Spotlight on HR transformation

Written by
Changeboard Team

05 Mar 2012

05 Mar 2012 • by Changeboard Team

What is transformation?

A true HR transformation is an 'integrated, aligned, innovative, and business focused approach to redefining how HR work is done within an organization so that it helps the organization deliver on promises made to customers.'

Many international corporations are facing challenges in their HR function. On the administration side, HR admin tasks are often duplicated across business units and countries – diverting focus from strategic HR tasks.

Modernising the HR function

It's not surprising to see that so many multinational companies have aimed to modernize their HR function and its service offering over the last decade or more.There are plenty of organizations out there that have already started their HR transformation journey, while others are to begin now or have made plans to do it in the near future:

  • A 2006 global study by Mercer consulting reported 50% of HR functions were undergoing some form of transformation, and another 33% had just completed or were planning to start a transformation effort.
  • In a 2007 study by ADP, 85% of global companies surveyed were undergoing some form of HR transformation , 66% of the respondents in the same ADP study say cost reduction is the primary reason for transforming. And 62% of the respondents say the primary reason for transforming is to improve strategic capability.
  • IBM’s Institute for Business Value 2010 Study reports that fewer than 5% of executives said they thought their organization’s management of people was not in need of improvement and suggested a key component of this was poor HR support.

What are the main reasons for failure?

In the book HR Transformation a number of reasons have been identified, why HR transformation efforts often fail. These are also referred to as ‘derailers to watch out for'. The main reasons are as follows:

Action before rationale:
Some companies begin an HR transformation by doing things in human resources such as implementing e-HR, restructuring the HR function, or designing new HR practices. These HR investments are then defined as transformational. If these actions are not tied to a business rationale and rooted in the business context, however, they are not transformational and are unlikely to be sustained. HR transformation needs to be grounded in the context of business demands.

HR in isolation:
At one company, HR leaders who had set aside time in July (because this was a slower time for HR) and drafted a strategy about what the HR department was doing and which HR practices would be developed. Meanwhile, the line managers drafted their business strategy in the fall to focus attention on the next year. The result was painful misalignment.

When an HR strategy is drafted in isolation from the business strategy, both suffer as stand-alone documents that probably won’t be sustained. HR transformation needs to be aligned with business transformation. It needs to be done in a way that focuses on adding value to the business rather than simply optimizing HR as a function.

HR in increments:
Some companies design an innovative talent management, performance management, or total rewards process and declare it an HR transformation. These piecemeal efforts are only part of an HR transformation. HR practices need to be integrated with each other around key business results if they are to have lasting value.

HR by individual fiat:
Some companies invest in an HR transformation because of the whims of an individual leader or a desire for more personal or functional influence. These individually sponsored initiatives probably won’t be transformational. HR transformation needs to be connected to the overall success of the organization, not just an individual champion.

Placing HR structure before business strategy:
Occasionally HR departments believe that reorganizing human resources is the essence of HR transformation. They may spend considerable time establishing service centers and centers of expertise or hiring a league of HR business partners, and then declare that they have transformed HR. HR transformation can only be complete as it helps implement the business strategy and drives business results.

Efficiency equals transformation:
More and more HR departments equate efficiency improvements with HR transformation; for example, a major global pharmaceutical company recently announced that its creation of a shared service centre constituted transformation. A leading consumer products company described self-service as its HR transformation.

Efficiency improvements can and usually are key elements of transformation, but efficiency alone does not make for transformational change. The authors call these “derailers viruses”, because they infect and can cripple the process of transformation. When identified and confronted, they can be treated and overcome.

What can be learned?

The International Public Management Association for Human Resources (IPMA-HR) has also conducted several studies on HR transformation. Some key findings of their study are :

  • HR professionals recognize the connection between improved and upgraded Information Technology (IT) and HR transformation.
  • Management support is a key factor in pursuing HR transformation.
  • HR professionals recognize the importance of HR being perceived as a strategic asset to an organization.
  • HR professionals understand the value in Workforce and Succession planning but clearly desire assistance in this area.
  • Outsourcing is not the norm and is not readily recognized as a key tool for HR transformation and improvement.

Interestingly, the picture doesn’t look too different when you look at the public sector and its appetite to transform HR. So in a way, private and public sector companies seem to be facing similar HR transformation challenges.

HR transformation: are we there yet?

Effective HR services can be delivered through any channel – in-house, outsourced, centers of excellence, and others. HR practices in 2011 saw Cloud application, multi-sourcing and SaaS trying to innovate business models, improve service levels, and control costs. World class organisations are seeking to make optimum use of these new capabilities as part of their HR Transformation journey.  

But best-in-class HR operations are still a long way off, considering that organisations have new options of deployment models (public, private, and hybrid clouds), as well as of service models (SaaS, platform as a service, and infrastructure as a service). The benefits vary in terms of efficiency, availability, scalability, and speed of deployment. Best-in-class HR functions will be attained when captive and outsourced HR operations, with the best suited deployment or service models, influence business outcomes effectively and deliver decision support and demonstrable bottom-line impact.


About the authors

Dave Ulrich is a leading authority on leadership and Human Resources, ranked by Business Week as the #1 management educator and by Forbes as one of the top five business coaches in the world, and is the expert when it comes to HR.

Navid Nazemian is a global Human Resources professional and university lecturer. He is passionate about making the connection between the corporate world and academia in order to enable individuals, teams and organizations the best they can be.