Seven HR Capabilities that Drive Performance Leadership - Hackett Group June 2015

World-Class HR I The Hackett Group I 1© 2015 The Hackett Group, Inc.; All Rights Reserved. | CR_2000183
The imperative for efficient and effective delivery of HR services has taken on a new
dimension. HR must also respond with agility to changing demands and opportunities
in an environment characterized by unprecedented competition, extreme volatility in the
supply and cost of resources, and disruptive change from new technologies.
Amid this context – and for the first time in many years – many HR organizations expect
modest increases in FTEs and budgets for 2015 (Figure 3). Nevertheless, nearly one-third
project staff reductions, reflecting pockets of continuing pressure on head count. The
budget picture is slightly better than in the past, with 40 percent of HR groups expecting
increases this year.
HR Executive Insight
Management Issue
June, 2015
The 2015 analysis ofThe Hackett Group’s HR benchmarking database quantifies the performance advantage of world-
class companies compared to typical HR organizations. Among the results: world-class HR organizations spend 37
percent less (Figure 1) – up to $17 million for the typical company1
and use 31 percent fewer FTEs (Figure 2) than
peers. Analysis also revealed the hallmarks of current world-class HR organizations and the critical capabilities they
leverage to achieve superior results.
Achieving world-class HR performance can take five years or more. However, a company is likely to see marked
improvements within two.These early wins are pivotal, establishing a foundation for more sweeping successes down
the line.
Key takeaways
• Agility – the ability to quickly respond to changing business requirements – is a growing imperative for HR
organizations, but many are challenged by flat budgets and FTE counts.
• The hallmarks of this performance advantage are unrelenting focus on operational excellence, strategic talent
management, close alignment to the business and insights that drive performance.
• World-class HR organizations achieve outperformance by leveraging seven difference-making capabilities that span
service delivery, technology, business partnership, talent management, skills, strategy workforce planning and
measurement and analytics.
By Nathalie Bression, Rebecca Collins andTony DiRomualdo
Com
plim
entary
Research
Seven HR Capabilities that Drive
Performance Leadership
The world-class performance advantage:
FIG. 3 Average increases expected in HR FTEs and budgets in 2015
FTEs
1.5%
Budget
1.4%
Source: Key Issues Study,The Hackett Group, 2015
FIG. 1 Total HR cost per
employee
Source: The Hackett Group, 2014
Peer group World class
37%
0
500
1000
1500
2000
2500
FIG. 2 HR FTEs per
1,000 employees
Source: The Hackett Group, 2014
Peer group World class
31%
0
3
6
9
12
15
1
The cost savings calculation is based on a company with $10 billion in revenue.

Hallmarks of the world-class advantage
At the highest level, world-class HR organizations are distinguished by four distinct
characteristics:
• Operational excellence: Trust and credibility are gained with stakeholders through
consistent and reliable service delivery. This also allows more resources and manage-
ment attention to focus on activities that deliver higher value to the business.
• Strategic talent management: Leaders with people management responsibilities are
equipped with the capabilities and support they need to do the job well.
• Close alignment to business needs: HR staff work side by side with the business
and are able to react with agility as needs change.
• Insights that drive performance: Well-developed reporting and analytics capabilities al-
low HR to provide valuable insights into its own operations and business performance.
Following in the footsteps of these leading organizations, HR executives can:
• Align their metrics more closely with overall business imperatives
• Improve their ability to leverage HR applications
• Develop the right HR talent for functional excellence and business partnership
• Turn their function into an engine for greater efficiency and effectiveness
• Provide more value to their customers in the organization
Getting started on the path to world-class performance
Analysis of data from thousands of our benchmarks and hundreds of our performance
studies revealed that the capabilities most strongly correlated with HR success are
also the drivers of organizational high performance, such as employee engagement and
workforce productivity. The capabilities can be grouped into seven categories, which we
call the HR “Step Up to World-Class” Framework (Figure 4). Each capability is a gear that
fits with others to deliver progressively greater levels of performance and value to the
business. These are discussed below.
1. HR staff skills
One of the biggest challenges facing HR organizations is “becoming fluent in the
business” – that is, understanding and being able to comfortably discuss its markets,
strategy, competition, operations and drivers of revenue and profits. This is the only way
that staff can truly impact business performance. Significantly more staff in world-class
HR organizations possess this knowledge (Figure 5).
FIG. 4 “HR Step Up to World-Class” framework
Source:The Hackett Group
HR
S
T E
P
P
U
HR
staff skills
Strategic workforce planningppp ggg
Technology/
automation strategy
E
People
management
skills of leaders
Uniﬁed, streamlined
processes and systems
Performance
measurement and
analytics
mployee
and
manager
self-service

Moreover, companies are constantly under pressure to change, both in incremental and
transformational ways. World-class HR, bringing its advanced organizational skills to
the table, have two-thirds more staff focused on leading business change. Additionally,
80 percent have staff who partner to a high extent with the business lines to enable
organizational performance.
Action step: Hire or train HR staff with the skills and business acumen required to meet
the business needs of senior executives. Start with HR business partners who have the
most opportunities for interactions with business unit executives. Recruit staff from key
business units in your company to serve a stint in HR as a business partner. Have them
mentor and coach other business partners that have come up through the HR ranks. To
build business acumen more broadly, assign staff to cross-functional teams to provide
exposure to different parts of the organization’s operations and make understanding of
business fundamentals a requirement in hiring of HR staff.
2. Strategic workforce planning
Strategic workforce planning (SWP) is like a GPS for managing talent, making the
road ahead more visible for company managers and helping them find the most
efficient route to success. SWP translates business strategy into its implications for
future talent. Analyzing the dynamics of talent demand and supply (current staffing
levels, growth assumptions, historical internal/external labor movement, macro-level
workforce demographics) pinpoints areas of talent-related risk. This data can be used
by the business to prioritize and fund improvements aimed at attraction and retention
of talent to fill critical roles. When done well, SWP can improve both business and HR
performance.
World-class HR organizations are much more advanced in their implementation of SWP
capabilities. They have automated workforce-related data and make use of tools and
platforms for analysis of this information. Furthermore, they are much better at working
with the business to incorporate workforce data and talent analytics into decision-making
and planning processes (Figure 6). These capabilities are what allow them to be more
effective strategic partners to the business on issues related to strategy execution and
talent attraction, engagement, management and retention.
FIG. 5 Demonstration of critical business skills
Source:The Hackett Group, 2015
Percent of HR staff working extensively
with line managers to enable
organizational performance
improvements
Percent of HR staff charged with
facilitating business change
as a primary responsibility
Percent of HR leaders engaged
proactively by management
to partner on strategic business
opportunities
60%50%
80%
Peer group World-class
67%
21%
35%
72%
29%
50%

Action step: Develop SWP capabilities and processes, including data management. The
first steps should include using benchmarking to set baselines for employee cost and
staffing levels, performing a total cost of workforce (TCOW) analysis, and developing
standardized data elements to enable uniform analysis and reporting of workforce data.
These actions help create the foundation for the program. Then focus on core areas
where skills and talent shortages are most severe or roles that are recognized as critical
to organization performance. Assess risks and costs of turnover of these positions and
future demand and supply trends.
3.Technology/automation strategy
Technology/automation strategy provides the road map for creating an electronic platform
that enables efficient and effective HR processes and service delivery. Increasingly, this
becomes the platform for delivering a whole new class of services, such as information
and analytics to guide decisions. Moreover, electronically enabled processes reduce
errors and make information easier to access, freeing HR staff for higher-value work.
Technology spend per HR FTE in world-class organizations is higher due to greater use
of process automation (Figure 7). In some areas the difference between the world-class
and peer groups is as high as nearly 80 percent. This investment yields real productivity
advantages: world-class HR are able to service 59 percent more employees per FTE.
More important, a high use of automation allows HR staff to devote more time to talent
and business performance-related activities.
FIG. 6 Strategic workforce planning capabilities
Have an explicitly articulated
workforce strategy
Maintain common platforms
and tool sets to enable access
to SWP data
Facilitate senior management
involvement in the
SWP process
1.5x51%
78%
2.6x
23%
60%
3.3x
18%
60%
FIG. 7 HR technology cost, automation and productivity
Technology cost
per HR FTE
Percentage of
transactions automated
Employees
served per HR FTE
34%
Total rewards
administration
Payroll
administration
Stafﬁng
services
Time and
attendance
Training
administration
59%
PEER GROUP
WORLD-CLASS
53%
60%
70%
73%
79%
20%
50%
27%
50%
32%

Action step: Design a technology strategy, implementation road map and data
architecture for building a platform for delivery of a comprehensive set of HR services.
Including performance measurement and analytical capabilities is essential. Work
closely with IT leadership to create long-term HR technology strategy, architecture and
implementation plans. Recruit and train HR staff to assume greater responsibility for
technology management and usage. Identify specific business-related goals for the
use of HR technology. Create a technology road map that defines desired strategic
outcomes, KPIs, needed behaviors and human-capital initiatives. The road map should
support the business case for HR technology, identifying the most logical connections
between HR technology and achievement of strategic objectives.
4. Employee and manager self-service
Employee and manager self-service delivers information and tools directly to users,
improving their productivity while also helping HR transfer its attention to more value-
adding work. Managers at more than half of world-class HR organizations make
extensive use of self-service technology to perform tasks related to talent acquisition,
reward and performance appraisal (Figure 8). At nearly two-thirds of world-class
companies, employees use self-service over 75 percent of the time to maintain personal
and benefits data and perform career-development-related tasks.
Self-service should be designed to equip managers to be effective leaders, not increase
their administrative burden. This requires the provision of productivity tools, information
and functionality that allow them to do their jobs better. The same is true for employees,
who should be able to access all the functionality they need to manage their own
personal information and careers.
Action step: Establish or expand manager and employee self-service functionality,
focusing on a high-quality user experience that will permit HR resources to be
redirected to higher-value activities. Identify key stakeholder groups and individuals,
their interactions with HR and general attitude toward HR. Document the data and
functionality needs and preferences of each stakeholder group. Develop services from
the perspective of the customer. This applies to the way processes are designed and the
touch points a customer has with the HR organization through the various interaction
channels available.
FIG. 8 Percentage of companies with high degree (>75%) of self-service utilization
Employee self-service
Personal/life-event
data changes
Course selection
and scheduling
Development plan
data capture
Employee competency/
skill inventory
PEER GROUP WORLD-CLASS
Manager self-service
Performance appraisal
data capture
Job/grade changes
Incentive bonus
awards
Merit pay changes
Employee pay
status change
Interview results/
data capture
Job requisition
submission 50%
50%
50%
50%
38%
63%
63%
41%
17%
29%
44%
33%
20%
49%
25%
63%
63%
63%
11%
29%
44%
39%

5. People management skills of business leaders
The Hackett Group’s research has previously documented the strong correlation between
leaders’ people management skills and the strategic performance of HR and the
business.2
World-class HR organizations help improve the effectiveness of their leaders’ people
management skills in a variety of ways. Training is one of the most important, particularly
in the basics such as giving feedback, performance coaching and building consensus.
Leadership training is provided to a high extent at half of world-class organizations, which
are also twice as likely to provide leadership training to new managers (Figure 9).
HR organizations need to be sure they are spending enough time working with
stakeholders to ensure that leaders at all levels are being developed. In the world-class
group, HR business partners spend 60 percent more time than the peer group facilitating
organizational and leadership development.
Action step: Target training initiatives and on-the-job experiences to increase the people
management skills of leaders. Provide opportunities to take on challenging assignments
aimed at developing specific skills. For example, work on people development skills by
serving as a mentor for a high-potential employee, training a new employee in a specific
skill or partnering with a skilled people manager to lead a special project team.
6. Unified, streamlined processes and systems
Processes and systems that are both unified and streamlined make it possible for HR to
operate in a cohesive and productive fashion. This attribute does not happen by accident;
it takes explicit design and methodical implementation. World-class HR organizations
manage their processes holistically. For example, they are three times as likely to assign
formal process ownership roles than peers. Their processes are designed to be more
efficient, as are their processes and organization structures. The results are reflected in
their significantly greater spans of control. Furthermore, they far exceed the peer group
in integrated HR applications (Figure 10).
FIG. 9 Leadership development practices
Leadership training offered
to a high extent
Percent of generalist time spent
on facilitating organizational and
leadership development
Leadership training
provided to new managers
61%31%
50%
60%
10%
16%
111%
19%
40%
2
“The Performance Advantage of HR Capability Maturity Leaders,” The Hackett Group Book of NumbersTM
Research Series, Vol. 17, No. 1

Action step: Implement uniform processes and supporting technology to enable efficient
and effective HR delivery. Start with a thorough documentation and assessment of HR
processes. Then identify opportunities to standardize, simplify, eliminate and automate
work. Implement technology that facilitates the sharing of data and workflows across
multiple systems.
7. Performance measurement and analysis
World-class HR organizations are more advanced in their development of performance
measurement and analytics capabilities. Their reports on performance are thus more
meaningful and their insights more applicable to decision making. Two out of three
publish HR scorecards monthly or quarterly, alerting management to issues needing
attention (Figure 11).
Their scorecards contain more metrics of importance to the business and are more
broadly distributed companywide. Most important, world-class HR organizations use key
metrics to strategically align the HR and business leadership teams around the aspects
of human capital that influence performance or have the potential to do so.
FIG. 10 HR organization, processes and systems
Overall span of control Percent of groups with dedicated
owner for hire-to-retire process
Percent of groups with
integrated HR applications
39%2.8
3.9
212%
24%
75%
58%
26%
41%
Peer group
48%
World-class
67%
Percent of organizations that
regularly publish HR scorecard
(quarterly or monthly)
40%
Category Metric Executive
mgmt./
board
BU
leaders
HR
leaders
HR
process
leaders
HR overall High-performer turnover
HR overall Revenue/FTE
HR overall Workforce performance
HR overall Workforce cost
Performance management Performance-based pay
differential
Management & leadership
development
Successor pool growth rate
development
Manager turnover
development
Manager quality
development
Successor pool coverage
Recruiting & staffing Quality of hires
Recruiting & staffing Employer brand strength
Source: Measuring HR Effectiveness and Impact Performance Study,The Hackett Group, 2014
Measures tracked by >50% of performance leaders but <50% of peer group
FIG. 11 Measurement and communication of HR performance

Action step: Strengthen performance measurement and analytics capabilities. HR must
be able to report and advise on topics with concrete value to business management.
Create a dedicated analytics group to fully leverage skills and tools across all areas of
HR. This may range from a single person in small or mid-sized HR organizations to a
center of excellence staffed by a team of people in large, multibusiness enterprises.
Seek candidates who are proficient in data analysis and modeling techniques from other
disciplines such as marketing, finance and operations. Train current HR staff in data
analysis and interpretation techniques.
Where to begin: Define your HR function’s current state
Start by identifying the gaps. Which competencies does the business need from HR that
you’re currently not able to provide? Rethink job descriptions, define new competency
models and assess your current staff against them. Once you’ve identified the gaps,
create a plan to develop your people’s skills or to recruit the necessary outside talent in
order to partner more effectively the business.
These may sound like heavy-duty investments, but as you’ve seen from The Hackett
Group’s results of world-class HR performance, the payoff is huge. Considering all that
HR organizations are up against, it’s a bet worth making.
Related Hackett Research
“2015 Key Issues: Enabling the Agile Enterprise,” January 2015
“The HR Agenda for 2015: Major Transformation Efforts Are Planned to Close Critical
Gaps in HR Capabilities,” January 2015
“Measurement Matters: How Performance Leaders Use Metrics to Align Business and
HR Strategies,” December 2014
“Operational Planning and Analysis: Factors That Improve Planning and Analysis
Performance in Business Services,” December 2013
About the Advisors
Nathalie Bression
Senior Director, Human Resources Executive Advisory Global Practice Leader
Ms. Bression has over 20 years of human resources experience with a
focus on general HR management, talent management, performance
management, process improvement, HR shared services, compliance
and employee relations. Her experience includes analysis and utilization
of HR-related data and analytics to help organizations identify strategic
priorities; design and deploy efficient and effective processes, implement
service delivery models, and conduct overall HR management. She also has deep
expertise in integrated talent management and overall strategic HR support to business
units and functional groups. Ms. Bression is certified by the Society for Human Resource
Management both internationally and for North America.
Rebecca Collins
Senior Director, North American Practice Leader, HR Advisory
Ms. Collins has over 20 years of professional experience in managing
the design and delivery of large transformation projects on a global
scale. She is highly proficient in strategic planning, integrated talent
management, organization design, business case development, and
project management. Ms. Collins also serves as global owner of The
Hackett Group’s talent management program.

© 2015 The Hackett Group, Inc.; All Rights Reserved. | CR_2000183
This publication has been prepared for general guidance on the matters addressed herein. It does not constitute professional advice.
You should not act upon the information contained in this publication without obtaining specific professional advice.
Tony DiRomualdo
Senior Research Director, Human Resources Executive Advisory Program
Mr. DiRomualdo has over 25 years of research and advisory experience in
the areas of HR, IT and business strategy. His work has focused on areas
including talent management, workforce planning, recruiting, learning
and development, employee engagement, leadership, performance
management, and HR outsourcing and technology. Mr. DiRomualdo has
directed several groundbreaking global studies, producing insights and
tools used by major corporations worldwide. He is the author of numerous Hackett
reports and case studies and has published several articles in prominent business and
academic publications including MIT’s Sloan Management Review and Chief Learning
Officer magazine. Before joining The Hackett Group, Mr. DiRomualdo headed his own
research firm and ran research programs at major management consulting firms.
For more papers, perspectives and research, please visit: www.thehackettgroup.com Or to learn more
about The Hackett Group and how we can help your company sharply reduce costs while improving business
effectiveness, please contact us at 1 866 614 6901 (U.S.) or +44 20 7398 9100 (U.K.).
This publication has been prepared for general guidance on the matters addressed herein. It does not constitute professional advice.
You should not act upon the information contained in this publication without obtaining specific professional advice.
The Hackett Group (NASDAQ: HCKT) is an intellectual property-based strategic consultancy and leading enterprise benchmarking and best practices
implementation firm to global companies. Services include business transformation, enterprise performance management, working capital
management, and global business services.The Hackett Group also provides dedicated expertise in business strategy, operations, finance, human
capital management, strategic sourcing, procurement and information technology, including its award-winning Oracle EPM and SAP practices.
The Hackett Group has completed more than 11,000 benchmarking studies with major corporations and government agencies, including 93% of
the Dow Jones Industrials, 86% of the Fortune 100, 87% of the DAX 30 and 51% of the FTSE 100.These studies drive its Best Practice Intelligence
Center™, which includes the firm’s benchmarking metrics, best practices repository, and best practice configuration guides and process flows. It is
this intellectual capital that enablesThe Hackett Group’s clients and partners to achieve world-class performance.
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