HR TRANSFORMATION: Aligning People and Business

A guide to the why, what, how, and who
of a great HR function.

HR people, structures, systems, and processes have always evolved. But new factors are hitting business with alarming frequency and show no sign of slowing. Demographic change. New business models. Employee expectations about culture and systems—where their own technology is more responsive and effective than their employers’. A relentless quest for cost savings. IT-driven automation. And an unpredictable economy.

To stay relevant and add value, HR functions must transform. The old model was to identify a glitch, run a change project, and treat the problem as fixed to continue as before. Now, one-off change is not enough. Genuine transformation demands continuous improvement. Change becomes always-on, not something that you do once and then stop.

In this digibook, we explore the key questions and practical steps HR leaders, their peers, and their teams must address to create a function that is capable of supporting wider organizational strategy—and helping businesses compete—in this state of permanent transformation.

Further reading.

If we seem to be missing three big-ticket items, it’s because they’re covered elsewhere in this series. Check out our three digibooks on Career Management and Development, HR Data and Analytics, and Managing Organizational Culture.

Who will find this digibook useful?

HR leaders. Your tools, technologies, and challenges are shifting quickly. As are expectations about HR. We don’t want to panic you, but if you’re not putting “CHANGE” as the headline on your five-year plan, you’re in trouble. (And we think we have some great subheadings for you…)

C-level execs. Put the “war for talent” cliché to bed. (Promise: It won’t appear again.) You already know that your agility and ability to operate rest on having the right people in the right places—and they’re increasingly hard to find and motivate. You need smart HR, not only to thrive, but to survive.

Line management. You have a right to expect smooth sailing on the transactional processes around HR. But be honest: Don’t you wish the HR function was a bit more focused on making life easier and a bit less driven by rules and process? This guide will help you ask for the right service.

THE GLOBAL CHALLENGE TO HR: CHANGE IS URGENT

“The future is here—it’s just not evenly distributed.”

Modern business is an unforgiving beast, which means one thing for support departments. Either you add value or you’re out. And HR is far from immune. So let’s spell it out:

“HR functions must help their companies increase sales and create new sources of revenue—now and forever.”1

If your HR function isn’t and doesn’t, it needs to change.

Three reasons HR needs to think fast about value.

  1. 1.

    Demographic change. Your workforce is getting older and more diverse. Forget millennials (a horribly oversold marketing label). The four-generations workplace is a coming reality. That means thinking now about policies and systems that are flexible, support knowledge transfer, reskill old workers, and more.

    FIGURE 1:

    Demographic changes in the developed world

    • 2013
    • 2017
    • 2022
    • 2027
    • 2032
    • 2037
    • 2013
    • 2017
    • 2022
    • 2027
    • 2032
    • 2037
    • Median age of UK population
    • People over 65 (millions)
  2. 2.

    Fast-changing business models. You don’t have to be in Silicon Valley pivoting your business to know that agility is today’s watchword. Your people need to be able to collaborate easily. Managers must build and reshape teams quickly. Talent locked in functional silos will leave or be wasted.

  3. “In a modern company, HR takes on this expanded responsibility for team building and enabling teamwork. I can’t think of anything that’s more important than that.”—Oracle CEO Larry Ellison

  4. 3.

    Transparent technology. We’re way past the point where employees’ personal tech got slicker, faster, and more entertaining than the kit they use at work. People expect systems to work seamlessly today; to be easy to use. Your HR system almost certainly isn’t. And that’s why you can’t persuade them to use it properly.

The only roadmap you really need.

Step one, then: Work out where your HR function is. And a good map is the HR maturity model. All you need to do is point to where you are right now…and keep moving right. The Maturity Institute version spells it out:2

FIGURE 2:

Sweeping right: moving up the maturity model

Investment yields little value or
risk management
The “Aha!” moment: HR as a driver of value
Risk management, value creation
  • Stage 0
    HR is non-existent
  • Stage 1
    Some HR admin
  • Stage 2
    HR treated as a function, but mainly transactional
  • Stage 3
    HR is seen as effective, and contributes
  • Stage 4
    HR becomes indispensable and integrated in business ops
  • Stage 5
    HR moves from operational to strategic focus and impact
  • Stage 6
    The entire organization aligns around human capital and values

HR needs to focus on the employee experience, removing barriers to them delivering to their full potential. HR has to be utterly aligned with the business. Its transformation must bring about a shift in management attitudes to nurture and develop the full potential of human capital.

The new basics.

HR needs to minimize the cost and complexity of the transactional basics so it can deliver against this checklist:

  • Talent-centric perspectives. What do you need from your people? (Extra points for not using any jargon.) Can HR help the organization deliver an experience that nurtures talent?
  • Collaborative tools and processes. People need to work across functions and disciplines to respond to colliding sectors and innovation. Collaboration tools need to be embedded, not separate systems.
  • Engaging and mobile interfaces. Employees expect the same responsiveness from their employers that they get as consumers, or on the social-media apps on their phones.
  • Insights for management. The ultimate proof of HR’s value—information, analysis, and advice that shape decision-making and can be connected to creating value.

So: Act fast or risk HR being sidelined. Factor in tech, business change, and a diversified workforce. Hold HR to account for the organization’s ability to grow the business. And get it all done before artificial intelligence makes the whole function redundant. We like a challenge…

WHY YOU SHOULD REVISIT
THE ULRICH MODEL

It might be 20 years old, but it’s still a great
way to frame transformation.

Many of the employees at today’s companies are easily replaced. In a world where machines are getting smarter, capital often matters more than people. But during the 1990s, many companies realized that pockets of their “human resources” weren’t just the most valuable asset—they were, effectively, their only real source of value.

In 1997, Dave Ulrich articulated this truth in a new model for HR—a quadrant you’ve almost certainly seen on a thousand PowerPoint slides. Here it is again, just in case:

Solving for Ulrich.

The problem? The bottom left is too often the focus because it involves HR processes that line managers and executives hate. If it’s not automated yet, it soon will be. Employees want and need a consistent modern, simple consumer experience, regardless of the device they use to interact with HR. Make the choices easy. Ensure the processes are efficient. Minimize the hassle.

The solution? Move up and right (which pushes you along that maturity model). HR should understand the business so well that decision-makers are beating a path to your door for help and advice. And embrace any automation that can knock off the dull compliance tasks from the bottom left.

The warning? Don’t go off half-cocked. In 2015, Ulrich himself lamented how poorly HR functions had adapted to his model. “What [transformation] often means is that a company changes one thing,” he said.3 “They implement an HRIS system. They change one practice. They train some HR people. And they call it a transformation. Not true.”

The four key questions about your HR function.

  • Why are we doing it? What are the external realities and the internal consequences of those realities? This sets the context for the structures, processes, and policies you adopt.
  • What are the outcomes of the transformation? Not what we do—what we deliver. What value does the company get because we’ve done good HR?
  • How do we transform? We can change practices (how we hire and develop people, how we communicate); HR function structure and governance (centers of excellence, shared services, technology); and HR people (who might need new skills and knowledge).
  • Who does the transformation? This cannot happen at the top echelon of an HR silo. Line managers, executive leadership, and HR professionals all have a stake. Ulrich seems to be arguing that HR needs to up its game on the business-partnering side.

Up and right is what everyone cares about.

In our own research on employee engagement globally, we find that employees are demanding three main changes in their organisations to get them, and keep them, engaged:

  • People want to work in organizations that give them the opportunity to develop personally and professionally, and move sideways or upward within the company as their skills increase.
  • People want to work in organizations that are a great fit for them personally, and enable them to work toward goals that are aligned with their values, in a way that’s aligned to their lifestyle.
  • Digital experiences and new technology aren’t necessarily going to improve employee engagement directly, but when used correctly, they can drive huge positive changes in every area that does directly impact engagement.
  • Their
    organization is
    concerned with
    their welfare
    38%
  • Their
    organization
    promotes
    flexible working
    40%
  • Their learning
    and training
    is linked
    to their
    development
    45%
  • Their onboarding
    process set
    them up for
    success in
    their jobs
    41%
  • Their company
    uses the latest
    technology to
    enable them to
    perform their role
    44%

Source: Oracle, “From Theory to Practice: A Practical Look at What Really Drives Engagement, 2016”, go.oracle.com/LP=39982?elqCampaignId=65988&src1=SO:BL::&src2=.

WHY YOU NEED TO KNOW YOUR BUSINESS BETTER THAN YOU THOUGHT YOU DID

Finding a strategic role for HR means
slipstreaming the enterprise.

Strategic partnership: It’s HR’s golden ticket to the boardroom. Downside: Unless HR can frame its activities and objectives around the strategic and operational realities of its organization, it’s doomed to an admin role.

Three steps to strategic HR.

  • Deliver the basics stunningly well. The number of HR functions that don’t even know how many people their organization employs is huge. Get admin and compliance nailed, and the business gets more visible.
  • Boost support for HR business partners (HRBPs). Top-class shared services are important, but the insights of great HRBPs will mean more to business decision-makers.
  • Build out deeper and more analytical understanding of what the business does. That’s partly about smart analytics—and partly about strategic intelligence and good comms.

OK, so that’s a bit like saying winning Olympic gold is just a case of working out in the gym for four years, finding every possible marginal gain on your skills, and being able to perform in front of a global audience. But the point is: You need a plan to win.

Top tip: Butter up the bean counters.

Sounds like HR needs allies. Analyst firm Aberdeen Group says although they’re “unlikely bedfellows,” the two functions that work best together are HR and finance. Finance has a well-defined view of the business. And it’s in great shape to evaluate the impact of HR on performance.

Aberdeen Group’s best-in-class companies are vastly more likely to combine HR and financial data—showing the power of connecting outside the silo. “The link between business and HR is defining the future of HCM, as 71 percent of organizations believe that the most critical skill of HR leaders is the ability to connect initiatives to the strategy of the business.”4

FIGURE 3

Three good reasons to slam on the brakes.

Yes, HR transformation needs to be compelling, strategic… and it’s really urgent. But if you don’t know the business really well first, it’s going to hurt. Why? What are the pitfalls?

  • No benchmarks. Finance has accounting standards; production has quality assurance. But who decides what in HR needs to be done, and how well it’s been achieved? Whether internal or industrywide, find a way to test the quality of your HR transformation.
  • Mindless best practice. The HR 10 commandments probably have “Thou shalt conduct annual performance reviews” right between “Thou shalt have a grievance policy” and “Thou shalt not discuss remuneration in the open plan.” But what if they’re wrong? A professional services firm, for example, almost certainly evaluates employees after each client engagement. Annual reviews might be a waste of time—and off-putting to staff.
  • Fashion addiction. HR is often afflicted with a “flavor of the month” problem, whether that’s processes, systems, or metrics. Don’t reach for the latest buzzword. Smart HR functions build themselves up to match operational and strategic realities, not jargon.

The perfect trio: HR, IT, organization.

HR needs to work in tight harmony with IT, the function that helps make sure technology decisions are supporting the HR vision and its transformation choices. In many cases, HR can dovetail with broader IT transformations around simplicity, security, and flexibility for the whole organization.

Best-of-breed HR systems might bring in great functionality. But if they result in data being stuck in a tech silo, HR will never reach its potential to drive value across the enterprise. Organizations need a single version of the truth—a truth that encompasses people data as well as financial and operational data. A suite approach is the only way to track the effects of decisions, the impact of strategy, and the complex interrelationships between plans in different parts of the organization.

And transformational HR today needs all the digital tools at its disposal. Neil Lewis, head of employee services at UK building society Nationwide, realized that HR had to find ways to use IT as creatively as the employees did at home or on their phone.

At one level, that meant straightforward new approaches:

  • Simplifying the HR intranet for employees. They’ve got to want to use it.
  • Using chat boxes to mimic employees’ experiences outside work. Even if it takes a bit longer than a phone call, employees love this technique.
  • Hosting instructional videos on common tasks. Looking up a DIY chore on YouTube was Lewis’s inspiration.
  • Empowering managers to issue approvals from their phones. Make it easy to run the business from anywhere.

“It really is making employees’ jobs easier every day; it’s making managers’ jobs easier every day; and creating that agility in our operation that we really wanted,” Lewis says.5

AUTOMATING HR OUT OF A JOB: SURVIVING THE MARCH OF AI

“I, for one, welcome our new robot overlords.”

Google’s DeepMind, an artificial intelligence (AI), made headlines by beating the human world champion at the strategy game Go. But that’s just tiddlywinks next to the enterprise applications for AI. Embedding natural language processing, algorithmic analysis, and machine learning into our systems holds out huge promise—especially for the softer side of HR. (You’ll want to check out our digibook on Data and Analytics.)

Some HR practitioners believe that parceling off the remaining transactional aspects of the role will allow them to focus on “strategic value-add” activities. But will we get C-3PO? Or Skynet from Terminator? (Both, arguably, are HR systems...)

What to look out for.

HR guru Josh Bersin produces a guide to what’s new in HR tech for Deloitte, and his pointers for 20166 are a pretty good roadmap for transformative HR leaders:

Systems renewal. Cedar-Crestone believes 60 percent of all companies are working on a new enterprise HR systems strategy, and 46 percent are increasing budgets.

A redefined talent-management market. Expect big changes in applicant tracking, learning, and performance management.

Feedback, culture, and engagement apps. Social listening for the enterprise is going to be a big deal. The traditional annual engagement survey? Not so much.

Employee well-being, wellness, and productivity. The wearables revolution has barely begun. HR can seize this ground.

People analytics. Smarter ways of looking at data that’s been more intelligently gathered. Plus, predictive analytics “to predict flight risk, assess high-potential job candidates, even find toxic employee behavior,” says Bersin.

Apps. HR needs approaches that people find easy and convenient to use. That means smartphone apps will become the default platform.

What if you’re not ready?

A problem: If most of the HR function is geared to transactional work, automation means…

  • The team suddenly looks too big
  • It has the wrong skills
  • It has no voice within the business

Don’t panic. There’s another diagram to lean on. The “Human Capital Model Value Triangle” ought to help HR see where it needs to deploy resources once the robots arrive:

10% 30% 60%
Old-school HR
Transformation
20% 60% 20%
Modern HR

Three strategic wins for AI in HR.

There are lots of ways strategic HR might benefit from AI, too. Digital startup adviser and former HR leader Anthony Onesto7 has been making a list…

  1. 1.

    Identify challenges. Machine learning allows a system to analyze data—even unstructured data such as emails and calendar entries—against prior experience to flag problematic trends.

  2. 2.

    Uncover hidden issues. Traditional reporting lines are notoriously bad at feeding through true employee feelings—or toxic behaviors, like institutional bullying. Sentiment-analysis systems can reveal what the real mood is.

  3. 3.

    Predict behavior. Once the systems understand the relationships between different inputs—decreasing engagement, for example, or a rise in the market value of a skill set—HR can take action to head off problems such as attrition before they arise.

Streamlining, enabling, and adding value.

Twenty-first-century HR is about freeing staff, their managers, and HR to focus on where they add most value. That’s why the first job of HR transformation is to make life easier.

A great example is Standard Life. The UK-based banking group started its HR transformation in 2012. Chief Operating Officer Sandy Begbie stressed that the new HR mustn’t “enshrine old practices” but instead work with the business to adapt. “Modern systems have best practices embedded,” he said.

During live reviews, for example, managers can now pull up an employee’s salary and bonus history, performance plan, rating, development plan, and risk of leaving—all in one place. Instead of managing a system to find information, they manage people.

The negative spin? A core role for HR is disappearing. But the HR technology is now facilitating a conversation that both managers and employees desperately want. It’s changing the culture from paternalism to a relationship between employees and managers based on adult-to-adult conversations.

DOING PR FOR HR: WHY COMMUNICATION IS KEY TO TRANSFORMATION

Winning the hearts and minds of business leadership.

HR transformation is meaningless unless both front-line managers and employees buy into new approaches. And, of course, you need the executive leadership onside. If they don’t see the impact and the benefit, the transformation journey could be a short one.

Comms playbook for HR.

The messages—at the board, to management, and out to employees—about what human capital means to the business will affect:

  • The design of new systems
  • How they’re rolled out
  • And how they’re promoted

Then HR needs five key elements if they are going to make ongoing communication work:

  • Insights for management. The ultimate proof of HR’s value—information, analysis, and advice that shapes decision-making, and can be connected to creating value.
  • The ability to segment talent into clearly defined groups according to skills, experience, and preferences. This means you can target messages and services more accurately, and manage groups more appropriately—around issues such as succession planning, for example.
  • A framework for successfully syndicating and distributing content tailored to the needs and interests of individual groups of professionals. HR makes proactive recommendations.
  • Tools for monitoring the effectiveness of communications with employees and prospects.
  • Processes for making continuous, on-the-fly improvements to the HR service delivery.

A three-step action plan.

Stealing the marketing team’s best ideas (hey, they almost certainly stole them from someone else!) is a quick win. These three steps will make that even simpler:

  1. 1.

    Develop a strong business case. If it’s good enough, people will buy into it without much persuasion. For example, show managers how digital marketing techniques will uncover high performers to be deployed in high-growth areas.

  2. 2.

    Work closely with marketing. Get experienced and creative marketing professionals to cycle in for rotations in the HR department—not just junior marketers doing on-the-job training.

  3. 3.

    Exploit new technologies. Just one example (there are many): The Oracle Cloud social sourcing solution provides an engine for promoting job opportunities. Candidates can one-click apply for an opening or refer it on social networks—and it tracks responses back to the referring employee.

Selling the new HR.

“Enabling people was the core of BT’s HR transformation,” says Daryl Szebesta, formerly CIO at the 150,000-strong British telco and now vice president of Cloud Transformation at Oracle. At that kind of scale, how HR systems and processes are sold to the workforce is critical.

For example, cloud technologies deliver agility at scale. But Szebesta stresses that promoting data privacy and security were key to maintaining the trust of employees. BT uses end-to-end encryption in its cloud-based HCM system, for example.

Having modern-looking, intuitive systems designed for strong user engagement was also a key part of winning over employees. “With engagement comes motivation and pace,” Szebesta explains. “It’s about embedding customer experience [in the HR provision].”

Building your
action plan

Use this checklist to build your action plan. As you select each item, they will build into a comprehensive set of next steps for you.

WHICH OF THE FOLLOWING DO YOU NEED TO DO? YOUR ACTION POINTS:

Your action points

  1. Start thinking about transformation.

    • Plot your HR function on a maturity model. It’s your transformation GPS.
    • Acknowledge that even if you’re not in trouble yet, internal and external forces demand change.
    • Accept that there are no short cuts.
    • Move on to a vision for the HR function that genuinely adds value.
  2. Become a change agent.

    • Map out your own HR function against the four quadrants of the Ulrich model.
    • List the concrete results you could bring the business by moving HR resources into the strategic ones.
    • Answer Ulrich’s four questions as a prerequisite for designing a transformation plan.
  3. Learn more about the business.

    • Sharpen up your HR business-partner skills and mission.
    • Develop better data-collection and analytics capabilities. The business expects it, and it’s a window on what’s happening.
    • Ditch the fashionable projects. Instead, work from the bottom up: simpler, clearer tools for HR and the business will bring them closer together.
  4. Automate effectively.

    • Automate manual processes using cloud and mobile. It delivers compelling outcomes.
    • Smart HR functions know already how they can redeploy freed resources to higher-value projects.
    • Don’t get complacent: AI is coming, so be its master, not its victim. Hunt for smart, predictive systems that will get the business ahead of the game.
  5. Communicate better.

    • Consider how to sell new approaches to the business at the design stage.
    • Work with marketing to frame a messaging and comms strategy.
    • Create clear paths for feedback on change, and mechanisms to act on it.
Find out more

We're here to help

EMEA

  • +448708768711

US

  • +1.650.506.7000