Berlin is a beautiful city in the autumn. Sitting in a bar in Friedrich Street provides a perfect vantage point of the Brandenburg Gate. It was somewhat ironic that a group of us were having a heated discussion on the steps of a symbol of peace. The argument went: “This profession is in danger of losing its USP. If we are to remain relevant we need to adapt and focus on areas that show where we can truly create future value.”
It was October 2014, and it was our belief that the HR profession should be more aware of the many forces shaping its destiny, and more proactive and positive in influencing the outcome.
The forces for change are well documented – consumerisation of technology, big data, self-service consolidation of service provision, cost reduction...
The emerging context of a globalised and interconnected operating environment requires a fundamental rethink of how organisations and people work. HR is not just affected – from an OD perspective it should be helping to design the future. So what are we going to do about it?
Our concept for HR’s future emerges from decades of experience in working to change organisations in executive and advisory capacities, underpinned by structured research.
To begin: two points of principle. First, managers are responsible for people – HR’s success should be measured in terms of how well it has enabled this responsibility to be exercised. HR’s responsibility is not to supplant but to enable.
Second, HR’s purpose should be to enhance organisational effectiveness. That means continually improving the context in which people work – culture, processes, leadership, capability and so on – and not just focusing on individuals and teams. We should discard the rest.
Re-shaping HR and other functions
We recommend achieving this purpose in two different ways. HR should become a slimmer, higher calibre, organisational effectiveness function working with the leadership team and managers on the full range of their strategic and tactical responsibilities for people policies, practices and performance. We will expand on this in our next article.
A single integrated organisational services function should take on the administrative aspects of HR, finance, procurement and IT. It should be designed to provide an outstanding service to managers and employees but also maximise the use of self-service software and automation.
HR operations – the end of an era
Personnel administration is historically where the bulk of HR people have been employed. The transition to HR was intended to shift the balance towards more added value activities. There have long been pressures for ‘personnel management’ to be less about process and rules and more about enabling people and organisations to perform better. HR functions vary considerably in how far they have progressed on that journey.
Technology now offers game-changing possibilities. The advent of cloud-based self-service software negates the need for vast numbers of people to be devoted to working on ‘transactional’ HR processes.
Outsourcing suppliers have long been offering alternatives to in-house service provision. The direction of travel is for these services to move up the value chain, replacing the ‘hand-holding’ activities of local HR managers or ‘business partners’ with skilled advisers who can deal with employment issues better and more economically 24/7.
Technology is eating into the provision of advice to managers and employees. Artificial intelligence mechanisms and ‘bots’ are being developed that are sufficiently sophisticated to overcome dislike of not dealing with a ‘real person’.
However, there is a fundamental need to stand back and consider the economics, practicalities and quality of administrative services. With the technology now at our disposal, how can employees best be supported in their work and what structure represents the best value for money? There are ‘push’ and ‘pull’ factors building pressure to adapt a more integrated approach, and to shift HR services and analytics into units that serve the whole business.
Integration of systems and analytics
An important ‘push’ factor is the move towards common platforms to support business operations and permit more coherent performance analytics. Organisations across the globe are painfully grasping the nettle of multiple and disconnected systems. Typically HR has needed particular attention – uniting dozens, even hundreds, of systems – with a primary challenge being to align with finance in terms of people data.
There is also a ‘pull’ aspect to this. International pressures are building – for example among investors and regulators – for clearer understanding of how performance is achieved and long-term value created. It is essential that organisations achieve clear insight into how they operate as a ‘system’; how effectively their component parts (people, processes, money) operate in combination in managing projects, providing services, and generating revenue.
Unifying and enhancing systems merely within historic functional boundaries is short-termist and reflects siloed thinking. The consequence is that both analytics units and administrative services need to be re-configured to support the organisation as a whole. HR analytics should form part of a multi-faceted business analytics function.
The employee services proposition
A key ‘pull’ factor is the imperative to attract, retain and engage talent. The central purpose of an ‘employee services’ or ‘business services’ function should be to provide employees with a service experience to match that offered to customers, to maximise engagement and productivity, throughout the employment lifecycle. Such a function would now lead in the interaction between the organisation and employee in areas that were formerly provided by HR, finance, IT etc. The core design principle is ‘what helps employees do a great job’, not what enables central functions to feel important. Why?
- It makes no sense for customers, internal or external, to deal with multiple disconnected departments – no-one would design such a system from scratch today.
- Intrinsic customer/employee loyalty to organisations must be earned – if a company wants good service from employees it must provide good support. The best people will go where the best employment experience is. Reputations will be won or lost on social media.
- Organisations that continue to manage their relationship with employees on a parent-child, take it or leave it basis will pay a significant cost in poor performance and poor talent attraction and retention. This is something all stakeholders, including investors, should be mindful of in assessing how organisational leaders perform.
In a digital age smart use of technology and analytics is a critical success factor. Emerging analytics tools offer unparalleled insights into external customer behaviour. The same degree of intelligent data collection, analysis and follow-through should be used to facilitate healthy internal relationships, as part of an employee-centric approach that builds mutual trust as well as enhancing performance and capability development. Employees now have a digital relationship with their organisation as well as a human one. Businesses need to become skilled in managing both types of relationship.
Moving towards a simple, binary structure of employee services and an ‘organisational effectiveness function’, applicable in small and large organisations, could signal the end of HR’s preoccupation with the ‘three-dimensional model’: business partners, centres of excellence and HR services.
Successful implementation requires a joint approach. First, managers: in meeting their responsibility for people and becoming genuine people leaders and developers. Achieving this should long have been an HR priority.
Second, central functions need to adapt to a new context, one where effectiveness and value for money are more important than retaining control. There may be no choice in this matter once CEOs and boards start demanding this change.
The shifts we have outlined will not happen overnight. They have started in some organisations but many others will struggle. The systems to support the transition are available now. The barriers lie in ‘traditional’ thinking and practices, and in capability. Our next two articles will help explain how to get ready.
Read an interview with Newall and Lambert in which they lay out their ideas. The next two articles will be in the January and February issues of HR magazine.