Transforming the HR model to enhance its commitment to output can prove to be a strong differentiator and hence become a real business partner
HR should focus on enabling differentiation, growth and margins to make itself more business relevant
What is the main driver of HR transformation?
Customer needs across industries have changed and more companies today seek support in growth, maximizing margins, and gaining adequate differentiation. HR Transformation is no more a strategic option, but a survival necessity for most organizations. Therefore, the internal HR mandate is to support the business in the three drivers of business: a) growth engine b) margins c) differentiator. These three demands HR to operate differently, and change its own service delivery model.
Transforming the HR model to enhance its commitment to output can prove to be a strong differentiator and hence become a real business partner. For example, when HR is able to commit to ‘real-time hiring’, business can confidently promise the client that they can start the project in 15 days instead of the usual 2 months that the business otherwise requires to prepare itself for delivery. The moment HR is able to make an output commitment; business will accept HR as a partner because of the business critical value that HR brings to the table.
Will transformation in HR happen in the way companies approach strategic HR or operational HR?
The question is not that of choosing between ‘either-or’. HR transformation is required at the strategic level to build the corporate brand and business context as well as a seamless, scalable and efficient HR operation. HR operations are important because it will define how HR leaders will find the bandwidth for strategic matters without compromising on efficiency, scalability and predictability.
The HR team is the driver of this transformation which is owned by HR and actively supported by line, CEO and the technology head. However HR can become the victim if it is driven by the finance team when HR can be sidelined. HR has the opportunity to lead this process by taking charge of the delivery and output of HR.
What do you think is HR spending time on today? What do you think HR should be spending time on? What are the models HR can adopt to stop doing what they are doing and instead focus on what they should be doing?
HR still spends a large amount of its intellectual bandwidth and time on repeat, operational tasks which can be automated or be delivered through a centralized and predictable shared services model, either outsourced or in-sourced.
HR should focus on enabling differentiation, growth and margins to make itself more business relevant. For example, a recruitment process in a large growing organization which manages hundreds of placements consultants and thousand CVs and candidates, the recruitment division can create a shared service which will manage it in a managed-service mode with clearly defined SLAs and TAT on a strong technology platform which does not require data entry but use technology like parsing which reduces processing time for CVs and creates the database for future reference. The recruitment department should then focus on new sources of candidates and building predictability in hiring numbers thus creating a clear differentiator for hiring process, improved margins as costs structures will improve and provide the requisite growth engine for scale!!
What is the new role of HR in this new context? What is the reason for HR’s existence if most activities are to be outsourced?
HR’s existence cannot be questioned and its role will become more strategic where HR will emerge as a business partner. However a new key role added to the HR department will be of 'program management' either for HR vendor partners or for running internal shared services.
What are the new competencies required by HR in this context? How ready is HR today for this new role?
The five key competencies HR must focus on are:
• Strong skills for translating business requirements for HR. HR program around the corporate brand and business delivery.
• Program management (managing vendor partners)
• Technology trends and options for HR to drive scale and innovation
• Finance and budgeting
• Selling and positioning HR with internal and external stakeholders
Should companies adopt an in-house centralized shared service model or should they resort to outsourcing?
Both will prevail. I believe that the more matured geographies and economies will have large components of outsourcing while less matured economies will see lesser amount of outsourcing as outsourcing is directly proportional to the number of vendors available. The differences are several, on the one hand driving and measuring performance is more difficult in an internal team, which will be the case if HR outsources its work to an internal party. Secondly, the investment on technology when you keep HR activities in-house might not make sense. Thirdly, if the scale is not large enough it becomes impractical for the company to run a captive shared service. Finally, if you centralize the work in-house, you cannot leverage on expertise and best practices that an outsourced service provider has, and the internal team will not have the exposure to such expertise and best practice. There are of course, some success stories on centralized shared services teams but it has been possible mostly in very large organizations that have global business presence.
As per the evolution of traditional Western economies, the first teams recognize the need to operationalize transactional work and build in-house captive team, and eventually outsourced it to external parties. In India, like the telecommunication revolution moved people from no phone directly to cell phone, without the traditional transition to landlines as in the West, HR transformation we will see companies directly moving from no share services to outsourced services.