HR can provide the required differentiator by committing to output, thereby becoming a real business partner
The talent crunch in India has forced organisations to pioneer new practices where HR proactively involves itself in search for solutions
PeopleStrong Roundtable Series
The complex and rapidly changing business dynamics continue to pose a challenge before organizations to transform themselves and adapt to the new realities. While HR transformation is also a consequence of such dynamics, the benefits of transforming the way talent is hired, managed and utilized is emerging to be a strategic differentiator in itself. The PeopleStrong roundtable series “HR Transformation: What’s inside?” brings together senior professionals from across industries and functions to share their insights on the role of HR in supporting the organization’s new talent strategies. People Matters brings to you excerpts from this roundtable.
Many CEOs are revisiting their entire people strategy as a result of the changing business scenario. The strategies that helped companies succeed during the downturn will not be applicable anymore and the pre-crisis talent approach will not work either. Progressive organizations will focus on rethinking and restructuring the HR function to align with the company’s growth ambitions. This makes HR transformation a necessity for organizations to prepare themselves for the next wave of growth.
HR transformation: The drivers
HR is actively moving from delivery of routine services to strategic services. “The role of HR will significantly move towards delivering strategic services that impact business performance,” says Dr. Santrupt Misra, CEO, Carbon Black Business, Director, Group HR and Director, Aditya Birla Management Corporation.
The drivers of HR transformation, at a broader level, are not different from the drivers that are impacting the overall business environment. The natural implication is that anything that impacts the business landscape and in turn, the way work can be done, will have an implication on the talent agenda. The elements impacting business and HR include, changing customer needs, new governance requirements, change in demographics and dynamics of talent, rapid evolution of technology and increasing importance of organizational culture for a sustainable business advantage.
Changing client requirements, and its implication on delivery. The current client requires companies to support their growth, maximize margins, and provide differentiators. “For any company to be able to support such demands from customers, HR transformation is a must,” says Pankaj Bansal, Founder & CEO, PeopleStrong. This scenario makes HR transformation a survival necessity and not a strategic option for organizations. HR needs to support the business by fuelling the growth engine with capable talent who can execute new business opportunities, while keeping a close eye on margins and creating a differentiated culture. This demand for the trio requires HR to operate differently and change its service delivery model. When transforming the delivery model, HR can provide the required differentiator by committing to output, thereby becoming a real business partner. For example, when HR can commit to ‘real time hiring’, it can provide great momentum to business which can then sell to the client a promise to start the project in 15 days instead of the usual 2 months that the business would otherwise take in getting its manpower ready for project delivery, and this is a huge business differentiator that HR can create. “The moment HR can commit to output, business will accept HR as a partner because the value they bring to the table is business critical,” says Bansal.
Change in talent dynamics. Changing talent demographics and the availability of talent is also impacting the way companies are looking at talent acquisition and retention. On the one hand, the demand-supply gap in India has forced organizations to pioneer new practices where HR proactively involves itself in the search for solutions, not only for their own company but also for the overall industry. On the other hand, the changing workforce demographics, their expectations and ambitions, require organizations to adapt themselves to create new ways of engagement at work. “An individual today lives in a connected world and has many different opportunities that he/she can align with and pursue,” says Sunil Chitale, EVP and Chief Strategy & Marketing Officer, Patni Computer Systems Ltd. “In such a scenario, business needs all the help from HR to build a compelling story that can be communicated in a way that will attract and retain the right people who are aligned to the vision of the organization,” adds Chitale.
Changing governance standards. The rules of business have completely changed after the Lehman era and some other infamous ones like Satyam, and Debacle of the microfinance industry. “The ways we measure business has radically changed,” says Shelly Singh, Co-founder & Vice President, PeopleStrong. The importance of metrics today is not only a business need but also governance imperative. Governance is no more a responsibility only of the legal and finance functions but it is equally a HR mandate. As KS Kumar, VP-HR, Castrol India shares, “In the backdrop of the economic crisis, HR must emphasize on governance and ensure that the people processes add value to the overall business and is in compliance with corporate governance.”
Organizational culture and values to find its true owner. CEO and the boards have realized that values and culture of the organization are crucial ingredients in building a sustainable and differentiated business. They have also realized that embedding cultural threads is not about “townhalls” and “skip level” meetings, but values and culture should be embedded in the way organizations run their day-to-day operations. The HR function has been specifically held accountable for embedding the culture and values in all employee lifecycle events as HR processes provides the right levers to build the organization’s culture. Therefore HR transformation emphasizes HR’s increased focus on nurturing organizational values and culture, while outsourcing the other more transactional activities.
New opportunities driven by technology. The increasing use of technology has transformed the way we collaborate, organize and learn. “For example, the mobile technology revolution has a potential impact on the way we interact and even the way we learn, using chat applications, search and query applications, all in the handset, so people can get support and learn wherever they are on real-time basis,” says Judhajit Das, Chief Human Resources, ICICI Prudential Life Insurance. These changes have implications on the way business operates and opens the door to many more models of work, like flexible working, virtual working, working from home, etc. In turn, it affects the way we will attract and retain talent going forward and as work changes, the talent requirement will change as well. Technology and social media also had an impact on employer branding. “The social media, has changed how people communicate, and is playing a vital role in shaping the image of an organization in the community,” says Gajendra Chandel, President HR, TATA AutoComp Systems.
Decoding HR Transformation
There is a need for HR transformation both at the strategic and operational level. “It is not an ‘either-or’ decision as it requires both strategy, which is built around the corporate brand, and the business context, along with a seamless, scalable and efficient HR operation,” says Bansal from PeopleStrong.
The critical question that CEOs and boards have for HR in devising a process to continually build on people and organizational capability mandates a radical shift in both HR strategy as well as HR operations. “From a strategic perspective, the prime focus should be on partnering with all stakeholders in the organization towards building people and organizational capability. From an operational execution perspective, the focus should be on streamlining the efficiency and effectiveness of HR delivery along with greater interface with all stakeholders,” says K. Ravichandran, Head HR at Future Knowledge Services. Further Vijay Sinha of TATA-AIG affirms HR’s contribution to business and says “The business side wants HR to transform to be able to make people available who are productive from the moment they join.”
Excellence in HR operations is important because it allows HR leaders to find the bandwidth for strategy without compromising on efficiency, scalability and predictability. The manner in which the HR team is structured will define the extent to which they would be able to implement the strategy in its entirety. If looked closely, 80% of HR’s mindshare should be invested in strategy whereas we see 80% time is instead focused on delivering the operational piece. “From my interactions with organizations, I see that the HR team is structured in exactly the reverse manner of what the business requires”, says Singh of PeopleStrong.
The owner of this transformation should be the HR teams, actively supported by the line, CEO and technology head. HR needs to be the leader and not the victim of this transformation. However, if the transformation is driven by the finance team, HR can become the victim and be sidelined. So there is an opportunity for HR to lead this process by taking charge of the delivery and output of HR.
What is core HR and what is not?
Dr. Misra puts perspective on how we can ponder on this question and says, “This is a question that each HR group should answer in the context of their business and their industry.” The onus of deciding how much time and effort HR should spend on which activity lies with HR alone and this requires HR heads to stop and reflect how they can maximize their impact on business. There is no one common answer to this question. If one is to compile these answers together, there are actually many common areas that may arise in terms of what is core and what is not, but one cannot take these areas and apply them in their HR teams without embarking on the exercise themselves.
At present, HR teams spend most of their time in activities that are transaction-intensive. Typically, all these activities fall under the following heads which consumes HR’s bandwidth: employee query resolution, creating and maintaining employee records in HRMS databases, administering compensation and benefits administration including F&F management, and managing administration of the other core verticals within HR like learning & development calendar tracking and coordination, recruitment operations etc.
HR transformation will require HR teams to define what is ‘high-touch’ and what is ‘high-transaction’ when deciding what is core and what is not. Further, they must look at outsourcing everything that is high-transaction. Even in the high-touch areas, very specialized services will also be outsourced when the size of the company does not justify a full-time team for delivering this service, for example, coaching and mentoring. In the high transaction area, most activities will either be replaced by technology or be outsourced to 3rd party vendors. “Increasingly, we will see this trend, and the value that HR will bring to the table would really have the ability to define what is the best way and the best partner to deliver services to the organization, understanding the context, culture, and history of the organization,” adds Gautam Chainani, CPO, Aditya Birla Financial Services.
While defining what is core and what is not, each company should look at their HR processes to identify the best way to support business requirements. HR teams hence need to ‘let go’ of transactional work and take on a role that supports organizations with strategic inputs and execution towards business plans.
For example, if you look at the recruitment process in large and growing organizations, the recruitment division should be really focusing on strategizing new sources of candidates, building predictability on hiring and providing real partnership for growth. Instead, recruitment divisions today are managing hundreds of placement consultants and thousands of CVs and candidates. This part of the process could be outsourced to a technologically advanced shared services team with capabilities of parsing resumes, speeding up screening while creating a repository of CV for future reference and all of this under defined Service Level Agreement (SLA).
Identifying core and non-core HR activities will help in moving out many mundane activities which otherwise result in increased boredom of junior level HR people who deal with such activities on a day-to-day basis. “This opportunity compels us to address the concerns of people who are bored with the mundane routine jobs, by seeking external expert assistance who can take over such transactional HR activities, allowing the HR team to instead concentrate on engagement activities and work towards enhancing workforce productivity,” says Mr. Rajendra Ghag, Executive Vice President - Human Resources at HDFC Standard Life Insurance.
Alternative models for non-core activities
Once the HR teams identifies the work that is not business critical, the next question is to find out who will take on that work. This is a second level question for HR teams. The answer depends on various elements like the number of service provider available, maturity and experience of the available service providers, their capabilities and the cost of outsourcing to the organization.
A natural question when looking at outsourcing is whether to create an internal captive shared service or look for an external vendor. While both models prevail globally today, the real question lies on the number of vendors available to undertake such type of work. Important factors to be addressed when deciding on building an internal shared services team are many. On the one hand, the management will have to create the mindset of service delivery, quality and performance in an internal team, drive SLAs and deliver performance; secondly, the commitment to invest on technology is critical. Technology will play a crucial role in creating value for the transactional team by providing bandwidth, and the commitment to invest in technology will determine the success of this internal initiative; thirdly, often if the operational scale is not large enough it becomes impractical for the company to run a captive shared service. Finally, the organization’s accessibility to best practices in the transactional space is important in making such a decision. Normally, outsourcing players will have a service delivery mindset, invest heavily on technology, have operational scalability and access to best practices as transactional operations in core to their business.
There are success stories on centralized shared services teams but it is possible mostly in very large organizations that have global businesses as the investment, reach and scale makes it a successful alternative.
Traditionally, the western economies had build in-house captive teams as a first option for outsourcing transactional work, and eventually looked at outsourcing it to external parties. “In India, in the same way that we saw the telecom revolution taking people from ‘no phone’ directly to ‘cell phone’, without the traditional step of ‘landline’, we will also see companies directly moving from ‘no shared services’ to ‘outsourced services’,” adds Bansal from PeopleStrong.
What defines the HR function today?
The role of HR in the new business environment is to support business transformation. The need of the hour is for HR to spend majority of its mindshare in the ‘thinking’ and not in the ‘doing’. The ‘thinking’ aspect of HR’s role will need to be kept within the organization and cannot be outsourced. The success or failure of HR will not be based upon how long it takes to answer a call in the contact center, rather around a much broader set of business metrics. “HR is the leader in this change management operation; this is the opportunity for HR teams to step out from the backroom to the boardroom,” says Singh from PeopleStrong.
The new HR function today has the following business mandates:
HR as a flawless executor. The present scenario has witnessed a shrink in the strategy - execution cycle. Hence, the way organizations flawlessly execute HR operations to support the pace of business demands will be critical in transforming HR. “Strategy will provide the direction and alignment to business goals, and execution of the strategy effectively, efficiently and per compliance, will be instrumental in the success of the strategy” says Gajendra Chandel, President, HR and Chief Ethics Officer, Tata AutoComp Systems. “Operational brilliance is the foundation for any transformation in HR”, adds Saagarika Ghoshal, Chief People Officer at Reliance BIG Entertainment. HR can build credibility only if their internal HR execution capability is operationally excellent.
HR to align with business and organization. The HR team will need to focus on understanding the business realities much deeper than before and justify its involvement in strategic decision-making. “The stage for HR is set as workforce emerges as the greatest asset for any company”, says Das from ICICI Prudential Life Insurance.
Advocacy to organizational values, employees and the HR function. The new role will require HR to play advocate to the critical requisites of business excellence – promote organizational value and culture to create the right alignment of employee contribution and organization’s vision; add value to the table by enhancing people capabilities.
HR as a multi-dimensional discipline. HR will need to adopt a multi-dimensional solution process approach to any business reality. For example, when looking at attrition, it cannot address the concern by only looking at one aspect but must view it as an integrated solution that looks at all touch points from profiling, employer branding, compensation philosophy, career management etc.
HR as a leadership coach. HR will become the coach to leadership in the company. HR’s role will actively involve connecting with business leaders to help internalize HR’s role in realizing organizational strategy and vision.
HR to work with the line. In the new organization, HR is owned by the line. The number of people in HR will reduce and that will consequently increase the involvement and ownership of HR processes and actions by the line management.
HR as a program manager. A new role that will be added to the HR department will be that of ‘program management’, either for HR vendor partners or for running internal shared services.
The transformed HR role will see HR professionals gaining higher value in terms of the role they play and the support they bring to the CEO. “We have seen this happen in the US and we are seeing the same trend catching up in India at a faster rate. At the organizational level, there will be a shift on how things get done. While HR will continue to be accountable, they will not be delivering a lot of the routine and repetitive tasks,” says Scott Bayman, Chairman, Lumis Partners. HR will focus their efforts in identifying business critical activities and take on the responsibility of finding the right vendors, managing them and assessing quality of service delivery.
Is HR ready for the required transformation?
The pertinent question before HR therefore is how it can effectively identify and distribute its time-spend between core and non-core activities, where core activities have been identified as the right path to afford HR its rightful influence to the business agenda. With workforce emerging as the undisputed competitive advantage across industries, HR’s role will transform dramatically to meet the new demands of business.
The essential competencies for the HR team going forward will be aligned to this new role. While knowledge of operations will continue to be important, the specific understanding of the business and organizational context will be most relevant. Just as the CEO is not an expert of all functions it is responsible for, the HR function too will not be required to be an expert in all HR areas but they will require a good understanding of the business and the organizational context to make the right judgments.
In the new HR backdrop, the key competencies that HR will need to actively hone include adequate business acumen, coaching and mentoring skills for CEO and the leadership team, ability to design and architect service delivery models, program management (managing vendor partners), understanding of technology trends and options in HR for driving scale and innovation, finance and budgeting, and ability to sell and position HR with internal and external stakeholders.
Given the transformed role that HR seeks to play, colleges and business schools will need to take a re-look at the pedagogy for preparing graduating professionals for the HR field. Existing companies will need to train people in-house on these new competencies so they can effectively contribute. While there is awareness about the new competencies that HR must acquire to prove its mettle in its transformed role, there exists a gap between current competencies of the HR community and the present/future requirement. This backdrop even opens the door for a new industry to emerge in the training space as more and more organizations will look for expert advice on how they can make their HR manpower more relevant to the new business scenario.