How HR has evolved

first_imgTherole of the HR professional has changed beyond recognition in the latter partof the 20th Century. Here we chart the way modern HR functions have evolved toallow outsourcing to come to the foreOver the last 30 years the HR function has evolved from being a manager ofpersonnel and employee information, to a department which has responsibilityfor everything from standard and essential procedures such as payroll, tocomplex, key strategic elements such as top management development. These taskshave different elements, require different kinds of management, and havevarying levels of impact on the organisation. This evolution is shown in table1, Change in HR functions. At the same time, internal and external forces are moving HR towards a morestrategic role in the organisation. The HR function needs to become a strategicplayer – to take a proactive role in planning what skills are needed, in thinkingabout how best to use existing resources, and in ensuring top managementsuccession. At the same time, along with other functions, HR needs to carefully manageits cost base and ensure it provides excellent service to its customers – bothmanagers and employees. As Dave Ulrich, professor of business administration atthe University of Michigan, wrote in the Harvard Business Review,(January-February 1998) “This new agenda for HR is a radical departurefrom the status quo. In most companies today HR is sanctioned mainly to playpolicy police and regulatory watchdog… the activities of HR appear to be, andoften are, disconnected from the real work of the organisation. The new agenda,however, would mean that every one of HR’s activities would in some concreteway help the company better serve its customers or otherwise increaseshareholder value.” There are five key forces driving this change. Force 1: Scarcity of talent The best companies are differentiated by their talent. At companies that performin the top quintile of returns to shareholders, 61 per cent of top executivesstrongly agree that their talent pool is much stronger than their competitors’.In mid-quintile performing companies, only 38 per cent of executives agree withthe same statement. Yet even at top performing companies, nearly three-quartersof managers believe that their talent is either insufficient or chronicallyshort of where it should be to seize available opportunities. Changing demographics mean that the availability of European managementtalent in the key age zone of 30-to-44-year-olds will decline over the next 20years (McKinsey War for Talent research, 1998) . In addition, changing forms ofcompetition and increasing job mobility mean that top management talent,already scarce, is simply becoming scarcer. This shortage applies both togeneral management, and to the management of the HR function. To rescue companies from this talent trap, the HR function needs to be proactivein supporting senior management in their attempts to attract, develop andretain top talent, and in improving the leverage of existing talent. But thisis not yet happening. While 78 per cent of corporate officers strongly agreethat HR should fulfil this function, only 27 per cent actually believe HRperforms this role now. Force 2: HR has become a dumping ground of activities A key reason for this gap between expectations and reality is thetime-consuming nature of the more standard procedures senior HR managementneeds to oversee. HR staff spend up to 85 per cent of their time on supervisingstandard processes such as compensation administration, but only 15 per cent onstrategic activities such as career planning. In best practice HR organisations,these figures are almost reversed. Only 20 per cent of time is spent onsupervising standard procedures, and the remainder is spent on the execution ofmore strategic activities. To perform their role adequately as a key player in the organisation, seniorHR managers must spend the bulk of their time on the core goal of attracting,developing, and retaining top talent for the company. As Russell Eisenstat,author of Organisational Dynamics (1996) writes, “The fundamentalchallenge facing HR [is] how to contribute to competitive success throughimproving the organisation and management of a firm’s human resources.” Force 3: Cost pressures As competition has become global, rather than local, and the capital marketsin the US and Western Europe have facilitated the rise of small andmedium-sized companies able to challenge established players at their own game,the pressures on large companies to reduce costs and keep reducing them haveintensified. Research by the Conference Board in 1999 shows approximately 80per cent of all companies targeted their overhead functions, including HR, forcost reduction during the 1990s. A spate of mergers and acquisitions has also put pressure on companies toreduce costs through synergistic benefits. HR needs to be at the forefront ofthis activity, reducing its own costs, participating in the due diligenceperiod, and facilitating post-merger integration in other areas of theorganisation. HR costs are an appreciable proportion of a company’s cost base, typically 4.5-7.5per cent of overheads. However, HR in many organisations still has some way togo to become completely competitive on cost. Although best practice HRorganisations approach dictates one full-time HR employee for every 300 staffmembers, for ex- ample, very few firms are close to this goal. For HR to fullycontribute to competitive advantage, continuous improvement on cost reductionmust be a core goal. Force 4: Improved service requirement Companies are also demanding more customer focus from their internalservices. Of 314 companies in the process of redesigning their HR function,more than 40 per cent indicated that a key goal of the reorganisation was tomake HR more responsive to the needs of the company or more able to add valueto the organisation. The HR function must be constantly looking for ways toimprove the services it offers to employees and management, while operatingunder cost constraints. Research by the Saratoga Institute suggests line managers are generallydissatisfied with HR service levels. Line managers were asked to rank the keyHR processes in levels of strategic importance and value it against HReffectiveness. The results are shown in Table 2, Balance between HReffectiveness and its strategic importance. The mean performance score was 3.7 out of 7, or “satisfactory”,indicating that HR needs to improve its service offering. In particular,resourcing, and training and development, are perceived to be “veryimportant” to business strategy, yet have low ratings for HR performance.This finding could be a consequence of HR resources being spread too thinly, ora result of HR being focused on other areas. This lack of congruity needs to beresolved. Force 5: Influence of technology Internet and intranet technologies are enabling companies to improveinformation flows both externally and internally. Internet technology isrevolutionising the human resources department by changing the nature of HRprocesses, delivering improved customer service by giving employees access toand control over their information, and dramatically reducing costs and cycletimes. However, research in 2001 has shown that investment in EnterpriseResource Planning (ERP) and large HR information systems have not delivered theexpected payback. Broad functionality has been paid for but very rarelyutilised. HR departments will need companies such as Xchanging to realise thevalue of technology. An HR intranet dramatically changes the nature of work for an HRprofessional. Rather than spending a significant amount of time moving andapproving paper forms, an HR professional may focus on the higher value-addedparts of human resources. For instance, an HR Intranet can integrate employeeinformation management, career development, and performance management forcurrent employees, and recruitment for new employees. Wide dissemination of external recruiting information can create a largepool of potential candidates while rapid online response reduces recruitingcycles significantly – and speed is crucial in the “talent war.” Thisintegrated internal and external recruiting approach is key to managing rapidhuman resources growth. Cisco Systems is a prime example of online recruiting,with 66 per cent of employees hired via Internet recruiting in 2001. By giving accessto and control over information, an HR Intranet delivers enhanced customerservice to employee hired via Net recruiting. An HR intranet typically holds information relevant to employees, includinggeneral information (contact details, title, compensation, holidays, etc.),benefits information (health, pension, car, etc.), career planning andevaluation, and recruiting details. In short, it contains all informationrelevant to employees, as well as discussion groups and communities that canenhance employee relationships. Employees are empowered to access and managetheir information. Giving employees control over information significantly reduces operatingcosts and cycle times for the HR department. HR professionals formerly burdenedby processing changes can focus on higher value-added processes. Instead of spending hours or days processing changes in benefits enrolmentsfor every employee, an HR Intranet puts the responsibility in the employees’hands to manage this enrolment. In addition to reducing errors, it greatlyreduces cycle times by making a formerly parallel process simultaneous. The HR professional can then spend more time selecting the appropriatebenefits provider or negotiating a more favourable agreement. The top five tips for implementing HR outsourcing – Ensure access to the Board. Aservice provider needs clear access to the Board, to best understand thebusiness drivers and strategy.– Focus on long-term strategy. Many issues can be resolved inthe short term, for example, updating a staff handbook. However, anorganisation also needs to commit to building a long-term relationship andstrategy with an outsourcing provider as business direction will inevitablychange over time and the outsourcing provider will need to adapt to and supportthis.– Recognise and understand the cost of investing in HR.Organisations should not expect an immediate monetary return on investment. Alonger-term investment outlook is necessary to see the benefits both of thecost invested as well as the costs avoided (e.g. avoidance of going through anexpensive tribunal).– Be honest. An organisation needs to be honest with itself,its service provider and its staff about the issues it is facing– Communicate the changes to all the staffOther reasons for outsourcing HR– High turnover of HR staffin-house – No HR function/support needed at certain levels– To take the risk away– Take advantage of leading technologiesOutsourcing Service Providers delivera consistent service.  Companies do notneed to worry about issues such as HR staff turnover.Outsourcing is a viable alternative to recruitment.  For companies who are missing a certainlevel of HR personnel in their team (e.g. an administrator or director), therole can be outsourced to a service provider as an alternative to recruiting aperson to do the job in-house.When outsourcing HR to a service provider, the risk ofinconsistent advice and lack of knowledge become the responsibility of theservice provider.  The service provideris fully accountable for any advice given to the client.Outsourcing service providers often provide state of the arttechnology to support their clients, for example web-enabled packages,intranet-based access to personal records, on-line facilities to requestholidays and copy payslips.HRat a crossroadsHR managers are overwhelmed with theneed to manage a vast array of tasks, all with different core skills, staffneeds, and management requirements. Senior HR managers need to be increasinglyfocused on the key issue of talent management while also ensuring execution,improving customer service and reducing costs. This is a challenging task.The separation of utility services from the strategicchallenges of HR has one key benefit. It creates a model that enables HRManagers to focus, and to make the best use of scarce HR management talent.Strategic and utility tasks require very different employeeskills, and very different styles of management. Utility tasks requiresupervisory management to ensure that established procedures are followed andthat essential services are consistently provided. Staff performing utility tasks need clear guidelines andprocedures, but should also be empowered to take the initiative to improvethese processes where possible, within given limits. Strategic management tasksrequire individuals with creative skills, who should be allowed to manage theirown activities, and should be encouraged to take risks to improve what they do.Separating these two staff groups is thus key to providing best practice in HR.The future of outsourcing HRHR outsourcing is top of the agendaat many organisations. However, it is still early days and likely developmentsinclude:– More organisations will take the decision to outsource intheir HR function– HR outsourcing will become increasingly strategic– The HR professional’s skill set will adapt to become moreproject and change management based– Globalisation will increase the need for outsourcing serviceproviders to offer an international service– Technology will enable more solutions such as the continuedmigration towards managed services– New service offerings will be driven by employee influence Trackbacks/Pingbacks How HR has evolvedOn 5 Feb 2002 in Auto-enrolment, Personnel Today Related posts:No related photos.center_img A Changing Landscape – The Past, Present and Future of HR – The HR Gazette – 19 Sep 2018 […] performed by the Saratoga Institute, explored by Personnel Today (, highlighted that modern companies stress much more importance on the delivery of good customer […] Previous Article Next Articlelast_img

Posts Tagged with…

Write a Comment

Your email address will not be published. Required fields are marked *