If you listen to digital evangelists at conferences, HR operations are currently undergoing a period of dramatic change. But HR managers often cringe with embarrassment when conference speakers present simple ideas under the banners of “agile” or “digital” HR. Often driven by hype, familiar organizational concepts are being recycled with a digital skin.
Of course, there are useful gains to be found in agile and digital — it's just that tools and apps do not solve more challenging organizational matters. We have yet to see a completely new, or even substantially different, idea of the HR structure breakthrough. So what is working in HR service delivery and what are the alternatives, if any?
What drives strong performance in HR today?
Mercer's international HR Service Delivery study surveyed more than 300 managers, predominantly from large companies, to analyze current practices. The results show that strong performance by HR departments can contribute to a company’s success by creating genuine added value for business areas and managers, by responding proactively to fundamental changes, and by driving innovation. In companies where this is the case, the HR organization is considered a “talent magnet” (91%).
In terms of the structure, approximately 70% of these high-performing HR departments apply a basic three-pillar model of HR Business Partner (HRBP), Shared Services Center and Center of Excellence. Notably, HRBPs in more successful organizations are far less likely to be involved in time-consuming everyday work, such as operational requests or administrative tasks, than their peers in less successful HR organizations.
We also noticed that HR managers in successful HR organizations do three things differently.
- They consistently review and enhance their organization. Over two-thirds (68%) have made changes to the structure of their organization in the past five years. They make these changes in reaction to specific contexts and work in collaboration with the business. Some 69% of board members/managers in HR discuss business and HR strategy with the CEO or COO at least twice a month.
- They establish networks within an HR community to work towards a common goal, rather than sticking to their HR silos. By way of illustration, mobility within the areas of Shared Services, Centers of Excellence and HRBPs – as well as between these areas – is twice as high as in average HR organizations. Somebody working as an HRBP in a high-performing HR department is almost seven times more likely to benefit from a specific development activity.
- They invest more, and more successfully, in technology. This includes standard technology such as self-service tools (2.6 times more common than in conventional HR organizations) and more advanced tools, such as big data and real-time evaluations (3.7 times more common). For example, we are now starting to see chatbots used in the HR Shared Services Center or leadership development.
A new blueprint for HR operations
The core idea of actively adding value is now a standard requirement in almost all HR departments and some practical trends are emerging that advance this goal.
The role of the HRBP will not be eliminated, rather it will become more focused. The experience of technology companies is of particular interest, because they have long coped with the talent challenges that are now familiar to many. Companies such as SAP operate in a market of continuous technological change, shortages in key employee segments, and limited top-notch talent. In their HR operations and organizational structure the HRBP role has become even more focused — both in terms of tasks and in the hierarchical levels of managers that they oversee.
Temporary structures can also give the HR organization the flexibility it needs. Traditionally, this involved projects that extended across HR silos, such as hot housing or workshops; the modern options are scrums, hackathons and design thinking sessions. “Competence pools” — for HR consultants, project managers and change experts, for example — enable this flexibility and offer a sensible solution to respond to rapid changes in business models, skills, leadership and frequent reorganizations.
HR managers have an ever-growing abundance of issues to deal with. But it is comforting to know that, amid general uncertainty and volatility in the modern world of work, three aspects of HR will always remain essential: adding value through people management, advising the business on organizational changes, and making the HR organization more effective and more efficient.
About the study
In 2016/2017, Mercer conducted a global study in 43 countries and 26 industries on the subject of the HR service delivery model. The respondents were 300 board members and managers, mainly from large companies. Using the database and 21 key performance indicators, participating HR departments were categorized as either “high performance” (top 50 HR organizations), “average performance”, or “poor performance” (bottom 50 HR organizations). In addition to details about the performance of the HR function, the study also asked for structural, organizational, capacity, and planning data. The evaluation was carried out by Mercer research specialists and HR management consultants.