HR Transformation: It’s the Business Partners, stupid!

The Economist has just posted an article on HR Transformation. It begins:

Human resources transformation refers to the massive restructuring of corporate human resources (HR) departments that took place in the decade or so after 1995. Before that, the staff in HR departments had generally been seen as administrators, not as people to be involved in high-level strategic discussions. HR staff saw themselves as lifetime career specialists with little need for knowledge or experience of what the rest of the business was about.

Actually, a lot of them still do. This paragraph implies that the great HR transformation has happened but, as the article later concedes, it is still very much under way.

Whatever the theory behind HR transformation, most organisations did it for three reasons; to cut costs, to get more innovative HR solutions and to bring HR closer to the business. These objectives broadly correspond to the three ‘legs’ of a re-engineered HR function; shared services, centres of expertise and HR business partners.

For the most part, the first objective has been achieved. As the Economist reports:

The consequences of HR transformation have been dramatic, and in some cases painful. On average, it has been reckoned that around 25–30% of HR staff have lost their jobs in the transformation process, with another 20% or so following them over the next few years. A study by IBM’s Institute for Business Value estimated that some transformations eliminated up to 70% or more of the workload of the traditional HR generalist.

But this is because, typically, HR transformation projects focus primarily on setting up the shared service centre, then on the specialists in the corporate centre. The development of the HR Business Partners has, all too often, been an afterthought. It is assumed that the old HR generalists will somehow just evolve into strategic business partners.

And this, of course, is where the whole thing falls down. As Dave Ulrich said last year, in an article defending his model:

20% of HR professionals will probably never be able to adapt to the full business partner role. Asking HR professionals who have focused on policies and transactions to do talent and organisation audits and make major changes may be too great a shift for some.

The tragedy is that many HR generalists had been saying for years that they’d love to do strategic stuff if only they didn’t get bogged down with all that admin. Then, when the admin was taken away, they didn’t know what to do next. At least transactional stuff helps you to justify your existence. Trying to be strategic, when you don’t even know what it means and no-one has helped you find out, is debilitating and makes you feel stupid. It’s no wonder that so many people failed to make the transition.

This hasn’t done the HR function any favours. Whilst CEOs were glad to cut costs it appears that some of them were actually serious about wanting a more strategic HR function and have been left disappointed. As the Economist notes:

The great expectations that HR transformation aroused, however, were largely frustrated. After a decade, fewer than 5% of executives said they thought that their organisation’s management of people was not in need of improvement. Part of the problem lay in making traditional HR people think strategically. “Don’t kid yourself”, said one senior executive, “that people who have never been strategic are suddenly going to become so.”

Two years ago, a survey by Deloitte and the Economist found that, while CEOs saw the management and development of people as increasingly curcial to business success, most of them did not look to their HR functions for innovative ideas and support in these areas. In other words, while HR issues were becoming more strategically important, there was no corresponding rise in the status of the HR function.

As if that isn’t bad enough, even HR directors are having a go too. Last week, Asda’s former HR director said:

A lot of people in HR are completely inappropriate and they give the profession a very bad name. They talk ‘HR speak’ and it’s meaningless. They are not well regarded by their line managers and they are a laughing stock in many companies. I suspect there are fewer good guys and more bad guys.

Not to be outdone, Simon Nash, HR director at legal firm Carey Olsen, said that only one in ten HR professionals are really fit for purpose.

Of course, HR directors must bear some of the responsibility for this. In the rush for HR transformation too much time and effort was spent on IT infrastructure and shared services and not enough on developing the business and consultancy skills of those who were supposed to become HR Business Partners. In short, we made the classic change management mistake; we implemented new structures and systems while assuming that the people would just change by themselves. We, who always bang on at Operations, IT and Finance mangers, “Don’t forget the people issues” when they are implementing their change programmes. What is it they say about cobblers’ children?

The quote from the McKinsey report “A Dearth of HR Talent” gives a clue to what needs to be done.

The troubling gulf between the needs of the business and the ability of HR to respond will force many companies to rethink their approach to the recruitment, training and development of HR employees.

If they’d thought about that when they first embarked on their HR transformation projects, perhaps HR directors wouldn’t now feel the need to stand up at conferences and dis their staff.

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8 Responses to HR Transformation: It’s the Business Partners, stupid!

  1. Jo Jordan says:

    Yep, last line is telling. In my travels, I’ve learned to capture leadership into three points. Know where you are going, Know how you are going to get there. And have 100% confidence in the people you are travelling with.

    If you don’t believe in your people, you should perhaps let someone else who does take over.

    The corollary is that the art of strategy is matching the territory that we want to capture with the troops and weapons under our command.

    Hmm, maybe HR Directors haven’t quite got it either?

    • Jo,

      very good point, but I would like to disagree partly on your definition of strategy. What you say is partly in the realm of tactics and doesn’t cover the full scope of strategy as this would also comprise the definition of which troops and weapons we need.
      Unless of course you use “matching” in the sense of making changes on both ends until it fits and brings the maximum benefit.
      In any case, there’ll be a need to make changes in troops and weapons in order to achieve as much as possible, but also in setting goals realistically so they can be met with the best resource mix.

      Note that this includes at least considering radical changes in resource plans. Instead of paying troops to conquer a territory, you could win over the population. Instead of transforming HR admin people into business partners you could change line management and give them leeway, so they manage their people and need far less help.

      In a nutshell, the point is: the HR staff available before the transformation (or after the pseudo transformation) is NOT a fixed pool of resources for the strategy to deal with.
      And YES: once you built up the best troops you cn get, you must believe in them!

  2. That’s exactly the point: in most transformation projects they focused on transactional efficiency (without taking the far too strong power away from admins) did a little bit around experts at the centre and renamed everybody else to be a an “HR Business Partner”.
    I’d like to disagree with the notion HR transformation is still under way, if this is meant to express hope it will go beyond transactional efficiency on the track it currently sits.
    We’ve worked in projects trying to fix this in a small and a broad intervention:
    – the small one involved workshops with HR-Business partners to understand shareholder value and create their bespoke HR shareholder value map to understand, communicate and IMPROVE their contribution. This helps quite a bit with low investment, but I’d say their are usually far more than 20% who’ll never be able to go the whole way. To be fair to HR: it’s definitely less than 20% of line managers who will ever be able to really manage people. Too many chief experts who don’t want to be bothered with this.
    – the broad one involves working along a transformation agenda which goes through all fields of people management (whether in HR or not), defined, monitored and driven through a CMMI-type maturity model, establishing a strong alignment with business strategy and culture. This seems to work well, if execs don’t shy away from decisions. However: it usually only works, if it’s an executive board project, rarely as an HRD project.

    So: if “and now we make HR more strategic” is only an afterthought after the “big” transformation, only very little can be achieved. It needs to be “So, we’ve gained some nice efficiencies and now let’s use some of these resources to do the actual transformation.”

  3. Ruth@VS says:

    Very true. Most HR people can’t read a balance sheet, let alone have strategic discussions about the business they’re in. Personally, I think a lot of that comes from the CIPD approach to HR (not wholly the fault of the IPD but a HR cultural issue), which generates people whose approach to HR tends to be about equality, policies and the latest HR trend. I lost count of the people I interviewed for HR jobs who didn’t have the first clue about the business but could waffle on interminably about the latest “self-service” HR system.

    I’m not sure what the answer is. More people coming into HR from different routes, maybe. The biggest problem I saw in HR was we had HR “managers” who had actually never managed anything, so there was an immediate credibility and experience gap. I don’t think HR is something you should get into straight from university. I started at the bottom in a general administration job and gradually moved into HR, never bothered with CIPD but did a law degree instead, which gave me more general knowledge and understanding of things important to business. The thing that made me was being given a small company to run – a big learning curve, but it made me a better HR director. More practice, less theory.

  4. shannon says:

    Hr professionals need to be more well rounded and need to adapt to changes in the business that they are involved in.

    shannon

  5. Ballbag says:

    “Shareholder value” – where did the pursuit of that get us?

    Back in the late 80’s and early nineties in many international organisations, shared services started in the finance function. Over time, this bled into HR. HR transformation did not evolve from the commercial impetus of leading HR figures – it came from the drive of organisations and CEO’s looking for efficiency, hence the start being in shared services. We didn’t drive it, or re invent the function, it was re invented for us.

    We went along with it, riding the opportunity for a bit of credibility and glory but not realising that in the end we would end up right where the last sentence of this post leaves us.

    The “strategic” HR guys were perhaps not so strategic after all.

  6. @Ballbag: i don’t buy into the fad argument that pursuit of shareholder value got us into this trouble. This crises destroyed more shareholder value than anything else, so saying its pursuit did get us there just doesn’t hold. It was the pursuit of quick profits and immediate huge bonuses to the disadvantage of the shareholders that brought us here.
    I don’t say shareholders are the only stakeholders we should care about, but would managers understand shareholder value properly (i.e. including the element of “advantage period” “profit sustainability” or how ever you call it) and go for it, we would certainly be in a better economic situation than we are now.

  7. Ballbag says:

    Sven. The point is that most shareholders are behind the persuit of ‘quick profits’ and the bonus schemes designed to drive the same. The shareholders being the institutional type – large investment groups, funds and organsitions with substantial investments in other companies or funds – these are the the shareholders that have the influence.

    It is the pressure from these very same shareholders that drives the ‘shareholder value’ statement and they are largely responsible for the short termism and the quick profit issue. They are of course interested in ‘sustainable profits’, but their behaviours (And greed?) prevent them from really truly buying into the route to it. Hence their obsession with quarterly reporting and that evil of all numbers, the Earnings Per Share.

    If you have time, check out the book The Number by Alex Berenson, a fascinating and eye opening read.

    Ultimately, the nature of shareholding is often at odds with sustainability of many kinds and i think in the longer term the notion of return and what value really means will need to be challenged.

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