Building The HR Function
of the Future
Hugh Shanks
Robert Zampetti
March 25, 2009
© 2009 Towers Perrin
Presenters: Hugh Shanks
Hugh Shanks joined Towers Perrin in London in 1986 in
the Human Resource consulting practice. He is a
Principal on Towers Perrin’s Worldwide Board and is
Chairman of the firm’s Human Resources Committee.
He leads the development of Towers Perrin’s HR
effectiveness work in Europe. His particular expertise
and interests are in the areas of developing people
strategies, maximising the value of HR functions and
developing performance and reward strategies that
increase the engagement of employees.
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Presenters: Robert Zampetti
Robert Zampetti is a Principal in Towers Perrin’s
Change Implementation practice in Montreal. Robert
recently returned to North America after working in
Towers Perrin’s London office.
Since joining the firm in 1993, he has specialized in the
area of designing and implementing HR delivery
solutions and more recently, has been involved in
numerous global HR transformation projects.
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The components of HR Function Effectiveness
Business Strategy
Growth plans
Competitive strategy
External environment
Workforce Strategy
Future demand for staff: numbers, skills, locations
Current supply
Gaps and how to close them
HR Function and Service Delivery Strategies
Overall direction, vision for HR
Service delivery model (where HR work is carried out)
Business case and high-level transformation plan
HR Structure HR Talent HR Process HR Technology
Design of COEs, BPs Assessing talent Process redesign ERP systems
and shared services Transition strategies Links between processes, Web and best-of-breed
Detailed roles technology and roles solutions
Governance: Decision making
Measurement: Metrics, benchmarks and scorecards
PMO and Project Management: Managing the transformation
Change Management and Communications: Ensuring engagement and support for the
changes
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The HR function of the future
Part 1: Setting the Context
What do we mean by the future?
What are the issues driving change?
What are the challenges facing HR functions?
What are the issues with today’s HR structures?
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The HR function of the future (cont.)
Part 2: Possible solutions
Some principles that have guided our thinking
The HR DNA
Different degrees of change
Improve current model
Evolution
Revolution
How do we get there?
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Setting the Context
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What do we mean by the future?
There are the things we can’t change —
they will happen anyway
these will shape our future whether we
like it or not
Then there are the things we can change
we can choose to reshape the way we
deliver HR to our organization to meet
those future challenges
or we can wait and get swept away
by the tides of change
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What are the issues driving change?
HR is a function under pressure
The most prominent issues now include
Reducing overall people costs
Increasing the ROI on total people costs
Reducing HR function costs
Retaining key talent
Maintaining levels of engagement
Globalization
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The conventional HR structure
Focus: Reinforces one culture,
ensures consistency and
standardization, measures value
Focus: Expert HR
HR Centers of design services,
Business Excellence business and local
Partners HR
Focus: Connecting Leadership fit while taking
HR and the Team advantage of global
business best practices
Administrative
Service
Centers
Focus: Cost-effective
service delivery of HR
administrative work
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The conventional HR structure:
the issues that arise
Can the COEs actually
Do business partners
provide best practice
have the needed
“expertise” at a competitive
capabilities to support the
price?
business?
How to ensure COEs
How to really engage with
HR Centers of respond to business needs
line managers and equip
Business Excellence (and don’t live in an “ivory
them with the required skill HR
Partners tower”)
and will Leadership How to ensure COEs build
How to ensure businesses Team holistic, connected solutions
are committed to the
(and don’t think in “silos”)
corporate agenda (and
don’t “go native”) Administrative
Service
Centers How to ensure sufficient flexibility of
HR resources to staff projects (rather
How to balance the cost vs. quality of service than having “captive resources”)
trade-offs associated with administrative How to build cooperation and trust
shared services (insourced or outsourced) between all parts of the model (and
How to ensure that the administrative and avoid “disintegration”)
transactional elements are conducted as How to reduce the overall cost of the
efficiently as possible and with a true HR function
customer service mindset
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Possible Solutions
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Some principles that have guided our
thinking
Strip permanent capabilities back to a core
of fundamentals
Focus on key outcomes, not inputs
Allocate work on the basis of proven competence
Create flexibility in resourcing
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The potential…
Traditional New
HR functions Project teams
Broad scope Focused scope
“vertical integration” outsourcing
Organization units Virtual teams
Oversight and compliance Dynamic facilitator
One size fits all Tailored
Command and control Enable and engage
Transactional, administrative Knowledge-based systems,
systems wikis, collaboration
ERP-based Enterprise 2.0-based
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The HR DNA
From our work and analysis,
we are suggesting that there
is a fundamental role for
HR the HR DNA
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Different degrees of change
Improve
Evolution Revolution
Current Model
In all of these approaches, we recommend launching operations (by which we mean administrative and transactional work) away from HR
Do not confuse this important change with outsourcing; we mean handing over accountability for HR administrative and transactional work to
another function or creating a new, separate function
Whether to outsource or not is a different question
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Improve current model
Differences vs. current model
Operations launched away
COEs smaller and more connected
to focus on DNA outcomes
Flexible resource pool
Some ambiguity as to where
budget and ownership for
business partners reside
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Evolution
Differences vs. current model
Operations launched away
COEs connected to focus on DNA outcomes and linked to other
functions to provide complete solutions to business needs
Only a very small core of policy
roles remain at corporate (e.g.,
major people assets and liabilities)
More services provided by vendors
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Revolution
Differences vs. current model
Operations launched away
No COEs (only a very small
corporate team)
Pure focus on DNA outcomes,
largely via business partners
(and line managers)
Much more vendor support
Business partners are purely
owned by lines of business
and are not dedicated
HR function, nor directly
owned by HR
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A summary of the three approaches to
HR function design
Name Description When It’s Used
Improve HR contains a full range of expertise dispersed Autonomous, decentralized businesses — strategic
Current Model among the centers (where group-wide programs business units are very different from one another
and policies are developed) and strategic (in extreme, this would be a holding-company
business units (where business-unit- specific approach), less competition for resources among
programs are developed) strategic business units
High volume of line manager support needed
(whether need-based or due to poor-quality line
managers), where “quality of our people” is
paramount (people-intensive businesses); strong
focus on key people
Evolutionary HR resources are organized in teams focused Dynamic, fluid, changing businesses seeking
Model on the priorities of the business strategy leverage across the organization to get competitive
(e.g., grow in Asia, become a serial acquirer). advantage — global companies, serial acquirers
HR resources are deployed on a pool basis and growth businesses
(like a consulting business). In addition, very
small COE teams focus on the “fundamental”
roles of HR
Revolutionary HR is small and strategic, focused on policy Start-ups, cost leadership businesses, centralized/
Model development and strategic thinking only. It standardized/routine processes, pressure to be low
undertakes the “fundamental” roles described cost, capital-intensive
earlier. Operational, transactional and COE
Operational businesses, manufacturing and retail —
services are brought in from specialist suppliers
often mature businesses in which people
with whom the company builds long-term
management is the core element of line management
partnerships
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More detail from a process perspective
Workforce Planning,
People Talent Management Managing Managing Total Employee
Name Strategy and Employee Brand Staffing Performance Developing People Remuneration Relations
Improve Capability Core to what HR should do HR-driven, using HR designs HR develops career COE model/all COE model for
in HR standard processes frameworks paths and training rewards staff report labor relations
Current Model Specialists in HR accountable
frameworks to COE only
for delivery Seek economies HR trains managers
of scale (regional) HR develops training Frameworks for For employee
Strong links to company Managers run process guaranteed vs. “at
curriculum relations,
strategy function and business Use outside risk”
HR monitors process frameworks
planning cycle suppliers where HR maintains stock options
developed
possible HR reviews outputs standards/reporting job evaluation
Talent management has strong partnership with
by HR COE but
links to line management/ Goal is to reduce HR HR consults with HR chooses preferred expert advisors operated by line
operating units involvement managers on external providers management
performance issues
Evolutionary Capability Central resource (enabling) Individual managers Focused on business Focused through Individual Run by line
in HR and/or build capability in tasked with hiring objectives and business objectives managers management
Model
Strategy Group and/or and onboarding, strategy goals and strategy goals determine rewards
Supported by
dedicated HR people in using common tools within framework
Invest in HR where Invest in HR, where business partners
business teams
Could be line- or significant shift is significant shift is COEs provide for major events
HR-driven, or even required and there required and there is broad philosophy (eg labor
dedicated project is a strong people a strong people focus and framework negotiations)
team for scarce-skill focus or business-
Prime accountability Expect to see
recruitment critical issues
Prime accountability with line managers some suppliers
Likely use of outside with line managers designing and
suppliers implementing the
programs
Revolutionary Capability Workforce planning embedded In the line Part of business Part of business Bought in from Run by line
in the in business units and business planning process planning process outside management
Model Contracted staffing
organization planning cycle
suppliers available Driven by operating Driven by operating Corporate HR
HR oversight Clear talent management as required units units focuses on
process driven by senior corporate people
Hire help as needed Hire help as needed
managers, perhaps with some assets and
external rigor/independence liabilities
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How do we get there?
- Depends on your starting point and ambition
- Think hard about business needs and fundamental capabilities required of HR
The New HR Function The “Rocket Ship”
HR Policy and Strategy HR Operations
Establish core policy and strategy team Identify source of appropriate operational
Build inventory of people management competence
capabilities Prioritize and sequence processes/services to
Establish new governance model transition (or stop)
Establish collaborative environment Carry out efficient amount of transformation*
Transition services and redeploy people
Expertise Business Partners
Build knowledge Identify effective
of expert marketplace business partners *Our research shows that organizations that
Identify and already in line undertake partial transformation prior to
select sources Redeploy effective HR transitioning services achieve the most
of expertise business partners to the successful outcome
Build vendor line
management Build on people
capability management
capabilities in the line
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Questions?
Hugh Shanks
hugh.shanks(at)towersperrin.com
Robert Zampetti
robert.zampetti(at)towersperrin.com
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