Redesigning the HR function: the argument for HR redesign

Section one of the Personnel Today Management Resources one stop guide on redesigning the HR function, covering: understanding the pressures for change; how HR is reacting to change; and the benefits of change. Other sections .

Use this section to Understand the pressures for change on HR See how change within HR can go wrong See the potential benefits of change

HR departments agree they need to become more cost-effective and improve the quality of their service delivery, and many are attempting to do so. However, many are failing; for what we think are avoidable reasons.

An essential element of any piece of writing is that the first sentence convinces the reader they should carry on and read the rest of the piece. Hopefully we have done this with the first paragraph, and now we must carry on to explain what we think the necessary changes are and what the right road to follow is.

You may feel that the HR function has changed considerably in recent times: new technology has made it easier to keep information about employees; HR departments have taken the lead in implementing new employment-related legislation; and so on. However, it is probably fair to say that most people still regard HR as being the department that processes forms and polices compliance, not as one that spearheads innovative ways of increasing the effectiveness of the business.

Most HR functions know more needs to be done if this is to change, particularly in cost and design of service delivery structure. Consequently, many are planning or undergoing significant change trying to address this, and to get their own costs and service delivery quality into better shape.

This is not to suggest there are not other important challenges in terms of designing better HR policies or establishing the right skills for and shape of the business itself: it is just that pressures for change currently seem to be focused on creating better designs for the HR function.

What are the pressures for change?

There are many pressures for change acting on HR, and the rest of this section looks at some. Subsequent sections look at how you can go about responding appropriately to these pressures.

Keeping up with other business functions

Most organisations will have recently seen a number of management philosophies sweeping through their operational corridors. Business process re-engineering, total quality management and just in time may have come and gone out of fashion, but their legacies remain. Organisations will now be more clearly focused on what their core business is, they will have procedures to ensure they get things right first time, and they will manage processes to make sure stock and staffing levels are right for what is needed at any particular time.

We can apply these principles to HR:

HR's core business is in shaping the work environment and providing services to employees and managers to enable everyone to contribute effectively to the work of the organisation. Getting the basics right (including record-keeping, pay administration and compliance policing) is part of this, but there are clearly more proactive things that must be done to achieve real HR effectiveness

Getting things right first time applies in HR from the micro-level of having accurate information about all employees through to the macro-level of using this information to ensure the right number of people with the right skills and knowledge are in the right job

Fast-changing business environments mean people must be deployed quickly and have instant access to whatever new knowledge and skills they require. Waiting three months for a recruitment exercise to get under way or for appropriate job training to be provided is no longer an option.

Meeting these requirements is driving significant change to the organisation, work procedures and technology of the HR function.

Making the most of your staff

The falling costs of technology have led to much manufacturing activity being relocated to countries with lower operating costs, and we are starting to see the same process happening in 'people' jobs, such as call centres and data processing. New technology means people have simply become too expensive for some tasks, leading to administrative tasks being automated and people reserved for jobs where they can add value.

These factors mean there is ever-increasing pressure to make the most of remaining staff. They need to be doing jobs that contribute to the bottom line, not to operating costs. This pressure is also affecting HR.

At one level this means finding ways of delivering HR services more cheaply through shared service centres, outsourcing or whatever. At another level, it means making sure HR is 'easy to do business with' and that HR processes are as invisible as possible to the end user, freeing up that employee or manager to concentrate on their own job.

For some organisations, it is also starting to lead to a consolidation into HR of the responsibility for all aspects of the relationship between individuals and the organisation. Currently various aspects of the individual-organisation relationship may be handled by different functions outside of HR such as finance, purchasing, payroll, employee relations, operations, IT, marketing, employee communications and training. However, new ways of delivering organisational services make it possible for much of the activity arising from these various relationships to be carried out more cost-effectively through a single HR-managed gateway. This is provided that such a gateway helps the organisation gain more under-standing and influence over the relationship between employees and the business.

Facing up to the practical implications of globalisation

Many people work in organisations with an international presence or where employees are not necessarily working in a formal office environment. Project teams may comprise individuals spread across the globe, some in an office and some working from their homes, cars, trains or aircraft. Traditional methods of exchanging information present challenges:

People are not in an office to see pieces of paper

Time zones make telephone communication difficult to organise

Technological complications may make transmission of material by e-mail over the internet difficult.

Increasingly, HR needs to adapt to these new challenges by putting in place arrangements for fulfilling its mission and meeting the needs of its 'customers'.

Taking advantage of new tools

Computer technology has long been available in the form of HR information systems, payroll systems, document management systems and the like, so why are the latest technology developments particularly different?

A simple answer is that systems based on internet technologies have made it possible to do two things at once:

separate databases can be linked together and accessed by common front-ends (based on web browsers)

everyone in an organisation can be given access to these databases through the browsers they use for other purposes.

Why is this important? Well, 'traditional' IT systems have been designed so that a database can only be accessed by a specific piece of software, so that you have, for example, the personnel records database only accessible by front-end software installed on computers in the HR department. As all departments store information related to employees in their own function-specific databases, there will be considerable duplication of data and no opportunity to link and compare information stored.

Linking means all sorts of things become possible. Think about these questions:

Is there a relationship between the amount of training that someone does and their performance in the job?

When a job vacancy arises, are there suitably qualified people available within the organisation? Who are they?

Is there hard evidence about a connection between quality and sickness in a department?

Not only can this information now be found easily, virtually at the touch of a button, systems can be designed so they automatically compile such information and deliver it as required to someone with a specific interest.

The attraction of these new tools is self-evident. However, successful implementation of the technology requires much greater adherence to common standards. This may mean that the business needs to carry out a thorough review of HR processes and policies to ensure they are consistent throughout the organisation. This is not currently the situation in many businesses, and changes may be required to both HR and the work practices of managers and employees.

What's the experience to date?

These pressures mean all HR functions are changing. However, many not in the most effective way. Let's take a look at some of the things that are happening.

HR is taking on too much technology too fast

Many factors are conspiring to make HR departments invest too quickly in technology: the persuasiveness of IT salespeople, pressure from other business functions, the belief that technology can solve all our problems, to name but a few. Certainly technology can provide a solution to many problems, but it needs to be implemented with appropriate understanding:

We must realise that only people add value, not technology. Technology is just a tool people use. If managers and employees are not prepared to use the technology it will not lead to added value, but the opposite

We can be overwhelmed by technology. It needs to be introduced systematically, so that it can be adapted to meet users' real requirements and people can learn to use it effectively

The size and complexity of many modern organisations mean technology is used extensively in other business functions, fooling people into thinking HR can be automated. However, successful automation requires certain prerequisites to be in place. The level of development of the HR function as a whole must be considered to see if the proposed automation is the appropriate next step, or is actually out of sync with the rest of the business

Not enough attention is being paid to the underlying business processes in the rush to automate HR, with the result that technology merely helps the same old problems to turn around and bite us on the nose more quickly.

The whole business to employee relationship is not being considered

In the 1990s, Jan Carlzon, chief executive of the airline SAS, started talking about 'moments of truth'. He pointed out that the relationship a business has with its customers was not just defined by the corporate logo or advertising campaigns, but by every little exchange the customer has with the business. He said these moments of truth happen perhaps every 15 seconds, and that each moment has the potential for enhancing or destroying the relationship. It was therefore vital that every employee, not just people in the marketing department, engaged positively with customers.

What can this tell us about HR? Well, if we think of the business as 'people management' and the customers as the employees, while HR can delude itself into thinking that by writing equal opportunities policies and keeping a record of everyone's GPs they are managing the business-to-employee relationship, the reality is that every 15 seconds employees may be engaging with a different part of the business and changing their perceptions for better or worse. Think about your own organisation. Who deals with:

pay, is this HR, finance or payroll?

training issues, HR, another specialised unit, or line management?

issuing security passes, HR or security?

internal communications, HR, marketing or IT?

employee relations, HR, another specialised unit, or line management?

The problem is that each individual and each function may have a different perception of what the organisation is supposed to be to its employees. Marketing's internal communications may not be reinforcing HR's messages to employees. A line manager may address training in a manner not consistent with HR's broader strategy and so on.

This becomes an issue when HR attempts to introduce new ways of working with its customers, since the project objectives will tend to reflect HR's perception of how the business-to-employee relationship should be managed, rather than the reality of how it is actually being managed. And unfortunately, if it is confined to its traditional narrow role, it may be difficult for HR to understand or influence the broader company approach. Some companies are moving to formally consolidate all aspects of the people management responsibility into HR to overcome this problem, but in the meantime differing perceptions about the organisation are causing significant deficiencies in the implementation of HR function change.

HR rushing to implement self-service

Self-service. That's what everybody else is doing. We've got to do it as well. Now.

It's like gadgets. They seem such good ideas, we rush out to buy them, then months later find we have hardly used them at all. Why? Usually because we did not fully analyse what we would use them for, and the same thing is happening with self-service HR.

Many businesses are reading about self-service HR, seeing competitors implementing it, and so think to keep up they must also have it. Well, perhaps they do and perhaps they don't, and what they are failing to do in their haste is look closely at how their business operates and identify what needs to be changed to allow self-service HR to be implemented successfully. Typically, these changes are extensive and affect not just how HR carries out work, but also how managers manage and even how other functions engage with employees.

The reality is that while a business signing a multi-million pound contract with a system provider to implement e-HR makes good copy in the trade journals, the ensuing nightmare when it fails to deliver on its many promises does not. The company buying the system does not want people to know it has made a ghastly mistake, and the system provider certainly does not want to advertise that its much vaunted e-HR system has turned out to be a turkey. We end up being much less aware of the problems than the promises.

HR not understanding the real risks of outsourcing and shared services

As with self-service HR, outsourcing and shared services have become fashionable. They can bring many advantages, including economies of scale, cheaper technology upgrades, and the benefits of shared knowledge. But, as with self-service HR, outsourcing service providers and shared service centre managers do not exactly fall over themselves to point out potential pitfalls to companies looking to cut HR costs.

To successfully implement outsourcing and shared service centre strategies requires, at its simplest, a completely standard, technology-compatible set of HR business processes. Generally speaking, HR is not a good place to find such standardised practices. On the contrary, organisations trying to outsource the HR function have often found a plethora of country-, business unit- or departmental-specific policies and procedures. The outsourcer's imposition of their version of best practice to sweep away all that variation is neither pain-free nor necessarily appropriate. People who have spent their working lives always doing basic things one way suddenly find that the systems have changed.

The resulting chaos as the business changes things to standardise around the shared service or outsourced work practices at the very least throws simplistic cost reduction calculations out of the window.

Is success important?

So is this really such a big deal? After all, we are only talking about the HR function, which often sits at the bottom of the corporate priorities list. The problem is that the kind of changes the HR function is being pushed to carry out are expensive. This is not always evident from the budget requests initially submitted by the HR function, but happens because those requests are substantially underestimated, leading to the kind of problems outlined above. Most HR functions spend a lot more than they originally envisaged in their change requests, often just to recover from the problems they have created through poor implementation. Just think about the amount of money businesses spend on poorly implemented changes and how this might be better spent improving the commitment and motivation of employees.

Poorly thought-through change has several negative effects

Money is wasted

New systems and processes are introduced, costing money but not bringing any discernible benefit. The reputation of HR suffers.

Basic services get worse

Old systems may have been inefficient, but by and large people will have coped and made them work. Badly designed new approaches to providing HR services may prove almost impossible to implement successfully, so the service that HR is seen to offer to its employees declines.

HR staff morale falls

People do not like change, and if changes are perceived as making things worse, commitment and morale will fall. Performance suffers and staff leave.

Getting the change right can bring many benefits

It clearly does matter. Change is dangerous and the wrong sort of change can be disastrous. However, getting the change right can bring many benefits. A business case for redesigning the HR function to meet the current new challenges could contain some or all of the following:

HR becomes more strategic

A move away from manual administration and data processing through the successful introduction of appropriate self service and other technology allows HR staff to take on more rewarding (both from an organisational and a personal point of view) tasks such as:

improving recruitment procedures, so better people are appointed more quickly

providing the tools, skills, data and services to allow efficient deployment and development of managers and employees to meet the needs of the business

improving management reporting and access to information.

Better support to management

Managers in operational positions can only make good decisions if they have access to useful information. By pulling together and distributing hitherto unconnected data, HR can provide an important service to managers.

Improved possibilities for collaboration

Providing they work together efficiently, groups of people almost always provide a better solution than individuals working on their own. But whereas in the past this may have required people to be physically together, modern technology means people can collaborate even if they are in different corners of the world.

Through appropriate technology, knowledge management and control of the intranet, the HR function can create an integrated approach to collaboration within the business.

Managers and employees may be able to collaborate:

synchronously, all working together at the same time using collaborative software

asynchronously, using such things as skills databases and knowledge management systems to identify other sources of expertise within the organisation.

Reduced administrative costs

Although in the long term the benefits described previously may be more significant, in the shorter term reduced administrative costs can be an important factor influencing the decision to invest in major change. Such costs accrue in two different ways:

Administrative costs are reduced through the automation of manual processes

Processes can be standardised and streamlined to avoid the danger of merely speeding up an inefficient process.

How do you make sure the benefits really appear?

Many organisations can already point to benefits they have seen as a result of transforming their HR function. However, some can point to great hopes dashed on the rocks. Why do organisations have such different experiences?

It is for the same reason as why buying the wrong ingredients and careless cooking never produces a wonderful meal. Success will be achieved by:

appropriate authorisation: understanding what it is you are trying to achieve and getting company-wide support for the vision

effective definition of requirements: clearly defining the specific outcomes you require sufficiently to enable you to select the right providers of the solution

Broader business realignment: investing in making all of the appropriate changes to the business which are required to properly implement the change