HR Transformation – don't put your operating model in the too hard basket
Ulrich’s HR service delivery model has been the leading model of choice for HR organisations for a couple of decades now. In short, it promises to create a more business-focused, ‘strategic’ HR function. The model has underpinned successive waves of HR Transformation, often triggered by technology, from early attempts at “B2E” (business to employee) to our current focus on cloud-based systems promising a better employee experience. So, it begs the question why, after decades of investment, most conversations with HR executives still reveal the same old frustrations? Why are HR Business Partners mired in administration, Centre of Excellence’s (COE’s) building programs that don’t get traction, and Shared Services functions that are taping together fragmented processes?
Levant’s point of view is that HR transformation has never been about the technology. It’s about how HR views its purpose in the first instance, and secondly how it shapes an operating model to achieve that purpose. It’s a surprisingly difficult conversation, as it isn’t as ‘sexy’ as the latest technology, and it challenges long held assumptions – among HR executives themselves – about what their role and value in an organisation truly should be.
In short, before you sign on to the shiny new toy, invest the time to examine your operating model.
The Context – Technology won’t transform you
Human Resources (or People & Culture, or whatever you call it these days) has long operated in the space between aspiration and reality. Somewhere between the promise of the function to deliver smart people solutions to complex business problems, and the reality of performing the basic task of administering people related activities in an organisation.
So, it’s understandable that HR Transformation has been such an attractive proposition to most HR leaders, at least how it’s been presented to them (mostly by technology vendors or systems integrators). The pitch is simple and attractive – “let’s help you get those pesky administrative tasks sorted out, which will free you up to play your rightful strategic/commercial/innovative role in the business”.
Our experience is that as the dust settles post-implementation, not much transformation has actually occurred. Despite rapid developments in HR technology and improvements in user experience (UX), you could argue that most HR functions potentially have better service channels, but haven’t changed their value to the business.
Our view is that in most cases, what is termed a HR Transformation is really a service delivery improvement program, with technology as the catalyst. The question being addressed is how do we deliver our current services, better or more efficiently? The question of whether your current services are relevant, make an impact and are valuable to the business is not addressed.
A true HR Transformation should start with redefining the purpose and value of a HR function in the business, and shape ways of working that would enable the function to fulfil its aspiration. In simpler terms, fixing the administration side won’t make you more strategic, it will just make you less administrative. To become more strategic, you need to shape an operating model that positions you to translate business priorities into people solutions, define a clear set of measures that speak to your value, then figure out how to deliver them well. Most importantly, you need to build the capability required to change the way the business views you.
Start with WHY – the Operating Model question
A different way to look at the value of HR
In discussions with most HR functions, the question of the function’s purpose can be confusing. Typical answers range from a view of the services HR provides (e.g. we recruit, develop, etc.) to a pragmatic, day-to-day view (e.g. we coach people leaders and help them complete their people related tasks).
In redesigning HR operating models, we always challenge our clients to take a big, existential step back and ask – what is HR there to do? As in, what is the purpose of the HR function?
In our view, the primary function of HR is to optimise the return on investment in your workforce. When you consider that for most organisations the single largest spend is on payroll, the function of HR is to determine and implement how to get the most out of that spend. The services and programs HR typically offer – recruiting talent, culture & values, diversity – are solutions and interventions that should be aimed at optimising that spend, configuring and managing the workforce profile and in the process turning the payroll liability into an asset.
To help address the fundamental question of HR’s purpose, we work with our clients to define and understand the HR Value Chain. The HR operating model builds on the HR value chain and provides a blueprint for how you plan to organise yourself to deliver your purpose.
Figure 1: An example of the HR Value Chain.
HR Operating Model vs Service Delivery
The HR Value Chain is a simplified view to help define how your HR function will identify business needs, understand the people implications of business strategy, then translate that into a set of programs and services that will optimise the value of your human resources – the why you exist in the first place. Exactly what services and programs HR delivers should be traced back to the needs of the organisation and deliver a positive return on investment. The question of how you deliver those services forces you to consider your HR Service Delivery Model, and the role technology can play in delivering a better experience.
The HR Operating Model differs from the HR Service Delivery Model, though they are often confused. While there is a relationship between the two, it is helpful to consider them in order – figure out what you’re going to do and who you want to do it (HR Operating Model), then design how you want services to be delivered within that model (HR Service Delivery Model).
Where this has been most confused is the role of the HR Business Partner. While the intent of most HR Business Partnering functions is to be a strategic and commercial advisor to the business, the reality is that they are often designed to be a delivery channel for HR services. In essence, the intent of the HR Operating Model (the why) is lost when translated into the Service Delivery Model.
Changing HR’s perception of its role
Taking a value chain driven view of HR’s role will often elicit varied and spirited reactions from within the HR community. One common reaction is resistance – the desire to maintain the line that “we can keep doing what we do, in the same way but with better technology, and deliver a different result”. The issues often lie within the various functions of HR itself:
HR Business Partners can be hesitant to change the dynamic of their current business relationships, where they are often seen as being helpful and positive, albeit administrative.
COEs have deep expertise and passion for their respective programs, so they can find it difficult to see themselves as being dependent on business demand.
Service Delivery functions are often most receptive, but can also be challenged to think more broadly about how they can contribute to designing services more effectively.
So, with this depth of potential resistance, it’s understandable that the discussion about the role and value of HR can be sidelined or parked for another time. It’s a difficult conversation to start, and the HR leader who wants to broach the topic will need to have a clear and compelling vision for what they want the future of the HR function to be. And it always helps to have your executive, particularly your CEO, sharing that vision.
Changing the business perception of HR’s role
Reshaping or transforming the role of HR, no matter what direction you take, will always hinge on the adoption of HR’s new role within the business. Senior Executives will need to have confidence in the capability of their HR Business Partners to play a strategic role, in order to invite them into broader conversations about business strategy. Line Managers, who may be asked to self-serve more often, will need to recognise their role as people leaders, and not revert to old habits or expect a HR business partner to step-in. And employees, the vast majority of customers for HR services, will need to think of the channels and processes as accessible, well designed and valuable. Services that enrich or simplify their working lives.
Getting the intended design completed is a difficult but valuable exercise that invites debate and self-examination. But managing the change effort, driving changes in perception and behaviour inside and outside of the HR function, is where the design becomes a reality, and the goals of your HR Transformation are realised.
The costs of putting your operating model in the too hard basket are significant and not only erode the value of new technology, but also impact HR’s overall effectiveness and credibility. For the sake of a bit of discomfort we say, bite the bullet and talk about what your business needs and how you plan to deliver it before you buy the new system.
Find out more about our Operating model and organisation design work here.
Want to talk to us about how we can help you with your HR transformation? Reach out to:
Fadi Zeitoune, principal
