According to Mercer’s 2017 HR Transformation Study – How HR Needs to Change, just more than one-third (35%) of organizations worldwide employ an HR service delivery model that includes the three components of Centers of Expertise (COEs), HR Business Partners (HRBPs), and HR Shared Services (HRSS). The successful operation of all three components is an attribute of high-performing HR functions. Moreover, few (17%) plan to change from their existing model.
In a rapidly changing workplace, the HR function’s slow transformation does not align with the C-suite’s plans for more change and support. Mercer’s 2017 Global Talent Trends research finds that the majority (93%) of executives are planning an organization redesign in the next two years with 41% expecting to move support functions to shared services.
“Organizations are making changes in the interest of greater efficiency and increased agility, which requires a combination of technologies,” said Karen Piercy, Partner in Mercer’s HR Transformation business. “Those that have been expanding shared services and business partnering skills have had the best success aligning HR to business needs.”
Mercer’s HR Transformation research shows organizations with HR functions that continuously evolve their HR service delivery model, build capabilities among their HR team, and invest in technology perform significantly better than those that do not. See Figure 1.
Evolve the model, build capability
Mercer’s study finds that more than two-thirds (68%) of high-performing HR functions have redesigned their HR structure within the last five years. As a result, many are utilizing a framework in which HR administration and decisions are made in a centralized manner, and processes and practices are consistent across the multiple locations.
As service delivery models evolve, organizations with high-performing HR functions are aligning COE and HR practices with the overall business strategy, shifting transactions to shared services, and providing more learning and rotational career development opportunities for their HR team. By building alignment to key business performance initiatives, HR professionals are well-positioned for value-added roles. According to Mercer’s study, more than two-thirds (69%) of CHROs/executive HR leaders meet with the CEO or COO to discuss business and HR strategy at least twice a month to ensure that strategic alignment.
“These meetings are important to strengthen the partnership between these leaders and help ensure that HR is aligned tightly with business strategies,” said Denise LaForte, North American Leader of Mercer’s HR Transformation practice. “When business leaders see HR programs aligned to the business strategy, they understand the value and importance of those programs, which is particularly significant since less than half of CEOs recognize HR for its capability and competence.”
Invest in technology
Investing in human capital management technologies that provide workforce analytics to drive strategic decision-making and deliver a consumer-based HR experience for both managers and employees should be a top priority on HR’s agenda, especially since only one-third (35%) of CEOs believe their HR function provides a digital experience for employees. Mercer’s study finds that organizations with high-performing HR functions have embraced technology and have realized significant results assessing and applying analytics. Specifically, they achieved better business outcomes, such as delivering exceptional customer value (94%), reacting proactively to disruptive change (83%), and driving innovation (89%). Additionally, they are viewed as great places to work (86%) and attract the talent needed to excel (91%).
Despite organizations with high-performing HR functions using technology much more than others, it is still limited. While 69% have employee self-service in place, just 36% have manager self-service and only 27% have mobile talent applications.
“Clearly, there is significant opportunity for the HR function to grow its digital presence,” said Ms. Piercy. “As HR functions adopt technology and advance their skills in data analytics, they are strengthening strategic decision-making, enhancing partnerships with business leaders and other functions, and providing a more digital and consumer-oriented manager and employee experience.”
For more information and to download the Executive Brief and replay to Mercer’s webcast, visit https://www.mercer.com/our-thinking/why-hr-needs-to-change.html.
Mercer is a global consulting leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and careers of their most vital asset – their people. Mercer’s more than 20,000 employees are based in 43 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy and people. With annual revenue of $13 billion and 60,000 colleagues worldwide, Marsh & McLennan Companies is also the parent company of Marsh, a leader in insurance broking and risk management; Guy Carpenter, a leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a leader in management consulting. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer.
Figure 1: Business practices of high-performing HR functions
Source: Mercer’s 2017 HR Transformation Study – How HR Needs to Change