Has the Ulrich model had an impact?
Dave Ulrich never claimed to have invented the three-legged model for HR – which proposed the distinct and specialised roles of shared services, business partnering and centres of expertise (COEs) – that has become synonymous with his name.
But 18 years on, Orion Partners has studied the effect of this model, finding out whether it has delivered on its promise and looking at the benefits and disadvantages organisations have seen – especially in the area of talent management.
We questioned business and HR users in 40 organisations, each with more than 10,000 employees. The results were compelling.
We found that a majority (77%) believe the Ulrich model has made a measurable, positive impact on HR, with improved operational efficiencies and capabilities, and that there is now a closer alignment with the commercial objectives of the organisation, demonstrating a ‘positive direction of travel’.
A shortage of talent skills in HR
The biggest area of impact was in HR operations, where 95% of organisations surveyed classed their operations as ‘good to acceptable’, viewing this as an improvement upon 10 years ago.
However, this success in shaping and streamlining HR transactional activity was not carried through into other areas of HR, with the majority saying that their HR business partner roles were still ‘too transactional’ in nature and not sufficiently integrated into the business.
The most surprising shortcomings were in the area of talent management (most commonly managed within the construct of HR ‘centres of expertise’). Less than half the organisations we surveyed said they were as happy with their talent management processes as they were with their core transactional processes, while nearly a third said that talent management represented ‘an area of major missed commercial opportunity’.
The reasons for this disaffection became clearer when looking at the centres of expertise in more detail. Just a third of organisations maintained talent specialists in each functional area, suggesting that critical talent skills were missing from their HR armouries. Furthermore, less than a quarter of organisations maintained a fully integrated talent process in which recruitment, performance, learning and reward all shared the same data and where activity in one area was understood in terms of its impact in the others.
Neglecting areas with commercial potential
We saw no evidence that the lack of progress in talent management was a shortcoming of the Ulrich model itself. However, it did seem that the HR function had failed to look beyond basic efficiency savings. With 97% of those surveyed saying that people issues were ‘highly important’ or ‘critical’ to the business, it appears that the search for HR efficiency has deflected HR from its true mission and that it has neglected areas that could offer the greatest level of commercial benefit.
Such a skewed focus is understandable. The process of implementing HR shared services and associated technology frequently absorbs the lion’s share of the HR transformation budget and can lead to a lopsided focus on transactional processes and automation.
By contrast, development of an integrated approach to talent can seem like a relatively minor part of the broader process of transformation.
This effect has been dubbed ‘1% thinking’ – a reference to activities that concentrate on the efficiency of HR processes and limit the benefits of change to the 1% of the workforce that resides in HR.
By contrast, an integrated approach to talent management may offer the best opportunity to impact performance across all parts of the organisation and incremental changes here might be expected to deliver a disproportionate benefit.
HR operations and strategic value
The advances of the past 18 years have not been in vain, however. It is unlikely that HR would have been taken seriously in any attempt to ‘add strategic value’ unless it could demonstrate an ability to ‘get the basics right’ in HR operations.
The results of our study suggest that HR has developed a greater commercial awareness and has invested heavily in an incremental ‘professionalisation’ of the function. We conclude that these changes have come about as a direct consequence of the Ulrich model.
Despite these findings, though, there is a clear limit to the benefits to be derived from excellence in HR operations.
For HR to deliver on its true potential, the next 10 years must bring an increasing focus on the commercial opportunities offered by effective talent management.
Characteristics of an HR operating model
The participants in our survey highlighted four critical factors:
• Alignment with the business model: Talent processes should not exist in a ‘best practice vacuum’. The talent needs of a retailer with a growth agenda will be different from an engineering firm with an ageing workforce, for example.
• Integrated talent process: This, underpinned by technology, must recognise the interdependencies between resourcing, performance, learning, succession and reward.
• Integration with back office: Linkage between the COE and the transactional service centre is an essential prerequisite to ensure credibility in talent operations.
• Business integration: Talent strategy must be closely aligned with the role of business managers so that performance and development are embedded in day-to-day activity.
‘Ulrich comes of age’ – a study of the impact of 18 years of the Ulrich model can be downloaded here.