Should we Distribute HR Into the Business?

apples Today we see an explosive change in the world of work: people work remotely with high degrees of connectivity, companies are globalized and organizations are flatter, employees are less engaged than ever, and talent markets are rapidly changing .

Is it time for a new operating model for HR? We think the answer may be yes.

We are completing several years of research into the modern High-Impact HR Organization and we have uncovered some significant findings.

(Come to IMPACT 2013: The Business of Talent, on April 22-24 to hear the details.)

The State of HR Organizations Today

Human resources organizations today deal with many operational, compliance, as well as strategic issues. Our research shows that approximately 2/3 of all HR spending focuses on technology, infrastructure, and operational programs (payroll, compliance, record-keeping) and around 1/3 focuses on strategic talent management.

The 2/3 of back office work are things that must be globally integrated, highly scalable, accurate, and efficient. So when we design an HR organization we typically create shared services groups (and use outside providers) to manage these tasks. And our research shows (cataloged in the Bersin by Deloitte HR Factbook, with details available to members) that you can benchmark this back office spending and it will typically cost between $1,000 and $3,000 per employee to deliver per year.

But once you have these programs running well (and this is no easy task), the remaining 1/3 of the HR budget must optimize its efforts on the strategic value HR and L&D provides: supporting what we now call "talent management" - sourcing, hiring, staffing, training, managing, developing, and supporting the team... and planning talent needs into the future.

In most companies these talent-related functions are being moved into the "Talent Management" function, and our research shows that high performing organizations are integrating talent functions in new and different ways. Today a world-class talent management team includes staffing and recruiting, talent development and mobility, leadership and succession management, corporate training, as well as the disciplines of diversity, engagement, and compensation. A lot of "stuff."

Each of these talent functions in and of themselves are complex. Just managing corporate training, where companies spend 1-4% of payroll, is hugely daunting. We have built an entire research practice around the practices of managing the structure, organization, and best-practices of employee development, and we estimate that businesses spend over $130 billion around the world on training alone.

Most companies today have a variety of teams performing these functions (sometimes located in "centers of excellence," a term we are going to recommend you change) and they are at various levels of integration, centralization, or distribution into the business.

A Newly Defined Role for HR Business Partners

In the traditional HR organization model (designed more than 20 years ago), the role that pulls all this stuff together is called the HR Business Partner, of often named "HR Generalist." The idea for these people was that they would "serve" and "support" business leaders and staff, using the expertise of the COE for support.

Well, our research and many conversations with clients tells us that this model is not working.

Why? Several reasons:

1. Skills and Expertise : First of all, the HR business partners need to be very business oriented and they do not often have the skills or expertise to customize and apply all these complex practices locally. Our clients tell us that their own teams lack the necessary skills it all the talent practices, analytics, coaching, and general business acumen needed for such a complex role.

2. Local Authority: In many companies the HR generalist or business partner has no authority. Their jobs have been "hollowed out" by the concept of the COE. As one senior HR leader put it, "I couldnt think of a worse idea than to tell my HR community that we want them to be 'generalists' and let someone else be 'experts.'"

While they have time to learn from their own stakeholders and often see many local needs to help, they are often not given the authority to customize or change programs which come from the COE. This leads to low adoption and often a lower opinion of HR than is justified. If they are not empowered, they often cannot do their jobs.

3. External Intelligence. The HR business partners are often buried in detail and spend a lot of their time simply supporting or aiding local managers and employees. Sometimes they are the dumping grounds for administrative work people don't want to do themselves. So they have very little time to reach out into the outside world, learn new things, and collectively improve their own skills.

4. Widely varying roles. And finally, we find that this critical role must span many potential needs. One day they are coaching top executives, the next day they are dealing with employee relations issues, and a third day they may be revising compensation plans. Our research shows that the HR business partner role typically falls into different "flavors," (OD-related, recruiting and staffing, employee relations and compensation, and executive planning).

The Ultimate Goal

Ultimately what we are trying to accomplish in the design of HR is not only to "optimize HR" but rather to "optimize leadership, management and employees." That is, HR's job is not to "manage the business" but rather to "help managers manage the business." So our ultimate goal in HR organization and governance is to put in place a set of structures, roles, and programs that empower leaders to make faster, better decisions and engage employees in new and exciting ways.

What our Research Finds...

What our research shows (this research will be launched in April at our IMPACT conference) is that High-Impact HR Organizations need to do things differently:

1. Distribute a greater degree of authority and intelligence into HR teams within the business. This means a different structure and more "authority" and "expertise" within each business unit. It breaks down the traditional "center of expertise" structure.

2. Create "networks of expertise," not only "centers of expertise," and let senior talent professionals relocate into the business where needed. This creates an external intelligence function that helps HR continuously improve and evolve as new talent solutions are discovered.

3. Spend more time and money building the skills of the HR team. Every HR professional needs a cevelopment plan (some organizations are now building HR certification programs) to deepen their expertise in the disciplines of HR as well as the business itself. High performing companies tell us that the new HR professional needs 50% MBA skills and 50% HR skills.

4. Define your HR strategy clearly and consider whether you are a "pioneer," a "fast follower," or focused on "efficiency." Our research shows that your choice of strategy helps define the best operating model.

5. Focus very heavily on integrating the talent management teams, bringing together the various talent practices discussed above. Today's integrated talent maangement function includes talent acquisition, development, mobility, retention, engagement, compensation, and analytics.

6. Look at HR technology as "systems of engagement" not "systems of record," so the HR infrastructure supports employees and managers directly. Nearly a third of the organizations we talk with are considering replacing their traditional HRMS with a cloud-based solution, and the biggest driver for change is the need to improve the user interface.

7. Make sure you have a plan to build an integrated talent analytics function. This involves bringing together analytics teams from throughout HR, and moving down a talent analytics maturity model.

8. Put in place a senior executive-driven governance process which lets senior business leaders directly see and impact HR, L&D, and talent investments throughout the company.

A New Model for HR

It's time to rethink the operating model for HR. Stay tuned for more to come on this topic, and please join us at (April 22-25 in Ft. Lauderdale) to get all the details.

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