The Swiss knife approach to HR transformation

By Luca Segantini
Originally published on HRO Europe, 2004

There is no one way to transform HR and the selection of the appropriate path and supporting tools depends on the following factors: company history, structure and culture, size and industry, current HR model, employees’ readiness for change, return on investment and short- and long-term cost saving opportunities.

Even when you have your HR transformation plan ready, including a detailed analysis of all of the above, you will have to choose among several tools which would help you to turn your HR function into a great support to the company bottom line. We have attempted at listing those tools below, with a few comments which should help understanding when each of them make sense. As we have a little bias towards shared services and business process outsourcing, we have expanded a bit more on these two options.

Centres of expertise
These are a small, highly-skilled group of specialists who leverage expertise across the company. They develop and assist in the delivery of world-class HR practices and processes. They tend to focus on strategic change, design and development of programmes, such as talent management, leadership development, skill building, improving performance, rewards, work/life, etc.

HR councils
HR councils are usually formed by a group of HR leaders who meet to align HR strategy with overall firm strategy, providing HR development guidance and support. They measure and evaluate HR (i.e. through balanced scorecard) and allocate resources. HR councils are effective for complex organisational structures with many distincts business units, as they break down silos within the company. Within councils there is a leadership representation from all disciplines and businesses of HR. In summary, they may either act like a sounding board or an active working group that makes decisions.

HR as internal consultants
In some corporations, a few HR professionals use process consultation and other methods to empower clients to solve problems and make positive changes, by providing insight using trends and data. Of course to be successful they MUST know the business of the organization they are working in. They focus on activities such as organisation design, change management, workforce planning, leadership, coaching, partnering with business leadership. They can be assigned to each business unit or centralised and leveraged across the company.

Business unit accountability for HR processes
Well, this is a daring option: in some cases, business units’ managers take responsibility for processes such as:

  • Performance management
  • Promotions
  • Career development
  • Compensation
  • And others

HR may facilitate the process by removing itself and by supporting technology-enabled manager self-service.

Shared services
Shared services are often started by consolidating transactions information and data through leveraging consistent processes and integrated technology.ultimately, they should become business-like entities providing services to internal (and external) customers, at a price, quality and timeliness that they are willing to pay for and competitive with third-party alternatives. Sounds tough? Well, it is, but you can get there, provided you take care that:

  • Services are consistent across business units
  • Size of workforce, workforce locations, cost of labour and consistency in service requirements are considered

Types of shared services include multiple vs. single site, national vs. global and via web vs. phone.

The main benefits of shared services (as identified from recent research conducted by the SBPOA and available to members at http://www.sharedxpertise.org) are:

  • Economies of scale
  • More efficient and effective service, higher quality, consistent answers
  • Avoiding duplication and re-work
  • Potential savings in labour costs between 15%-40%
  • Possibility to reduce administrative costs between 20%-50%

Main issues are:

  • Shared services is a costly and time-consuming option
  • Huge efforts are needed to gain consistency of processes
  • They may face resistance to change
  • Potential service disruption
  • New skill set required for HR shared services employees
  • May require large investment in technology
  • Challenges associated with centralization

HR outsourcing
Often an organization realizes that using a third party to perform HR processes and deliver them to their employees makes a lot of sense. Initially, outsourced services tend to be transactional in nature (high volume and repetitive), but companies can choose to outsource anywhere from one function to all functions.

Benefits

  • Some services can be provided more effectively by third parties
  • Allows the company’s HR department to spend more time focused on core and strategic activities
  • Customer service often available 24 hours a day
  • Sophisticated reporting and data capabilities
  • Availability of a standard, integrated platform
  • Sometimes cheaper through economies of scale

Issues lie mainly in how the relationship between the outsourcer and the service provider is managed: executives tend to focus on getting the deal right and they often oversee the importance of managing the relationship over time. This is especially important given that:

  • Outsourcing firms may not understand the company culture and processes
  • Quality of service can be an issue
  • Outsourcing firms may not be as committed to company’s success
  • Getting processes to an “outsourceable” state is a great challenge
  • Initial resistance to change can be substantial.

eHR
Using technology to provide HR services has become increasingly common. The web is quickly becoming the most frequent medium, followed by email. Phone use is decreasing. Intranets, web-based learning and online recruiting are all part of this trend.

HR self service
“Employee Self Service” (ESS) is a combination of technology and organisational change that enables users to interact directly with their Human Resources information to inquire, review and act upon transactions from their workplace.

It can be enabled via Internet, intranets, interactive voice response. Examples of activities include enrollment in benefits, updating personal information, inputting vacation time, enrolling in training classes, viewing payroll and compensation data, applying for internal job, etc.

HR portals
They combine data from various systems into a single point of interface, allowing 24/7 access to information. Through HR portals, information exchange and knowledge transfer take place, and they often fit into larger knowledge management initiatives.

Whatever you and your team are choosing to transform HR within your organization, do not forget that the following competences are critical for success:

  • Personal credibility
  • Ability to manage change
  • Ability to manage diversity
  • Efficient delivery of human resources best practices
  • Understanding and supporting the business

This looks like an easy and obvious check list, but daily interaction with HR professional tells us that there are still many hurdles to be overcome. So keep your Swiss knife handy and, more importantly, try to learn what each of the blades is supposed to be used for…

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