Building The HR Function

of the Future

Hugh Shanks
Robert Zampetti

March 25, 2009

© 2009 Towers Perrin

 Presenters: Hugh Shanks
 Hugh Shanks joined Towers Perrin in London in 1986 in
the Human Resource consulting practice. He is a
Principal on Towers Perrin’s Worldwide Board and is
Chairman of the firm’s Human Resources Committee.
 He leads the development of Towers Perrin’s HR
effectiveness work in Europe. His particular expertise
and interests are in the areas of developing people
strategies, maximising the value of HR functions and
developing performance and reward strategies that
increase the engagement of employees.

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 Presenters: Robert Zampetti
 Robert Zampetti is a Principal in Towers Perrin’s
Change Implementation practice in Montreal. Robert
recently returned to North America after working in
Towers Perrin’s London office.
 Since joining the firm in 1993, he has specialized in the
area of designing and implementing HR delivery
solutions and more recently, has been involved in
numerous global HR transformation projects.

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The components of HR Function Effectiveness
Business Strategy
 Growth plans
 Competitive strategy
 External environment

Workforce Strategy
 Future demand for staff: numbers, skills, locations
 Current supply
 Gaps and how to close them

HR Function and Service Delivery Strategies

 Overall direction, vision for HR
 Service delivery model (where HR work is carried out)
 Business case and high-level transformation plan

HR Structure HR Talent HR Process HR Technology

 Design of COEs, BPs  Assessing talent  Process redesign  ERP systems
and shared services  Transition strategies  Links between processes,  Web and best-of-breed
 Detailed roles technology and roles solutions

Governance: Decision making

Measurement: Metrics, benchmarks and scorecards

PMO and Project Management: Managing the transformation

Change Management and Communications: Ensuring engagement and support for the
changes
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The HR function of the future
Part 1: Setting the Context
 What do we mean by the future?

 What are the issues driving change?

 What are the challenges facing HR functions?

 What are the issues with today’s HR structures?

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The HR function of the future (cont.)
Part 2: Possible solutions
 Some principles that have guided our thinking

 The HR DNA

 Different degrees of change

 Improve current model

 Evolution

 Revolution

 How do we get there?

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Setting the Context

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What do we mean by the future?
 There are the things we can’t change —
they will happen anyway
 these will shape our future whether we
like it or not

 Then there are the things we can change

 we can choose to reshape the way we
deliver HR to our organization to meet
those future challenges
 or we can wait and get swept away
by the tides of change

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What are the issues driving change?
HR is a function under pressure
 The most prominent issues now include

Reducing overall people costs

Increasing the ROI on total people costs

Reducing HR function costs

Retaining key talent

Maintaining levels of engagement

Globalization

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 The conventional HR structure
Focus: Reinforces one culture,
ensures consistency and
standardization, measures value

Focus: Expert HR
HR Centers of design services,
Business Excellence business and local
Partners HR
Focus: Connecting Leadership fit while taking
HR and the Team advantage of global
business best practices
Administrative
Service
Centers

Focus: Cost-effective
service delivery of HR
administrative work

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 The conventional HR structure:
the issues that arise
 Can the COEs actually
 Do business partners
provide best practice
have the needed
“expertise” at a competitive
capabilities to support the
price?
business?
 How to ensure COEs
 How to really engage with
HR Centers of respond to business needs
line managers and equip
Business Excellence (and don’t live in an “ivory
them with the required skill HR
Partners tower”)
and will Leadership  How to ensure COEs build
 How to ensure businesses Team holistic, connected solutions
are committed to the
(and don’t think in “silos”)
corporate agenda (and
don’t “go native”) Administrative
Service
Centers  How to ensure sufficient flexibility of
HR resources to staff projects (rather
 How to balance the cost vs. quality of service than having “captive resources”)
trade-offs associated with administrative  How to build cooperation and trust
shared services (insourced or outsourced) between all parts of the model (and
 How to ensure that the administrative and avoid “disintegration”)
transactional elements are conducted as  How to reduce the overall cost of the
efficiently as possible and with a true HR function
customer service mindset

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Possible Solutions

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Some principles that have guided our
thinking
 Strip permanent capabilities back to a core
of fundamentals
 Focus on key outcomes, not inputs

 Allocate work on the basis of proven competence

 Create flexibility in resourcing

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The potential…

Traditional New
 HR functions  Project teams
 Broad scope  Focused scope
 “vertical integration”  outsourcing
 Organization units  Virtual teams
 Oversight and compliance  Dynamic facilitator
 One size fits all  Tailored
 Command and control  Enable and engage
 Transactional, administrative  Knowledge-based systems,
systems wikis, collaboration
 ERP-based  Enterprise 2.0-based

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 The HR DNA
From our work and analysis,
we are suggesting that there
is a fundamental role for
HR  the HR DNA

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Different degrees of change

Improve
Evolution Revolution
Current Model

In all of these approaches, we recommend launching operations (by which we mean administrative and transactional work) away from HR
Do not confuse this important change with outsourcing; we mean handing over accountability for HR administrative and transactional work to
another function or creating a new, separate function
Whether to outsource or not is a different question

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 Improve current model

Differences vs. current model

 Operations launched away
 COEs smaller and more connected
to focus on DNA outcomes
 Flexible resource pool
 Some ambiguity as to where
budget and ownership for
business partners reside

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 Evolution

Differences vs. current model

 Operations launched away
 COEs connected to focus on DNA outcomes and linked to other
functions to provide complete solutions to business needs
 Only a very small core of policy
roles remain at corporate (e.g.,
major people assets and liabilities)
 More services provided by vendors

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Revolution

Differences vs. current model

 Operations launched away
 No COEs (only a very small
corporate team)
 Pure focus on DNA outcomes,
largely via business partners
(and line managers)
 Much more vendor support
 Business partners are purely
owned by lines of business
and are not dedicated
HR function, nor directly
owned by HR

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 A summary of the three approaches to
HR function design
Name Description
Improve  HR contains a full range of expertise dispersed
Current Model among the centers (where group-wide programs
and policies are developed) and strategic
business units (where business-unit- specific
programs are developed)
Evolutionary  HR resources are organized in teams focused
Model on the priorities of the business strategy
(e.g., grow in Asia, become a serial acquirer).
HR resources are deployed on a pool basis
(like a consulting business). In addition, very
small COE teams focus on the “fundamental”
roles of HR
Revolutionary  HR is small and strategic, focused on policy
Model development and strategic thinking only. It
undertakes the “fundamental” roles described
earlier. Operational, transactional and COE
services are brought in from specialist suppliers
with whom the company builds long-term
partnerships
© 2009 Towers Perrin
When It’s Used
 Autonomous, decentralized businesses — strategic
business units are very different from one another
(in extreme, this would be a holding-company
approach), less competition for resources among
strategic business units
 High volume of line manager support needed
(whether need-based or due to poor-quality line
managers), where “quality of our people” is
paramount (people-intensive businesses); strong
focus on key people
 Dynamic, fluid, changing businesses seeking
leverage across the organization to get competitive
advantage — global companies, serial acquirers
and growth businesses
 Start-ups, cost leadership businesses, centralized/
standardized/routine processes, pressure to be low
cost, capital-intensive
 Operational businesses, manufacturing and retail —
often mature businesses in which people
management is the core element of line management
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 More detail from a process perspective
Workforce Planning,
People Talent Management Managing Managing Total Employee
Name Strategy and Employee Brand Staffing Performance Developing People Remuneration Relations

Improve  Capability  Core to what HR should do  HR-driven, using  HR designs  HR develops career  COE model/all  COE model for
in HR standard processes frameworks paths and training rewards staff report labor relations
Current Model  Specialists in HR accountable
frameworks to COE only
for delivery  Seek economies  HR trains managers
of scale (regional)  HR develops training  Frameworks for  For employee
 Strong links to company  Managers run process  guaranteed vs. “at
curriculum relations,
strategy function and business  Use outside risk”
 HR monitors process frameworks
planning cycle suppliers where  HR maintains  stock options
developed
possible  HR reviews outputs standards/reporting  job evaluation
 Talent management has strong  partnership with
by HR COE but
links to line management/  Goal is to reduce HR  HR consults with  HR chooses preferred expert advisors operated by line
operating units involvement managers on external providers management
performance issues

Evolutionary  Capability  Central resource (enabling)  Individual managers  Focused on business  Focused through  Individual  Run by line
in HR and/or build capability in tasked with hiring objectives and business objectives managers management
Model
Strategy Group and/or and onboarding, strategy goals and strategy goals determine rewards
 Supported by
dedicated HR people in using common tools within framework
 Invest in HR where  Invest in HR, where business partners
business teams
 Could be line- or significant shift is significant shift is  COEs provide for major events
HR-driven, or even required and there required and there is broad philosophy (eg labor
dedicated project is a strong people a strong people focus and framework negotiations)
team for scarce-skill focus or business-
 Prime accountability  Expect to see
recruitment critical issues
 Prime accountability with line managers some suppliers
 Likely use of outside with line managers designing and
suppliers implementing the
programs

Revolutionary  Capability  Workforce planning embedded  In the line  Part of business  Part of business  Bought in from  Run by line
in the in business units and business planning process planning process outside management
Model  Contracted staffing
organization planning cycle
suppliers available  Driven by operating  Driven by operating  Corporate HR
 HR oversight  Clear talent management as required units units focuses on
process driven by senior corporate people
 Hire help as needed  Hire help as needed
managers, perhaps with some assets and
external rigor/independence liabilities

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 How do we get there?
- Depends on your starting point and ambition
- Think hard about business needs and fundamental capabilities required of HR

The New HR Function The “Rocket Ship”

HR Policy and Strategy
 Establish core policy and strategy team
 Build inventory of people management
capabilities
 Establish new governance model
 Establish collaborative environment
HR Operations
 Identify source of appropriate operational
competence
 Prioritize and sequence processes/services to
transition (or stop)
 Carry out efficient amount of transformation*
 Transition services and redeploy people

Expertise Business Partners

 Build knowledge  Identify effective
of expert marketplace business partners *Our research shows that organizations that
 Identify and already in line undertake partial transformation prior to
select sources  Redeploy effective HR transitioning services achieve the most
of expertise business partners to the successful outcome
 Build vendor line
management  Build on people
capability management
capabilities in the line
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Questions?

 Hugh Shanks

hugh.shanks(at)towersperrin.com

 Robert Zampetti

robert.zampetti(at)towersperrin.com

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