The importance of metrics today is not only a business need but also governance imperative
HR is the leader in this change management, and definitely a partner. It is up to HR to leverage this opportunity and step out from backroom into the boardroom
1. What are the major drivers of HR transformation?
The rules of business have completely changed after the Lehman era and some other infamous ones like Satyam and Debacle of the microfinance industry. Essentially, there are three key levers that impact business and HR.
Firstly, business outcomes and the way we measure these outcomes have changed radically. The importance of metrics today is not only a business need but also governance imperative. Governance, which was earlier the responsibility of the legal and finance function, is crucial for the company’s success.
Secondly, CEO and the Board have realized that organizational values and culture is a crucial ingredient to build a sustainable and differentiated business. Embedding cultural threads is not about “Townhalls” and “Skip Level” meetings but it is essential that values and culture be embedded in the way the organization runs its day-to-day operations. This in turn impacts all policies, practices and systems. HR has been specifically held accountable for embedding this in all employee lifecycle events as the HR process provides the right levers to build the organization’s culture.
Finally, the external factors in the socio-economic environment also affect the way we run business which has implications on our people strategy. For example, the supply-demand gap in India and the inadequate skilled resources available in our country have made HR proactively search for solutions not only for the company but also for the industry it belongs to.
2. What will transform HR? Is it the way companies take on strategic HR or the way they execute HR operations?
It is really one continuum and I believe that the 80/20 rule applies here. 80% of the time should be spent on intellectual mindshare, thinking on the ‘what’ and the ‘why’ of HR, which defines the strategy, and 20% of the time should be spend on the ‘how’ of HR, which defines the execution of HR activities.
Both are important, and it is like asking if the ladder you have is the right one or is the wall you are trying to climb the appropriate one.
People strategy is largely a part of the business transformation portfolio where the output is a set of recommendations that need to be implemented for the business heads and by the HR team. When assessing this, it is important to note if the HR team is geared to implement this strategy in entirety. The right approach is if 80% of HR mindshare is invested in strategy, while what is seen is that normally 80% is focused on delivering the operational piece. This is a concern of HR’s alignment as well as capability to focus on the right aspects. From my interactions with organizations, I have seen most HR teams are structured in exactly the reverse manner than what the business requires.
3. What activities is HR spending time on today? If there is a need to change focus, what are the different models that HR can use to start doing focusing what needs attention now?
Interestingly, HR spends most of its time in activities that are transaction intensive, and this is true across industries. The top heads where HR’s bandwidth gets consumed include:
- Employee Query Resolution
- HRMS Database Management (create, maintain and update records)
- Compensation and benefits administration including F&F management
- Administration of the other verticals (L&D, PMS, recruitment)
For decades, administrative matters related to compensation, benefits and personnel policies have consumed HR’s time. Now, most, if not all of these processes can be standardized, centralized and automated through a HRO. This frees HR to apply its energy to talent management, organizational development and other strategic endeavors that contribute directly to meeting business goals.
The real role of HR in this new stage is to support business transformation so for that HR can spend majority of its mindshare in ‘thinking’ and not in ‘doing’. The ‘thinking’ will need to be kept within the organization and must not be outsourced.
HRO empowers leaders to have real-time views of their organizations for their vision and charter. At the end of the day, the success or failure of HR will not be based upon how long it takes to answer a call in the contact center but around a much broader set of business metrics.
Already, areas of HR that lend themselves to better standards via HRO include the obvious services surrounding employee recruiting commonly known as RPO, payroll and other retirals administration activities, as well as identification and administration of benefits plans.
In addition, HROs are developing capabilities that will help organizations produce better results in managing workforce productivity, reducing liability exposure for employee relations issues, or being able to model global workforce changes to mirror changes in the business requirements.
You may call HRO a business process outsourcing, business improvement or even reengineering or maybe an HR transformation, or something else entirely. Whatever you choose to call it, the name signifies a lot about the mindset, objectives, and approach to implementing HRO.
4. What is HR’s new role in this new context? What is the reason for HR existence if most activities can be outsourced? Is HR a vendor or a partner?
HR is the leader in this change management, and definitely a partner. It is up to HR to leverage this opportunity and step out from backroom into the boardroom. What can be outsourced is only 20% - 30% of the execution-related jobs, while the balance 80% is what creates impact, gives direction to business and helps in solving issues related to scale, growth and sustainability in business operations.
This 80% has to be delivered to business through various enablers for which an internal consultant needs to gather the best know-how and customize these solutions to suit the particular business. In concept, replication and best practices are the ideal solutions but you can borrow know-how up to an estimated 60% only and there are elements in the people strategy that would need to be aligned by the HR team to the overall business agenda. For example, the employee referral process is the most celebrated concept of hiring but the concept might lose its relevance in some industries.
5. What new competencies will HR require in the new scenario? How ready is HR to take on this new role?
HR will have to drive operational efficiencies and act as a business function. It can no longer stay in the backyard solving operational issues but there is a need for HR to provide predictive output and become accountable for the outcome. In hiring, the focus is already moving from SLAs and average cost per hire to quality of hire, both, in terms of productivity and tenure. CEOs are pushing HR leaders to be responsible for talent not only at the time of on-boarding but also carry it through to next 60-120 days to ensure sustainability. A good program management will ensure that you have the right levers in place so that both direction and execution are seamlessly interwoven, replicable and predictable. The output is the focus and not the process, which becomes a key driver in deciding whether to ‘make’ or ‘buy’.
The readiness seems to have reached a new level after the recession which has forced HR leaders to take a stock-check of what HR must focus on, and where they should invest their financial and intellectual bandwidth. HR leaders are making clear choices on what is core to the HR function that they must invest upon and what they can buy to leverage the core competence of the partner who can deliver the predictable output.