Transforming Hr Into Strategic Functions Management Essay

High competition, pressure imposed by environmental changes, accelerated trends for change, and new management techniques have caused enterprises to evolve dramatically with respect to their structure as well as cultural and human resources (Garcia, 1997 cited in ).Nowadays, it is important to consider HRM as a strategic dimension within the wider improvement of quality and good marketing position. HRM can be said to be a strategic coherent approach to the management of an organization’s most valued assets- the people working there, who individually and collectively contribute to the achievement of its objectives (Armstrong, 2000).

“The field of strategic human resources management has enjoyed a remarkable ascendancy during the past two decades, as both an academic literature and focus on management practice” (Becker & Huselid, 2006). The transition from the older HR practice with focus on staff matter to a subject of re-birth which focuses on linking people as organizational asset with the business strategy of the firm (Niehaus, 1995) means that the HR professional is performing a new and more challenging responsibility that requires new competencies and skills. The Human Resource function should be strategically integrated with a company’s business plan to help the company achieve its business objectives. The objective of HR professionals is to ensure that HR adds value to strategic planning and business results of the organization (Ulrich, 2001).

HR lack’s alignment with other departmental goals

To be involved with the over-all strategy, HR needs to be aligned with the organization. One Harvard survey found that 80% of HR departments lack a strategic planning process that aligns it spending with the organizations strategy (Norton, 2001). HR needs to become interdependent with the rest of the organization. HR needs to take a comprehensive approach that aligns its actions with the entire organizational strategy. The motivation to correct these HR problems is high because the strategic integration of HR into an organization achieves a competitive advantage. HR has much to contribute in a strategic supporting role. The ultimate goal is for HR to support an organization through the management of human capital, which is the major subset of the broader organization’s strategy. HR needs to be part of the organization’s strategy development. In order for HR to effectively align itself with the strategy of an organization, it must present top management with solutions that address the strategic need and support of the organization (Freedman, 2004).

Definition of Human Resource Transformation

Beer (1997) argued that the HR function needs to shed its traditional administrative role and adopt a new strategic role, aimed at developing the organisation and the capabilities of its managers. The drive towards a more ‘strategic’ HR function has pre-occupied the profession for some time and HR functions are increasingly under pressure to become a ‘strategic business partner’ or an ‘internal consultant’, to become ‘aligned to the business strategy’, demonstrate its ‘added value’ (Alvares, 1997, p.9), and latterly, to become involved in ‘Human Capital Management’. HR professionals aspire to a strategic role because it raises their status, makes their work more interesting, lifts their personal career horizons and (hopefully) is better for the business as a whole. One of the biggest perceived barriers to achieving this strategic role is the amount of time spent on administrative work; although the amount of time spent on administration has been steadily falling over recent years, to 36% from 50% between 2003 and 2007 (CIPD, 2007a), a Mercer report on the HR function (Mercer, 2007) confirmed that HR teams would like to reduce the time spent on delivering services, transactions and compliance even more. The response by many HR functions has been to undertake a programme of significant organisational change, frequently labelled as ‘transformation’.

Human Resources Transformation has been defined as follows:

“The process of recreating or reinventing the HR function – such as re-engineering, restructuring, implementing new systems or a new HR service delivery model, outsourcing or co-sourcing – with the specific intent of enhancing HR’s contribution to the business” (Mercer, 2007, p.1).

“HR transformation is something done internally to improve the ability of the human resources group to work more effectively with management teams, creating greater value, bringing more timely information, becoming a better business partner.” Steve Klingbeil, Partner Chazey Partners

“A true definition of HR Transformation is an integrated, aligned, innovative, and business-focused approach to redefining how HR work is done within an organization so that it helps the organization deliver on the promises made to customers, investors, stakeholders, and other stakeholders.” (HRT- building Human Resources from the outside in, Ulrich, 2009)

Drivers and Barriers for HR Transformation

According to a 2005 survey (Rampat 2005, p. 7) key drivers for HR transformation include the following:

Making HR strategic

Improving HR service

Responding to changes in business

Benefiting from new technology

Better managing the cost of internal processes

The same survey also revealed the following key barriers to the success of HR transformation

Lack of appropriate skills among HR staff

Lack of appropriate support technology

An unwillingness to take risk or deal with complexity

Difficulties in dealing with bureaucracy

Difficulties in dealing with corporate or international cultural differences

Lack of employee buy-in to HR Transformation

Failure in building a business case to support change

Lack of genuine top management support

Regulatory constraints

Unions

According to the 2008 Global HR Transformation Report done by Human Resource Outsourcing Association (HROA) in association with Automatic Data Processing (ADP), among the keys to success in achieving HR transformation goals are:

Access to better tools/resources: improved/new technology, use of online tools and services, and automation of processes;

Change management and education: change management planning prior to implementing a transformation programme, cultural acceptance of change, training and motivation to encourage and engage staff in the transformation, and pre-transformation agreement on the programme goals;

Management support at both the top and line levels: gaining top-level management support, and as much line-manager level buy-in as possible, prior to programme introduction; and, continually demonstrating the benefits of the programme to attempt to increase line-level buy-in over time;

Alignment, focus and standardisation: alignment between HR and business units, harmonisation of processes, centralisation of services, standardised reporting

The New Roles and Competencies of the HR Professional

David Ulrich and Wayne Brockbank (2005) have created a model that describes the new roles of human resource professionals. They stress on the importance of building professional, credible relationships across the organization, and performing in a manner that both supports the business and preserves the integrity of the profession. As they outline the new capabilities of the human resource function the role of strategic talent management begins to emerge. Human resources professionals become less responsible for providing service and more accountable for facilitating better decisions.

David Ulrich defined 5 major HR Roles in his HR Model to build efficient and modern Human Resources professionals.

Figure 2.1: HR roles defined by Ulrich

HR Professionals are Employee Advocate, with the responsibility to make sure that the employer -employee relationship is one of reciprocal value Furthermore, the build workforce of the future through the Human Capital Developer. They are also Functional Expert who design and delivers hr practices that ensures individual competence and organizational capability. As Strategic Partner, they help line managers at all levels meet their goals. And to sum the first four roles, HR Leaders need to lead and value their own function. Ulrich et Al., (2005)

There are six major factors of HR competencies according to Ulrich et al., (2009), they believe that it is vital for the HR function to be a strategic professional player in a changing world. The two arrows (see figure 2.2 below) illustrate that HR must consider both aspects of the business, i.e. people and business oriented. The characteristics/roles HR people must have or play (six circles within the V shape below) to achieve will be described further.

Figure 2.2: Competency model by Ulrich and Brockbank

Credible activists build relationships of trust based on facts and have a point of view not just about HR issues, but about business issues.

Operational executors do the operational work that have to be addressed by HR, using information systems to ensure better, faster and cheaper HR delivery.

Business allies demonstrate a firm grasp on how the organization operates, how they work to enable to make a profit and compete.

Culture and change stewards support the organization in identifying and facilitating important changes that improve the capabilities of the organization to compete. It is important that HR professionals help to formulate, communicate and create the organizational culture.

Talent managers and organizational designers provide important support and counsel in both employees’ development (for example, competence and career development) and how the organization capability.

Strategy architects contribute to the development, execution and communication of winning strategies. They prepare themselves for the future by drawing strategies to meet upcoming challenges.

Possessing the competencies and performing the roles mentioned above, HR departments will derive their goals from the business objectives of the organization and become more strategically involved.

HR Transformation and Technology

Rapid improvements in technologies are changing the way work is performed by HR professionals from being administrative to todays a more strategic role. With new approaches such as Human Resource Information System (HRIS), web-enabled HR applications, HR self-service and Enterprise Resource Planning (ERP), HR practitioners are now more involved in strategic decision making.

A key development in the field of IT is the emergence of enterprise resource planning (ERP) applications, such as Oracle, SAP and PeopleSoft. Enterprise resource planning systems are commercial software packages that enable the integration of transaction-oriented data and business processes throughout an organization (Markus and Tanis, 2000). ERP packages may be configured to more closely fit an enterprise’s structure, business practices and workflow (Chalmers, 1999).

Recently, the HR function has had to adopt a more value adding role to the organization. With the growth of information technology, HR can be relieved from the burden of transactional human resource activities and this can be accomplished either by outsourcing some of the HR function, but what would be more relevant to this study, is to use technology solutions.

There is a greater opportunity for HR professionals to become a strategic partner

Self-Service

HR self-service technology assists in meeting the needs of employees and managers, while supporting business objectives (Keebler & Rhodes, 2002). Employee Self Service allow employees to manage their own HR activities such as updating their own personal details, leave application, nominate themselves for training, facilitating feedback and giving them visibility of the information held about them on HR systems. Eventually, HR professionals can concentrate on value added HR activities and spend fewer resources in managing administrative HR activities. Manager Self-Service (MSS) puts the information managers need at their fingertips giving them the ability to more closely monitor and direct their team towards the strategic goals of the organization.

Business Partner Model

Within this transformational HRM area, Walker (2001) breaks this down further into three types of work done in transformational e-HRM. These types of work include: strategic partnering with the business, creating centres of expertise and administration of service centres.

In order to move to the third level of HRM, Beatty (2001) identifies five success factors.

These include changing:

– the culture of HR, the people employed in the HR function, and also their competencies, developmental needs and their performance;

– the roles and responsibilities of individuals performing HR activities, that is, the structure of the HR function;

– HR processes or HR products;

– service delivery and development; and finally;

– the technology used for HR functions, which may include enterprise-wide systems and custom systems.

HR Shared Services Centres

HR shared service centre is defined as follows by (Brescia and Hartness, 2001):

“A centralized location where customer transactions and customer enquiries are handled”

Increasingly, HR are now using the shared services concept to drive down costs, provide increased levels of service and improve data accuracy and integrity. HR shared service centers help transform HR into a business-driven function focused on facilitating and supporting organizational change. HR shared service centre is usually a part of a wider transformation of HR structure within the organization. Shared service centers are usually proposed for the organization’s strategic reasons in order to improve the capability and effectiveness of HR function. The HR shared service centre can include the full service from routine administration in recruitment, payroll and training, or provide specialist HR information and advice on HR policy and practice.

While HR shared services provide “quantifiable” benefits in terms of cost reduction (through achieving economies of scale, the standardization of process, better management structures, etc.), the strategic benefits achievable from HR transformation are significantly more important. Strategic benefits of HR shared services include sharing more relevant and accurate information across the organization (sharing HR best practice, leveraging HR expertise, pooling knowledge across different parts of the organization and different geographical regions), achieving greater structural flexibility, improving organizational learning, and freeing up HR from day-to-day routine enquiries.

Centres of Expertise (CoE)

CoE provide specialist technical and professional support to the business and other areas of HR on specialist HR topics. CoE HR professionals play a number of important roles that should be clarified in an HR transformation:

They create service menus aligned with the capabilities driving business strategy.

They diagnose needs and recommend services most appropriate to the situation.

They collaborate with embedded HR professionals in selecting and implementing the right services.

They create new menu offerings if the current offerings are insufficient.

They manage the menu.

They shepherd the learning community within the organization.

Strategic Business Partner

Senior HR professionals working closely with business leaders influencing and steering strategy and strategy implementation. The role can vary enormously depending on organisational size and business priorities. Some activities that strategic partners are likely to be involved in include:

organisational and people capability building

longer term resource and talent management planning

using business insights to drive change in people management practices

Intelligence gathering of good people management practices internally and externally, so they can raise issues that executives may not be aware of.

Model for HR Transformation

The following HR Transformation is a four phased model proposed by Ulrich et al., (2009)

Business Context (Why)

Phase one addresses the question: why carry out transformation? To start Human Resource Transformation journey it is important to ensure that the context of the business is clearly understood by all those involved in the transformation process. Ulrich et al., (2009) believe that when the presenting problem for HR transformation comes from the context of the business and from the expectations of key stakeholders, then the case for transformation is stronger than if the presenting problem originates primarily inside the business.

Outcomes (What)

Phase two explains the expected outcomes from the transformation. Hr transformation should also change the fundamental identity, culture, or image of the business. This outcome is referred to as defining and building capabilities. These capabilities become the identity of the firm, the deliverables of HR practices, and the keys to implementing business strategy.

Redesign HR (How)

This phase has three components, each of which is a way of defining what we mean by HR:

The HR function or department may need to be redesigned.

HR professionals may be upgraded to possess the competencies required to do their work.

HR practices may be transformed to be more effectively or more fully aligned, integrated, and innovative.

The transformation model focuses on redesigning the HR function to make sure that it is aligned with business strategy. The redesigned of HR needs to differentiate between transactional and transformational work. Furthermore competencies of HR professional may need upgrade in order to perform their roles in the new organization.

Hr practices may need to be revamped. Four domains representing the flows or process central to organizational success are as follows:

Flow of people- ensuring talent availability to accomplish organisational strategy.

Flow of performance management- promoting accountability for performance and rewarding it

Flow of information- ensuring employees is given information needed to do their work properly.

Flow of work- who does the work, how and where work is done and ensure quality outputs.

The flows should also be integrated with each other to bring results.

Accountability (Who)

Line managers are ultimately accountable for ensuring that the organization has the right talent and right structures in place to deliver on the expectations of customers, shareholders and communities. Clear role definition and rigorous accountability will help an HR transformation succeed.

HR Transformation achieved at AT &T

Anne Fritz, vice-president HR, who has been with AT&T for almost 30 years, said: “As competition, rapid technological breakthroughs and globalization turned our business upside down; the old HR model could not support the need for strategic change. Now, our role is to help internal partners to succeed in sometimes-fragile states of competitiveness and to ensure that we have the talent in place to build future business capability. Doing so delivers a value-adding service.”

HR transformation was achieved through key steps that represent a good-practice model for integrating the HR function with business strategies and aligning organizational performance to corporate goals. The key steps were:

Determining strategic business needs – customers, growth, reducing cost and technology; reviewing organizational structure, dynamics and systems

Defining the strategic implications for HR – continuous learning, team working and empowerment

Identifying HR systems – those that were required to support organizational, structural and cultural change

Leveraging HR capability through leading-edge practices – leadership, staffing, performance management and education

Devising high-level HR initiatives for special needs, such as workforce planning and downsizing.

Implications of the Human Resource Transformation in the Telecommunication Industry

The HR Transformation model proposed by Ulrich and HRT process at AT & T will be used as background for this study. The different components in the above transformation process at AT & T key steps are interrelated, only those that seemingly represent the important practices and or potential constraints in HRT will be further explained below.

Empowerment

Empowerment is an essential element of organizational change and transformation as the global business environment becomes ever more competitive.

By enabling managers and employees to have more control over their work and their working lives, they are being empowered.

Employee Self-Service (ESS) has a great influence on the empowerment aspect. ESS allows employees to help themselves (changing their personal details, checking or applying for leaves, etc…), thus HR professionals are now free to spend less time on day-to-day recordkeeping and focus on value-added functions that aid in meeting the goals and objectives of the organization (i.e., talent management, staff development and retention, performance management, rewards, etc.). Furthermore MSS enable managers processing basic HR transaction (appraisals) and retrieve data without involving the HR professionals.

Leadership

Effective leadership of the change process is fundamental to its success (Buckingham, 2005;Hunt & Buzan, 1999; Johnson & Uline, 2005; Kamener, 2004).

The concept of managerial leadership permeates and structures the theory and practice of work organizations and hence the way we understand SHRM. In the management texts, leadership has been defined in terms of traits, behaviour, contingency, power, and occupation of an administrative position. Most definitions reflect the assumption that leadership involves a process whereby an individual exerts influence upon others in anorganizational context.

Employee satisfaction, motivation, and loyalty are of major importance when it comes to retain the most valuable employees and this is where a strong leadership becomes very important. There is a difference between management and leadership. Leadership means understanding the corporate mission, developing goals which support the mission, then using personal and management skills to help build a stable, skillful, productive and satisfied workforce. Leadership is seen as the power to inspire and motivate the ability to permeate employees with the desire to change the organization to the best.

Training and development

Swanson (1995) defined employee training and development as the process of systematically developing expertise in individuals for the purpose of improving performance. Training’s strategic contributions to the organization’s goal include new employee orientations, diagnosis and correction of skills problems, remedial training and sometimes long-term career development’ (Ceriello and Freeman, 1991).

Indeed training and development is an important aspect in HRT, with new technologies, enhancement of HR practices and processes put in place, training will be required to adapt to new HR requirements.

Link: Survey of Global HR Challenges: Yesterday, today and tomorrow PWC

Leadership development also proves to be a big challenge. HR professionals continue to wrestle with understanding the best ways to keep people in the pipeline and develop leaders for future succession planning. Increasingly recognized as becoming strategic business partners within their organizations, HR professionals are expected to provide the essential frameworks, processes, tools, and points of view needed for the selection and development of future leaders. Across the globe leadership development has been identified as a critical strategic initiative in ensuring that the right employees are retained, that the culture of the organization supports performance from within to gain market position, and that managers are equipped to take on leadership roles of the future so that the organization is viable in the long term.

Performance Management

Performance management is a holistic process, bringing together many of the elements which go to make up the successful practice of people management, including in particular learning and development. Performance management is about establishing a culture in which individuals and groups take responsibility for the continuous improvement of business processes and of their own skills, behavior and contributions.

At AT& T performance HR initiatives is monitored by using the corporation’s top-level business performance measures:

Customer value-added. The degree to which the competencies, people-planning and culture/design requirements have an impact on customer satisfaction.

Financials. Revenues, cost reductions and earnings realized from the deployment of competencies, people planning and performance management.

People value-added. A measure of the degree to which employee perceptions of leadership, job satisfaction and diversity issues, among others, meet or exceed corporate goals and objectives for all four requirements of the performance-system model.

Performance management will aid the HR Transformation process, measuring the performance of employees will help in monitoring the productivity in the organization and establishing a culture of continuous learning, motivation that will result in better ROI. HR managers and professionals must take the lead in building and maintaining this performance culture and in ensuring it permeates the organization. Rewards are often credited as a source of motivation.

Communication

Good communication between HR function, line managers and employees is essential. Employees need to feel they form part of the organisation and have to be made aware of what is happening within their workplace. Lack of communication to employees can lead to confusion, rumours, misinterpretations and negative morale. Managers often think that employees are more aware than they really are. By building strong communication messages to employees this could help obtain commitment of employees which is important to the good functioning of the business where HRM is being transformed strategically.

User involvement

All parties should be involved

Change management (structural and cultural change) The Inside Track on HR

Outsourcing: Retained HR and Other Success Strategies

Bruce Barge, Namrata Mundhra and Hameedah Merchant, 2007

The changes associated with HR transformation put enormous pressure on HR. HR transformation has a wide reach, often affecting the entire organization. With the emphasis of HRO on self-service, managers and employees often have concerns about the decrease in face-to-face contact with HR. HR staff often have fears about performance expectations that are connected more strategically to the business. Business leaders might have doubts about HR’s ability to attain a more strategic role.

Further, while HR is often the champion of change in an organization, there are unique challenges in managing change around HR transformation. HR is supposed to be a role model of effective change management, yet in this case it is the function that will need to navigate through the most wrenching change as HR transforms itself to accept a new and difficult role.

A strong understanding of stakeholder concerns and interests is necessary to take a proactive approach to change management. An impact analysis provides a basis from which enablers and barriers to change can be identified. In an impact analysis, a sample population from the stakeholder groups, including executives, managers, employees and HR staff, is surveyed through focus groups and interviews. The findings of the impact analysis drive the development and execution of practical approaches to effect change, which are documented in a change management plan. HRO should help the HR generalist, or “business partner,” staff focus more resources on the crucial change and talent issues that drive competitive success of the business.

HR needs to change and lead change initiatives to transform other functions. If HR transformation is implemented skillfully, HR professionals will become a much more vital contributor to organizational success through business partnership and strong leadership.

Hr professionals

Engage in projects with other departments

Role and competencies

Training, coaching guiding

Attract, hire, retain talent

Employees

Be more empowered

Participate

Engage on self-learning

Committed

Line Managers

Encourage movement of staff to work collaboratively with other departments

Empower and motivate staffs

Building Employee Commitment

encouraging employee’s professional development, compensating them fairly

use MSS

fine tune hr strategy to fit with org strategy

structure and resource allocation

communicating strategy, organization changes at all levels