2010 Emea Hr Transformation Survey Mercer Copy


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2010 Emea Hr Transformation Survey Mercer Copy

  1. 1. Survey reportHR Transformation in EMEAA Mercer study
  2. 2. 1
  3. 3. Table of contentsTransformation 2010 .............................................................................................................................1 Why does HR transformation remain of such interest? ...........................................................1HR’s evolving significance ....................................................................................................................2Engaging with the business .................................................................................................................4 HR perceives itself as a strategic partner...................................................................................4Day-to-day realities: a different story .................................................................................................6 HR’s role in a post-recession economy .......................................................................................7 HR’s strengths and weaknesses..................................................................................................8 Measuring HR effectiveness .......................................................................................................9A closer look at ‘transformation’ .......................................................................................................10 HR organisational structure ......................................................................................................11 HR technology initiatives ..........................................................................................................12 HR processes ..............................................................................................................................13 HR capability ..............................................................................................................................13 Enhancing the HR role: barriers and opportunities ................................................................14Maximising HR’s potential as a strategic business partner .............................................................17
  4. 4. About this survey*Responses were collected in 2010 from over 500 organisations representing more than 15 industriesand 39 countries across the Europe, Middle East and Africa (EMEA) regions – this was the highestresponse rate since the survey began in 2003. Among the respondents, 61% were from WesternEurope (UK and Ireland included), 23% were from Eastern Europe and 16% were from the MiddleEast and Africa.Twenty percent of the participating companies were global headquarters, 14% were regionalheadquarters and 31% were country subsidiaries of a foreign multinational. An additional 27%were domestic private companies and 9% were domestic public sector/government organisations.Thirty-three percent of respondents were from organisations with 5,000 or more employees,27% were from organisations with 1,000 to 4,999 employees and 41% were from organisationswith less than 1,000 employees.The survey was completed by HR professionals from a wide breadth of industries, including:■ Manufacturing, durable and nondurable (17%)■ Services, for-profit (16%)■ High-tech/Telecommunications (12%)■ Finance/Banking/Insurance (8%)■ Retail/Wholesale (7%)■ Transportation (7%)■ Chemicals (6%)■ Energy (5%)■ Health care (5%)■ Holding company (3%)■ Government/Public sector (3%)■ Entertainment/Hospitality (3%)■ Construction/Real estate (2%)■ Services, nonprofit (1%)■ Agriculture/Forestry/Fishing (1%)The collected experience and views of these HR executives present a number of key findingsand commonalities that should be useful as your company assesses its HR function.* Note: Percentages in this report may not total 100 due to rounding.
  5. 5. Transformation 2010This report presents the results of Mercer’s 2010 Europe, Middle East and Africa (EMEA) HRTransformation Survey, which is conducted on an ongoing basis by Mercer, and is a follow-upto the 2003 and 2006 surveys. Participation in the 2010 edition of this survey has nearly doubledsince 2006, demonstrating that this subject remains high on the agenda of HR practitioners inthe region.Each survey we have conducted illustrates how HR functions are responding to externalmarket pressures and business needs; as businesses adapt to market shifts, HR transfor-mational efforts also continue to evolve. This 2010 report indicates that, in the wake of therecession, HR is focusing its efforts on business and workforce alignment while continuingto enhance its own service delivery model through more efficient and effective processes.Why does HR transformation remain of such interest?The increased participation rate in this year’s Transformation Survey confirms that HRtransformation remains a priority for HR practitioners in the EMEA. In particular,a significant rise in participation (almost 40%) was noted in the region’s emerging markets.Most functional transformations typically begin with a need that develops into a future-orientated vision focused on enhancing its contribution to the business. For the HR function,the key driver for transformation efforts is based on the requirement to partner strategicallywith the business by establishing a best-practice approach to service delivery and bydemonstrating value in areas of HR that contribute to improved business outcomes.Recognising the critical importance of human capital management practices to businesssuccess, business leaders are asking their HR functions to play an increasingly strategic role inachieving business objectives. At the same time, they are looking to wring excess costs fromHR service delivery, as well as manage programme spend, in order to redirect those funds toother business imperatives.The HR function has been in a process of transformation for nearly 20 years, with varyinglevels of success. The 2010 survey results show that HR transformation is still a process thatorganisations are undertaking at similar levels to the 2003 and 2006 surveys.The desire to transform remains high, with organisations either planning to transform oralready undertaking steps to transform in Western Europe (54%), Eastern Europe (49%) and theMiddle East and Africa (52%).Exhibit 1Status of HR transformation 10% Currently in the midst of a transformation process No current plans to transform HR 22% Completed an HR transformation more than 12 months ago 42% Completed an HR transformation in the past 12 months 10% Plan to begin a transformation within the next year 16% 1
  6. 6. HR’s evolving significance Over the years, respondents have transformed their HR functions to varying degrees and at different paces. Survey results show that some transformation initiatives are now complete; however, where transformation efforts are still underway or launching, two primary reasons are cited: ■ An increased focus on performance monitoring and continuous improvement ■ Post-recession re-evaluation of HR’s role in the business The desire to transform HR is typically driven by a number of factors, including: ■ A change in business strategy that requires HR to react by providing new or different services to the organisation, such as globalisation of the workforce, M&A activity, product offerings that require new employee skill sets, etc. ■ HR’s own awareness of the need to elevate its role in partnering with the business ■ As a response to the substantial increase in financial management constraints Exhibit 2 HR transformation drivers Part of a broader organisation- 27% wide transformation process Response to changes 19% in the organisation HR awareness to transform itself, to subsequently 14% drive change across the organisation Company-wide cost 14% reduction mandate Leadership changes 10% in the HR function CEO/business leader mandate for change 5% in the HR and/or other staff functions HR not adding value 4% in its existing role Change in domestic market 2% environment or regulation 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%2
  7. 7. HR transformation is therefore embedded in the changing context and demands of the business.In our experience, many triggers for transformation programmes are driven by complexityand/or technology. For example:Complexity-driven transformation programmes tend to focus on helping theHR function address:■ Inadequate involvement in the execution of the business strategy■ Failure to devote sufficient effort to align HR strategy with business strategy■ Inability to deploy programmes and policies adapted to different business areas, geographies and other considerations■ The current efficiency of HR operations not following market standardsTechnology-driven transformation programmes tend to focus on:■ Leveraging technology to eliminate cost from the current delivery model■ The technical and functional instability of the current technology platform■ A need to provide the business with key human capital information and insights that require more access to data■ Providing more integration, automation or flexibility in the execution of HR processes, eliminating excessive manual interventions in routine administrative transactions 2010 key themes ■ HR’s strategic intent: The self-perception of HR’s strategic contribution is diminished by the focus of its efforts and the reality of the transactional activities it still undertakes. ■ Talent and culture of performance: Management of key talent and embedding a culture of performance remain a priority for HR. ■ HR service excellence: There is a commitment to continuous improvement, renewal and performance monitoring. ■ HR effectiveness evaluation: In light of business and workforce changes in this post-recession environment, organisations have a renewed focus on evaluating HR. ■ Capability-driven success: To bridge existing gaps in people-management skills, HR staff must be appropriately trained or, if this is not possible, managed out of the organisation; HR must make tough decisions about its own talent and how it can most effectively be deployed to meet business needs. 3
  8. 8. Engaging with the business HR perceives itself as a strategic partner Unsurprisingly, debate continues over the term “strategic partner”. Some will regard the term as a cliché, but it remains a primary focus of HR and an area of high interest. Approximately 66% of respondents said their HR function views itself as a strategic partner, yet only 38% said HR fully participates in strategy decision making. Twenty-eight percent of those who completed the survey said that although HR participates in strategy discussions, it does not have decision- making responsibilities. Just over 25% of respondents indicated that although HR isn’t yet a strategic partner, it is increasing its influence in this area. Finally, only 8% said that HR is not seen as a strategic partner. The view that HR is perceived as a strategic partner is evidenced through its contribution to strategic business-led discussions such as: ■ Discussing significant business-wide issues (73%) ■ Translating business strategy into a human capital strategy for the business (68%) ■ Driving and developing methodologies to drive change in the organisation (63%) ■ Participating in business operations planning (57%) ■ Being brought in early to significant business issues and opportunities (55%) Compared with the survey results of 2006, these findings indicate a slight decline in the proportion of respondents focusing on the above activities. We apportion this to the increase in the representation of Eastern European and Middle Eastern organisations within the respondent profile. Functions in these locations appear to be more concerned about managing talent shortages than are their Western European counterparts, where establishing strategic partnering is a higher priority. Western European counterparts have largely put in place talent management practices and are more focused on moving the HR function forward through strategic partnering. Even so, findings indicate companies across the region appear to be making inroads in HR’s strategic contribution by building relationships with business leadership and positioning HR and human capital as a source of value. The data also show that in Western Europe, HR is seen more as a strategic partner, while in Eastern Europe and the Middle East, HR is increasing its influence as a strategic partner.4
  9. 9. Exhibit 3aTop human capital challenges Top challenges % of participantsRetaining key talent 51%Acquiring key talent/lack of available talent 39%Developing an environment that drives and supports a culture of performance 33%Increasing workforce productivity 31%Driving cultural and behavioural change in the organisation 30%Identifying and building leadership capability 30%Aligning HR strategy and programme design with the organisation/business strategy, 30%operating model and customer requirementsIncreasing line-manager capability to handle people-management responsibilities 25%Aligning workforce plan/requirements with organisation and business needs 24%Increasing workforce profile to align with organisational performance requirements 22%Exhibit 3bTop regional human capital challenges Retaining key talent 58% 46%Acquiring key talent/lack of available talent 44% 35% Developing an environment that drives 26% and supports a culture of performance 39% 0% 10% 20% 30% 40% 50% 60% 70% Eastern Europe, Middle East and Africa Western EuropeIn Western Europe, after retaining key talent, the second top priority is developing anenvironment that drives and supports a culture of performance. 5
  10. 10. Day-to-day realities: a different story A closer examination of the work and activities undertaken by HR does not fully corroborate HR’s self-perception. Our survey found that the amount of time HR devotes to direct strategic activities is only 15%. However, respondents also indicated the function would like to be able to allocate even more time – up to 25% – to strategic activities. This suggests that, while some organisations have achieved their strategic alignment goals, others feel there is room to expand this further. Encouragingly, compared to previous surveys, the most prominent shift has occurred in the allocation of overall time for transactional and recordkeeping activities, dropping from 28% of total responsibilities in 2006 to only 18% in 2010. This is a promising indication that HR is making a concerted effort to pull away from time-intensive transactional activities to instead focus on more value-added contributions. Interestingly, HR’s growing focus on internal management (14%) could point to a desire to “get their house in order” and focus on developing internal skills and capabilities. Exhibit 4 Percentage of HR staff’s time currently spent performing HR activities 12% Delivering HR services 27% Transacting/recordkeeping 14% Strategic partnering Designing HR programmes or systems Internal management 14% 18% Compliance/auditing 15% We believe that over time, as HR capabilities grow and HR service delivery models evolve, organisations will increasingly invest in developing line managers’ people-management skills to ensure this key workday interaction is appropriately managed. Mercer’s view is that HR should partner with the business on human capital issues. Employees are owned by the business – not HR. HR therefore needs to continue to work through the top human capital challenges with the business in order to bolster the perception of HR as a strategic partner.6
  11. 11. HR’s role in a post-recession economyA salient difference from previous surveys is HR’s perception of its role. The 2010 responsesindicate a greater focus on the role that HR plays in leading organisation-wide change initia-tives. In our view, this can be explained by a requirement from the business for HR to dealwith the aftermath of the restructuring and redundancy programmes that companies wereforced to implement as a result of the recession. As businesses slowly begin to emerge fromthe economic downturn of 2008 and 2009 and respond to shifting market demands, HR hasmaintained a strong focus on retaining and acquiring key talent. This will be key to businesssuccess as companies grapple with dips in employee engagement resulting from harshcost-cutting initiatives.Exhibit 5Top roles for HR in the post-recession economy HR leading organisation change initiatives 54% Strategic focus on retaining key talent as well as opportunistic talent acquisition 47%Understand market conditions to react quickly and help organisation differentiate its 42% capabilities to influence the bottom line HR owner of leadership development 31% Aligning talent to roles and driving productivity via workforce planning 26% Establishing transparency in employee communication 23% 0% 10% 20% 30% 40% 50% 60% 7
  12. 12. HR’s strengths and weaknesses Mercer’s previous HR transformation surveys explored HR’s performance and ability in traditional areas such as interviewing, customer service and recordkeeping. This time, the 2010 survey sought to also capture emerging areas of HR’s capability, reflecting the evolution of the scope of HR responsibilities. A contradiction in the findings is that, while most organisations believe their HR capabilities are sufficient to meet the needs of today’s business environment, respondents also indicated that a key opportunity for improvement is the enhancement of the skills and competencies of HR staff. HR’s ability to be a partner in terms of consulting and labour relations is the strongest area for improvement. The three weakest areas reported are: ■ Leadership ■ Talent management ■ Organisation development and effectiveness Exhibit 6 Skills within the HR team that tend to be viewed as only sufficient Partnering (e.g. consulting, 21% 66% 13% labour relations) Work-enabling competencies 14% 68% 19% (e.g. adaptability, communication) Leadership 12% 56% 32% Technical – learning 14% 66% 19% and development Technical – talent management 11% 63% 26% Technical – compensation 11% 67% 22% and benefits Technical – organisation development/ 8% 68% 24% organisation effectiveness 0 10 20 30 40 50 60 70 80 90 100 Strong Sufficient Weak8
  13. 13. Measuring HR effectivenessAt the core of any HR transformation is the ability of the function to measure its activities.Recognising the changing role of HR and evolving business needs in the new economicand business landscapes, Mercer introduced several new HR effectiveness measures tothe 2010 survey.Exhibit 7HR effectiveness measuresHow do you measure the effectiveness of the HR function? % of respondentsEmployee satisfaction 76%Line-manager feedback on effectiveness of HR programmes and service delivery 69%HR cost management 55%HR programme effectiveness 55%Meeting stakeholder requirements 42%HR operational measures 42%Line-manager effectiveness as people managers 39%Impact on business operations/outcomes 38%HR staff/employee ratio 36%Workforce productivity 35%Processes in place to lead/facilitate organisational change 34%Customer satisfaction 34%Increased customer usage of HR staff for more strategic interventions(rather than using external providers or building capability outside of HR) 32%Communication of workforce expectations 30%Shift in staff time spent on higher value-added activities 20%No specific measures 5%Following are some of the overarching themes that surfaced from the survey results:■ Cost management and programme effectiveness remain consistent, which, given the current economic climate, is to be expected.■ There is a changing focus away from employee satisfaction and towards engaging with line managers – this indicates a bolder outlook on customer satisfaction.■ HR is focusing less on benchmarking – as evidenced by the decline in the prevalence of HR staff/employee ratios as targets – and more on measuring the effectiveness of the function, demonstrating the function’s greater awareness of the importance of evaluating its contribution to the business, rather than implementing a metric with little regard for context.■ Now that HR is aligning itself with the business to help drive productivity and influence the bottom line, it is relying substantially less on employee satisfaction as a measure of effectiveness. 9
  14. 14. A closer look at ‘transformation’This survey shows that the assessment of HR effectiveness remains steady with trends in thepast. Transformation is still clearly on the minds of most executives. Plans for transformationwere fairly consistent across Western Europe, Eastern Europe, and the Middle East and Africa.More than half of the survey participants indicated that they continue to engage in transformationefforts or are planning to commence efforts within the next year. Approximately one-third ofrespondents indicated that they had completed their transformation. Only 16% of respondentssaid they had no current plans to transform HR.Exhibit 8Initiatives undertaken during HR transformation Redesign of HR work processes 42% 21% 36% Design of a new strategy 39% 27% 34% for delivering HR services Talent development strategy 39% 13% 48% for improving skills within HR Assessment of HR 37% 19% 44% function effectiveness Implementation of new HR roles, 35% 27% 38% responsibilities and competencies Implementation of a new 32% 29% 39% HR organisational structure Evaluation/implementation 32% 16% 52% of new HRIS technology Assessment of HR customers’ 29% 25% 46% needs/requirements Strategy for attraction/retention 24% 11% 65% of HR staff Audit of current HRIS technology 24% 23% 54%Identifying environment, market, business 22% 22% 56% and organisational implications on HR Changes in reward 22% 9% 69% strategy for HR staff Review of external vendors 19% 9% 72% or sourcing strategy Decentralisation of selected 18% 14% 68% programmes in the business Outsource any part 15% 9% 76% of the HR function 0 10 20 30 40 50 60 70 80 90 100 Planning to complete (short/medium term) Completed No actions planned10
  15. 15. Based on 2010 responses to the survey, fewer transformation activities are planned comparedwith 2006. Before embarking on the next phase of the transformation journey, organisationsmay be pausing to let the impact of previous initiatives take effect or to realise the benefits orreturns on previous investments. The ramifications of the recession should also be considered –in a cost-sensitive environment businesses will tend to shed investments in “non-core”functional areas such as HR.Regardless of rationale, the nature of activities planned implies that HR is committed tocontinuous improvement and performance monitoring, particularly in the areas of HRstrategy processes and talent. The top plans cited in the 2010 survey included a redesignof HR processes (42%), new strategies for delivering HR services (39%), talent developmentstrategies for improving skills in HR (39%) and assessment of HR effectiveness (37%).HR organisational structureThe survey responses indicate that the majority of organisations in the EMEA region arecontinuing to adopt the three-pillar model, which consists of HR business partners, HRshared services and HR centres of expertise. Sixty percent of respondents are now usinga centre-of-excellence model, which leverages and centralises critical talents.Exhibit 9 HR centres of expertise 60% ■ Appointment of an HR programme aligned HR controller (40%) or 56% specialist transformation HR functions implementation teams HR service centre/shared (51%) emerged across 52% all regions service operations ■ Equal number ofHR business partners reporting participants indicated 52% to the business unit leader business- vs. HR-driven decision-making protocols HR business partners 51% (reporting to corporate HR) 0% 10% 20% 30% 40% 50% 60%However, today’s HR service delivery model is failing to deliver on its promise to the business.Mercer has found that the reasons for this include:■ Flawed implementation relating to how individuals within HR will support the newly transformed landscape■ Insufficient HR skill set■ Failure to provide top-notch transactional services■ Limited satisfaction in self-service by employees and managers■ Lack of support for line managers■ Insufficient geographic focus 11
  16. 16. HR technology initiatives Survey responses show very little difference between 2006 and 2010 in the rate of HR technology initiatives undertaken by HR. A wide range of initiatives has been under way, and for good reason: the efficient and effective use of technology enables HR functions to do more with less – for example, by automating transactional processes and minimising costs associated with manual intervention – an important advantage in these uncertain economic times. For instance, 51% of companies use an intranet for the online publication of HR policies and processes, providing employees and managers alike with easier and more immediate access. And 46% have implemented entirely new HR systems. As with transformation, we see the implementation and deployment of technology as a journey of continuous improvement. Companies have implemented technology to a greater or lesser extent depending on multiple factors, ranging from availability of resources to organisational appetite to business priorities. Some companies are focusing on “getting the basics” right – for example, by implementing HRIS or revamping intranet sites/HR portals or by seeking to expand existing functionality. In the next study we will seek to explore this continuum further and more closely examine where organisations find themselves on this journey. Exhibit 10 Main technology initiatives in the previous three years 60 50 51% 46% 46% 40 % respondents 36% 35% 30 28% 20 21% 16% 10 13% 6% 0 lu im sy te ns em e ns m em oc HR ns e s es H ar l lo t re sep na se ic ic no en R a te tio io so ter gi io rv rv st es st co e io pr or ys ct ch m at se se sy ed in e ar ct nd t f sa ts te ge ic lf- lf- th h n R at f un an s a ne en ic fu m to a H se se an tr m ie ra em of ith h c to en er ee w w ifi m m lic int R ag n ag au m rH oy d ), ec co se tio n- loy po of an an te nt sp pl ca fo or ta em m no ep se m m o sf of et en eg it t t U of D e al an of em se dg nt ru en ra e rt se tr U se po le re m pl U in U ow bu .g. loy Im R of ti c H Kn p se om (e e fr ols D U to12
  17. 17. HR technologies have been implemented with varying degrees of success. More than three-quarters of survey participants indicated that previous HR technology implementations didnot entirely meet expectations. The main reasons cited for the lack of success in this areaincluded:■ Insufficient planning■ Functionality not meeting expectations■ Limited collaboration between IT and HR■ Poor implementation■ HR managers’ continuing involvement in transactional workToo often, organisations overlook the functionality required of technology to match theirvision. Technology is not a panacea, but a tool to deliver on business strategy. Successfulselection of HR technology is achieved by appropriately scoping the functionality needed tooptimise the HR service delivery model and by looking critically at the role technology canplay in assisting HR with the flawless delivery of operational activities (for example, throughautomation). This will help inform decisions on whether to use the functionality offered bycore HR technology vendors or if best-of-breed systems are needed to support key peopleprocesses (such as talent management).It is also crucial not to underestimate the change-management effort required to successfullydeploy HR technology and shared services, for it has ramifications not only for how HRoperates (for example, where resources are deployed to support administrative processing),but also for how employees and managers interact with the function via online “self-service”.HR processesApproximately one-third of respondents have completed major work on the redesign of theirHR processes. Emerging from the recession, in 2010 the rate of completion doubled from 2006.More than half of respondents (52%) are currently in the midst of an HR process redesign orsee it as a requirement for the next 12 months. HR process redesign is essential to continuousimprovement and renewal of the HR function – rather than a one-off exercise. HR processesmust be revised regularly, taking into account any changes to the operating model, and aresubsequently an integral step to any HR transformation initiative.HR capabilityAs HR looks to the future and considers how to change the business perception of HR’s valueand its ability to influence the workforce, it forecasts a dramatic increase in capabilitiesrequired to achieve this goal. But rather than look externally for these capabilities, HRtransformation plans are relying heavily on training existing HR staff, according to thesurvey responses. The top three plans to improve HR capabilities are:■ On-the-job structured training for existing staff■ Assessment of current HR staff skills to identify improvement opportunities■ Face-to-face training for existing staff 13
  18. 18. Exhibit 11 On-the-job structured 40% 43% 18% training for existing staff Assess current HR staff skills to 36% 45% 19% identify improvement opportunities Face-to-face training for existing staff 34% 52% 14% Use outsourcing/external suppliers 18% 34% 48% to supplement internal capability Rotate HR staff to line roles 13% 38% 50% Rotate line staff to HR roles 13% 33% 54% Replace or augment 12% 32% 56% current staff with new hires 0 10 20 30 40 50 60 70 80 90 100 Major intent Moderate intent Little or no intent Enhancing the HR role: barriers and opportunities As all practitioners know, good people management can be achieved only through the presence of an effective HR function informed by high-quality inputs from operational line managers. Ultimately, the results show that the business perception of the value that HR can bring to the organisation is both a barrier and an opportunity to enhancing HR’s performance. Leadership capabilities are often cited among the core issues relating to HR barriers and opportunities – survey respondents identified the capability and skills/competencies of both line managers and HR as the two most critical barriers to success. Addressing these issues may prove a challenge in an age of organisation-wide cost constraints, limited resources and other day-to-day service delivery challenges, all of which restrict the time HR has to manage capabilities and undertake internally focused performance management. In response to a similar question about the major barriers and opportunities for the function going forward, respondents also noted that the skills/competencies of HR staff are of chief importance, as is the business perception of the value HR can bring to the organisation. Technology investments and HR leadership are other major parts of the opportunities equation.14
  19. 19. Sk % respondents Ca % respondents ills pa /co m bilit m 0 10 20 30 40 50 0 5 10 15 20 25 30 35 40 an y pe ag of te em lin nc Sk en e m ies ills Exhibit 13 Exhibit 12 Bu Barriers of /co to a va sin m f t nag lu es HR pe he e ew s pe sta te ir rs i pe n hi rc ch e ff nc op 47% ies le 40% HR ptio of Opportunities ca n o HR n br f Co sta in B st ff g 44% HR Te 39% fu ch va usin co nc no lu es ns tio lo At ew sp tra na gy tit in hi erc ts 32% l le ud ch ep 37% Ca ad es HR tio pa Bu er of ca n o sin sh lin n m bilit es ip em br f 32% an y sl in g 31% ag of ea an em lin de ag en e m rsh Bu em to a ip sin en Re es t 30% f t nag 31% po he e sl ea At or rtin ir rs i de tit ga g pe n rsh ud ni str ip 25% sa uc ople 19% es tio tu HR Te of n fu ch lin str re/H nc no Av em uc R tu Av tio lo ail na gy 21% ab an re ail 17% ilit ag ab l le yo em ilit ad en yo er fr sh eq t fr ip 19% Re eq 14% ui po ui re re Di d or rtin d ve sk ga g sk rse ills ni str ills 15% wo sa uc 14% tio tu rk fo n Co str re/H Av rce uc R st tu 13% co re 14% ail Re ab ns gu ilit tra Un yo in Na lat io ts or 8% in fs tio yc ns ol 12% Re lo ut na on gu ca io l/c str lat lm n ul ain Na or ar s tu ke ra ts 6% tio Av yc t ld 11% na on ail iff l/c str ab er ul ilit en tu ain ce ra ts yo s 4% ld 7% iff in f so er lo lu en ca tio ce Di lm n s ve ar s 3% rse ke 6% wo t Un rk io fo ns rce 3% 4%15
  20. 20. Next-generation HR: how the HR operating model needs to change For HR to be successful in its transformation, the human capital and HR strategies need to be aligned with the overall business strategy. The strategy will need to encompass the following: ■ People strategy – How will the organisation manage and motivate a workforce that can execute the business strategy? ■ HR function strategy – How will the HR function support the people strategy, deliver expected value and contribute to the organisation in support of the business priorities? – What HR programmes and initiatives (for example, talent management, rewards, learning and recruiting) are required? ■ HR operating model – Sourcing – What activities will the function do itself versus outsource? – Infrastructure – What internal capabilities are needed to fulfil the HR function strategy? – Governance – How will the function be led, and how will related investments be managed? How will success be measured? The new model will require several key changes. First, HR will need fewer business partners playing different roles. Next, centres of expertise must shed transactional services to drive new thinking. And shared services and outsourcing will be key to achieving the strategic model. Ultimately, business success will depend on line managers, and HR will need a different set of skills and capabilities to ensure success as well. Several key changes: HR business HR needs fewer business partners partners playing different roles Centres of expertise must shed HR centre transactional services to drive new thinking of expertise HR leadership Shared services and outsourcing Tier 0 Tier 1 are key to achieving the strategic model Tier 2 HR case Business success manager People development depends on line managers HR geography managers manager Line managers A different set of HR skills HR es sha ic and capabilities is critical r e d serv H RIS16
  21. 21. Maximising HR’s potential as a strategic business partnerBased on our survey findings, we can conclude that, in the wake of the recession, the HRfunction needs to focus on both efficiency and effectiveness in order to develop its maximumpotential contribution.HR operations must be as efficient as possible in order to contribute to business results. While HRseeks to set the strategic tone for people management and shape business decisions, it can only dothis effectively once operational aspects of delivery are in order. It can do this by:■ Where possible, deploying homogeneous, measurable and predictable HR processes throughout the organisation that appropriately balance the workload and the responsibilities of all players■ Maintaining a low “cost of ownership” of the necessary technology to reduce operative risk (including technical risk), increasing efficiency and realising the benefits of past technology invest- ments. This is also a key factor in developing the business case for future technology investments.Having a more efficient management of day-to-day service delivery operations will free up HR’s timeto focus on the more value-added activities that define its strategic business contribution.HR services, programmes and policies must be closely linked to the business strategy in order tobe as effective as possible and develop a productive and engaged workforce. This will allow HR to:■ Create programmes and policies that contribute directly to the business strategy, taking into account the diverse needs of various business units■ Prioritise its efforts on deploying those services and programmes that provide the most impact and value to the organisation 17
  22. 22. Mercer’s concept of HR transformation is that it is a never-ending journey that must be supported by a culture of continuous improvement and that sometimes needs new impulses in the form of transformation programmes – whether motivated by technological changes to give a major boost to efficiency or motivated by the urgent requirement to handle more complex practices for people management. Our main recommendation, in view of the data in this report, is for organisations to simply take the time to reflect on two fundamental aspects of management of the HR function: 1. Assessing the contribution the function makes to the business, the efficiency of operations and the effectiveness of HR programmes. This will allow practitioners to detect early on the eventual arrival of “burning platforms” that might impair HR’s strategic contribution. 2. Focusing on the development of internal capabilities that will enable the function to drive continuous improvement. This will allow the function to be appropriately equipped with the skills it needs to transform the HR function, at the required speed, and to provide a suitable response to changing business needs and thought leadership on HR service delivery. Finally, we encourage organisations to reflect on these items through the lens of the entire HR operating model, taking a holistic view to examine the following interconnected factors: sourc- ing of activities, infrastructure (including processes, technology, talent and organisation) and governance. Creating a strategic partnership between HR and executive management is not an organic process; rather, it is the result of defined goals that reflect HR’s awareness that the first busi- ness of HR is the fulfilment of the organisation’s business objectives. The organisations that achieve successful HR transformation are those that have secured a commitment upfront to travel this new path. For more information, please visit www.mercer.com/HRTransformationEMEA.18
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