Knowledge Center: Article
Setting up HR for Success1/1/2016 Cathy Powell
We recently asked 20 chief executives: “What are the top three obstacles to achieving your strategy?” In almost every case, not having the right people, capabilities, or culture were among the CEOs’ top three.
Recently, the Conference Board published the views of 729 CEOs across the world about the challenges for the coming year. Their views echo our findings. Human capital is the key challenge. This applies to all of the CEOs surveyed, irrespective of location. It seems that most boards and executive committees agree that unless you get the right people and get them working with you, your chances of delivering your strategy are probably zero.
So how well-equipped are HR functions to deliver this challenge? Back to our sample of CEOs. We then asked them: “If getting the people agenda right is so critical to your strategy, how confident are you that your HR function can deliver on it?” In only two cases was the response “high.”
HR’s role is now more critical to business success yet most HR functions do not appear to be set up for success. This is despite the fact that many of the CEOs we spoke with said that their organizations had implemented some form of ”HR transformation program” over the last few years. More than two decades on from the then-groundbreaking “Ulrich model,” which was intended to relieve the administrative burden and position HR more strategically, many HR functions appear to be in no better shape to align their people and their organization with their strategy.
Our research shows that the majority of HR transformation programs deliver a significantly watered-down version of their intended benefits and come in behind schedule and over budget. Any self-respecting HR function wants to be seen as strategic, rather than administrative. It is ironic that there has been far more progress in the last ten years in the delivery of HR transactional services than in the strategic development of the function itself. Most HR transformation programs typically involve the creation of some form of shared services, which aims to improve the line manager’s and the employee’s experience, while lowering the costs of delivery. “Get the basics right to earn the right to play a more strategic role,” was the mantra for many HR leaders..
The good news is that, in many cases, basic HR services have now improved with simplified processes, more choice of delivery channels, increased consistency of response, and better access for users. The costs of delivery of HR transactional services have typically reduced by 15–20%,but often only after a painful process. Although line managers and employees now serve themselves rather than relying on HR, the potentially more valuable prize of enabling line managers to be better leaders of their people is much less evident. This seems to be the case even where improving the quality of people management was a stated objective of the HR transformation program.
So, although some progress has been achieved, an HR function, capable of creating the workforce and the culture its organization needs to deliver its strategy (the real strategic contribution), is still a rarity. Why is it so difficult to position HR to address the organization’s strategic people challenges and also ensure that HR transformation programs deliver against expectations? We have identified three main causes:
1) Losing sight of the real business case
Lower HR function costs are important, but the real prize is creating competitive advantage through people and culture.
2) Many HR functions simply don't have enough good people
Ironically, given that people in HR functions are the specialists in talent development, most HR transformation programs flounder through a lack of the right HR talent.
3) Most HR functions are not good at change
HR should role model great change leadership to the rest of the organization yet few HR functions have strong change-management capability. Future-state designs often get watered down because of resistance or rejection by HR teams themselves. Without strong program management skills, the critical path and the key dependencies of the transformation program may not be understood — so delays and rework become inevitable. HR leadership teams typically underestimate and under-invest in engaging, mobilizing, and galvanizing the right sponsors to co-lead and support change. They often do not demonstrate sufficient entrepreneurship, rigor, discipline, and bravery to take the tough decisions and deliver targeted benefits at speed.
If you are about to embark on a HR Transformation program, or your HR transformation has faltered or not achieved its expected benefits, we have identified seven factors that differentiate successful HR transformations from their less successful counterparts:
Keep focused on the big prize
Be very clear about the links between HR transformation, the business strategy, and the benefits to the business as a whole; not just the HR function. Avoid focusing on savings alone — the big prize is the delivery of a people and organization agenda that creates competitive value.
Be clear about HR capabilities needed to drive competitive advantage
Is it the capabilities to develop best-in-class leaders who can create a healthy climate and drive up levels of engagement? Or is it the ability to attract, hire, and retain scarce talent? Or is it the capability to design optimal organization structures to meet your new business model? These capabilities should be at the heart of your new HR operating model and HR organization design. The most successful HR transformations maintain relentless focus on building these critical capabilities; on tracking progress; on removing obstacles and, above all, on the realization of the targeted benefits.
Reflect the voice of the customer, and tomorrow's customer, in the design of the new function
The most successful HR transformations are customer-centric. They are brought to life by a compelling story based on real benefits for HR’s customers. This means recognizing that 80% of HR work is not actually done by HR — it’s done by employees, line managers, suppliers, and so on. If most of the benefits from the program are for people inside the HR function, it’s unlikely to succeed.
Make creating the HR function and capabilities you need a priority for senior leadership, not just HR
Creating the capability of your organization to deliver its people agenda should be one of the top priorities for the leadership team. Leaving it to HR is just too risky. Senior leaders must all be active sponsors who promote the case for the transformation of the HR function to their own leaders. By supporting and challenging HR on its change journey, the function’s game gets raised. It’s worth thinking about how much quality time you spend as a leadership team on the most critical people and organization issues in your business. Are the key people and organization priorities clear? Do you have programs in place to address them? Are they working? Are you measuring their effectiveness? Are you spending enough time as senior leaders reviewing the capability and capacity of your HR function to support the people and the organization’s priorities? If not, it may be time for more quality discussion on how you are building HR capability.
Appoint the best talent to HR roles
Top-performing HR functions invest in defining the capabilities needed for key roles, such as the HR business partner or the functional specialist.
Having defined the HR capabilities required, it is critical to adopt a rigorous appointments process to select to key roles. The best HR functions avoid the tendency to “rebadge” HR generalists as HR business partners. In reality, it is usually only a small minority of HR generalists who make a successful transition to fully-fledged commercial, strategic business partners. In our experience, the best way to turbo-boost the capability of the function is to combine the best of the current HR team, selected via a robust objective job/person matching process, supplemented by selected external hires and an injection of non-HR people with commercial acumen, change management, people leadership, and project management skills.
Hire fewer, higher caliber people into specialist functions
Better to have one or two best-in-class specialists than an army of average generalists. The best HR centers of excellence we have come across are small and lean. They have deep expertise in their discipline so they can add real value over their business partner colleagues. They are freed from their administrative workload so that they can bring the best of their specialist knowledge to deliver the strategy. The best HR functions move the work in specialist functions that can be automated or proceduralized to shared services so there is no dilution of focus. They recruit specialists not just for their technical expertise but also for their commercial edge, their consulting skills and their ability to build strong relationships between the functions, the line, HR business partners and shared services.
In the best HR functions, business partners, specialists, and shared services colleagues work productively together; they name the tough issues and work to resolve them constructively in pursuit of better outcomes for their organization. In their poorer-performing counterparts, unhealthy competition and unresolved tensions undermine the function’s health, the quality of its delivery, and the performance of the organization.
Build HR capability and increase skill of people leaders
There is no shortcut to building functional excellence. The benefits of appointing best-in-class people will diminish over time unless there is a systematic program to build and grow the capabilities required for the future. The best offer is a program of learning interventions in the required HR capabilities; they create HR learning communities where action learning is used to solve key business issues. They require all members of the function to demonstrate commitment to their own professional and personal development. They expect all leaders in HR to be coaches and capability builders.
By building HR’s delivery capability interventions land on time and within budget. They deliver expected benefits. The best HR functions coach and develop commercial acumen, change management capability, project management skills and discipline in equal measure. They role model to the rest of the organization how you build capability. They systematically build the capability of people managers so they improve the performance, morale, and health of their organizations.
HR transformations are hard and always easier to start than to finish. Rigor, discipline, a relentless focus on delivery of benefits and the building of capability are the hallmarks of the best. In their book, Great by Choice, Jim Collins and Morten Hansen write that “the factors that determine whether a company is truly great are largely in the hands of its people.” We think this is spot on; now is the time to pay more attention to how well your HR function is helping your organization to be truly great.