Owning our HR operating model: an enterprise-centred organisational design methodology for HR

There seems to be no HR function that is not embarking on, is not part-way through, or has not recently completed major change in the way it organises itself and how it delivers its services to the organisations it supports.

Much has been written on how to implement the ubiquitous ‘Ulrich model’. Billions have been spent on outsourcers, consultants, advisers and technology platforms that have apparently ‘transformed’ HR. Many hours of reflection have been spent by businesses wondering why the first, second or even third rounds of HR transformation have not achieved what they wanted, both for the function and the organisation itself. The ‘What comes after Ulrich?’ question has been floating around for a few years now, but few coherent propositions have arisen and even fewer fully implemented as alternative operating models for HR.

Our belief is that HR’s struggle with what comes next, and the near mono-culture we now see in the way HR organises itself, is a direct consequence of HR failing to take a systematic and methodical approach to the organisation design of its own function. This would lead to designs that they themselves are the architects of and that are anchored in the current and future needs of their businesses.

The disciplines and toolkits for organisation design were developed and pioneered in the early 1970s by internal change agents at IBM and GE and soon after adopted by strategy consulting firms. Why these methodologies have not become part of the core knowledge base of HR is the subject for another paper; however, the purpose of this one is to advocate and illustrate the benefits of applying methodical organisation design to the reshaping of HR and its operating model, an approach that both starts and ends with the enterprise as a whole.

Almost by default the drivers for functional improvement come from beyond the function itself, imposed on HR: internal instructions to cut costs, cut numbers, improve ratios, adopt the enterprise-wide technology platform, get the basics right, standardise, simplify, outsource and offshore. And a cacophony of external voices: ‘use us as we know better than you’ say the armies of consultants, ‘use our technology, it’s better than theirs’ say suppliers, ‘follow our star’ say the gurus, and so the external voices go on. And so HR frequently follows.

More appropriately some enterprise-wide organisation changes do require HR to follow suit and change its structure and ways of working: rapid organisation growth, mergers, acquisitions, divestments, retrenchment, relocation, change of ownership, the introduction of matrix structures, centralisation, localisation. Though HR is not often enough the architect of the new enterprise-wide restructuring, these top–down changes provide an ideal opportunity for HR to take the initiative in the organisation redesign of their own function.

The organisation design process should always start at the enterprise level, with HR posing a series of questions about how effective the current enterprise operating model is in enabling the organisation to fulfil its strategy. Our belief is that HR leaders are failing their organisations if they are merely designing HR organisations that perfectly fit anachronistic enterprise models. The first question should be: ‘To what extent is the enterprise operating model fit for purpose in delivering the firm’s strategy?’ Only then should the focus move to the HR organisation and its capacity to support the business strategy.

Structure should follow strategy and the launch point for a review of HR structure should be a people strategy that clearly differentiates the role that HR will play in enabling the enterprise to deliver its strategy. This is not a generic list of HR activity and projects. Strategy is about making choices. It is about differentiation. So, which people-related choices are going to enable this business to deliver its differentiated strategy and deliver its specific goals?

In answering this question, the organisation design team should be thinking not just of structural options but about reshaping leadership, capabilities, processes and the other elements of its operating model.

Organisation design criteria should be determined and agreed early on in the process. These may be related to fit and alignment to the broader enterprise as well as to elements of the people strategy. They should then be used to evaluate the contrasting benefits, costs and transition risks of the alternative organisation designs for HR. It is a myth that there is a perfect structure. Every structure entails a series of compromises, for example the loss of standardisation for the benefit of localisation, or vice versa. The question that must be answered is, ‘Which compromises are we willing to make and where will we hold our ground?’

In designing an operating model for the function, a ‘whole systems’ approach should be taken to identify changes to be made in processes, governance, culture, leadership, accountability, resource allocation, boundaries and handoffs, and so on, in order to create a coherent, self-sustaining and integrated way of working.

What emerges then is not a porting-over of someone else’s best practice nor an implementation of a ‘standard’ model nor one sold in by advisers who ‘know better’ than the business. This is a structured, sequential, paced and methodical process. As a result, the emergent operating model is anchored in the business, the design is coherent and systemic, the business case is made, key stakeholders have contributed to the shaping of the model and they become key to its implementation. This methodical approach results in diversity of HR operating models, alignment and innovation in design – characteristics too often missing in HR operating models.

So what does this mean for the further development of the HR operating model?

Developments in IT have made employee and manager selfservice a reality, making HR largely redundant in basic ‘personnel’ processes.

While this has been happening, a more significant change has been happening. Organisations have become increasingly bigger, more complex and more global. With poor internal alignment and lack of cross-functional effectiveness, the organisation expends a lot of its energy fighting with itself. Like an octopus wearing roller skates, there is a lot of activity but little momentum. Most people who’ve worked in complex matrices will relate to this metaphor. If HR isn’t focused on optimising the system as a whole, which function is?

Whether as an HR function or an ‘organisation effectiveness’ or ‘business transformation’ function, the name is less important than its capacity to act with flexibility and with pace, to partner the business in change, to develop and embed practical solutions that are owned and sustained by the business, and that create a work environment that attracts and retains the HR talents and capabilities the business needs.

HR directors and their leadership teams have to be courageous and bold in anticipating their organisations’ needs in this way, taking ownership of their own change agenda rather than responding time and again to external pressures to change. By continually making itself redundant and reinventing itself in this way, HR can maintain its relevance to the business and its centrality in organisational performance.

About the authors

Barry Fry

Barry Fry is MD of Slumbering Giants. Barry has significant global experience in the design and implementation of major business transformation projects, including globalisation, complex international and national mergers, fundamental restructuring, culture change and major re-skilling initiatives and has held roles in a number of HR transformations.

Barry was previously Global Director of Organisation Development at BOC Group, Global Line of Business HR Director at BOC Group and Global Organisation Development Director at The Linde Group. Barry is also an experienced trainer, facilitator and consultant. He combines mastery in instructional design with deep subject matter expertise and ensures that there is humor and fun in his programmes.

Barry's previous clients include the BBC, Virgin Media, Orange, EE, Yell, SIG, Sanofi, Pfizer, Atkins, Dentsu, Aegis Network, Alvarez and Marsal and University of Southampton.

COM - Fishman

Anton Fishman

Anton Fishman has spent the last 30 years advising and working alongside HR functions as they improve people processes, enhance their HR functional capability, and learn to lead and manage their own function as well as providing support to the business. He has an MBA from Cranfield and has held previous roles in Hay Group. He founded a successful change management consultancy called Regenesis and its business psychology offshoot Corporate Insights.

He then became a partner in Boyden Interim Management and latterly co-founded Crowne Finch, the HR transformation consultancy, helping establish it as a leading international provider of consulting services to HR before becoming its chairman in 2013. Anton has returned to consulting in the HR, OD, capability and culture domains as MD of Fishman & Partners Ltd.


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