists, versus less than 40% for non-optimised teams. The role of 'generalist' almost goes away.
- They build 'networks of expertise', not 'centres of expertise'. The recruiters or learning advisers, for example, who may be assigned or embedded in the business, are all connected to each other. They know each other and share best practices – using common tools and methodologies wherever possible. The centre of expertise is small and focuses on technology platforms and standards – not centralised services.
- They have senior-level HR business partners, often operating as 'VPs of HR' in the business, with local control. These local leaders partner directly with local line leaders and they orchestrate solutions and serve as consultants. These roles must be developed over time because these individuals need strong business experience and deep HR domain. Many of our clients tell us the title 'business partner' is now obsolete, so these are essentially 'people leaders' or 'talent managers' – to connote their direct responsibility for results.
- These organisations have strong internal technology groups to build common platforms and avoid renegade talent, learning and payroll systems from popping up. They build strong analytics teams centrally and bring together compensation analytics, engagement analytics, retention analytics and all the other analytics teams into a core central group that can help understand and plan the future of the company's talent needs.
- They have internal groups that focus on HR professional development, research, and tools and methods. These teams, while small, are critical to making these HR teams successful because they make sure the HR team is educating itself. Today fewer than 8% of all HR organisations have a professional development team for HR – this is becoming a critical need and one strong organisations fund and staff internally.
- They have chief human resource officers who are laser focused on the business and delivering on business outcomes, not just operating HR as an efficient provider of service. Of course HR must deliver services – this is core to its mission – but the CHROs of these companies are often business people (35–40% of all CHROs we now interview and work with are coming from the business) and they push HR to solve local business problems.
- They focus on effectiveness and outcomes, not just efficiency. Our research shows that these high-impact HR organisations must go through phases 2 and 3 before they can effectively get to phase 4 – because otherwise they become highly inefficient. One large Japanese client of ours has 100 HR departments, each distributed into different business units. This is not high-impact HR – it lacks the standards and co-ordination needed to be innovative and share information and skills across the company.
This new operating model, which we have been sharing with clients for about a year, is very well aligned with the CIPD's Profession Map. It pushes HR to be much more business aligned and accountable to local business leaders.
Think about it like this. In the coming years we, as HR leaders and professionals, are going to be the craftsmen that build the organisation of the future, attract top talent, fix and improve engagement and learning challenges, and make sure managers are well trained for the future. As craftsmen, we must be experts at our craft, we must have world-class tools and we must be close to our clients. By thinking about HR this way we can focus on our own expertise and bringing it close to the business in a co-ordinated and scalable way.
One of our clients put it well: 'When the HR function works well, everyone in the business thinks they're just "part of the team" and leaders feel they are making and owning the right decisions.' Let's rethink HR and move beyond HR as a 'service' and 'designer of programmes' and reimagine ourselves as consultants. This is the future we are moving into, and it will be exciting and rewarding for us all.
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