What does high‑performance HR look like in 2023? 

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25 April 2023

HR leaders are navigating a lot while carrying a heavy and unbalanced workload. They’re grappling with issues such as the redesign of work around skills, labor market tensions, and the acceleration of AI and machine learning. On top of that, compliance demands, evolving technology, shifting rewards and benefits, and operational challenges are making it hard for HR leaders to see where potential pitfalls may lie.

Balancing the tension and time between the multiple roles HR teams play, struggling to make sense of data, while not feeling agile enough for new business and employee requirements is enough to make HR question whether they have what it takes to be truly strategic.  

According to Mercer’s HR Operation Model Research, 65% of HR leaders are not convinced business leaders view their HR function as state of the art. Only 4% of HR teams believe they deliver an exemplary experience today while 58% of companies are re-designing the function to become more people-centric.

Our recent HR Operating Model Research uncovered three traps lurking below the surface that prevent HR teams from driving real value to the business.

  • Trap 1:

    HR Federated Model (includes Centers of Expertise (COE), HR Business Partners  (HRBP) and Shared Services operating at its basic capacity and without the appropriate level of (or worse - dysfunctional) interaction
  • Trap 2:

    Underutilization of the technology with more focus on the implementation rather than its adoption 
  • Trap 3:

    HR function is understaffed and with an outdated HR learning agenda
With businesses focused on the future of work, people solutions, customer segmentation and on-demand personal employee experiences HR will continue to be hit by this reality unless it confronts what lies beneath. So what can HR do? To get started, HR Leaders need to increase their strategic role in business transformation by exposing and eliminating processes and outcomes that yield little value. What are the traps and what drives value and agility in modern HR?

Trap 1: Insufficient HR Operating Model

The Federated HR model drives agility and positions HR teams to deliver – when executed in full and with transparent collaboration among the three elements (COEs, HRBPs and Shared Services). While the use of the Federated model has expanded, only 47% (of all US companies with more than 500 employees) leverage all three elements of the federated model. Centralization matters too. High-performing HR functions are more likely to have all elements of the federated model and be centralized. In fact, 77% of high-performing HR teams leverage all three elements in a centralized model.

But having all three elements and centralizing operations are just the beginning. Leveraging the interactions, technology and data among COEs, HRBPs and Shared Services is where HR teams differentiate themselves.  Overall, high-performing HR teams make it a priority to:

  • Align HR governance and strategy with business strategy: High-performing HR teams (66%) do this at 4X the rate of low-performers (16%).
  • Eliminate a siloed mindset in terms of people, governance, roles, technology, and data.
  • Alleviate HRBP involvement in “day-to-day” (employee and management) inquiries and transactional services so that HRBPs can focus on strategic people initiatives in the lines of business. In fact, high-performing teams are 9.5X more likely to have HRBPs regarded as true strategic partners by business leaders as compared to low-performing teams.
  • Integrate technology to be data-driven: partner across COEs, HRBPs and Shared Services to deliver real-time data and detailed workforce analytics reports and dashboards to support data-driven business decision-making.

Organizations that are on the right track will:

  • Have leadership buy-in accountability and policies and procedures are aligned, established and integrated.
  • Continuously look for ways to mature the model. High performing teams continually optimize their model over time.
  • Leverage interactions among HR and operational leaders by setting clear delegation of responsibilities, engagement and technology adoption that are HR driven and robust.    
  • Optimize target metrics and benchmarks - with measurement and monitoring in place to adjust to market shifts.

Trap 2: Underutilization of technology

HR is always looking to improve delivery of transactional services and provide a consumer-grade HR experience. However, almost 60% of HR Leaders do not think their HR function is sourced with the right mix of HCM tech to effectively execute against business goals.

Less than 15% of US companies (with more than 500 employees) have in place and fully utilize:

  • Manager or employee-specific mobile apps to access HR data anytime/anywhere
  • User-friendly interface to make self-service personalized and easy to use
Furthermore, 6 in 10 have no plans to use chatbots to answer simple HR questions. HR needs agile HR design. It is the missing link to drive adoption and digital transformation as it can substantially decrease administrative tasks in favor of more core services.
6 in 10

In the US, 6 in 10 companies have no plans to use chatbots to answer simple HR questions.

Executives and HR continue to put workforce planning and skills at the top of their agenda. But half of the companies have no plans to use AI/machine learning technology in the following ways:

  • Highlight employees for promotion consideration
  • Provide recommendations for individual learning
  • Identify skills needed for the next job
  • Identify individual’s current skills inventory

According to Mercer’s 2022 Global Talent Trends Study, 34% of companies have identified which roles are most suitable for agile work models. By fostering hybrid skills, leveraging data analytics and providing learning experiences to bridge any gap, HR can break the cycle. HR also drives value by implementing a cross-functional talent analytics team. Having a co-facilitated COE team and Shared Services team dedicated to Workforce Analytics leads to more data sharing with HRBPs and the business. While only 23% of US companies have both a dedicated Workforce Analytics COE and a Workforce Analytics Shared Services function/team - these teams also leverage all three elements of the Federated model. Almost all (81%) of these partnered analytics teams report that they share self-service data tools/dashboards with HRBPs and business leaders on a regular basis.

The good news is HR is planning to invest in HR tech in 2023. Among US companies increasing their total HR spend, 63% are spending more on HR tech in 2023 with 32% increasing their spend by more than 20%.

Trap 3: Understaffed & Under-skilled HR Team

It is clear that HR continues to have limited bandwidth for strategic advisory with almost 70% of HR leaders saying they believe their business operations leaders desire an increase in HR’s strategic consulting capabilities. 

At the same time, there is a talent crisis within HR that must be acted upon. Retention of HR talent is a challenge. Attrition in HR is real. According to Mercer’s recent Inside Employee’s Minds research: 36% of HR staff report feeling frustrated on a typical day and 43% are looking to leave their current employer. Our 2022 Global Talent Trends research reports that HR in the US is pulled in too many directions, is exhausted, is under-skilled and feels undervalued - and these realities derail HR transformation ambitions.


Over half of US companies are recruiting or planning to recruit new HR staff in 2023.

Due to these sobering realities, over half (55%) of US companies are recruiting or planning to recruit new HR staff in 2023. HRBPs, Talent Acquisition and COE specialists top the HR recruitment list. HR talent is scarce but finding adept, agile, and strategic HRBPs internally and externally is especially challenging.

In addition to staff turnover and burnout, HR leaders foresee a real need to upskill their HR staff. According to Mercer’s 2022 Global Talent Trends Study, about 50-60% of HR leaders expect a permanent change in the need to upskill HR staff due to new enterprise-wide responsibilities post-pandemic. Want to be a high-performing HR function? Invest in HR-specific upskilling - as high-performing HR functions are 3.5X more likely to invest in HR skill development.

Where are HR leaders investing in their own people?

It is clear that upskilling adds value to the transformation agenda as we see that high-performing HR teams are 3.5X more likely to invest in HR skill development compared to low-performing teams.

High-performing HR teams are 3.5X more likely to invest in HR skill development compared to low-performing teams.

High-performance HR teams are investing the most in learning activities that advance:

  • Persuasive communication skills and negotiation techniques for eye-level conversations with executive business leaders.
  • Basic analytics, insight generation and accurate interpretation as a basis for strategic decision-making.

Low-performance HR teams, trying to improve performance are more likely to invest in building HR skills across the board. In comparison to mid and high-performance HR, these teams report especially elevated HR investments in:

  • Systems, process or critical thinking skills
  • Leading change or transformation
  • Building commercial or industry acumen
  • General emotional intelligence: collaboration, coaching, conflict management, inclusive teaming or relationship-building skills

Moving ahead now for the future:

In conclusion, HR must optimize HR interactions and act as one HR Team, setting up and continuing to improve an operating model that is sustainable yet agile. While investing in people to assess skills, create best-fit careers within HR and adopt a continuous learning model that will build HR talent from within.  Employ HR technology with the employee and management experience at the center and delegate transactional work. Partnering with AI will help HR shift to being more adaptive, creative and experimental and enable faster and more informed decisions. By taking a strategic approach HR can ensure organizational fluidity and agility and be the “predictive station” for business leaders.  Acting as Talent Advocates HR can redeploy tasks flexibly to add capacity and resilience and focus on skills-based talent management.
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