Professional Documents
Culture Documents
C O R P O R AT E R E S E A R C H F O R U M
February 2009
Coaching
Configuring HR for Tomorrows Challenges
"HRs role is to understand the business and its external
environment, ask challenging questions and bring
'does anyone have someone who
innovative solutions to business
problems.
would benefit from six months or a
year's experience in my function?'"
Report sponsored by
Mchenzie
research
C O R P O R AT E R E S E A R C H F O R U M
February 2009
Andrew Lambert
research
CORPORATE RESEARCH FORUM
CONTENTS
Contents
Foreword
Acknowledgements
Executive Summary
Introduction
10
1. HRs challenges
14
27
35
42
5. HR priorities
59
79
85
8. Measurement
97
107
129
151
12. Appendices
163
168
research
CORPORATE RESEARCH FORUM
FOREWORD
Foreword
My HR colleagues in AdviserPlus call me a recovering CEO, although I suspect they live in fear
of a relapse! Recovering because I now, apparently, get what is possible for HR to achieve if the
function is properly enabled and if it adopts a manager-centric approach.
As a CEO of a quoted plc in the 1990s with over 2,500 people, I was largely guilty of regarding
HR as a discrete function, and one which under-estimated the ability of managers to deal with
people issues. I saw the role of HR to protect liability, rather than drive performance.
This resulted in a reactive, rather than proactive HR function. HR perpetuated itself in largely
unproductive activities which should have been dealt with by managers. In turn, HR allowed
managers to abdicate responsibility because they enjoyed picking up those matters it made
them feel needed. Neither party had many good words to say for the other and much of, what I
now understand as, failure demand was created.
We set-up AdviserPlus to solve these issues. And thats why we are keen to be associated with
this report.
Configuring HR for Tomorrows Challenges is a balanced, constructive and timely challenge to
the role of HR. It asks many of the right questions. It challenges some of the givens of fashionable
HR models, some of which, in my view, reinforce and perpetuate the failure demand noted above.
The report provides recommendations which recognise there are few silver bullets. While
organisations have more similarities than HR would care to admit, they do have different
cultures and they are at varying stages of evolution which requires tailored responses.
It also recognises that HR cannot be seen in isolation, but is rather an essential ingredient of an
effective organisational team. This is particularly relevant today given the challenging
economic climate. Indeed, there have been a number of once-in-a-lifetime moments for HR to
increase its contribution. Now is another such moment. We hope that more HR leaders grasp
the opportunity with both hands.
Karl Chapman
Chief Executive
AdviserPlus Business Solutions
karlchapman@adviserplus.com
www.adviserplus.com
mobile: 07976 840298
research
CORPORATE RESEARCH FORUM
ACKNOWLEDGEMENTS
Acknowledgments
Contributing researcher, Ben Reid, is a Research and Consulting Fellow at Henley Management
College and previously a Lecturer in Business Analysis where he has undertaken projects for
numerous clients. They include Ford, Aegon, United Biscuits, Department of Work and
Pensions, Qinetiq, European Commission, BBC, Department of Education and Skills. He has
recently completed a PhD at Henley/Brunel in Business and Management.
And finally, CRF wishes to thank Karl Chapman, Managing Director of AdviserPlus, whose
company is the main sponsor of this report, along with Sheppard Moscow who also provided
sponsorship.
research
CORPORATE RESEARCH FORUM
ACKNOWLEDGEMENTS
About CRF
Since 1994, CRF's membership has grown to well over 100 international companies and
prominent public sector organisations. The Forum brings together subject experts and
experienced practitioners through research projects, events and publications to share ideas,
good practice, objective analysis and recommendations. As part of CRF, member organisations
develop and implement more effective business-focused HR/OD policies
actively participate in cutting edge research projects such as this report that address issues
relevant to large employers
develop senior executives, HR leaders and the HR team
improve organisational learning and knowledge
engage in networking, peer learning and sharing experiences with other members who face
similar challenges
enjoy unlimited access to CRF's extensive resource base of research and publications, and the
resources of our partners.
Member organisations are typically represented by their director of HR or OD, or a senior
executive in those functions. They often comment on how CRF's work makes a real difference
to organisational performance and effectiveness. To join CRF or to find out more, e-mail
info@crforum.co.uk, call (+44) 020 7470 7104, or see www.crforum.co.uk.
research
CORPORATE RESEARCH FORUM
Executive Summary
Some HR executives in progressive organisations are exasperated or bored by the long-running and
backward-looking debate about whether HR drives performance and improvement.
HR under pressure
For years, HR has been under pressure to become more efficient and
add more value. Long-standing angst is felt within HR about its
position in the corporate pecking order, and the difficulties it feels it
faces in tackling poor people managers.
Critics have seen the function as overly process-oriented, fad-prone,
insufficiently business-focused, poor at customer service, and timid in
the face of challenges.
Some HR executives in progressive organisations are either
exasperated or bored by this long-running and backward-looking
debate. They feel confident that they are central to driving
performance and improvement. They do not wish to be held back by
the slower ships in the HR convoy.
Whats the solution?
research
CORPORATE RESEARCH FORUM
EXECUTIVE SUMMARY
research
CORPORATE RESEARCH FORUM
INTRODUCTION
Introduction
Discussion of the role, shape and capabilities of the HR function has always formed an
important part of CRFs work concerning organisational effectiveness through masterclasses
with eminent authorities such as Ed Lawler, Vladimir Pucik and Gordon Hewitt.
In 2002, Andrew Lambert wrote a CRF report on the career issues of corporate functions, which
included some 60 interviews with mainly senior HR executives. Both in the report and at a
subsequent meeting to discuss its findings, it was evident that HR executives in progressive
companies that typify CRF membership were unhappy about the functions reputation. HR was
clearly the butt of much criticism from the chairmans office to the staff canteen.
This was galling to the many ambitious and capable HR people who had contributed to the CRF
work. They were frustrated both by the low level of expertise among HR professionals and by
the HR tendency to navel-gaze and complain year on year about the functions status without
actually doing anything substantive to raise the game.
Additionally, as the report pointed out, professional bodies in management accounting, for
example, appear to be more successful than their HR counterparts in orienting their members
towards a broader business perspective and contribution, often on an international scale.
In consequence, a CRF working group examined HRs future which, as a side benefit, helped to
prompt a new approach to raising standards in the UK Civil Service. This CRF initiative led in
turn to CRF Publishings report, The Future of HR: A Fit For Purpose Function (2005), by
Chris Ashton and Andrew Lambert.
While many of that reports findings and recommendations are still valid, its principal messages
were not successfully implanted in the collective consciousness of the HR world. HRs
reputation continues to be an issue and yet the need for people and organisations to be better
managed is as pressing as ever.
For this report, CRF had substantive discussions with 20 thought leaders, and 20 senior HR
practitioners and CEOs in international organisations. As a result, we provide some pointers to
how HR can win the respect it desires. The opportunity to add real value to their organisations
future success beckons, for those with the courage and skill to seize it.
This report addresses our messages to those best able to shape the functions future HR
directors or chief human resource officers and the CEOs who hire them. There are also
messages for those with the ambition and talent to be part of the necessary change process,
and to stakeholders who influence how organisations are run.
We have found a strong consensus not only about the problem but also about HRs future direction
through examples of what this should look like. Now we all need to start spreading the message.
10
HR should be re-cast as the
organisational effectiveness
function. But this time, dont
change the name on the tin
until it is matched by the
contents.
Andrew Lambert , CRF
HRS CHALLENGES
research
HRS CHALLENGES
Introduction
Topics covered
14
15
19
22
research
HRS CHALLENGES
Being an organisational function is not a popularity contest but HR tends to be the most criticised of all.
1.1
These generalisations are, perhaps, unfair to progressive HR people and functions. Examples
from leading organisations in this report show how different this picture can be.
In addition, being an organisational function is not a popularity contest, and there are plenty of
critics to be found of finance, IT and other functions. However, HR does tend to be the most
criticised.
Why does this matter?
Many organisations state that people are their most important asset, and much of the intangible
value of publicly-quoted firms can be ascribed to the estimated worth of employee knowledge
and capability.
Furthermore, talent is now recognised as a critical differentiator and driver of long-term
organisational success. Being able to attract, retain and get the best out of its people represents the
core of an organisations employer brand value. City analysts may struggle to put a number on this
value, but common sense tells everybody else that the way people are managed really matters.
15
research
HRS CHALLENGES
Top leaders, C-suite executives, managers and employees all want HR to be well-run, capable and well
thought of.
Obviously it is inherently unhealthy if there are doubts about the orientation and capability of
the one function that should be expert in this field.
From an employee perspective, there are clear reasons why it is important that they should think
well of their HR function.
HR is typically the part of the organisation they first have dealings with when they join.
HR is also the function that employees feel has a duty of care towards them throughout their
employment to whom they should be able to turn if in difficulty, and to obtain advice on
careers and development.
They also expect HR to ensure that managers are well selected and trained.
Managers, at every level, have many expectations of HR to help them in managing their people
as a provider of advice and direct support as well as helping in their own development.
Leaders will have the most expectations although these will be tempered by their
experience in working with HR people before and since they reach their leadership
positions. They will at least demand that HR is efficient. But at a time when every
function must prove its worth, what they really want is substantial help from HR in
improving their organisation.
Thus everyone wants HR to be a well-run and capable function, sensitive to the needs of
internal customers.
Drive for value debate
The debate about the HR function over the past 10-15 years has resulted in one particularly
clear trend the move to reduce what an organisation pays for personnel administration.
Technology is an enabler, but the debate has been as much about what HR should stop doing,
and also what line managers and employees should do for themselves. There are fundamental
tensions about whos job is it?, as well as whether the driver is cost-reduction rather than what
is genuinely effective.
Numbers, www.thehackettgroup.com.
An important strand of the debate concerns the widespread view that HR should become more
strategic, if it is to be taken more seriously. This tends to reflect also the notion that day-to-day
administrative workloads can be reduced by automation, to enable HR to concentrate on more
important matters.
16
research
HRS CHALLENGES
Can HR make itself into a strategic asset that is, by adding demonstrated value to the organisations
capability? Professor Gordon Hewitt.
Thus the drive for value represents two dimensions lower cost administration and more added
value through higher expertise. However, two questions arise.
Is personnel administration actually being done better through models such as service
centres, whether in-house or outsourced?
Has HR actually demonstrated that it understands critical business issues and provides better
value through resolving these from a people perspective?
Both issues will be examined in the course of this report.
More business focus is the mantra
Time and again, in articles, books and discussions with and about HR people, we hear the same
overall message HR must be more business-focused, as an essential pre-requisite to becoming
more strategic. The criticisms concern these points.
Ed Lawler - Professor
USC
Too little knowledge of business essentials finance, accounting, operational methods, sales,
marketing and technology.
Too little experience of work outside the HR function.
A tendency to set objectives, and design and implement practices that are not tied clearly to
achieving worthwhile business outputs.
From the perspective of CEOs and business managers, this is reflected in procedures that appear
overly-complex and couched in HR language they find arcane. They comment that what HR
does, or recommends, too often does not start and end with genuine business challenges.
This may appear to HR executives as shooting the messenger, in that it falls to them to ensure
that their organisations adhere to legislative rules and labour agreements that some line
colleagues find unpalatable.
The HR problem
The problem is that HR does not seem to be able to position itself as a business partner.
Even the most recent studies of its position in major corporations suggest that it is
struggling to be more than an administrative function that is viewed as a cost centre,
rather than as a value-added strategic function. Ed Lawler.
17
research
HRS CHALLENGES
Ive got a great talent programme underway for new entrants, commented one Group
HRD, but the problem is that I still have to address the quality of the HR managers they
will report to. That takes longer to sort out. Other HRDs made similar comments.
18
research
HRS CHALLENGES
The more line managers understand what good people management is, and the better they do it, the
easier it is for the HR function to refocus on more challenging and interesting organisational
improvement work.
Internal recruitment
Capability programmes
1.2
The capability challenge for managers
While managers tend to be critical of HR, the converse is that the shortcomings of managers are
regularly observed by HR people.
People is a management responsibility
The reality is that managers, in aggregate, are responsible for managing people, not the HR
function. There is no shortage of evidence that there is room for improvement in how they do so.
Even the best organisations spend considerable time and effort ensuring that managers exercise
this responsibility with skill and conviction. Just as HR might need to understand more about
business, so managers generally need to learn more about psychology and motivation, both in
theory and practice.
19
research
HRS CHALLENGES
Some managers over-rely on HR to support them in managing people and relationships in part, they
abdicate their responsibilities.
The example set by leaders is of overriding importance. How they speak and behave sets the
priorities and behavioural standards for managers at all other levels. If top executives are too
busy or culturally ill-equipped to be role models as people managers, any HR function will
struggle to make an impact. Note that
surveys of trust in leadership regularly poll below 50% in the UK and USA
the less visible managers and leaders are, the less they are trusted
on average, immediate managers rate better than more senior managers because their staff
know them.
Clarifying accountabilities, reducing dependence
Organisations must make clear who is accountable for what, for people management to avoid
falling between two stools the line manager and HR. Recent evidence shows some positive
steps forward, with increasing recognition of three basic principles.
People are my job although many organisations have struggled in the way they have
adopted competency frameworks, the overall trend is to make it clear what is expected of a
manager in general, and to place the primary responsibility for managing people on line
managers.
Employee engagement starts with managers the widespread adoption of engagement
as a set of guiding principles has helped to provide some rigour, and sharpened the
measurement of the quality of people management.
Managers are responsible for developing capabilities CRFs 2008 research report on
developments in coaching and mentoring found that more than half of the 36 companies
consulted stated explicitly that managers are formally responsible for actively coaching their
staff, not just reviewing development plans.
Bill Pasmore
CCL
20
For many years, managers have over-relied on HR to support them in managing their teams in
part abdicating their responsibility for managing people and relationships, and avoiding the
chores that may accompany people planning and review.
research
CORPORATE RESEARCH FORUM
1
HRS CHALLENGES
This issue is at the heart of the widespread attempts to reduce HR manager headcount.
The strategic shift that HR functions still struggle to make is to reduce hand-holding activity
with line managers and employees by moving towards self-service, using the intranet and
telephone advice from HR service centres. At the same time, some re-frame HR manager roles,
so they spend more time on advice and support that really adds value.
Survey results in the 2007 CIPD report, The Changing HR Function Transforming HR?,
found the main reasons for HRs difficulty in transferring work to the line appeared to be line
manager skills, managers having other priorities, a lack of time devoted to people management
and a reluctance to adopt self-service.
This tension also skews the debate about business focus, in that
on the one hand, if managers are asked what they want, some will regret the perceived
diminution of support and feel that HR is distancing itself
conversely, most will support the reduction of spend on overheads, particularly if internal
accounting makes clear how this affects managers bottom line.
Only by clearly framing the requirements of both managers and HR can organisations set a
course for better value outcomes. Managers, for their part, must feel convinced that
arrangements to support them are effective which we discuss in Chapter 7. For HR, the
challenge is to be successful both in re-positioning the function and to ensure that the calibre of
staff matches higher expectations.
21
research
HRS CHALLENGES
1.3
The challenge for professional associations
Discussed in this section is the part that professional associations have so far played in helping
HR to transform itself into a more business-focused, high achieving function. The main players
noted in the column have sponsored many recent studies concerning HRs priorities and future
challenges. See the column opposite. These are aimed partly at the HR world but also at general
management and governments. A secondary aim is to promote their profiles.
Despite worthy intentions and much good content, it is hard to identify any significant impacts
yet from this large catalogue of work on HRs reputation or capability.
There is no evidence to indicate that managers in general and CEOs in particular are aware
of such surveys and literature. They are generally too busy with other priorities to take much
notice, even those who might be interested.
Awareness among key HR audiences, including HR directors, is also low even though some
will have been consulted. Studies consistently reveal that most HR managers are generally too
busy doing to read much beyond sound bite material.
Reports in the media are fleeting and brief, and the small number of journalists who write
about management and people topics are awash with books and reports from academics,
consultancies and trade bodies.
Additionally, the surveys of HR priorities by and large say much the same thing, in the course of
listing topics that HR directors, and possibly their CEOs, feel are important. Managing change,
leadership development and talent generally head the list, except that the PwC study contrived
to leave talent out altogether. These surveys do not tend to communicate anything memorable
about how HR might successfully meet and resolve its challenges.
That said, the CIPD research programme, along with the BCG and Cranfield reports for WFPMA,
stand out in terms of directly addressing HRs future roles.
Raising capabilities
What impact do these professional bodies have in raising the capabilities of HR?
SHRM and CIPD are the largest and among the most sophisticated of the professional bodies.
The qualifications they devise most visibly spell out what an HR professional is expected to
know, the curricula being determined through extensive consultation. They also provide
conferences, training programmes, chapter meetings and many publications and newsletters
all aiming to influence HR thinking and behaviour.
22
research
HRS CHALLENGES
Surveys of HR priorities, by and large, say much the same thing. They dont tend to communicate
anything memorable about HRs challenges.
However, in terms of raising HRs game and addressing long-standing criticisms, the evidence is
not encouraging.
First, all the studies indicate that the profile, reputation and skill set of HR people has changed
little over the past 10 years or more.
Association studies
WFPMA a recent study with Boston
Consulting Group (BCG) is Creating People
Advantage How to Address HR
Second, CRFs research in 2008 reveals exactly the same ambivalence and occasional
disregard for professional associations among top HR directors, as we also found in our 2002
study. In the UK, while HR directors generally support people who want CIPD qualifications
and mention these when recruiting, they ascribe no great importance to them.
Well-placed US experts tell us that associations there do not have as much penetration of their
marketplace as CIPD, and tend to attract more medium to smaller-sized organisations and the
public sector than influential corporations.
Professional Standards.
There is a considerable gap between what progressive companies want and what professional
association qualifications deliver. HR directors complain that they lack the rigour required, say,
for legal and accounting qualifications.
Indeed, the contrast with bodies such as ACCA and CIMA that serve the management
accounting area is striking. They make it clear that they provide a route into general
management, and build in considerably more general business content. They are also more
extensively involved in supporting in-company programmes than their HR equivalents.
Are colleges the weak link?
A further issue is that, although professional bodies determine the curriculum, it is hard for
them to govern the standard of teaching in colleges. While self-study or in-house courses are
available, the usual route for young entrants is through training in colleges.
Quite simply, college lecturers are hardly at the forefront of HR thought leadership, nor do they
teach courses that prepare future HR managers for the reality of the challenges they will face.
As mentioned above, our US and UK interviewees including students raised concerns over
the variability of standards in educational institutions.
Hewlett-Packard, for example, described their extensive efforts to identify better colleges and
business schools, but then also have to try to entice the better students to apply for HR see
the case study in Chapter 10.
Brian Hackett, an experienced US observer of HR, remarked: Colleges with HR courses have
pretty much the same curriculum as 20 years ago, especially regarding compensation and
incentives. And most MBA courses dont yet teach anything worthwhile about leadership or HR.
Even UK universities with good reputations for business and management courses provide
mixed experiences.
23
research
HRS CHALLENGES
One informant told us: Having studied there only a few weeks, I realised it did not live up
to its reputation. All results, both for assignments and exams, were always later than
promised. Dissertation assignment and feedback was poor. The course required a lot of
work which was made harder by the fact that the teaching was not up to standard and way
below what it should have been for 8,000.
There are three levels of qualification - the Professional (PHR), Senior Professional (SPHR) and
Global Professional (GPHR). The examinations are experience-based, and are only open to
those who are already working in HR.
Every five years, the HCRI updates the body of knowledge on which professional qualifications
are based new requirements for its higher level GPHR qualification will be released in 2009.
This is based on extensive consultation among HR executives and a panel of subject experts.
It has strengthened the global aspects of HR, and is targeted at those with cross-border
responsibilities.
Overall, a gap is evident between our interviewees who envisage MBA-level entrants in the
future and the flavour of what is required. All three qualifications demand business knowledge,
but are relatively weak in organisational effectiveness. There is little obvious recognition of the
need for service management, despite the adoption of HR service centres. The separate position
of ASTD vis a vis SHRM also means that its focus on L&D is light.
SHRM does provide a suite of three-day business education workshops using professors from
leading business schools. They feature more contemporary HR challenges such as change
management, employer branding and talent management, and business disciplines such as
finance and metrics. These are not formally tied to a qualification process.
Employee relations
Employee engagement and employer
branding
IT and service delivery
Note that these terms may undergo
modification by the time of official publication.
24
CIPD
By contrast, there is little in CIPDs training portfolio that features the business and
organisational effectiveness agendas in any depth although it provides optional courses,
including workshops for line managers on people skills. Additionally, the CIPD standards
published in 2002 were, in hindsight, not seen as addressing the criticisms of HR.
research
HRS CHALLENGES
However, now under new management, the CIPD will launch a new framework for
professional standards in 2009, following extensive consultations. Although, as with
SHRM/HRCI, that consultation has not particularly focused on feedback from HRs
customers, the intention is to place organisational needs as the starting point of HRs
agenda not just something to be taken account of. CIPD felt its market position would
deteriorate unless it took action.
It appears that CIPD is now reflecting key HR developments such as the emergence of service
centres and the increased focus on organisational effectiveness.
Internally, CIPD acknowledges that gaps in its offerings for more senior practitioners need to be
tackled, as do those in emerging practice areas such as organisation development and design,
business solutions, and IT and service delivery. In addition, the framework is aimed primarily at
the generalist, rather than the specialists who may operate in centres of excellence. CIPD also
acknowledges it is light on behavioural offerings.
While adopting a more aspirational agenda, CIPD is aware that it has much to do to achieve a
significant impact.
The main impact will be on college curricula CIPD cannot realistically rely on college
lecturers to lead a cultural revolution.
The experiential element is particularly important in developing the right HR orientation and
that is the part that CIPD has least control over.
There is a tension to be managed between the desire to meet the needs of more progressive
companies, and the reality that most of its membership will likely struggle to meet new and higher
standards there are obvious dangers if CIPD goes too far ahead of its subscription payers.
In overview, there are limits to the extent to which professional associations can realistically
address the upskilling of HR, despite their prominent position. HR directors collectively can also
play a critical role, since they determine the standards their organisations require. This point is
expanded on in Chapter 9 and some of our company examples in Chapter 10.
25
research
Introduction
Topics covered
2.1 Contextual challenges
28
29
29
30
31
33
27
research
Organisations seem more than ever to be driven by events rather than shaping their own destinies.
Is it the same for HR functions?
2.1
Contextual challenges
In any age there are new challenges confronting organisations and people. However, at a time
of constant financial and market turmoil, organisations seem more than ever to be driven by
events rather than shaping their own destinies.
Nonetheless, while planning ahead is undoubtedly becoming more difficult, organisations that
fail to understand and then prepare for what may lie ahead will surely become a casualty on the
list of past corporate names.
What governs survivability is entirely human attitudes of mind and collective organisation.
Hence the opportunity beckons for HR to develop expertise in enabling people to be fit for
whatever their challenges turn out to be.
The question is whether HR is ready to do this and specifically whether it has developed
its thinking about how to handle the many difficulties that confront their organisations and
the nature of work.
From our interviews and literature sources, here are the groups of factors that should be considered,
along with pointers to related people issues. The questions we ask readers to consider are
what responsibility has HR taken to tackle each issue, either itself or shared with others?
what active steps has it been taking as a result?
We group these factors into four categories, as shown in the diagram.
Forces Shaping the World of Work
External
Forces
Operating
Environment
Market
Forces
Work
Corporate
Culture
Staying
Competitive
Internal
Forces
28
research
HR needs to devote serious thought to how changes in the operating environment affect organisations,
people, work, and HR itself otherwise it will be flying blind.
2.2
HR in tough times
2.3
29
research
Developing capability to implement the wrong game more effectively is not a recommended solution
to the elusive challenge of creating corporate value and competitive advantage. Professor Gordon Hewitt.
Competitive advantage
new sources
Its not just technology, its what people do with it. The music and media industries are visible examples of how
the ways of doing business are being reinvented, with organisation structures and job types being swept away.
Established players find themselves challenged by new players with less bulk and more agility, working in very
different ways and changing the rules of the game. What is HR doing to anticipate such threats? How does
scenario planning allow for left-field challenges that will require a complete organisational re-think?
Measures of performance, reward and appraisal systems have hitherto been rooted in vertical and hierarchical
management control systems. Increasingly, projects, initiatives and value creation depend on a more fluid and
horizontal way of working. As Professor Gordon Hewitt, of Michigan and Glasgow universities, told us, There are
tensions to be managed about how much autonomy to allow and how responsibilities are allocated.
Collaboration across business units, or across company boundaries, needs to be accounted for in different ways.
People systems need to be rethought to match a business world that works in more of a networked than
command-and-control way.
2.4
Staying competitive
These are some things that organisations do to respond to or anticipate external forces.
Emergent strategy
Traditional strategy formation and planning processes belong to an era of relative predictability
where regular cycles dictate the rhythm of organisational rituals such as budgeting and
performance appraisal. When events move so fast that yesterdays stable and respected business
is tomorrows casualty, new ways of thinking and organising are required.
Many years ago, Mintzberg proposed that strategy should be seen as emergent, a continuous
process of dialogue and a resetting of the course.
Gordon Hewitt - Professor
University of Michigan
30
research
Disruptive innovations are putting pressure on established companies to increase the pace and type
of innovation. Its becoming impossible for established companies to adapt fast enough. Martin Sorrell,
CEO, WPP Group, at Davos, 2006.
Steve Kerr, drawing on his time working with Jack Welch as Chief Learning Officer at GE, told us
that, some 10 years ago, they concluded it was futile to try to anticipate in any detail what
extrinsic change lay ahead. Rather, their task was to prepare the organisation for anything that
might occur, which then guided their management processes and L&D activities.
Speed and quality of execution
As many strategy writers point out, nine-tenths of a successful strategy derive from how well it is
implemented. Having strategic ideas is the easy part, Professor Hewitt notes. Its deploying your
people and systems faster and better than rivals that counts, especially when ideas are so rapidly
copiable. Teamwork and training are important elements, together with collective experience.
Differentiation
In a world of ideas, marketing noise and rapid cloning, what is HRs contribution to enabling
its organisation to stand out?
What is distinctive, appealing and lasting about the organisations employer brand?
And, as Professor Vladimir Pucik challenged members at a CRF masterclass in 2005, what is
different and better about the way you manage your human capital and run your HR function?
Resilience
With the speed of change increasing inexorably, one of the most desirable characteristics an
organisation can possess is the capacity to reinvent itself. True resilience is more than being able
to take hard knocks, or achieve sustainability. In discussions with Sir Andrew Likierman of the
London Business School, CRF and its sister organisation the Performance and Reward Centre
have identified resilience as the most important contributor to organisational survival and
long-term success. This, in turn, is fundamentally based on the way that people and people
systems are managed.
2.5
Shifts in corporate culture
These are some aspects of organisational culture that have a major impact on the way people work.
Corporate culture as a strategic tool
As organisations grow and change at an ever-quickening pace, they come to realise the value of
focusing on shared beliefs and ways of doing things if they are to retain cohesion, while allowing
flexibility. Hence the management catchphrase, culture eats strategy for breakfast a cohesive
organisation can handle strategic challenges as they emerge. Additionally, as a growing
organisation absorbs people from many country and company cultures, developing its own
strong culture to trump others and prevent fracturing is crucial.
31
research
HR Processes
and Practices
32
Role &
value
added
of HR?
Organisational
Capabilities
Business
Value Creation
research
The challenge is that many HR people are being dragged into competitiveness rather than leading it.
This requires a shift in mindset, knowledge and HR capability amongst practitioners and especially
function leaders. Professor Vladimir Pucik, IMD.
2.6
The organisations and HR directors we consulted were all at various stages of moving in this
latter direction and they agreed on the critical business-people issues cited in the column.
We will comment on the topics in the column and provide examples of good practice in the
chapters that follow.
As regards the HR function itself, we will discuss in Chapter 9 the issues when developing
future-facing characteristics, supported by practical examples. However, a first requirement in
repositioning HR is to determine what the function will now prioritise and why for people
inside HR, its customers and stakeholders. This is the theme of Chapter 3.
33
research
Introduction
Topics covered
3.1 Framing the question
36
36
37
38
39
40
35
research
The question on HR purpose is what do the CEO, C-suite executives, managers and employees want
from HR?
Understanding HR terminology
3.1
Framing the question
We particularly wanted to hear from HR directors what their functions felt accountable for, and
also asked questions such as
what does a chief executive and top team colleagues want from HR?
what do managers and employees want from HR?
since we felt the answers should be essential in shaping HRs purpose.
We invited respondents to be future-focused and, if necessary, aspirational, should they not be
satisfied with current expectations. The intention was to identify any major themes HR directors
were conveying to their stakeholders and how these might shape the understanding of their
people in what they should do and how.
We were concerned with the question if the HR function had not been invented, what would
we now construct unencumbered by legacy issues?
3.2
What HR directors told us
These are examples of the language being used.
Execute the business model from a people perspective.
Everything related to the people side of strategy shaping it and implementing it.
Pulling the people levers of organisational performance.
Help management and employees to engage collectively to perform and prosper as an
organisation.
Catalyse and unleash the energy and contribution of people, to create discretionary effort.
Guardians of the employer brand, and being a great place to work.
In interpreting these phrases, we should distinguish between purpose, mission and
deliverables. Most of the language used is aspirational, and should thus be seen as indicating
HRs mission see the column.
36
research
reinforce the main areas where HR should deliver for their organisations talent and
capability, resourcing and workforce planning, performance and managing change
challenge the organisation to create conditions for lasting performance by using concepts
such as engagement and the employer brand which also provide measures of progress
convey roles for HR for example, acting as a catalyst, and providing drive and energy, which
go beyond traditional, passive forms of HR.
3.3
What managers and employees say
What CEOs and top team members expect from HR is discussed in Chapter 4, since their view
tends to reflect their relationship with the HR director. This naturally influences the latters
perspective of what HRs purpose should be, as noted above.
An Institute for Employment Studies report in 2008, What Customers Want from HR, provides
a useful perspective. Ironically, relatively little is said about what they want HR to do the
comments mostly concern how they want HR to behave, as examples in the column show.
Note also that if HR people concern themselves only with strategy documents, process redesign
and interactions with top management, they are viewed as remote. They may think they are
having a strategic impact on the business but, once out of touch with line managers and the
workforce, they are perceived to have little to offer, especially to senior executives.
While little is said that defines what HRs purpose should be, it emerges that the large majority
of staff do not know what HR does, and HR does not make a conscious effort to tell them, as one
senior manager interviewee put it. At least, managers and employees would welcome
clarification of what HR is there to do.
37
research
"If organisations are calling people business partners, they need to be more commercially savvy and
more in tune with business imperatives. The profession has not yet developed enough HR people with
those skills." Sian Thomas, Deputy Director, NHS Employers.
3.4
What business academics say
The most prominent voice of the last 10 years is that of Dave Ulrich, with some input from his
fellow professor at the University of Michigan, Wayne Brockbank.
Ulrich and Brockbank express their ideas as combinations of roles and characteristics, designed
to indicate more effective contributions from HR individuals and the HR function. While such
models have been hugely influential, they have suffered from misinterpretation and
misapplication and some of the desired effect to transform HR has been lost.
Ulrichs initial model in Human Resource Champions (1997), set out four roles business
partner, change agent, administrative expert and employee champion.
Business partner has become widely adopted as a job title, but with some controversy see the
column. By contrast, employee champion has been the least observed.
The most common misinterpretation is to see these as separate jobs, while Ulrich was referring
to them as qualities to be considered whatever the structure of an HR function.
What has proved most influential on HR structures has been Ulrichs three-legged stool
model business partners, centres of excellence, and service centres. Criticisms suggest that
this has created barriers between parts of HR. In reality, these barriers may be caused by
failing to address HRs silo behaviour, rather than the model itself.
Ulrich has since adapted his thinking and now talks about corporate HR, embedded HR, HR
specialists, and service centres.
He has recently introduced a new model of HR characteristics credible activist, culture and
change steward, strategy architect, talent manager and organisational designer, operational
executor and business ally. We examine this in more detail in Chapter 9, and in Appendix, 1.
Wayne Brockbanks thinking concerns five roles, as shown in the diagram on opposite page.
What we observe is how many in the HR world have selected the parts of these models that
appeal, and attempted literal applications when they were only offered as concepts. As
noted earlier, some blame the models when problems arise rather than recognising that
the underlying behaviours and competencies have not sufficiently changed. Some in HR
seem as confused as ever about what to aim at.
38
research
Coach
Business
Leaders
HR Systems
Designer
Organisation
Architect
HR
Facilitate
Change
In short, the most important messages from Ulrich and his peers for example, Lawler, Hewitt,
Brockbank, Pucik, and Wright are the simple ones of starting with business needs, designing
effective organisations, focusing on talent and performance, raising service performance and
getting better at measurement.
3.5
What professional associations say
As discussed in Chapter 1, we find considerable cynicism among HR leaders about how much
professional associations have contributed to re-shaping HR. They see them as being middle-ofthe road, and lagging rather than leading in their efforts.
In practice, association leaders are conveying much the same messages as the more progressive
practitioners as noted here and in the column.
Says Sue Meisenger, recently retired SHRM President: HR professionals should ask CEOs what
keeps them awake at night. If the HR function is not focused on the same issues, it is not
adding as much value as it could.
Debra Cohen, Chief Knowledge Officer at SHRM, adds: Today and in the future, HR
professionals need to know how organisations work, how business operates, and what is
unique about their own industry.
39
research
We propose that an HR function finds its own distinctive mission based on its own circumstances.
In conclusion, neither SHRM nor CIPD appear to have yet articulated anything memorable
about the direction of HR though the opportunity exists to convey a powerful and attractive
vision of HR as a place for high achievers. While the more progressive companies are tending to
do this, a tipping point may only be reached when all the key influencers in HR are aligned
around what they communicate.
3.6
What we propose
Every organisation will have particular needs and challenges that their HR function should
support. Taking this into account, HR will need to consider how far its capability development
meets future business needs, and then design its purpose and/or mission statement accordingly.
We offer as an example a form of words a straw man statement indicating the kind of
direction we advise HR to move in. This is based on the sentiments expressed to us by leading
HR directors, all pointing in the direction of organisational effectiveness.
HRs mission is to help management and employees to engage collectively to perform and
prosper as an organisation. We endeavour to do this by ensuring that the organisation
has the right people to meet current and future needs
provides a supportive environment for great performance
develops the skills and capabilities it needs
organises itself to meet future challenges
monitors and continually improves the way it uses its people resources.
Note that the word environment needs explanation as it covers aspects of HR and people
management such as motivating goals, recognition and reward for good work, supporting
people with resources, etc.
We propose that an HR function finds its own distinctive mission based on its own circumstances.
The models and terminology provided by business academics provide much food for thought in
doing so.
40
research
Introduction
Topics covered
42
43
44
45
45
47
49
51
54
55
56
56
research
While CEOs unsurprisingly say they want an HR function that is commercial in outlook, thats not what
the majority yet feel about their senior HR people. This is in line with many surveys over the years of
CEO attitudes to HR. The Secrets of CEOs, Steve Tappin and Andrew Cave, 2008.
4.1
Legacy issues concerning those HR directors who have not been as influential as expected
affect others perceptions of the role.
Given the stated importance of people to most organisations, why has the chief people
person not been included in the top executive team? Why do CEOs and senior executives
regularly question what an HRD or a function has to contribute to shaping strategy?
These are what determines how HRDs are viewed.
The personal credibility of the HRD and how this reflects on both the function and the
organisation.
The capabilities, influencing skills and attributes they possess.
Perceptions of the HR functions effectiveness.
How such effectiveness shapes the licence to operate at the top.
The focus of this chapter is on the personal contribution of the HRD as seen by interviewees,
many of them Group HR directors. We found a strong consensus about the role, its
characteristics and the conditions for success
43
research
I want functional directors like HR to be bold and bring me ideas. Dave Illingworth, CEO, Smith & Nephew.
4.2
Membership of the top team
All interviewees agreed that an HRD should be a member of the top executive team as
occurred in all the organisations we interviewed for these reasons.
Because organisations run on money and people, the finance director or CFO and HRD should
be the CEOs key aides, particularly in managing change CEOs often say this.
Employees typically represent the asset with the highest cost and greatest complexity to
manage thus HRDs are intrinsically concerned with financial management.
An organisations reputation is interwoven with the way its people are managed and especially
how it shapes their behaviour.
People factors have become more crucial within the context of global competition, as have the
need to fight for scarce talent, focus on ethics, innovate and exploit ideas.
The HR directors we spoke to shared similar views to those in the column.
Knowledge of business is critical they are top team members as business people, with a
particular set of HR-related responsibilities.
The HRD should bring insights and experience that are fundamental to every organisations
success workforce planning, talent, performance, organisation design and effectiveness, for
example.
Few decisions do not require careful thought about the people component.
The HR function as a whole cannot operate effectively without a full place at the top table.
44
research
Its impossible to manage a top team without a good HR director. They should be able to play the role
of an empathetic, holistic colleague, working with the business heads who report to me and who can
advise, listen and be trusted. Mark Tucker, CEO, Prudential Group.
4.3
2005.
Business acumen.
People policies.
Analytic capability.
Systems thinking.
Leadership.
Working with SBU heads and their HR business partners on strategy, people issues and plans.
Functional performance.
Consulting.
Influencing.
Conflict resolution.
Regarding the last point, continuous attention to the cost-base, competence, quality and
contributions of the HR function is essential for an HRD to gain and retain peer respect,
which applies to any function head. Many we spoke to had been hired specifically by CEOs to
overhaul the HR function.
CEOs expectations of HRDs will also be influenced by the focus of boards and investors. These
days, thats a lot to do with senior executive remuneration and succession, observed Mark
Tucker, CEO, Prudential Group.
Measurement.
HR functional knowledge.
Many of these would now be desirable amongst
HR managers in general and not just HR
directors.
4.4
Organisation design and effectiveness
Aside from their own functions performance, any HR director should endeavour to maximise
that of the organisation at large. While some of this work is necessarily done at lower levels
involving HR business partners and/or OD specialists the tone must be set at the top.
Business and function heads may invite advice from HR colleagues in the course of regular
discussions.
45
research
CORPORATE RESEARCH FORUM
4
THE HR DIRECTORS ROLE
46
The degree of skill and experience in organisation design should be considered for any senior
HR appointment.
As CRF has pointed out in previous reports, skilled organisation designers are scarce. Without
this, politics, personalities and short-term pressures have driven many re-structurings in
government departments, public and private sector organisations, which has been reflected
in poor outcomes and further re-structuring.
Organisations have necessarily depended on external expertise. However, constant complaints
are heard about change that looks good on Powerpoints but is rather harder to execute
given that strategy consultants tend not to take responsibility for outcomes, nor have
implementation capabilities.
Good organisation design is not static. Like sailing a ship, it requires both setting a sound
course and the skill to trim the sails and make constant adjustments to cope with changing
contexts. This is best done by experienced insiders with skin in the game.
The HRDs we consulted were all involved in suggesting or guiding organisation improvements.
However, among HR directors generally, questions need to be asked. Well-placed organisation
experts are conscious of relative inexperience in organisational development and design among
HRDs which puts them at a disadvantage in working authoritively with business colleagues.
research
The CEO is very open to the HR director being a prime source of personal feedback. Hes looking for
ideas regarding his personal style, because he knows this is critical to his success. HR director.
Indeed, part of the test of a strong HRD is their ability to analyse and improve the effectiveness
of structures at the top of organisations that is, executive and board committees.
Some Group HRDs spoke of the importance of achieving healthy power balances. For example,
their view is that parity between the number of business and function heads on executive
teams is better for decision-making similarly, decisions about the make-up of groups such as
Remuneration and Audit Committees are important.
Establishing behavioural and process ground rules in top teams and boards potentially pays
huge dividends, given the tensions that typically exist below and sometimes above the
surface. This tends not to be tackled effectively in many organisations senior executives need
someone with the courage and authority to draw attention to negative patterns of behaviour.
4.5
Relationships with the CEO and top team
Our discussions with HRDs revealed that they also played a number of other important roles,
often on an informal, unwritten basis.
Interlocutor for the CEO and top team on sensitive issues.
A coach to the CEO and senior executives or, at least, a provider of coaching.
Facilitator of top team processes.
David Russell of William Hill provides a picture of the transition that many HR directors have
been able to achieve in recent years. Eight years ago, HR wasnt at the top table. Its very
different now. Apart from having a close relationship with the CEO, Im a sounding board,
facilitator and coach for the whole team. Others expressed similar views, as the column shows.
Collectively, these roles help colleagues surface the difficult issues that any leadership team
experiences. Some might feel that, if top team dialogue is sufficiently open and honest, there
should be no need for an HR director to act as interlocutor between senior executives and the
CEO. However, this view can be unrealistic.
Many CEOs, particularly in global companies, are under huge pressures of time and travel, as
indeed their senior colleagues may be.
Power relationships inevitably distort conversations on sensitive issues, particularly if the
stakes are high.
A CEO can use an interlocutor to get across informal signals and advice, and to help induce
changes of behaviour without causing loss of face.
47
research
Even though Im new here, and the team has been together for some years, they have welcomed me in
the capacity of both coach and challenger. HR director.
It may be harder for an HRD to be challenging when the issue is about committing to a
particular strategic course that is not primarily about people and relationships. Even here
though, a business savvy HRD should know how to pose tough questions and use the coachs
toolbox to induce greater reflection.
We found that many HRDs are formally involved in personal performance and development
planning reviews at director level and sometimes the next level down as part of talent
management processes. Both these and less formal interactions provide opportunities to
listen to and guide colleagues.
Other senior executive team members should be able to have off-line conversations about
their performance, development and career issues.
Being a confidante to the CEO places the HRD in a strong position also to coach peers
although they must have the time and skills to do this.
When external coaches or mentors are used, the HRD should be aware of this to ensure the
investment in leadership support is spent wisely.
Although being a confidante to a CEO and direct reports is naturally challenging, HRDs we
spoke to saw it as a litmus test of their effectiveness. Said Paul Chesworth of Vodafone, You
need to be clear about how you respect confidences. Trust is essential. People know youre
involved in hiring and dismissing them but they must also see that you dont take sides.
This aspect of the role is further strengthened if the CEO formally positions the HRD as a focal
point to facilitate teamwork and processes at the top, and minimise dysfunctionality. Working
with top teams is also where positive culture change typically must begin. Our interviewees
spoke at length about their efforts to
48
research
CORPORATE RESEARCH FORUM
4
THE HR DIRECTORS ROLE
4.6
HR and the board
Despite the ostensible importance of good people management to any organisation,
experienced US and UK observers noted that few public boards of directors included people
with an HR background. Why?
People management has not been an explicit aspect of corporate governance, despite its
proven contribution to intangible value and employer reputation.
Relatively few HR people are in the pool from which non-executive directors are drawn, such
as past CEOs, CFOs or people with political networks.
Despite this, a gradual increase is evident in HR directors interacting with the board, for these
reasons.
The spotlight among investor and regulatory communities is focused on executive
remuneration and performance-related incentives especially since the 2008 financial crisis.
Greater importance is being given to issues such as talent benchstrength, succession and
engagement, all of which have become board concerns.
What potentially gives such interactions a sharper edge is where a board starts to pose hard
questions about executive performance and behaviours particularly in the US where they
tend to see the CEO on a regular basis, and where ethics has become part of the corporate
legislation framework.
49
research
HR directors need to become partners with the board and not just management, but too many HR
professionals are not developed to work at board level. This is now a major issue.
From the report, Managing Executive Performance for Organisation Results, 2008, the Performance and Reward Centre.
`In the UK and elsewhere, there has been some debate about HR directors as board members
desired by some in the HR community to boost the functions standing. However, as noted in
previous CRF reports and confirmed by interviews for this one, this is a red herring. See the column.
We explored what a board expects of an HR director, about which little has been written.
In principle, boards should have a high level view of the people plan and the quality of its
employer brand people should always be considered in terms of risk management.
In practice, HRDs spoke of their boards not previously knowing what a good people plan
looked like a number had taken the initiative to provide regular briefings at board meetings
as part of ongoing strategy reviews.
Boards naturally want a good pipeline of talent for successors to top jobs. They want to be
reassured that we can provide the Executive Committee of the future, commented Prudentials
Vacassin. Topics include the balance of internal development versus external recruitment.
Some boards appreciate the role of an HRD in respect of executive directors. They expect me
to work with the CEO to select and develop a highly capable top team, and pay attention to
the teams dynamics, observed Stephen Dando of Thomson Reuters. The board also had
major expectations of him in facilitating the companys recent merger.
A board will seek reassurance that shareholders and regulators are not going to take them to task
for allowing soft executive pay deals it is the job of the RemCo to examine the detail of such
arrangements.
Increasingly and particularly in the UK, HRDs expect to meet the chairman and non-executives
for briefing meetings during the year. Should CEOs be concerned about what might be
discussed when they are not there?
Not according to Mark Tucker, CEO of the Prudential. If you run an open organisation, its
right that HR directors should have access to the chairman and discussions with the board.
For their part, HRDs see this as another aspect of the trust they have to establish with all senior
executives.
Priscilla Vacassin also points out that non-executives should be able to trust how decisions to
hire or fire executives are made, which requires an understanding relationship with HRDs.
As the selection and management of boards becomes less of a cosy club, the professional
knowledge of HRDs is increasingly needed for more rigorous selection of non-executive
board members, and advice on related remuneration and development.
50
research
Comments Professor Pat Wright of Cornell University, a leading expert on HRs role in
corporate governance: The competencies of top HR executives, such as team building,
group processes, selection, training, and performance management, are all critical to an
effectively functioning board. Consequently, HRs role must expand to include all these
activities, not just at the organisational level. We discuss this further in Chapter 6.
4.7
HR, the HR director and strategy
The HR community has become preoccupied with the extent of the functions contribution to
strategy. This is regarded as a measure of whether HR is regarded as a core player or merely as
an order-taker. Horror stories are quoted of major decisions being taken, such as acquisitions,
with HR being informed just at the last minute and being lumbered with a long and messy
implementation.
By contrast, the HRDs we interviewed participate fully, as executive team members, in all
strategy discussions and major decisions. Indeed, where HR initiates organisational
effectiveness reviews and is recognised as an internal authority on organisation design and
shaping culture it becomes centrally involved in organisation planning at multiple levels.
Others used similar language, and the term HR strategy is on the wane Geoff Lloyd at Serco
represents this trend. I dont like to separate it from business strategy, but we do refer to
people strategy for others to identify with. We do not call it an HR strategy. See further
examples in the column.
We found that strategy formulation is becoming more of a collective process. Increasingly,
individual functions develop their plans in consultation with each other thus moving away
from the silo behaviour of the past.
51
research
A Group HR director should ensure that business level HRDs have the necessary experience and
credibility to play an identical strategy role at their level. This can apply also to HR managers or
business partners at the next level down should those management teams participate in
formulating strategies as happens in devolved structures, for instance.
The people component of strategy
Some areas of people management should be major considerations in shaping strategic
direction, in which HR is a primary influence.
Workforce planning: comprehensive assessments of medium to long-term needs, specific skills
demand, supply factors in territories and business sectors along with the options and
associated economic modelling that arise.
Helping the board and executive team understand the external environment from a people
and workforce perspective, in addition to the internal climate and engagement.
Talent and capability: the organisations potential for attracting, using and retaining core
competence and management talent and the capability investments needed.
Performance: how the organisations ability to perform matches up to competitive threats and
opportunities to the expectations of owners and investors, and to the requirements of future
business models.
Change: assessing the organisations ability to cope with and manage multiple forms of
change, and mergers and acquisitions in particular.
John Whelan of BAE Systems expressed a sentiment common among HR directors. Of course
were there to ensure that people issues are thought through. But we should also offer a more longterm and conceptual viewpoint thats our particular contribution. Many HRDs point to instances
where strategic thrusts are, in fact, mainly about people, as the previous column showed.
A truly strategic HR function and director will make other important contributions to strategy by
being proactive, rather than simply ensuring people considerations are taken into account.
Facilitating the strategy process
From an OD perspective, influencing how strategies are formed and implemented, taking into
account both group strategies and sub-strategies at business and functional level.
Ensuring the right people are involved and defining particularly useful behaviours in strategy
formation learning to overcome the limitations of preconceptions, assumptions and fixed
positions, for example.
52
research
Acting as strategy meeting facilitators a number of HRDs said they and colleagues undertake
this role at times.
Priscilla Vacassin of Prudential, who has been a strategy facilitator at both BAA and Abbey, refers
to a new language and insight on organisational effectiveness thats often been missing at the
strategy table. She also works on getting the right issues addressed at the right level we call
it levels of work, with Group work being level five which helps to facilitate delegation and
avoid micro-management. Like other HRDs, she ensures that the governance of people has both
rigour and prominence, as the box shows.
People governance at Prudential
HR directors across the Group meet quarterly. They develop the People Strategy but it is
signed-off and owned by the Group Executive Committee (GEC), with a formal report to the
board every year.
The GEC meets three times a year as the People Forum, discussing issues rather than simply
reviewing metrics. The top 100 is a priority focus for discussion key roles, succession, the
proportion being filled internally and externally, and performance rating distributions.
Each business division echoes this process, with their top teams also meeting as People Forums.
Note the case study on Hewlett-Packard, where Leslie Berkes describes how the top 80 line
executives have been trained in organisational effectiveness concepts.
Shaping the strategy function
This involves ensuring that those with specific responsibility for strategic thinking, scanning and
analysis actually have the breadth of competencies to develop rounded strategic proposals.
Specific points to note include
avoiding the traditional practice of locating this function within finance
ensuring that the strategy team has organisation development and design skills, whole
organisation perspectives and implementation capability
53
research
Skill areas
Business.
Strategy.
Influencing.
Getting things done.
OD.
Understanding and effective use of numbers.
Success factors
4.8
The HRDs personal characteristics
Integrity.
Courage and polite toughness.
Clearly HR directors have to be a role model in many ways, both for their function and their peer
group. They should set standards for functional skills and knowledge in areas listed in the column.
HRDs who have worked outside HR find that this often stands them in good stead, not just as
experience-building but also in terms of credibility. Having operated in different industries is
also valuable but so is having a deep knowledge of the organisations sector. You cant add
value in Vodafone unless you understand the telecoms business, observed Paul Chesworth.
Gary Dibb
People who get on in HR typically punch above their weight in managing relationships, said
BAEs Whelan. Like others, he felt that, by acting in an informal coaching and facilitating
capacity, an HR director should be able to demonstrate these skills.
While having the authority to advise on senior executive performance and prospects, it was
felt that the HRD must avoid politics and rivalries. You must not be seen as a threat, said
Gary Dibb, former COO at Barclays. That would compromise your position as confidante to
your peer group.
There was some debate about the extent to which an HRD should distance himself from business
heads in order to be able to stand back and make independent judgements.
54
research
Its important for your credibility, however close to the CEO you are,
that you are seen to disagree where necessary, and that you are
respected for it. Its counter-productive for the CEO as well if this is not
the case. Priscilla Vacassin, Prudential.
One expressed this as standing on the edge of the circle. Another said: A Group HRD must
be prepared to be lonely.
Others felt that all directors should be free to speak their minds if not, then the leadership
team would have a problem.
Some HR directors emphasised the importance of close working relationships with other
functional directors.
My relationship with marketing is critical it needs both of us to shape and drive the brand.
The CEO often says that finance and HR are the two key functions in driving change so its
no surprise that we work closely together.
For Group HRDs, an overall challenge is ensuring that HR directors and business partners at
other levels can mirror these behaviours and characteristics. Otherwise, they would spend
significant time working at other levels. The onus is on the HRD, through selection and
development, to build a strong HR leader pipeline.
4.9
Non-professionals as HR directors
A controversial issue in HR circles is the practice of appointing non-HR professionals to head the
function. There are many instances of this, particularly in the US. The point is made that the
equivalent hardly ever happens in finance, legal, IT or marketing and if it did, shareholders
would likely challenge it. Why does this occur in HR? See the column.
It is certainly the case that such appointments usually revert to an HR professional in order to
restore professional strengths.
It is difficult to generalise on this sensitive issue. Some organisations such as HewlettPackard train line executives in HR skills, and Mars has a long-standing policy of placing
managerial talent within HR for defined periods. HR functions with people from a range of
backgrounds will think differently from one comprising HR lifers.
The real challenge to tackle, our interviewees felt, is strengthening the HR talent pipeline to
ensure a flow of people with both a career anchor in HR and strong business skills.
55
research
People trust me to be independent. They would be quick to spot it if this didnt happen. HR director.
4.10
Scope of the role should it be split?
Given the emerging agenda for HR change in this report, particularly in large organisations,
careful thought is needed about how the HR director role should be structured and resourced.
As a former chief operating officer (COO) at a number of organisations, including Barclays, Gary
Dibb makes these points.
An authority on performance.
Experience in different kinds of organisations.
Rapidly acquires deep knowledge of the
particular organisation and sector.
You can spend a lot of time working with the CEO and with the top team, helping them in vital
ways to manage the business and their own interactions. This is time well spent. However, this is
a job in itself particularly if you have to travel leaving little time to manage the function.
Theres always work to develop and shape the function and, if there are capability issues that you
arent getting time to address, that will undermine your peer relationships.
As a COO, I am able to pull all the functional levers to help the CEO fulfil his objectives, allowing
him to be more outward-facing. Getting functions to work together in a more streamlined way is
another potential benefit. In addition being generally more accessible than the CEO a COO is
able to help facilitate faster decisions because he is an extension of the CEO. I can also bang
heads together if needs be. To be trusted, however, it is important not to be a rival for power.
If there is no COO, the Group HR director can do many of these things but he must have the
capacity as well as the skill.
4.11
The ideal HRD
Chief executives know that the HR director they appoint has a determining effect on the
function. Typically, they want HR to be better at helping deliver performance, manage change,
and provide quality administration, while minimising costs. Beyond that, do CEOs know what
qualities a good HRD should possess? By all accounts, this depends on what they, and peers,
have experienced to date.
56
research
Professional associations bring up HR people to be mandarins, and so thats what CEOs get used to.
Occasionally, CEOs think out of the box and thats when the fun starts. Daniel Kasmir, BDO, Stoy Hayward.
The HRD must be able to manage the many tensions that come with the job.
A member of the business team, yet will not be swept away by group-think.
While a trusted aide to the CEO, able to be objective and can be consulted in confidence by
other directors.
Takes a long-term perspective whatever the short-term tactical pressure and crises.
While encouraging open discussion and helping the CEO to be a good team manager, can act
as an interlocutor between the CEO and team members, when appropriate.
Being a friend to all senior executives including the CEO yet prepared to be rational in
finding their successors and taking an objective view of their performance.
Being a role model to other directors as well as the HR function.
Managing the function effectively as well as being a top team member and, in particular,
developing HR function talent so more can be safely delegated.
Managing time efficiently in order to be visible around the organisation to listen and get a
feel for the organisation.
The general view among recruitment consultants is that demand for such a wide set of skills
considerably outstrips supply. Are these the HRD competencies of the future? Certainly they
are, because few can claim to possess them all now.
57
research
Introduction
Topics covered
5.1 Designing the organisation
60
62
67
71
77
59
research
5.1
Designing the organisation
A question that any board or any enquiring shareholder should ask of management is:
where is your source of expertise in organisation design?, given its importance to
ensuring future performance and managing change.
An essential capability
Busy senior executives facing multiple pressures are unlikely to be either in the best position to
make dispassionate decisions or able to study the subject in detail.
In Chapter 4, we drew attention to the role of HR director as organisation designer in chief,
guiding the CEO and senior colleagues in decisions about organisation and function structures.
In our view, a scientific understanding of organisation design and of organisational
psychology should be a requirement for all HR managers, enhancing their skill by work on
change projects in different scenarios.
The benefits from such capability include
keeping organisation design issues under expert review as part of strategy discussions and
thus reducing ad hoc design decisions
ensuring that the practicalities of implementation are incorporated into strategic decisions
about structures
knowing how best to use consultancy support note Ed Lawlers advice in the column
having a deep knowledge of, and being able to ascertain, what will and will not work
using design expertise to guide, or review, proposals for mergers and acquisitions.
Consultancies should be used to enhance, not supplant, the development of internal skills
though in a large organisation, expertise should usually be located
in a central organisational effectiveness unit or expert, working with the strategy team
at business level, to facilitate local design decisions
within business teams, with the HR director or manager being expert enough to guide
strategy discussions, and involve specialist colleagues.
60
research
Note that organisation design experts must protect their objectivity particularly if
executives have assumptions or special interests in the area while skills/knowledge should
be maintained by studying successes and failures elsewhere, and the environmental factors
that may affect design decisions. The current structure should be continually reviewed.
The HR director of a global firm we interviewed commented that his new CEO had required HR
to assume responsibility for the evolution of all business and functional structures. Its our job
now to take the initiative its not just down to the relevant director. This requires a high level
of OD skill with deep knowledge of the subject, which is scarce even in major consultancies.
Much more than a blueprint
In our view, organisation design is more than structures the capability we have described
above must interpret organisations as whole systems, which is the purpose of Jay Galbraiths Star
Model of 1973. This highlights the inter-connections between strategy, structure, processes,
people and the way people are rewarded. Subsequently, Lawler has added the dimension of
core organisational competencies and emphasises that these elements collectively comprise
an organisations distinctive identity.
The Star Model
Rewards
Strategy
People
Structure
Processes
An organisation designer thus has to be a rounded expert to ensure that change in one part of a
system does not adversely impact on other parts. Leaders also need to be clear about the kind of
organisation they envisage to achieve their objectives and how the design model might
provide a source of competitive advantage. See the future view in the column.
61
research
What are organisations now doing differently in talent? Too often, its grabbing a new label and not
fundamentally changing anything. Its become a water pistol fight for talent, not a war. Brian Hackett.
To be a guide and interpreter of new ways of thinking, HR should anticipate rather than react to
technological advances, and be able to identify the human implications before decisions are
made about structure and work processes. As the previous column suggests, hierarchical
structures are now shifting towards the concept of networked work systems, where behaviour
and culture are critical to build organisation cohesion. Management of capability, performance,
change and engagement will be critical enablers.
5.2
Managing talent and capability
Taking responsibility
Surveys of business and people-related issues frequently find that talent, leadership and
organisational capability are almost always at the top of a CEOs priorities and it is there that
responsibility for talent management and capability development begins.
Leaders will set the objectives that determine the capabilities the organisation needs, and
influence the culture or climate that either attracts or puts off talent and future potential
leaders.
Line managers play a key role in any talent system in how they develop capability, motivate
good performers, and identify and encourage potential.
What should HR be responsible for? Ultimately, providing the expertise that enables their
organisation to obtain and deploy the talent it needs to succeed. This includes
devising the talent approach that best fits the organisations objectives
helping shape strategy to align business and talent objectives
designing and supporting the core processes of talent management
devising a measurement system to guide management decisions and provide data on talent,
its capabilities and improvements
identifying opportunities, problems and queries regarding the effectiveness of the talent
system
encouraging, educating and refreshing managers on their roles in talent management.
How well HR succeeds in these areas depends on the authority deriving from its skills and
influencing ability and thereafter, its ability to shape leadership behaviours that
champion capability, talent and performance.
62
research
Finding ways to make employees feel valued, while identifying specific groups as high potential
using a segmented approach.
Making clear that talent is not just about achieving senior management positions there can
be talent needs at many different levels.
Targeting development activity carefully and overtly so that employees feel supported.
Recognising all who perform well and show potential not just a favoured few.
63
research
The challenge of embedding talent management and development disciplines among managers is
largely about behaviour.
Diversity
In global labour markets, using talent development activities to build a diverse and culturallyaware cadre of leaders, project managers and subject experts. An important aspect of this is
international mobility, as described in CRFs 2007 report, Operating Globally.
Movement in and out
of the talent pool
Progressive organisations make clear that inclusion in a talent pool is not an entitlement and depends on
continuing to progress as expected. If circumstances change, individuals can also choose to retire from the
pool. Entry should be possible for late developers. Managing such movements should be sensitively
handled with regular discussions.
While recognising the value of new talent particularly when fostering culture change and performance
uplift most HR directors we interviewed aim to increase the talent they make rather than buy, thus
concentrating more on talent development.
Cross-fertilisation of talent
There is increased attention paid to movement of talent across the organisation to build experience
which also helps to reduce silos and foster a more shared culture. For example, Tom Brown of Rolls-Royce,
describes how, Weve created non-executive roles on managing boards within the business to develop our
own top talent, and also to facilitate more integration and cross-fertilisation. Shared learning experiences
also encourage cross-fertilisation, including working on business-critical projects, with director-level
oversight and coaching.
More focus on behaviour
We generally found more thought and rigour being applied to employer brand development
and employee value propositions. The Hewlett-Packard and Musgrave case studies are
examples. Positive differentiation through both brand and propositions contributes directly to
success in attracting and retaining talent.
Rigour of review
Our HR director interviewees regularly organise board and top team level talent reviews often
twice or three times a year. While boards attention is mostly on top management succession, they
are also concerned with employer reputation issues. An increasing trend is for business areas and
functions to undergo their own talent reviews, often led jointly by the HR director and CEO.
64
research
Impact of recession
In the current difficult economic circumstances, talent tends to be careful about considering job
moves. Companies are focusing more on the important value contributors and the different
skills required in recessionary conditions.
The importance of context
The internal climate, or context, is a major factor in good talent management, as shown in the
model below, devised by CRFs Mike Haffenden. This is as much about how things are done as
what. The message is that the cultural environment also needs managing. A failure to do this
effectively accounts for the poor talent management outcomes that some organisations have
experienced despite much talk about and investment in talent-related processes.
How do you
improve context?
Leadership
Stimulating
values
Appropriate
structure
Clear processes
for TM
Openness
Extrinsic
motivation
Context
Average people
encouraged to
do well by
great can do
environment
High calibre
people, high
performance
culture
Low calibre
people, low
work ethic,
non-supportive
environment
Capable
people,
performance
stultified by
context
Is there value in
developing
great talent in
an environment
that stifles it?
Capability
How do you improve capability?
Hire intellect
Develop knowledge and skills
Give experience
Intrinsic motivation
Discussions with Ed Lawler raised strategic choices that organisations face about the context
for talent management, based on how they organise themselves. He sees these choices as
fundamental issues that HR professionals must be capable of addressing. Much of his recent
book, Talent, is devoted to distinguishing between structure-centric and human-centric
organisations.
65
research
Some companies make no apologies for offshoring jobs. Its a natural consequence of needing talent
at the lowest price available. Ed Lawler.
Lawler also argues that organisations which depend on talented people for their future face a
crucial choice about the employee deal.
High commitment organisations focus on employer brand values and processes that bind
talent for the long term. Employee involvement and engagement are priorities, building a
sense of community and, perhaps, shared ownership. An interesting example is Nucor Steel
see the previous and this column.
However, in the context of globalisation, some organisations prefer to minimise their
commitment to geographic markets or business lines, but need highly-skilled talent to compete.
Investment banks are an obvious example though Lawler identifies this as a more general trait.
The talent proposition of transaction-oriented organisations is that they have a core of longterm business managers, and then hire skilled employees to fit business projects or ventures.
They are more likely to buy technical and managerial talent than make it. Thus they travel
light in terms of investment in talent, and offer different types of contract to suit circumstances.
Each approach has advantages and disadvantages.
High commitment organisations need to be sure of their ability to be successful, and believe
that greater mutual commitment yields benefits in tough times as well as good. Again, this
reflects Theory Y as opposed to the more mercenary approach of transactional businesses.
66
research
The latter expect and reward high performance. On the surface, they may have many features
of the high commitment organisation in terms of benefits and employee support, for example
however, the main commitment is to flexibility rather than people. Innovation is more likely
to be bought in.
These companies make no apologies for offshoring jobs. Its a natural consequence of their
need for good talent at the lowest price available. Its a kind of creative destruction that they see
as necessary if they are to stay at the leading edge of their industry, comments Lawler.
Whoever specialises in shaping talent management and many organisations now appoint
a talent head or director within HR to do this they need to influence leadership thinking
about the fundamental choices raised by the business model and culture, along with the
impact of these choices on the way talent is sourced and nurtured.
5.3
Performance management
There is a rich history of dissatisfaction about performance appraisal among end-users it is,
arguably, the least popular process associated with HR. Regular debates in management circles
focus on whether it should be dispensed with. Yet, there is general acceptance that a good
performance management system (PMS) is essential. So, what should a CEO and senior
executives expect from HR to improve confidence in the PMS?
Organisations tend to focus on the process of performance reviews when, in reality, performance
management involves understanding a set of inter-connected activities an entire system. Note
that a PMS should take into account both individual and team performance.
While understanding and managing an inter-connected system is complex, the component
parts should be as simple as possible. There is a tendency to over-design which should be
strongly resisted, as Tim Miller points out in the next column.
67
research
How individuals and groups behave is as important as achieving results. Positive environments best
shape that behaviour potentially creating a platform for good results year-on-year whatever the
circumstances. This cultural context for performance is critically influenced by organisational
values, and how leaders articulate and role model them. As Jack Welch pointed out, those that
achieve results without respecting values are destructive to collective performance. Hence, many
high-performing organisations incorporate values assessment in their PMS.
Finding ways of doing things differently and better should feature in any interpretation of
performance. This leads us to conclude that a performance culture should be synonymous with
a learning culture if employees are to own their performance improvement.
Self-identified improvements are more lasting and inspiring.
High-performing organisations stress the importance of experimenting, learning from
mistakes, and the sharing of learning.
While a fear of failure can produce stretch performance when self-driven, fear of punishment
tends to undermine initiative and positive risk-taking.
Ensuring performance management is continuous
Rather than being an annual chore, performance reviews should be a regular process of
discussion, coaching, adjusting of objectives and development activities happening as often
as mutually agreed to be helpful. Monthly one-to-ones are common, as are in-depth yearly or
twice-yearly discussions.
68
research
While we dont own the management of performance, HR professionals are the guardians of the
process and the challengers about how it is used. Priscilla Vacassin, Prudential.
Many performance systems, especially the review and reward process, still concentrate
heavily on individuals, while much of the work done is through team effort. The PMS needs
to be re-thought where this imbalance persists.
Priorities for HR to work on
While managers have direct responsibility for performance, HR should have shared
responsibility for the effectiveness of implementation, and for quality outcomes. Design and
implementation could be through a beneficial partnership managers will respect a system
more if they have helped to create it and can see how their needs are met. HR functions have
been conducting PMS system audits for many years but how many can claim that managers
praise both the PMS and HRs contribution?
Focus on motivation
Just checking whether performance reviews and planning are completed and on time
achieves little. A truer test of PMS quality is whether they have motivated reviewees to achieve
more and whether employees look forward to them.
Develop performance management skills
The quality of feedback determines whether performance reviews are motivational and, of
course, drives performance improvement. Openness, being honest with each other and creating
the right atmosphere to say difficult things where necessary, are success factors. The onus is also
on the manager to be self-confident and to build the confidence of the reviewee to provide
meaningful upward feedback.
See the Borealis example in the column. While some organisations struggle more than others
with open discussions because of their cultures, it is a challenge for any manager.
69
research
Ranking systems are no substitute for judgement and courage. Steve Kerr, Goldman Sachs.
While the capture of agreed key points is useful for the parties in a performance discussion
and for tracking progress and plans over time the quality of discussion should be the focus, not
the documentation. This is an issue if HR is obsessed with the process rather than the outcome.
See CRFs 2006 report, Improving Performance Through Appraisal Dialogues, for guidance.
Skill and fairness in rating
The fairness of ranking is another indicator of PMS quality. Ranking occurs in a performance context
to determine promotion and reward decisions, and in talent and succession review processes.
Every management team has to learn how to do this well, and were no exception,
commented Prudentials Priscilla Vacassin.
One of the important things we teach managers is how to distinguish between performance
outcomes, effort and potential, observed Noel Keeley of Musgrave.
Favouritism and subjective judgement have to be eliminated for the process to be respected.
While some organisations still use forced ranking, logically this sends the message that artificial
rules are being imposed which distort reality. If managers cannot be trusted to rate fairly, it is an
admission that they have been insufficiently selected and developed and that collective
decision processes are poor.
Role modelling and recognition
Those who demonstrate skill and dedication in developing employee performance and potential
should be encouraged to act as role models and be recognised and rewarded appropriately.
At Standard Chartered, managers whose teams score highly in engagement may be asked to
advise peers, and thus help raise standards.
Though much time, effort and capital has been invested in financial incentives, relatively little
attention has been paid to non-financial rewards, despite evidence that they can be more
effective in motivating performance. That is not to dismiss variable compensation per se
properly managed, it communicates powerfully what is seen as important, and provides an
incentive in the short-term. However, the costs linger on after the effect has worn off.
Furthermore, there are other more meaningful ways for an organisation to show it notices
and cares when people do well. Aside from formal recognition schemes, a critical factor is
management behaviour a simple thank you and shared values, for example.
70
research
While there are some fundamental principles for good performance management, organisations
with global structures and networks have to adapt their approaches to local needs and contexts.
We need to understand the drivers and motivations in different country and company
cultures, just as the characteristics and needs of different types of business and function
should be catered for in design and implementation, points out Vincent Thomas of
Barclays. HR itself should have the right attitude and accumulate experience in order to
guide leadership decision-making and behaviour.
MIS and measurement
Performance management data and information needs particular attention and an appropriate
management information system requiring HR to do more than just conduct occasional audits
on how performance reviews are done. Comparisons should be made between end-results
profit, sales and other output measures and measurements of people inputs and people process
indicators, providing a real-time dashboard of performance management quality. There are many
indicators to help build such a picture. For example, staff survey feedback on PMS effectiveness
can be correlated with engagement scores, as well as classic data on absenteeism and turnover.
5.4
Managing change
Having discussed in 5.1 above the need for organisation design expertise, similar points apply to
the role and expectations of HR regarding designing and implementing change.
The need for expertise
To a large degree, an organisations success and that of its executives depends on how well
change is managed, yet many studies and media reports cite a high rate of failure or, at least,
under-achieved goals arising from change processes. See CRFs 2006 report, HRs Role in
M&As, for reference. There is no shortage of advice either from literature, change tools and
authorities such as Porter and Kotter.
Ed Lawler told us that he found no consistent pattern in the way companies organised themselves
to manage change. Organisation design just doesnt exist as a discipline in many companies.
research
What qualifies leaders as designers and organisers of change? To what depth have they
studied the subject? How broad are their experiences and what do these tell us about how
effective they might be in leading future changes?
Does the organisation have specialists with proven expertise to support leaders in managing
change processes?
In terms of definition, change can be applied to entire organisations, functions or just to teams,
and there is a sliding scale between two extremes.
Radical or transformational change, with deep impacts on structures, work, jobs, prospects
and so on.
Evolutionary change through incremental improvements, adjusting the way existing things
are done.
Nonetheless, there are common factors, all of which require change expertise, as shown here.
There are increasing pressures to be able to handle radical change more often.
External stakeholders will make assessments of an organisations abilities to drive and handle
future change. Hitherto, some company analysts and fund managers, for example, have not
been searching enough in questioning organisational capability to manage change. Customers
and employees can usually provide insights from experience, but owning stakeholders dont
necessarily check their perspectives.
72
research
HR and change? Its a constant it should be part of what we do all the time. We should be aiming to
develop the organisation as one continuous process. John Whelan, BAE Systems.
Our focus here is on how companies, public sector bodies and their functions organise and
prepare for change and on the specialist contribution that an HR function can and should
deliver.
All central functions have a role in managing change, either because change affects their area
or because they have a wider part to play in the change process. This begs similar questions to
those posed above about leaders.
How qualified are they in managing change? What does their track record suggest about
handling future changes?
How well do these functions work together in designing and implementing change?
How do those affected by change, internally or externally, feel about how well it has been
communicated, designed and executed?
The HR contribution
As all change involves people and people systems, in principle HR should be a key player in
managing change. However, other questions follow.
What roles should HR undertake?
How should it be organised to perform these roles?
What are the capability requirements for HR?
The more strategic or technical the change, the more important it is for HR to offer insights and
experience. Its ability to add value needs to be demonstrated.
We see five principal HR roles.
1 Management team
member
This is HR as a contributor to change decisions, planning and follow-through and ensuring that the people
implications are thought through and embedded in the change process. It applies to HR directors at organisation
level, and also to HR managers in businesses and functions.
2 Change manager for For changes in people processes, HR should naturally manage all the stages from envisioning to project managing.
people processes
But note this caveat. As people strategy should be owned by management teams, changes to the support processes
should be seen as business changes, and not HR initiatives. The point is how the organisation benefits, with
ownership lying with the management team and not HR. This should avoid any impression of HR having its own
functional agenda.
73
research
There is a huge advantage from having a dedicated resource that works with a strategy unit to develop
the organisations capacity to change and be more agile.
3 Change supporter
Change processes have many practical people implications the elements that need to be redesigned as a consequence of decisions taken, whether about restructuring, new technology or
operating methods. Within HR, much work will have to be done to support implementation. In
contrast to being reactively involved after the fact, we envisage a well-prepared HR function
being proactive and thinking ahead by virtue of having been part of initial decision-taking.
4 Change skills champion
The more progressive companies tend to interpret change management as a core requirement
of managers attitudinally as well as in knowledge and experience. See the GE example in the
column. Leadership development processes reflect this, including the use of change projects as
practical learning opportunities with direct organisation benefits. L&D functions should design
and facilitate the change of culture as well as competence, working closely with HR heads across
the organisation. The irony is that organisations moving in this direction already have a good
change orientation at the top.
5 The organisational transformation unit
We posed the question above about organisations having specialists with deep expertise to
support leaders in managing change processes. We find that many have not yet filled this gap,
and have relied too much on external advisers, with mixed results. There is a huge advantage to
be gained from having a dedicated resource working closely with a strategy unit to develop the
organisations capacity to change and be more agile. In Chapter 9, we make a case for an
organisational transformation unit.
Change capability portfolio
A senior HR executive should be able to offer experience in these areas of change.
Creating a change-oriented culture: addressing behaviours, encouraging involvement,
instilling confidence and helping overcome insecurities, fostering adaptability, flexibility and
envisioning.
Innovation: both improvements and breakthroughs, understanding process and behavioural
issues, and how these interrelate with strategy and organisation structure. Note CRFs 2007
report, Embedding Creativity and Innovation.
Collaboration: how to align people around designing and managing change, develop a
collaborative mindset, and ensure that value is created as a result.
Project management: individual skills and collective disciplines.
Organisation analysis and process-mapping: taking into account the operational, financial,
human and reputational implications.
74
research
This refers to the set of principles and pre-requirements used to speed up change processes
safely, thus improving outcomes such as competitive advantage, reduced costs, increased
customer satisfaction, and so on. Most aspects of fast-cycle change impact on people
management and organisational culture. As Gary Hamel explains in The Future of
Management, 2007, the emerging style of management in fast-cycle change situations is
processing information quickly and accurately.
75
research
Its an important principle in managing change to respect the knowledge that resides in the line.
Steve Kerr, Goldman Sachs.
Co-creation
This principle advocates involving key stakeholders especially staff, customers, suppliers and
business partners. Apart from providing valuable insights, creating a sense of shared ownership
and responsibility for change considerably boosts the likely success rate.
Large-group decision-making
Steve Kerr
Goldman Sachs
76
research
CORPORATE RESEARCH FORUM
5
HRS PRIORITY AREAS
Those involved in service delivery should understand the fundamentals of change to help
them be more effective. This applies especially to those working directly with managers and
employees. They are also ambassadors for the HR function, and should be able to act as skilled
listeners and data collectors.
As regards creating a centre of expertise in change management, we argue that this is best
done through an organisational transformation unit which works closely with the strategy
function. Its role is to focus continually on how to improve all aspects of the organisation
from work systems to structure and capabilities. This is where specialist expertise in
organisation design should be found.
Such a unit may or may not fit within an HR structure, as discussed in Chapter 9 where the HR
function itself is examined.
5.5
Other priorities
There are many other responsibilities and priorities that an HR function should address. These
include learning and development, HR technology, pensions, employee wellness, diversity,
ethics, safety, industrial relations, etc. Some have particular prominence in certain countries
healthcare costs are a major issue in the USA, for example or at particular times, such as when
a labour dispute or a health and safety incident occurs. Workforce planning is another key
requirement CRF will produce a research report on this in late-2009.
77
research
Introduction
Topics covered
6.1 Whats the issue?
80
81
82
6.4 On reflection
83
79
research
HR must devote considerably more wide-eyed effort and attention to assessing the honesty and
integrity of the organisations decision-makers. Professor Pat Wright, Cornell.
6.1
Whats the issue?
Why might an HR director be asked to assume a formal role in corporate governance,
interacting as appropriate with the board, senior executive team and stakeholders? There are
four main reasons.
Ethics
A latent mistrust of executive management is evident, resulting from scandals such as Enron
and fuelled further by M&A deals that sometimes seem to benefit those at the top while others
lose their jobs. This has triggered regulatory measures such as Sarbanes-Oxley, including its
requirement for formal, evaluated ethics policies to cover all employees.
Given the financial mismanagement, excess and fraud exposed by the credit crunch, regulation
is set to increase, given the various failures of oversight.
Over-mighty leaders
A sea-change in attitudes concerning overly-powerful leaders is occurring. In recent times,
some have been fired for reckless behaviour Jean Marie-Messier of Vivendi, for example or
dishonesty, such as Conrad Black and Denis Kozlowski. Investors and commentators are now
alert to those leaders who dominate their boards or executive teams citing the danger that,
without challenge, hubris or complacency is likely to set in, and business failure may ensue.
Indeed, that conclusion is now drawn in the case of several major banks.
research
Relevance to HR
Debate regarding HRs role in avoiding scandals and mismanagement or in challenging
executive behaviour has led to pointed questions being asked of HR and the HR director.
Does the HRD have the courage to stand up to a strong leader or a headstrong team?
Does the HRD know enough about the business to realise when a strategy is reckless rather
than bold?
What guarantee of good behaviour do investments in psychological assessment, leadership
training, executive coaching and talent development provide?
Why is it that inequities of pay and performance expectations between the top and employees
are allowed to continue?
What is the HRD role in this regard?
6.2
Professor Pat Wright of Cornell University is a leading expert in corporate governance and HR.
He shares the views of our HRD interviewees that
boards are taking a greater interest in talent and engagement
they also seek to avoid criticism for bad senior appointments, poor succession planning and
unjustifiably generous executive remuneration as public pressure demands more accountability.
Wright stresses: HR must devote considerably more effort and attention to assessing the
honesty and integrity of organisational decision-makers. The function should be able to refuse
promotion, control behaviour or terminate. Assessments must be thorough, ongoing, and
cover all aspects of an executives life.
81
research
While this may sound intrusive, it is the kind of examination that psychological assessments and
360s should provide and is the basis for rigorous performance and development reviews.
Those conducted at senior level in organisations such as Musgrave, Thomson Reuters and
others, are close to his view.
Wright also points out that experience shows how executives slip into positions and behaviours
which, with hindsight, they should have avoided.
Even bad apples were probably not always bad. Rather, as they constantly encountered
legal and ethical boundaries, they possibly found they had crossed them without knowing.
HR professionals need to keep their executives from getting too close to those boundaries
and speak up as soon as they cross them.
Our HRD interviewees said they were in a sufficiently influential position to do this, and also felt
they had access to the board. But, it is by no means universal. More generally, HR directors feel
they could be fired for taking such a stand and there is evidence to support this.
6.3
Specific HR role and responsibilities
Along with Professor Wright, CRF is among the first to explore the potential role of HR in
corporate governance, since there is no mechanism to create an agreed collective position, nor
is there a body that might realistically do so.
Based on what HRDs in progressive companies are starting to do, here are CRFs
recommendations for good practice. They reflect the view that boards and top teams should
face similar disciplines and principles concerning selection, development, performance review,
team processes, and reward, that other employees are expected to follow.
HRs expertise and responsibilities for these activities should include the board, as far as practicable.
HR directors should be involved in the selection and assessment of board members against
clearly agreed criteria. These should include agreed ethical principles that apply to all board
appointments potential conflicts of interest are an example.
HRDs should be accountable to the board jointly with the CEO for designing executive pay
systems that have clear linkages to performance, which are reviewed continuously. This
includes formal agreement about what effective executive performance is, with allowance for
updating to short-term targets. Reward levels may be relative, though the data that informs
judgements should be available on request to shareholders.
82
research
CORPORATE RESEARCH FORUM
6
HR AND CORPORATE GOVERNANCE
HR professionals need to keep their executives from getting too close to [crossing] those boundaries
and speak up as soon as they cross them. Professor Pat Wright, Cornell.
HR directors should be formally consulted on board-level reward, with their views being
recorded.
They should be consulted on processes for board and executive team functioning, in view of
the professional expertise they should possess.
Boards should agree a formal performance system which, typically, HR directors should be
responsible for designing or, at least, their advice on its design should be recorded.
Boards should have collective and individual development plans, with HRDs being consulted
on their form and content.
HR directors should discuss the organisations people plan with boards at least annually, as an
integral part of approving strategy and operating principles.
Data should be available that indicates historic and projected performance in people
management.
Board members should have access to HRDs to discuss people and performance issues at
executive level.
HR directors must demonstrate their suitability for these responsibilities through business
knowledge and skills, and their understanding of corporate governance.
This list is indicative and is neither intended to be exhaustive nor precise. Our intention is to
provoke debate which could lead to incorporating the principles above into voluntary codes of
corporate governance. Making such standards publicly available would be an important step
forward in providing substance to the corporate governance debate.
6.4
On reflection
Although some Group HRDs are already doing much of this, the extra workload should be
recognised. As we indicate in Chapter 4.6, an HRD active at board level is probably already doing
a job and a half. The calibre of such a director needs to match the high-level responsibilities.
In conclusion, we refer to Professor Wrights suggestion that HRDs might take on the role of
Chief Integrity Officer. Their responsibility for challenging colleagues reflects an informal role as
the organisations conscience which could be formalised if responsibility for CSR is assumed. In
this context, Wright suggests that some form of contractual protection should be available for
an HR director who might be dismissed by a CEO for exercising that role.
83
research
Introduction
Topics covered
7.1 The necessity of great service
86
86
87
89
91
93
94
7.8 In summary
94
85
research
7.1
The necessity of great service
For most employees, the core requirement of a personnel/HR function is for basic people support
systems to work efficiently and, preferably, regard them as valued colleagues. The loftier
ambitions of HR as talent and change managers are not usually their first concern. It is more about
being paid on time, being treated fairly and not being encumbered by rules and procedures.
If such services are inefficient, HRs credibility will be questioned and its platform to provide
more value-added contributions undermined. While payroll systems and training administration
are not likely to attract people to an organisation, poor administrative practices can certainly put
them off. At stake is HRs reputation.
CEOs, senior executives and managers will naturally expect an HR director to ensure that
services administration is running smoothly, at head office and across the organisation.
After all, this is where most of the money on people is spent and where quality of service
must be as important as cost-saving and efficiency. Clearly, organisations face crucial
decisions on how best to provide such services in the future.
7.2
Efficiency, service and cost
The three main drivers of change in HR services are efficiency, service and cost.
Efficiency. Historically, HR has not always enjoyed a reputation for being the most efficient of
central functions. Even interviews with HR directors in progressive organisations revealed a
need for more robust systems to improve reliability and service quality.
Service. Although HR has an expected duty of care to employees, experience of its service can
appear more controlling than supportive and the notion of service does not fit well in
traditional personnel departments. Over time, a weak service orientation fosters employee
and manager cynicism.
In recent times, HR has had to run to stand still, as organisations undertake increasing
amounts of strategic and structural change including M&As and globalisation which have
led to higher volumes and complexity in administration workloads.
Cost. The most important issue driving efficiency initiatives in HR has been the pressure to
reduce costs. This is nothing new and also applies to other central functions.
86
research
Service centres are not just about better administration. They can also
impact on business costs by having lean and governable processes.
Mark Judd, Rolls-Royce.
Intended benefits
Many organisations have, therefore, committed to HR transformation initiatives that typically
adopt technology to automate processes, shift administration work away from relatively
highly paid HR managers and, ultimately, reduce HR function size. Essentially this is about
attempting to work smarter.
Typically, service functions have been centralised into shared services units in effect, call
centres that take over administration tasks previously performed locally, either retained inhouse or outsourced.
Another way of lowering cost is by reducing complexity, which can result from
local variations in terms and conditions that reflect custom and practice rather than business
logic or market differences
legacy systems and processes that need re-thinking to match new scenarios
support functions such as HR, finance and procurement having separate and mis-aligned processes.
As Mark Judd of Rolls-Royce puts it: Its not just about better value administration. These
centres can also impact the significantly higher corporate payroll, recruitment and learning
costs of the business by having lean and governable processes.
In a world of legislative compliance, the shared services centre is a safe way of dealing with risk
management, business assurance and quality control. Complying with the Data Protection Act,
which may have been complex and unmanageable, now becomes visible and auditable.
The adoption of a shared services model features in the Rolls-Royce case study. See also the case
study on Royal Bank of Scotland in the 2006 CRF report, Outsourcing the HR Function.
7.3
87
research
Transformation is not always what it appears: this over-used word tends to refer to a new
technological platform and new structures, rather than the more fundamental issues
concerning HR practices and behaviours, which is where transformation should start.
People issues
Staff selection for a service function needs care.
Attitudes to the new function may vary widely for example, antagonism may be felt among
existing staff, given that job losses are likely with the transition to a centralised, leaner function.
Creating a new service centre raises important career issues. Those transferring to an internally-run
centre can feel cut off from the organisation, with their options limited to the service centre itself.
Importing new recruits with positive attitudes may seem attractive, but retaining people with
organisational knowledge is vital.
Assessment can weed out the unsuitable, but this must be seen to be fair by others.
How organisations shape and communicate future career paths so that recruitment and
retention do not suffer is a significant issue.
People who move with an outsourced operation actually change their employer and, therefore,
their prospects will also change whatever they may have been promised. In theory,
outsourcers should provide career paths but, in reality, they may also consider offshoring.
Shifting administration to managers
A foundation of reduced workloads is encouraging self-service by both employees and
managers. However, potential pitfalls can be avoided by
ensuring that managers can identify tangible benefits from more self-service rather than it
being perceived as HR pushing administration onto already busy managers
ensuring that self-service tools are simple, user-friendly and supportive of business needs.
88
research
Anonymous call centres in faraway places, with bored operators reading from a script, rarely help
employee engagement. Nick Starritt, PARC and Sirota.
Over 10 years ago, Dave Ulrich suggested that the advantage of self-service would be the user is
the chooser that is, internal customers would define service levels, and take-up would be the
measure of success. Some organisations fail to abide by this fundamental principle.
7.4
Shared services, outsourcing and offshoring
When creating a shared services function, it is crucial to introduce a service culture based on
user-friendly access whether by phone, intranet or, in rare cases, face-to-face. The orientation
and skills of internal staff transferred into the operation must be considered. Any tendency
towards control or procedures first will damage how the centre is perceived.
Outsourcing is no magic bullet
Most of our interviewees felt that many major HR outsourcing deals have failed to live up to
expectations.
Vendors do not make much money.
This is not to say that outsourcing cannot be successful. We comment on how best to achieve
it below.
Rick Emslie, an experienced observer of the outsourcing market, told us: P&G and IBM claim to
have a successful outsourcing partnership, but I cant think of another. Its not a question of
whose fault it is because there have been unreasonable expectations from all sides.
89
research
90
Surveys on outsourcing conducted within the HRO Buyers Group some 77 large and mostly
US organisations revealed that time saved on administration by HR business partners was
minimal, and even that was often taken up with contract management. For more details, see
People Management magazine, March 2008.
The majority of HR directors we interviewed were not in favour of broad-scale outsourcing.
Why should we pay a margin to a contractor for something we should be doing ourselves, one
said. Others voiced similar concerns, some saying they would be prepared to consider it when
their investment in systems needed to be reviewed providing the supplier side was robust.
As yet, offshoring occurs relatively rarely, whether part of shared services or outsourced.
Intrinsically, it works best for handling processes and data rather than, for example, advisory call
centre services. Just as with consumers, the idea of being served by people in another country
who are dependent on manuals and scripts may not be particularly appealing. The more
advanced the advisory services, the less practical and acceptable this is.
Nonetheless, as more service centres are located globally, an increasing number of staff will
inevitably find they are dealing with an overseas facility.
Over-powerful purchasing function
Tales abound of purchasing functions that regularly accept the cheapest deals offered by
outsourcing vendors, and have little capability and often little orientation to understand
what quality looks like when hiring suppliers.
While it cannot be assumed that more delegated decision-making is better, it is important to
remember that trust and service suffer when cost is the main preoccupation especially where
supplier relationships become partnerships, as in HR services. Note the positive example of RWS
below, compared with the unfortunate failings of a Department of Transport project.
Shared services a stepping stone towards outsourcing?
While moving to an internal service centre may be a good way of transitioning to outsourcing, in
practice, its not that simple. Organisations are unlikely to dispense lightly with their extensive
investment in new systems and a service culture. They will tend to keep an open mind, preferring
to reconsider the issue as and when a systems reinvestment is due. They also need to be sure of
the quality of suppliers.
Outsourcing will have to be 20% more efficient before we can consider it, said Brian McLaren
of Royal Bank of Scotland in CRFs 2006 report, Outsourcing the HR Function. There has to be
a real service edge. I think were already efficient and we can always supplement with culture
change programmes. The issue turns on whether the edge is worth the effort.
research
7.5
Thorough preparation
An obvious, but key, point is the need to be robust about the rationale and advance
preparations, taking into account
potential resistance to reduced autonomy, and suspicions when trade union agreements may
need to be renegotiated
the need for a thorough and persuasive relationship management process.
Co-create as far as possible
This starts with ensuring that services are designed to meet employee and manager needs, in
substance and how they are delivered. Too often the attitude has been we are redesigning HR services,
so we are the best people to judge. Time pressures and the bother of consultation may also be factors.
By contrast, co-creating services is the soundest way to ensure acceptability and fitness-for-purpose.
For example, BT refers to the voice of the internal customer being seen in everything they do.
If line managers are not yet attuned to be people managers, or to use technology tools, then the
necessary investment must be made well in advance to achieve that cultural shift.
Leaders as role
models
As in so many areas of people management, it helps if leaders actually lead when moving to new processes. Time
pressures and technophobia can present obstacles but setting an example is a core attribute of true leadership.
The fact that everyone is on the same system is powerful in terms of decision data and practical tools, such as for
performance management and development planning.
Service culture is
critical
From design to implementation, the message must be that centralisation is not about cost-cutting at the expense of
service. Indeed, targets and measurement should concentrate on improving the support levels for employees and
managers. Retaining existing staff in a new HR service centre can be advantageous in managing relationships with
colleagues. Any service culture deficits can be reduced through introducing external recruits with extensive service
experience, particularly in management positions.
research
92
Imaginative communication about the service centre can offset any sense of distance between
it and the rest of the organisation. A service centre should encourage visitors, and its own staff
should be allowed to visit other company locations to gain a better appreciation of their
customers and the organisation they serve.
Smart management information
Smarter management information is a major advantage of re-engineering HR services and
adopting new technology tools. It is not just a question of software, but how people measures
are devised and the value they offer to management decisions.
Speed, relevance,
accuracy of systems
research
An HR shared services centre can actually champion the line manager by providing inputs to business
planning and decision support. Mark Judd, Rolls-Royce
7.6
Adopting a holistic services model
A more ambitious concept is to think afresh about how HR support services are provided,
breaking with traditional bonds and existing functional structures.
Start with a people services function dedicated to a simple core message that all employees
should be well-supported.
Identify the main services required, irrespective of which function they traditionally belong to
this could embrace PC and software support, financial forms, premises, as well as the kind of
personnel services we have been referring to.
Imbue this new function with strong service values, dedication to continuous improvement
and joined-up thinking and link the way it is measured to employee productivity.
This idea is not new there used to be administrative directors but, unfortunately, without the
expertise and service values. However, technology now provides fresh perspectives. The selfservice concept can be applied to services from several functions raising the notion of the
multi-function service centre or just people services. There are obstacles to overcome,
however.
Functional heads may be reluctant to lose parts of their functions, particularly if they measure
their worth by the size of their kingdom.
Greater complexity will have to be handled if the scope of services to be transformed is wider.
If the desire is to outsource, risk levels may increase.
Having first floated this idea in CRF Publishings 2005 report, The Future of HR, some examples
are starting to emerge. See the column.
93
research
7.7
Providing career paths
Mark Judd, Director of Shared Services at RollsRoyce, had previously created a combined
administration service covering several functions
risk, finance, HR and IT when at PwC. The
message was that we all had to learn to work in a
different way. It was branded, Making It Easier,
reflecting our determination to achieve a
beneficial impact on line managers workloads.
PA Consulting have helped create two combined
function centres, one at the UKs Westminster
Council, and the other at Rijkswaterstaat (RWS)
the government body responsible for managing
road and waterway infrastructure in the
Netherlands. The RWS initiative
centralised 85 different support functions in
17 offices over 18 months
reduced headcount by 40% saving 750 fulltime equivalents and 45 million per year
dealt with 50,000 requests for support in its
first year of operation
resolved 85% of all queries and received an
average online customer satisfaction score
of 70%.
94
Experts and leading practitioners have argued that HR should redesign its structures and ways
of working in order to think and act like a business. This includes service centres becoming
increasingly distinct from HR by focusing on administrative excellence. I think it is a rude
awakening for most shared services centre staff that the old career route of HR administration
from office to manager has now disappeared, commented Mark Judd.
Moving to a multi-function services unit might be seen to accentuate the break from HR,
although it may provide more options for those who wish to pursue administration roles. What
Rolls-Royce and other organisations illustrate are
opportunities to develop skills in service management, project management, continuous
improvement and Six Sigma techniques all of which are transferable
close links being created between the advisory service units and the remaining parts of HR.
For example, if a service centre runs field teams dealing with grievances, discipline or TUPE
issues and is also proactive in organisational analysis built around its data handling then it
already has skills that can allow transfer towards centres of excellence and business partner
roles after development.
The lesson is to build future career paths into organisational thinking and staff communication
at an early stage.
7.8
Many good practices we have indicated can add marginal costs to the way service centres
operate but such effort and investment can make the difference between success and failure.
In summary
research
CORPORATE RESEARCH FORUM
7
HR SERVICES AND PEOPLE SUPPORT
95
MEASUREMENT
research
MEASUREMENT
Introduction
Topics covered
8.1 Whats the issue?
98
99
100
102
103
104
97
research
MEASUREMENT
What is HRs contribution to outputs, as well as to inputs and throughputs? The functions Achilles heel
has been that it seems more comfortable with just inputs and throughputs. Professor Gordon Hewitt.
8.1
Whats the issue?
98
research
MEASUREMENT
Doug Brown - Head of Commercial HR
Scottish & Newcastle
8.2
2 Business change and improvement initiatives: for people systems and issues, such as a
new incentive scheme or a skills development programme. Or, they might concern changes in
broader organisation or work systems inevitably with people implications. Measurement is
involved before, during and after an initiative is launched.
3 HR function review: like any support function, HR should regularly monitor its service
performance and customer satisfaction including periodic reviews with stakeholders to
guide future plans and improvements.
99
research
MEASUREMENT
4 External reporting
In addition to internal information, it is essential to provide external stakeholders with details about the organisation and the way people are
managed. Reputation-related data includes activities loosely described as corporate social reporting often added to the HR portfolio of
responsibilities. This can reveal how the organisations culture and values translate into action. Stakeholders include investors, regulators,
business journalists, politicians, potential recruits and local communities. We expand on this topic in 8.6 below.
These four dimensions are an adaptation of the CRF Evaluation Model, originally devised and
published in 1999 and updated in 2004. We found few organisations articulate clearly how
they manage people. However, more progressive companies interviewed for this study were
using some of the guiding principles below.
The Five Rights of HR Measurement
Workforce Success
Right Types of HR
Alignment
Right HR Practices
Right HR
Professionals
What HR Does
HR Do-able
What HR Delivers
HR Deliverables
8.3
Guiding principles
100
From our interviews, the following principles emerged to help HR improve measurement in the
future. More guidance can be found in the CRF reports, Effective HR Evaluation, 2004, and
Making the Most of Employee Surveys, 2006. The diagram above from Becker, Huselid and
Beatty is also useful.
research
MEASUREMENT
Some aspects of HR are numbers-friendly, others are not. Theres a great deal of subjectivity. Its an
area where you need experience. You need to understand the biases. Sometimes, its about
illuminating rather than proving things precisely and using the 80:20 principle. Steve Kerr, Goldman Sachs.
Evaluation
As shown in CRFs 2004 Evaluation Model, just proving a target or budget has been reached is not
as important as demonstrating, through evaluation, that value was added. Evaluation should also
identify lessons learnt to guide improvements or, if necessary, a different course in future.
101
research
MEASUREMENT
For some HR functions, just ensuring these principles are understood and implemented will be an
advance. However we now discuss further areas for HR to work on in future.
8.4
An integrated approach to measurement
Metrics in organisations have generally developed through functional silos finance,
operations, marketing, HR, IT, etc. However, from an OD/OE perspective, an organisation should
be seen as a whole system. While the idea of an inter-related management decision system is
not new, many companies are still learning how to use models like the balanced business
scorecard and service-profit chain to understand the correlations between different silo-based
approaches to metrics.
Aggregated scorecards for senior executive and board use are common and are essential. We
found evidence that these had become simpler and clearer to aid comprehension and facilitate
decision-making.
On posing the question, what is your overall philosophy and approach to measurement?, CRF
has found relatively few organisations have taken meaningful steps to align understanding and
practice across all levels. Below and in the column are some areas on which to focus.
First, identify correlations between different data sets. Many organisations and HR functions
specifically can do more to establish cause-and-effect relationships between performance
and human factors. Productivity is an important measure, yet factors that influence it are
managed by different functions, from financial and IT systems to the work environment.
Taking this further, functions should be able to work together on aligning their measures,
including their timing. CRF commented on how the Royal Bank of Scotland did this in its 2006
report, Making the Most of Employee Surveys.
As mentioned in Chapter 5, Daniel Kasmir of BDO Stoy Hayward, told us how he had brought
different functions together to create a combined business intelligence scorecard, built
around common business success objectives.
102
research
MEASUREMENT
Numerical abilities in HR will be improved if the function has dedicated expertise in measurement
and metrics.
Metrics should be a key priority for an HR function that includes business-oriented, OD thinking
and skills in its core tool-kit thus shifting HRs reputation from laggard to expert in metrics
capabilities. Its not just about being smart at numbers but how those numbers are used.
8.5
Organising for better measurement
In the 2005 CRF Publishing report, The Future of HR, the emerging practice of analytics groups
enhancing and professionalising HRs measurement work was reported with Royal Bank of
Scotland appearing to be a pioneer. Ed Lawler and colleagues, John Boudreau and Pete
Ramstad, have helped establish this approach among larger US organisations.
However, there is less evidence of it being used elsewhere as indicated by the BCG/WFPMA
report already cited.
While there is no single model to follow, abilities within HR will be improved if the function has
dedicated expertise in measurement and metrics. Some HR director interviewees said they had
appointed individuals or teams to do this. Paul Chesworth of Vodafone was among several to
point out that metrics capabilities should be tailored to particular industries.
Note these caveats if creating a specialised unit.
Achieving more measurement sophistication should not lead to more complexity managers
need simple measures that are relevant to their work and circumstances.
Having specialist capability in HR should help achieve alignment with other functions, not
simply reinforce any silo thinking in the function.
Analytics is about qualitative as much as quantitative data.
Once better metrics systems and abilities are embedded, a specialist unit should not be needed.
The idea of a network of metrics specialists as an integrating mechanism is to be encouraged
for example, the way having balanced business scorecard champions in different functions, as
Merck Serono does.
However, the creation of a shared service function inherently operating across an organisation
provides a convenient platform to unify and increase the effectiveness of people reporting, when
it is used as a more enquiring, strategic measurement lever rather than simply analysing HR
service data as described in the Rolls-Royce case study, its role becomes predictive, and
supports both improvement and change
the service centre is designed to support multiple functions, rather than functional silos.
103
research
MEASUREMENT
Statements from companies that, people are our greatest asset, drive me wild because they are rarely
backed by evidence. Theres an enormous gap between the rhetoric and the reality and I think its
insincere and inappropriate. Ed Lawler.
8.6
External reporting
104
There are two sets of reasons why organisations should report on people factors to external
stakeholders.
Pull factors
It wants to project positive messages to
investors about how well it is run, and how it is building capability for future performance
potential employees about why it is a great place to work
communities and interest groups about how it seeks to be a good corporate citizen.
Push factors
The organisation is required, or feels obliged, to explain itself either because of regulation, or to
recover from a reputational problem. This is still an under-developed area for the following reasons .
Many management teams prefer not to reveal more information than they have to, particularly
if as often with staff survey results that information may be critical of their performance.
HR functions have yet to acquire the skills and disciplines to support the proactive marketing
of their organisations.
Regarding the latter, IMDs Professor Vladimir Pucik, poses fundamental challenges. What
evidence can HR provide to show how the quality of people management enhances their
organisations value? How is HR differentiating the organisation?
The employer brand concept provides a means of answering Puciks challenge in terms of
employer reputation, along with a distinctive employee value proposition. Several interviewee
companies are regular contenders in externally benchmarked Best Employer competitions.
However, another important question from Pucik concerns future economic value. How does
the data HR provides indicate that the organisation is better able to perform in future? There
have been some recent developments on this, as described in the column.
It is clear that there are forces at work to provide meaningful data. But what about the demand
for this information?
From a regulatory standpoint, cultural issues such as ethics and health and safety are more
important than evidence of performance culture, quality, innovation and profitability.
Regulators in financial services are interested mainly in risk-related information, ultimately
because of its impact on the stability of markets and hence the reputation of governments.
research
CORPORATE RESEARCH FORUM
8
MEASUREMENT
The idea that financial data is clear and robust was always a fallacy and Enron has certainly proved it.
If good people data helps managers to run a business better, analysts should be interested in it too.
Steve Kerr, Goldman Sachs.
105
research
Introduction
Topics covered
9.1 Guiding principles to shape HR
108
110
112
113
116
119
121
124
107
research
There is no one HR design nor one optimal size of HR function. Nonetheless, HR functions of the
future should be slimmer, yet more efficient.
9.1
Guiding principles to shape HR
What are the main considerations for designing the HR function structure of the future? These
are our overall conclusions from interviews and the literature on HR structure.
Originally advanced by Ulrich, the general concept of concentrating expertise around
centres, encouraging self-service, and using technology more effectively is a sound basis for
future HR improvement.
Aside from some progressive HR functions, most have yet to implement these ideas fully and
many are still learning how to do so.
What most undermines progress and the implementation of new HR structures is a lack of HR
capability the knowledge, experience and personal qualities of HR people.
HR has no alternative but to adopt more streamlined ways of working and must therefore
tackle its capability issue as a main priority.
The threat of competition to HR exists from consultancies, for strategic advice and process
improvement; and from outsourcers for HR services. HR must think and act like a business if it
is to survive and prosper.
The three-legged model shared services, centres of expertise and business partnering has
been widely adopted, especially by larger organisations. See the column. However, evidence
reveals mixed ability and variable levels of understanding. Note these points.
HR should not simply end up creating a new set of silos the inter-relationship between the
elements is as important as the way they are segmented.
HR should be clear about its dual purpose when to act in service mode, and when to guide or
control. Managers and employees need to know where they stand.
Ulrich recommends the addition of a corporate leg, representing the HR governance required
to manage people in a disciplined manner.
Organisation structures vary considerably in size, complexity and geographic spread and HR
structures should reflect these organisational needs. Hence there is no one HR design that can
cover such varied entities as small companies, global operators and government departments.
Similarly, there is no one optimal size of HR function. While several HR directors told us they
were aiming at ratios better than 1:100, the right proportion depends on factors such as
business needs and the abilities of HR staff. Nonetheless, HR functions of the future should be
slimmer yet more efficient reducing in size by up to 50% or more if moving from labourintensive administration to self-service.
108
research
In the diagram below are the building blocks that experts and HR directors agree should provide
the basis for any HR function. They can apply to a company of any size, scaled down to
individuals or up to teams. However, we stipulate some design features to address issues found
in implementing the three-legged model.
HR Organisational Blueprint
CEO
HRD/CHRO
HR Specialists
Corporate HR
Centres of expertise
Consultancy
Policy, Strategy
Risk management
Local HRDs
(or BPs)
on mgt teams
HR Services
Administration
Advice
Data management
HR technology
The arrows in the diagram between Corporate HR, HR Specialists and HR Services denote close
interaction and co-ordination.
We see organisational effectiveness (OE) skills as important for specialists, HR directors and HR
managers. Some interviewees feel that OD is not always interpreted in a sufficiently businessoriented way OE is increasingly the preferred term. Nobody in the line knows what OD means,
and neither do many in HR either, says the well-known independent researcher, Wendy Hirsh.
HR specialists may work as internal consultants for parts of the business, or as policy shapers
and project managers on organisation-wide issues for the top team and HR director.
Specialists should operate as a flexible pool of expertise.
In a large company, local HR directors or HR managers/business partners should be members of
management teams Ulrich refers to these as embedded HR who represent the HR
governance chain of command. They will be the conduits for commissioning work from
specialists. Their roles should require regular knowledge-sharing with all three elements above.
109
research
HR tends to configure itself into silos. But business problems dont come in neat functional shapes.
Geoffrey Matthews, Merck Serono.
Where the services centre becomes multi-functional, as described in Chapter 7, its reporting
line would switch to an operations director or COO. However, close linkages with specialists,
corporate HR and HR directors/managers must be preserved, and not undermined by a
change of reporting.
See the Standard Chartered case study for an example of how this simple design is interpreted in
a large global company. Note that they have formally separated Group policy specialists from
locally-based specialists, and HR Technology from HR Services.
Common criticisms of the Ulrich model
Creating centres of excellence can end up with remote experts delivering gold-plated
but impractical policies.
Business partners can end up becoming too wrapped up within their business unit to
appreciate the overall needs of the organisation.
Adoption of the service delivery model may also be regarded by employees as making
HR seem more remote.
The segmentation of HR into these three separate areas can make HR feel disjointed if
silo behaviour sets in.
However, these criticisms relate to implementation of the model rather than its faults.
9.2
Reporting lines and HR governance
Certain principles should be articulated to ensure clear lines of responsibility, and that HR is
embedded into the management of the organisation.
As indicated in Chapter 4, the senior executive in charge of HR should always report to the
CEO the importance of people management to the business demands it. If there is an issue
of calibre, that needs to be fixed.
Divisions and subsidiaries should also have a senior HR executive whether called director, VP,
manager or business partner as a full member of the management team. A common preoccupation for our HRD interviewees is the quality of these key individuals since the internal
reputation of HR depends on them.
110
research
Generally, the direct reporting relationship will be to the business area head, just as the HRD
reports to the CEO. A dotted line relationship would exist with the Group HR director.
The nature of direct and dotted line relationships needs to be clearly understood.
Typically, a group functional head will take the lead in recruiting and overseeing the technical
aspects of what the divisional functional head does, but with the final decision on
appointment residing with the business head.
Performance reviews should be led by the business head, but with significant input from the
functional head, particularly in respect of development and career issues.
Generally speaking, direct functional reporting lines are not advisable if HR directors are
members of their respective management teams. However, there can be hybrid arrangements
where, for example, an HR executive sits on more than one management team.
An HR manager or director for head office or group functions should be considered especially
if these functions are large, but also to ensure that functional needs are understood in depth.
Function heads should naturally be involved in their performance review.
The end result should be that both performance reporting lines and HR governance
structures are clear. When an organisation is decentralised, tensions may occur if local
business heads are independently-minded. Thus, agreeing common frameworks and
shared ways of working become crucially important to retaining organisational cohesion.
Disciplines for agreeing HR strategy should be clarified and how both HR and talent agendas
are addressed as part of a regular cycle that links to board meetings. Note how Prudential and
Standard Chartered do this, as described elsewhere in the report.
Should HR reporting lines follow organisational structures?
Generally yes, as there should always be a business-skilled and technically-capable HR
executive working on management teams. However, sometimes the job size will be too
small to justify someone of the right calibre dedicated full-time to every team.
We recommend a high quality HR executive covering several parts of the organisation
rather than a junior appointment. This should not be a relationship manager, but
someone regarded as an important member of the management team.
111
research
Technical experts dont naturally talk to each other theyre protective of their patches. They need to
be re-oriented to come up with joined-up holistic solutions to meet business needs. Geoffrey Matthews,
Merck Serono.
9.3
HR specialisms and expertise
The following example groupings reflect ongoing strategic priorities for most organisations.
Engagement, including employer brand
management and employee surveying.
Talent management, resourcing, workforce
planning.
For HR to demonstrate greater added value, the quality and deployment of its specialist
resources is of central importance. How should HRs various specialisms best be organised?
Grouping specialists
There are two principles to take into account in designing centralised expertise groups.
Specialist disciplines
The more traditional approach is to group specialists according to the areas of HR practice they
specialise in, such as compensation and benefits or recruitment.
Organisational priorities
Centralised expertise may also be required in
areas such as industrial relations, health and
safety and HR technology.
We recommend, in particular, the creation of an
organisational transformation group see 9.6
on page 119.
Locating specialists
Additionally, there is the issue of where HR specialisms are located.
The logic behind the creation of centrally-located centres of expertise is to group specialists
together to serve a large organisation, rather than distributing them among different business
divisions or subsidiaries and thus having a profusion of small HR departments. The
advantages include more economic use of resources, better sharing of knowledge, and more
organisational cohesion.
112
research
CORPORATE RESEARCH FORUM
9
HR FUNCTION STRUCTURE AND CAPABILITIES
Local businesses and divisions tend to go for the opposite, in order to have expertise locally.
This may be for practical reasons singular local needs or geographic distance, for instance
or because local business and HR heads just prefer it that way.
As with most aspects of business, there are cost and quality issues.
A high quality, and good value, central resource will look attractive to a cost-conscious local
business head, if it is clear how overheads have been reduced.
A centrally-located function has to be effective at managing relationships, service and
acquiring local perspectives to overcome perceptions of distance, and thus avoid local
management teams wanting to revert to local specialists.
An HR director will need to judge the depth of resource required and, depending on the work,
the laws of supply and demand will not necessarily apply efficiently. For example,
local management teams may not want help, or may need it more than they realise
consultancies or interim hires can fill resource gaps which can be an advantage if such hiring
is centralised rather than diffused. Managing the overall consultancy bill is another reason for
having a centre of expertise.
Where it is agreed that specialists should be deployed both locally and centrally, the linkage
between them needs to be considered carefully, to ensure alignment and knowledge sharing.
This always applies when specialists are dispersed. At the very least, they should be part of a
recognised community of practice. The other end of the spectrum is that they are secondees
from the centre.
In future, we predict that more organisations may choose to co-locate centres of expertise
with HR service centres, if they have them, for the reasons suggested in Chapter 7.
However, location is less of an issue if specialist roles involve them being out in the
business on a regular basis.
9.4
Business and corporate HR
The business partner
As already indicated, the term business partner is a currency of variable worth an issue
discussed in the next section. The points here refer to those who are members of management
teams alluded to in 9.1, whether called HR managers, divisional HR directors or vice-presidents.
113
research
As an HR director, having a good Number 2 is a huge advantage. I could get up all sorts of drainpipes
and find out what was really happening. Don Young, former HR director.
HR in the business
The more HR is intrinsically involved in the
front end of the business, the more respect it
receives and the more value it contributes.
Vladimir Pucik, Ed Lawler and other business
academics have long stressed the importance
of HR becoming closer to the organisations
customers to understand better how to
support and design roles, development
programmes, performance frameworks, etc.
Here is an example of how HR at Serco actually
does this. See also the BAE case notes in the box.
The Serco Case
114
Ulrich, and others who described the business partner role, see it as akin to a GP who calls for
specialist help when needed. In addition, they encourage colleagues to use HR service centres
more proactively and effectively. The thinking is that business partners should potentially require
little or no staff as a consequence, thus contributing to a reduced overall cost base for HR.
research
CORPORATE RESEARCH FORUM
9
HR FUNCTION STRUCTURE AND CAPABILITIES
research
CRF will stage a debate on this topic in September 2009 as an opportunity to reach a collective
conclusion with members.
Corporate HR
There are two dimensions to HR specialisms that, in larger organisations, are grouped into
centres of expertise.
Control setting policy requirements, monitoring adherence, and corporate change projects.
There is tension between these roles. The policing aspect of HR has always been unpopular,
and has been lampooned in Dilbert cartoons. It is preferable to keep the control and enabling
roles separate.
First, both HR consultancy and HR service activities can help managers and employees to
comply where needed while also giving feedback to policy-makers about what is unpopular
or not fit-for-purpose locally.
Second, there can be good reasons to create a small number of central posts to support the HR
director in the control role.
Tackling policy work in discussion with HR specialists and services.
Supporting HR governance in monitoring and advising, for example.
Though not concerned with internal service, corporate social responsibility can also be included.
This should allow OE centres of expertise to focus primarily on providing a consulting and
facilitation service. This happens to some extent at present but should be defined more
sharply in future to reduce any confusion about how the three-legged model is interpreted.
9.5
Using three time-frames to set HRs objectives
Organisations are structured in many different ways and may need to evolve quickly as business
circumstances change expansion, contraction, M&As, new markets, etc. Merely adopting a
different HR structure does not in itself guarantee that HR effectiveness is improved.
116
research
The three lenses should be HRs focus - doing a good job now, making improvement happen and bluesky thinking for transformation.
A simple way to re-orient HRs activities that fits any HR structure from an all-in-one department
to the Ulrich model is the use of three lenses, as shown in the diagram. These provide a way of
both thinking and channelling HR activities, and then organising work accordingly. It also aligns
with business needs. Every HR director we spoke to supported the concept.
3 Lenses
Now
Time-frame
Current needs
Improvement
HR services
HR specialists
Future
Transformation
.T
.U
NI
Lenses
Short/medium
term
HR BPs or
generalists
Lens One
Lens Two
Lens Three focusing on the long-term future, identifying radical change, supporting
innovation and stimulating breakthrough thinking.
These three lenses match three types of objective on which any organisation should focus.
Doing a good job now.
Learning and making improvement happen.
Blue-sky thinking and longer-range development of breakthrough strategies and genuine
transformation.
117
research
The diagrams below describe how different parts of HR could use the three lenses.
HR Services
Lens
Responsibility
Current
Improvement
Future
118
Lens
Responsibility
Current
Improvement
Future
research
There is a glaring gap in most organisations as regards the third lens who is in charge of taking the
organisation into the future?
HR Specialists
(eg L&D, Reward & Performance, Engagement & Brand, IR/ people
policies, Analytics)
Lens
Responsibility
Current
Improvement
Future
9.6
Organisational transformation unit
There is a glaring gap in most organisations as regards Lens Three who is in charge of taking
the organisation into the future? Often, minimal resources are devoted to this, compared to
dealing with today. The future tends to fall to CEOs and strategy units, but much more is
required to focus the entire organisation on future competitive advantage.
Most HR directors we spoke to have not filled this gap. However, here are relevant examples.
At Hewlett-Packard, OE and OD specialists have been working on this for years.
Steve Kerrs work at GE fell into this category.
A multi-disciplinary innovation team at Scottish & Newcastle is challenging and facilitating
parts of the organisation to devise and implement new ideas see CRFs 2007 report,
Embedding Creativity and Innovation.
119
research
The new space to be in for HR is creating value through better internal and external collaboration.
Thats not what HR people tend to talk about but they should. Stu Winby.
Responsibility
Current
Improvement
Future
research
Conceptually, the work of an OTU should be seen as a corporate asset, a key enabler of added
value and differentiation, as well as long-term organisational resilience. Its value lies chiefly in
enabling smoother change, and avoiding collateral damage, because of a far higher quality of
design and strategy implementation
using consultancy support selectively and appropriately
as a result, far better ratings by stakeholders for leaders regarding how they manage change.
A transformation unit does not necessarily belong in HR. As a multi-disciplinary team working
with strategy, it could report to the CEO.
If, however, the HR director and function have embraced the organisational effectiveness
challenge and hence the responsibility for organisation design and driving change then
their contribution to this unit is exactly how they would make a major contribution to the
third, future-oriented lens.
9.7
HR capability requirements
Preceding chapters have indicated the kinds of knowledge, skills and orientation required for
HR to tackle its current and future challenges. We have described these for HR directors at
Group, divisional or subsidiary level in Chapter 4.
Books and articles by Lawler, Ulrich, Brockbank and other experts, as well as HR reports and
surveys, all send the same message about the future competencies required for the HR function.
Professional associations are starting to use the same language.
More knowledge about business, markets, operations, processes, finance and technology.
Better understanding of the organisation itself and its sector whether private or public
service or not-for-profit.
Sound grounding in the classic HR functional knowledge areas underpinned by an
understanding of related theory.
We add also an understanding of individual and organisational psychology, without which an HR
professional will have few behavioural insights.
121
research
A painful transition
Proactivity taking the initiative to identify opportunities and solutions, float ideas and draw
up business cases to support them.
Additionally, practical skills and knowledge areas, such as being numerate and able to express
ideas clearly and write well, are important.
CEOs want proactivity solutions not problems
I have yet to meet an HR person whos come to me with an idea or suggestion which spots
and resolves a business problem this is surprising, because thats what makes one
valuable to an organisation. Instead, I hear reasons why things cant be done. Kai Peters,
CEO, Ashridge. Other CEOs have voiced similar views in previous CRF research.
The answer, as at BAE Systems, starts with rethinking HRs purpose and building this into
work and objectives.
HRs role is to understand the business and its external environment, ask challenging
questions and bring innovative solutions to business problems. Alistair Imrie, Group HRD,
BAE Systems.
We would argue that these requirements apply to all kinds and levels of roles in HR whether in
service centres, being the HR member of a management team or working in a specialist area,
including young entrants.
The diagram opposite shows a general capability framework for HR. Note the base of business
and functional knowledge, applicable to all. At a more advanced level, higher order skills are
required, including
business and organisational analysis
project management
understanding technology
client management disciplines
facilitation skills
122
research
We have well-intentioned, motivated people, with a strong service orientation, trying hard to deliver.
Theyre light on challenge. Many have the necessary intellectual raw material, but theyre not applying
it to the right issues and business challenges. Thats what our development programme must address.
HR Director.
in addition to the knowledge areas listed. A yardstick for success is to be seen to provide a better
service than can be bought from consultancies.
HR Capability Framework
Effective
tomorrow
CEO &
Board
Adviser
Leadership
Consulting skills
Org
anis
atio
nal
Effe
ctiv
ene
ss
Culture
Business &
HR strategy
Organisation
design
Organisation growth
and development
Leadership skills &
coaching
Talent management
Engagement
Innovation and improvement
HR Functional
HR Business
Knowledge
Knowledge
Learning &
Strategy &
development
planning
Performance
Markets &
management
competition
Recognition & reward
Metrics & finance
Effective Organisational
Resourcing
today
Employee relations and law
psychology
Communications
Operations &
HR systems & technology
processes
Administration
skills
123
research
We spend a great deal of time training HR people. We send them to business schools and universities
such as INSEAD and Michigan, rather than use CIPD college courses. I find the best development tool is
two years in a role and then rotate. Vincent Thomas, Barclays.
124
While a generic framework is a useful guide such as that recently developed by the CIPD
each organisation should make explicit what it wants, especially its business-related needs. Its
just as critical for people in service and specialist roles to be as business-aware as managers and
directors. If not, their advice may become disconnected from reality. See, for example, the BT
case study for its HR capability framework.
At present, internal customers of HR tend to respect the ability of individual HR people they
meet. Yet their overall impression of the function is less positive see our notes from the 2008
IES study, What Customers Want from HR, in Section 3.3. Therefore the aiming point in
regular customer reviews of HR should be that everyone in HR they deal with is professional,
knowledgeable, responsive, gets things done, etc.
Finally, we reproduce in Appendix 1 Ulrichs most recent thinking on HR roles. This complements
what we have proposed but offers new descriptions that update his original roles of business
partner, change agent, employee champion and administrative expert. As before, he seeks to
provide a catch-all description for HR as a whole.
9.8
HR capability development
As we have indicated, the core issue for HR is not its shape and structure but its attitudes and
abilities. In this section, we review how the HR community can address these.
Knowledge and skills programmes
We have stressed the difficulty of attracting high quality graduates into HR, and that many HRDs
are unimpressed with how well young graduates are prepared at colleges and business schools.
What then are organisations doing themselves?
Many of our interviewees noted that HR and its L&D specialists tend to be busy devising
development programmes for the rest of the organisation but not tackling their own needs.
A striking number referred to a cobblers children mentality.
When money is tight, there are inhibitions about proposing investment in HR training.
There is also a reluctance to be seen as admitting a weakness. But, actually, there would be
much support for a higher skilled HR function, said Ed Lawler.
research
CORPORATE RESEARCH FORUM
9
HR FUNCTION STRUCTURE AND CAPABILITIES
Royal Bank of Scotland was among the first in the UK to do this, using Cranfield.
BAE Systems programme was designed with Professor Wayne Brockbank at Michigan.
We also describe briefly activities in Rolls-Royce and BT see the BT case study in Chapter 10.
Such programmes go hand-in-hand with devising a professional development framework, as
noted in the previous section. The success of these can be measured through HR function
service surveys.
Career development
As with any talent programme, on-the-job development, experiential learning and career moves
are essential elements. Note these points.
While there is nothing new about moving HR people around different disciplines or around
the business not all companies do this rigorously.
125
research
Life experience.
There is nothing new about people entering HR from other functions and disciplines. In future, this
should be managed as a positive talent-building move.
126
Projects and secondments provide an excellent opportunity for HR talent to work on businessimprovement ideas, and to show their capabilities as ambassadors for the function.
Note that this challenges the narrow view of HR as a profession, with all the connotations
of exclusivity that this implies. Rather, it supports the reality that effective people
management requires involvement in, and with, the business
The repositioning of HR as a driver of organisational effectiveness is central to the functions
reputation. The overview of the business and the opportunity to make a significant difference
should be core attractions in HRs employee value proposition. This should work both ways.
Talent should be more attracted to HR as a place to get ahead.
research
It should be easier to place HR people in other parts of the business for broadening purposes,
because they become known for their insights, and practical skills such as project management.
Indeed, HR functions, and HRDs in particular, should determine a desired mix of people with
HR or other career anchors, as a way of ensuring that teams have an inclusive picture of
business realities.
127
CASE STUDIES
10
research
10
CASE STUDIES
Introduction
Topics covered
10.1 Hewlett-Packard
130
132
10.3 Musgrave
137
Hewlett-Packard
10.4 BT
141
10.5 Rolls-Royce
146
129
research
10
CASE STUDIES
"It is essential that people work in unison toward common objectives and avoid cross purposes at all
levels if the ultimate in efficiency and achievement is to be obtained." Dave Packard, HP founder.
Facts about HP
10.1
Hewlett-Packard enriching HR quality
We spoke to Leslie Berkes, who has had a long and varied career at HP in various organisation
effectiveness roles, and is now responsible for leadership and management capability across the
organisation. It has been his responsibility to introduce OD thinking, not just into HR, but into
general management.
HPs HR function
Prior to the EDS merger, there were around 1,800 HR people in HP, with EDS employing a similar
number. Following integration, and after increasing self-service HR for managers, the current
target is around 2,500 people. The function is structured into three broad groups.
Global Operations this includes all HR managers working with teams in the different
business segments and regions. They have a dotted line responsibility to their business teams.
Centres of expertise these cover the usual areas of expertise such as talent, L&D, reward,
and also an Employee Experience team that focuses on the employer brand and employee
value proposition.
Shared services function using SABA technology, this function is also a way to develop HPs
ability to include HR outsourcing in its commercial service offerings.
Note that we no longer have a separate organisation effectiveness (OE) team. It is now seen as
an essential core competence that we build into HR.
Three priorities for functional development
HP uses its HR Academy for developing HR talent, providing services directly and by using
contractors. The three main areas of focus are
business acumen enabling people to be business, as well as HR, focused
professional development aligning with SHRM and ASTD, but also developing HP learning
content and OE proficiency
career development integrating development with career decision-making.
There is a strong focus on experiential learning using projects, job roles and action learning.
Developing business acumen
This is part of the core curriculum for general leadership development, but there have also been
specific initiatives for the HR function. The same training partner has been used for both BTS,
who specialise in developing commercial competencies and mindset.
130
research
10
CASE STUDIES
HR is constantly examining organic growth and acquisitions, from planning to execution, to estimate
revenue and cost streams. Leslie Berkes, HP.
The top 80 HR executives underwent a series of four quarterly three-day workshops. This had a
strong OE flavour, covering organisational analysis, business analytics and influencing skills.
Group projects were undertaken between the modules on live issues.
All other HR staff went through a workshop programme also focusing on commercial
competencies.
In addition, there are targeted recruitment efforts including concentrating on the best business
schools in the HR subject area, such as Michigan.
This means that HR people must be proficient in two areas where, historically, they have been
weak technology and measurement. They need to know the critical factors driving our
performance in any of the business models they are working in.
Efficiency
Targeted growth
Young entrants into HR follow a two-year programme in which they are moved around the
business, including non-HR roles. We are specifically looking for MBA-level people. They may
choose to stay in their business area, but we are building our reputation for interesting and
important work.
What about attracting talent already employed? We intend to increase that in future. We have
some high profile role models including our last chief learning officer and also the current
head of the HR Academy, who is finance trained and last worked in a big sales job.
Some will wish to remain in specialist career tracks in the centres of expertise, but the onus on
them is still to be business-focused.
131
research
10
CASE STUDIES
The banks management committee spends 40% of its time discussing people, organisation and
culture issues. Tim Miller, Standard Chartered.
In summary
HPs approach ticks most of the principal boxes as regards developing a future-fit HR function.
Hiring and developing people with business acumen.
Embedding OD and OE skills throughout HR.
Rotating people in and out of the function for career development.
Developing an HR service proposition that aims to be second to none.
Running HR like a business, with a constant focus on a good return on investment.
Its still work in progress, said Berkes,but we feel were well down the road compared to
others.
10.2
Standard Chartered people governance, HR development
This case provides a brief overview of how Standard Chartered builds people management into its
governance process; the banks talent management framework; and the evolutionary journey its
HR function is undertaking. We spoke to Tim Miller, Director of People, Property and Assurance.
Governance and people
Clarity of governance is important as a starting point for good people management
transparency about who does what, how decisions are taken and how risks are managed.
Standard Chartereds top team reflects three dimensions of governance geographic, global
lines of business, and its functions. While possessing a proud heritage as a multi-local bank
well-embedded in its local communities, its governance processes also ensure that a one bank
principle operates with clearly-defined shared processes and policies. Talent management
and sharing good practice are prominent requirements.
It articulates governance principles for performance, people and sustainability. Regarding
people, it commits to ensuring proactive steps to attract, retain and develop talented and
skilled people who live the values in their everyday working life.
This is echoed in its declaration of strategic intent towards key stakeholders, such as customers,
communities, investors and regulators. As regards our people, four inter-related commitments
are made.
132
research
10
CASE STUDIES
The Strategic People Agenda is a management, not HR, process. We review each country, business
unit and function. There are robust exchanges, covering topics such as performance, talent and
diversity. Tim Miller, Standard Chartered.
PLC
Board
Principal sponsor
and architect
Group
CEO
Group Mgmt.
Committee
Strategic assessment
of critical talent priorities
for the bank
Monthly people
reviews and quarterly
strategic people reviews
Quarterly
people forums
Country CEOs
chair quarterly
talent reviews
Global Business
Leadership Teams
Countries
Standard Chartered
Note that overall responsibility lies with the Group CEO, and with business and country
management teams. This is supported by more detailed planning discussions involving HR,
although again the Group CEO has overall accountability.
133
research
10
CASE STUDIES
We believe in a powerful metrics capability that helps managers understand their performance issues.
Tim Miller, Standard Chartered.
Talent segmentation
There is more detailed segmentation of talent
for the purposes of planning and providing
learning and development for all staff.
Categories include the following.
New hire.
Raw talent.
Talent pool.
Lateral talent pool international moves, for
example.
The two largest groupings are Critical Resources people who perform valuable roles and
Core Contributors, those who are steady performers.
Pivotal roles.
There are three smaller groupings underachievers, underperformers and staff who are new
or in transition roles, for whom it is premature to assign performance ratings.
Data on performance achievement in these bandings is part of the regular assessment of people
management at all levels in the management structure.
In general, the organisation has always emphasised its use of HR data to illuminate issues,
ensure objective judgements and drive decision-making. Miller commented that, We believe in
a powerful metrics capability that helps managers understand their performance issues. This
also allows us oversight of important issues such as how they differentiate between average and
best performers.
Another dimension is the importance of performance discussions, which is intrinsic to its
Great Manager Programme. Training and guidance on conversations that count stress the
role of discussion to foster engagement, learning and development, building strengths and
building careers.
Talent management and development
The diagram below indicates the dimensions of talent pools and associated development
processes. Note the way that talent is managed both in-country and on a global basis and is
segmented, as described in the column here.
134
research
10
CASE STUDIES
Midcareer
MBAs
Senior
Management
HIPOs
Middle
Management
HIPOs
Junior
HIPOs
ols
International
Graduates
Country
Management
Trainees
al
ob
Gl
t
len
Po
Ta
2 year
development
Strategic
Locally
Reviewed by Reviewed by
Locally
through
hiring which
managed
and
10 global
Group
tailored
rotations and
supplements
reviewed in
leadership Management
programmes
global
leadership
56 countries
teams
Committee
programmes
pipeline
Standard Chartered
HR functional development
A Target Operating Model describes how HR will be configured by 2011. In practice the goal is to
extend what the bank is already doing. However, the way the function is being re-shaped and
described reflects the principles set out in this report for the HR function of the future.
As shown in the diagram on page 136, the function is organised around two simple concepts
service and organisation effectiveness.
The 2011 service aim is for 80% of all people processes to be self-service, using the Banks
developing shared services structure. The main differences between now and 2011 are
providing a common technology platform across the Banks global operations, capable of
serving twice the current staffing level
facilitating the uptake of self-service in areas where this is less well-established at present
establishing more completely a suite of core people products and processes tailored to particular
business area needs and, as a result, reinforcing Standard Chartereds values and ways of working.
135
research
10
CASE STUDIES
HR strategy
Supporting the business
HR specialists
Senior point of contact for
businesses/ functions
whose role is to optimise
business performance
through people
Local OE will deliver
business and function
people agendas at local level
ORGANISATION
EFFECTIVENESS
Business and function aligned
Organisation Effectiveness
HR management
Day-to-day operations
Core HR transactions
SERVICE
DELIVERY
People@SCB Portal
Hubbed specialists
providing expertise in
country
Global specialists
conducting research,
owning policies, processes
and continuous
improvement
HR governance, risk and
finance
Flexible project team to
address business critical
issues
Query Management
Functionality enabling
managers and employees
to perform HR
transactions themselves
Query management
comprising contact
centre and case unit to
resolve issues that
cannot be resolved
through self-service
Hubbed Specialists
Employees
GROUP
Global Specialists
(Strategy, Policy,
Product
Management and
Research)
Managers
Project
team
Continuous
Improvement
Focus on improvement
through operational
efficiency
Provide transactional
processing support,
analytics and reporting
capability to support
evidence-based decision
making
Standard Chartered
A slim management structure oversees both the service and organisation effectiveness parts of
the function. A small top HR management team sets the agenda, and is charged more formally
than its predecessor with both looking ahead and looking externally. A larger HR Management
Team drives the transformation in an integrated way, including as it does the HR heads from
around the business and geographical structure.
The implementation of the model is measured both in terms of benefits and cash savings from
the smarter use of resources and technology. HR staffing levels are planned to be 1:80.
136
research
10
CASE STUDIES
Noel Keeley - Group HR Director
Musgrave
10.3
leadership development
talent management
HR technology.
For the first time, common measures and KPIs were developed across the business. They are now
a core part of the organisations business metrics, which include an annual engagement survey
with follow-up action planning.
Leadership and talent development
Musgraves people strategy includes development processes for all employees, driven by the
adoption of personal development planning disciplines across the company.
137
research
10
CASE STUDIES
My role as Group HR director is to guide and challenge where necessary, both the CEO and my peers.
I expect divisional HR directors to do the same. Noel Keeley, Musgrave.
Specific processes are tailored for different groups, particularly senior management and talent.
While for convenience they may be seen as programmes, observed Keeley, in practice, we
manage development as an ongoing activity as part of the DNA of the business. It is also
values-driven, with a strong behavioural element.
New leadership development focus
We started at the top, explained Keeley. First, the chief executive and board team
underwent assessment by YSC, and then each team member had an in-depth review and
development planning session with Keeley and the CEO.
Second, the board spent 14 days in the first year discussing individual and collective
behaviour. The outcome was a set of executive committee operating procedures. Now,
some three years later, a progress review has identified further improvements, mainly
about the strategy process.
The top 50: driven by their PDPs and following assessment by YSC, every member of the top 50
has tailored development, including all executive team members.
Developing brands.
Driving innovation.
Achieving lowest cost without compromising
quality.
Creating the best team.
Additionally, there are team development actions to enable senior teams to be high
performing.
Externally-provided coaching is selectively available to support people new in role or making
a challenging transition.
The next 150: the Musgrave Leadership Pathway includes mandatory development processes
for all senior managers in respect of performance development, employee recognition and
living the values. Optional elements include development of areas such as presentation or
project management skills.
Future leaders: 24 individuals are nominated by divisional top teams every two years from
within the group of 150 to take part in the Musgrave Strategic Leadership programme. This
includes four residential sessions, assessment and coaching, and ongoing mentoring by
members of the top 50.
138
research
10
CASE STUDIES
High potentials: below the top 200, there is the Musgrave Leadership Development
programme. Twenty individuals, who have the potential to be future directors, are selected at
divisional level each year. They experience an 18-month schedule including 360 degree
assessment and feedback, coaching and two residential learning sessions.
Finance
HR
Marketing
Succession planning
The top 200 managers are discussed in annual people reviews carried out by the CEO and Group
HR director, with the MD and HRD of each business division. They examine performance,
development plans and succession ladders. The results are collated and reviewed collectively by
the Group executive team in a whole-day session, with particular attention given to the top 50.
Product development
Supply chain
Trading
Store design
An important point we put over to managers when they consider performance is how to
distinguish between outcomes, effort and potential, Keeley pointed out.
IT
Given the extensive process of assessment and review, some managers will not meet the
required standard. Keeley comments that careful monitoring means that when this happens,
wherever possible people leave of their own accord and in a positive manner.
The HR directors role
Keeley explains that he and his divisional colleagues, as members of their respective
management teams, play a full part in all decision-making. Resourcing and customer service are
particularly important issues, and help to place people issues at the heart of the management
team agenda.
In addition, my role is to guide, and challenge where necessary, both the CEO and my peers. I
expect divisional HR directors to do the same.
That involves being trusted by both CEO and board members to listen and advise in confidence,
and help manage relationships at the top.
139
research
10
CASE STUDIES
HR is provoking positive change, as well as ensuring it is managed effectively. Noel Keeley, Musgrave.
Musgrave has placed people at the heart of its brand communication, and is now articulating
the employee value proposition to support this.
Musgrave people cycle wheel
val
ues
2
en
ga
ge
m
en
t3
n1
Open s
Br
an
d
Co
mp
any
RD
ily
REW
A
fa
ve
lea
scheme
ve
ive
m
Co
n4
tio
uc
ind
ns
he
e
pr
ion
ess
rogr
rp
aree
Supporting the
community 6
nt
t
velopmen
ay
pm
e
th
w
pa
hip
er
s
ssio
nal
rofe
2P
s4
nt 5
ork 6
R
UNDE
ey
rv
su
ad
me
mit
Le
ye
com
plo
Em
Team w
LO
PI
NG
rm
Gr
g te
VE
DE
pr
Lon
at
u
ad
EN
am
r
og
1 Talent de
ent
ndm
eco
Learning th
e business
1
Tra
inin
g an
Int
d de
er
velo
na
pme
tio
na
nt 2
lo
pp
or
tun
itie
s3
AN
D
6 Edu
GA
GING
YOU
pport
cational su
5S
140
NG
sharing
si
hen
pre
ar
ke
he t lea
me di
ng
s
2R
pe
ewa
ns
rd fo
ion
r pe
rfor
man
ce
1 Competiti
ve pay
sc
JO
IN
I
electio
6 Profit
om
5C
3M
an
e
ye
plo fits
Em ne
be
ON
IT I
N
OG
EC
4
The good news was that our people were already positive about working at Musgrave. Sharing
the creation of our people strategy has reinforced, as well as improved this. Now all our HR
activities are tuned to support the lifecycle.
elo
Co-creation was central to the refinement of the people strategy. An extensive series of
working groups led to defining the Musgrave People Experience as a lifecycle. The four stages
and their elements are shown in the diagram.
dev
The retail brand strategy has been developed with extensive staff involvement, not only
profiting from their knowledge but building their ownership of what follows. The brand work
identified behaviour as one of four key aspects to be managed.
AN
D
G
IN
D
N
STA
research
10
CASE STUDIES
Facts about BT
HR executives are included in the various leadership and talent development processes
Masterclasses on coaching, to help senior practitioners extend their role to senior team
development, are to begin shortly
other professional workshops are being planned.
A plan to adopt a shared service model is being developed, but this will also support finance and
IT, and may include outsourced elements.
We will naturally be examining the development needs of business partners, Keeley says. He
regards facilitating change to be embedded in HRs job description. We are provoking positive
change, as well as ensuring its managed effectively. Three of the business divisions also have
an OD manager working with the HR director.
In summary
This case indicates the main steps a relatively little-known but sizeable company has taken to
sharpen both its performance and reputation. It shows how performance management and
development planning together with development interventions are intrinsically part of the
strategy for business success.
Also of central importance are the business values which can be seen to shape both priorities
and behaviour.
The HR function is key to all this, and has been the primary change agent. There is still more to
be done but, in four years, Musgrave appears to have made rapid progress.
10.4
BTs professional development framework for HR
This is an overview of BTs recent work in transforming its HR function.
Growing HR talent
Alex Wilson has put the emphasis more on
growing talent rather than external
recruitment. Apart from working on HR skills,
an effort is underway to recruit talent from
other areas into HR. He commented that BT
generally encourages movement between
functions 10% of HR now come from the line,
or areas like strategy, business improvement
and marketing.
Purpose
Given the realities of the telecoms industry, the recent history of BT is one of constant
transformation. Group HR Director, Alex Wilson, took on the challenge of up-skilling HR so
that it could better support business performance improvement and change.
141
research
10
CASE STUDIES
Ten per cent of HR now come from the line or areas like strategy, business improvement and marketing.
Alex Wilson, BT.
This is encapsulated in the vision statement adopted for HR people experts at the heart of
change.
Primary levers to realise this vision have been a set of new HR capabilities, development tools to
support the achievement of these, and a process of building ownership of higher standards
through culture change within HR.
Among secondary goals has been a desire to encourage more collaboration and sharing and to
minimise silos and re-invention of the wheel. While these are natural occurrences in a large
international group, more joined-up behaviours in HR will contribute to its reputation for
service and professionalism.
Alex Wilson - Group HR Director
BT
Creating
Value
through
Delivery
Creating
Impact
through
Relationships
Creating
People
Solutions
Strategy
Development &
Implementation
Flawless
Execution
Programme/
Project
Management
Managing Change
Relationship
Management
Communications
&
Influencing
Knowledge
Management
Diagnostics &
Problem Solving
Process & Policy
Management
Commercial
Understanding
Data Analysis &
Interpretation
Research &
Benchmarking
BT Leadership
Capabilities
BT
142
HR Specialist
Knowledge
research
CORPORATE RESEARCH FORUM
10
CASE STUDIES
Description
Developing
Practitioner
Intermediate
Practitioner
Full
Practitioner
Expert
Practitioner
BT
The various competency areas are each articulated in detail. We just show one below as an
example, relating to change management and describing the three higher levels of
attainment.
143
research
10
CASE STUDIES
Managing Change
Intermediate
Practitioner
Full
Practitioner
Responds positively to
change & highlights
the benefits to others
Coaches others on
the identification of the
people impacts of
change & how these
can be addressed
Demonstrates an
understanding of a
change tool & how it
can be used to plan &
communicate change
Identifies the people
impacts of change on
individuals &
anticipates employee
requirements
Manages ambiguity
Identifies potential
barriers to change
Coaches managers
on the change
management process
Implements a range of
change tools &
methodologies
Creates energy
behind the change
process
Diagnoses change
requirements &
proactively challenges
the current practices
Anticipates &
manages the politics
around change to
establish the
alignment of
stakeholders
Develops &
implements strategies
to overcome
resistance & barriers
to change
Creating
Value Through
Delivery
Expert
Practitioner
Coaches leaders on
the leadership of
change
Visibly champions
change within the
business & role
models appropriate
responses to change
Builds organisational
change capability
through a culture of
learning, flexibility &
innovation
Motivates an energetic
response to change in
other business
leaders
Communicates
change with passion
and commitment,
creating a compelling
vision for others
BT
Capability development
All HR staff were put through a development centre, and tested against these competencies.
This provided a view across the BT Group of the levels of competence in HR.
Individual results were fed into performance and development planning.
An extensive on-line toolkit has been developed to support each of the competencies, as part of
BTs Route to Learn system. BT was an early adopter of the intranet in the 1990s, and distance
working and home working are strong features of its modus operandum.
144
research
10
CASE STUDIES
BT uses rotation as a development tool, moving people through other functions and different countries
HR people do this too.
Naturally there are also internal development programmes, workshops and masterclasses
aligned to the competencies. Where there were gaps, new programmes have been developed.
For example,
two were recently launched, on commercial awareness, and on communications and
engagement
a third, on organisational effectiveness, is being piloted with the intention of rolling it out
across HR and then to line management.
Rising stars may be put through external programmes such as those provided by RBL, the firm
led by Michigan academics Dave Ulrich, Norm Smallwood and Wayne Brockbank.
BT uses rotation as a development tool, moving people through other functions and different
countries. HR people do this too, and it all helps to foster more internal cohesion and
knowledge transfer.
As regards oversight of the programme, the HR leadership team holds a Careers Council to
address talent and succession planning. The number of development interventions is also
tracked monthly and reported to Alex Wilson.
HR cultural transformation
Apart from working on the skills, it was an intrinsic part of the plan to work on behaviours too.
BT undertook a process of engaging HR people in the transformation journey, in two stages.
Measurement for HR
BT is using a range of methods to test progress
and learn for the future.
For the last three years, HR has asked line
managers to undertake on-line assessments of
HRs added value and commercialism,
supported by interviews with top managers.
BT is undertaking further assessments in HR to
determine the level of improvement in HR
capabilities, and provide pointers to add yet
more value to the business.
Part of the transformation task and hence
measurement relates to managers
embracing more their people responsibilities.
BT has other survey tools which provide data
on this.
Accentures operation of HR services is also
measured in great detail against SLAs and user
satisfaction targets.
BT also participates in some external
benchmarking and comparisons, both on costs
and its degree of transformation.
Discussions were held throughout HR to look back over the past five years, have honest
discussions about what needed to improve and envision what was needed in the future to
become people experts in change management. Some 150 people contributed through
interviews
facilitated group discussions
using regular HR regional conferences.
BT used a group called Delta 7 that specialises in visualising vision and strategy development.
They already had experience of the company, and they helped to assemble a picture of BTs HR
journey into the future.
145
research
10
CASE STUDIES
Embedding
As stage two, this visual representation was then discussed in late-2007 by every HR team in BT,
with detailed guidelines given to facilitators. The purpose of the team meetings was to
aid understanding of the journey and vision
provide an opportunity to express ideas and feelings in a safe environment
give participants the confidence to engage with their own stakeholders about HRs future
direction
collectively agree the principal steps to take to support transformation
encourage every participant to commit to a behavioural change towards realising the vision.
The guidelines provide examples of sharp-edged and tough questions, designed to stimulate
honest and open debate.
Involving the line
Using specially designed discussion guides your role as people managers this approach has
also been deployed among line managers in some parts of the business, to raise understanding
of the role of both HR and the line in managing people.
10.5
Rolls-Royce creating a shared services centre
We spoke to Mark Judd, Director of Shared Services, who had previously pioneered shared
services in PricewaterhouseCoopers.
Context
Rolls-Royce is making a transition to a global power systems company, rather than being a
predominantly UK-oriented aerospace company, as in the past. CEO, Sir John Rose, made it clear
that HR would need to play a central role in achieving this transition. The HR function itself has
required a thorough transformation to equip it for this challenge.
The initiative to create a shared services centre began in 2006, and it now employs 180 people
located in Derby. The first step has been to serve the UK workforce of 22,500 employees. The
extension to the rest of Rolls-Royces workforce outside the UK currently over 50% and
growing is now underway.
146
research
10
CASE STUDIES
Weve been a catalyst for positive change by providing line of sight that only the unions enjoyed
previously! Mark Judd, Rolls-Royce.
The transition
Rolls-Royce has moved from a situation where some 40 sites across the UK had been run with
considerable independence. There were all manner of historical relationships and practices,
and separate agreements for non-managerial workers, observed Judd.
Scope of HR change
The areas of HR activity include both
administration and advisory services covering
Reducing complexity
reward
The service centre provides a platform for continual simplification, and insight across the
business enables the more efficient use of resources. Having only one phone number is an
example. Duplications were revealed and were then negotiated out. Initiatives to redefine
grades and adopt a flatter leadership structure were introduced.
pensions
Weve been a catalyst for positive change by providing a line of sight that only the unions
enjoyed previously!, said Judd. Its painful at times, as in exposing and challenging
different local practices we are dredging up unsightly sediment in terms of costs and
illogicalities. But, eventually, the company will be more robust as a result.
recruitment
In preparing the ground, service centre managers undertook workshops with each business to
consult, test and build confidence. Each had to sign off content at the outset about local
terms, for example.
As regards ongoing service, Judd explained, it was important to communicate that its certainly
not less personal. Instead of walking half-way across a site, you just pick up a phone anytime and
speak to someone you know can deal with the issue right away.
Building confidence
As might be expected, not everything worked smoothly to begin with. However, extensive
measures have been taken to build confidence amongst line managers. Colleagues are regularly
invited to visit the centre.
Around 75% of the staff have worked in Rolls-Royce before. They actively maintain their
relationships, and this spreads confidence. Visitors dont just meet senior managers they
encounter the people who manage or do the front-line work.
147
research
10
CASE STUDIES
We resist silo-based working in HR, and will work actively with the other HR communities.
Mark Judd, Rolls-Royce.
148
Bringing in visitors from Rolls-Royce operations outside the UK has worked well in selling the
transition to a global service centre model. Indeed, the fact that the service centre is now
receiving regular visitors from other companies also helps to build its reputation.
While we had a full promotional strategy from leaflets to workshops the critical confidencebuilder has been going live. First time service is what you are judged on, and the word spreads
fast. People there seem to know what they are doing, was the perception we built.
Initially, operations managers also worked as relationship managers with parts of the business,
and helped sort out teething problems. This is now no longer necessary as self-service has
become the norm.
Service standards moving ever upwards
Service levels are benchmarked externally through Saratoga. Internally, they are measured on a
monthly cycle, including phoning people randomly for their views and ideas. The service centre
has achieved the bronze standard in the companys quality programme and is now progressing
to the silver level.
Were moving from the foothills up to the mountains. Theres a long way to go, but we are
already getting internal recognition HR is now being seen to lead the way in internal
services. Were getting external recognition too, even though we dont seek it.
The service centres management are now shifting from a reactive to predictive mode,
developing the agility to handle a variety of changes in the business from shrinkage to
acquisitions. Working more proactively with business partners and centres of excellence, the
service centre will both propose incremental improvement and engage in discussion about
more fundamental changes.
We resist silo-based working, and will work actively with the other HR communities.
What about outsourcing?
This option was ruled out, since the variety of practices in Rolls-Royce would make the cost of
transfer too high. Having now made an investment in a robust technology platform and
achieved high service levels, there is no visible advantage in considering major outsourcing.
We use contractors for specific services, just as we have always done.
However, Judd remains open to the concept in the long term, when a new technology platform
might be required.
research
CORPORATE RESEARCH FORUM
10
CASE STUDIES
Further development
The priority for the HR function in Rolls-Royce is to achieve the successful implementation of a
global HR shared service organisation over the next two years. A possible goal for the future is
becoming an enterprise service provider, supporting other functions in addition to HR as Judd
achieved at PwC.
"We start with business cases about areas where shared practices make both economic and
internal customer sense." At that point, the service centre would naturally gravitate to
becoming more than just part of HR.
Meanwhile, to cope with recessionary pressures, the service centre is working on a ready for
anything approach. We cant know what the business will ask us to do, because the operating
environment is so unpredictable. So we need to gear our thinking and methods to be both
flexible and fast.
149
11
research
11
Introduction
Topics covered
11.1 Conclusions
152
155
160
151
research
11
11.1
Conclusions
Knowledge
Business
Organisation design and OD
Psychology
Work and process design
Business and people metrics
Skills
Communication
Numeracy
Overall conclusions
Over the past decade, HR functions have had to cope with significant changes resulting from
legislation, new markets, technology, globalisation, etc. They have worked hard, covered the
basics well and some have done better than that. Yet, surveys indicate that HR in general
continues to have a reputational problem.
Long-standing concerns persist about competence, lack of business focus, service quality,
courage and added value.
The widespread shift to a three-legged structure has not clarified managers and employees
understanding about what HR does. Also, there are question marks about how effective HR
has been in implementing new functional structures.
Parts of the HR portfolio have been off-loaded to consultants, lawyers, benefits specialists and
outsourced service suppliers with mixed results.
Analysis
Project management
Demands for higher HR expertise intensify as technology drives new business models and
ways of working and globalisation adds complexity. Managers need more help than ever to
see beyond task requirements and operational pressures.
Attributes
Courage
Influencing ability
Behind any reputational problem is a reality problem. Our interviews with leading HR directors
and experts
confirm and illustrate where the problem areas are
Resilience
help us to identify seven priorities for configuring HR in the future see below
Tact
152
research
11
3 Re-skill HR people
While usually designated as the guardian of talent management, HR urgently needs to tackle its
own talent and professional development issues. It is in the interest of the whole organisation to
have a function that specifically improves organisational and people performance. This requires
a new employer brand for HR itself, to reposition it as a place for high achievers.
4 Re-define people management responsibilities
Clarity about who does what is crucial to avoid responsibilities falling between two stools. A
people governance structure is required, incorporating
managers being primarily responsible for doing and engaging, with leaders having
responsibilities as role models
HR being the guide, goad and guardian of quality and its success should be connected to
how well managers do
agreeing a calendar and process for developing a compelling people strategy as part of
formulating business strategy.
In most organisations, managers still need to
recognise the full extent of their people responsibilities
learn more about the fundamentals of good people management, from psychology to behaviours.
There should, therefore, be a continuous drive to strengthen managers people skills in
performance management, feedback, capability development, and understanding
organisational effectiveness.
Finally, good people governance requires regular measurement and reviews to give a more
incisive picture of how managers and HR are doing and highlight further improvements.
5 Re-shape HR relationships
There are three critical relationship areas for HR to work on.
HR and customers HR needs to use co-creation rather than just consultation in convincing
managers and employees that their needs will be met by HR services and processes. This has
mutual education benefits. HR should also clearly distinguish between its service mode and
control mode the latter when it acts on behalf of the management team.
153
research
11
All managers think they are experts in human behaviour. Actually, the knowledge of most on this
subject is minimal. Ed Lawler.
Other conclusions
From our research, we reached two further
conclusions relevant to HRs future.
CEOs
Investors
154
HR directors and CEOs/top teams the ideal HR director will not only drive functional
renewal, but will also improve top team effectiveness by
- acting formally as adviser to the board on reward, performance and development at the top.
Within HR ensuring collaboration between different parts of HR in using services and
specialist resources. Also, acting as an integrating function to avoid silo behaviour and
enabling head office functions to serve the organisation as a joined-up team.
6 Refresh HR processes
Our research indicates that people processes should be designed with more rigour
underpinned by operational evidence and tied more directly both to organisational goals and
the needs of managers/employees to perform effectively. Therefore, we conclude that
processes should be prioritised performance, talent and change will always be high on the list
processes should be mapped with clear owners, customers and success measures and
supported by evidence that anticipated benefits will be delivered
in HR services, customer satisfaction and value added must be at least as important as cost
a strong focus on measurement and evaluation should underpin all HR activities, requiring the
development of analytics capabilities.
7 Re-align professional bodies
As yet, professional bodies in HR are not felt by experts and HRDs to be doing enough to raise
the sights of the HR community. They have issues to face concerns about over-reaching their
members, and the limitations of college lecturers as levers for progressive HR thinking and
practice. These bodies could have more impact by
ensuring that educational standards and course content more truly reflect HR of the future,
and include high quality experiential learning
working with HR directors and progressive organisations to create a new tipping point for
HRs reputation.
research
11
Too many HR people step aside and defer to specialists in leadership development and OD. These
should be seen as core HR skills. John Whelan, BAE Systems.
11.2
Recommendations for HR
1 Repositioning the function as organisational effectiveness
The functions purpose is to help managers get the best out of people, and create an effective
performance environment. This is how the different parts of HR support this.
A services function for day-to-day issues and continuous improvement.
Specialist areas for advice and facilitation, and to support corporate HR policies.
HR managers in business teams are catalysts in framing specialist input and liaising
with services.
OD should be a core skillset for HR managers and specialists.
Organisational effectiveness works on the organisation context, not just people.
This should not involve HR acting in isolation to change itself. The re-framing must be of direct
benefit to the whole organisation with manager/employee needs built in. They should both
understand and feel it is in their interests, which is more likely if they are consulted.
Eventually, it is conceivable to drop the HR and re-name the function OE. However, part of
HRs reputation problem is that it has changed the name on the tin more than once from
personnel to human resources, from training to learning and development, from HR
manager to business partner without changing the contents.
Thus we recommend no name change at all until it is clear that HR has genuinely transformed
itself into an organisational effectiveness function.
Irrespective of the precise structure adopted, HR directors should ensure that objectives and
work are defined with the help of the three lenses, as described in Chapter 9.5. It should be clear
to all function professionals how they contribute to organisational effectiveness for current
needs, improvement, and more radical change.
2 Focus on HR talent
HR directors and CEOs must see that HR is staffed with capable problem-solvers who also have good HR
knowledge. The job cannot be done by second-raters without relevant experience. Key ingredients are
re-framing capability requirements by level and performance standards
an internal development programme, with external expert inputs
experiential development projects, secondments, etc
career paths moving staff around the function and the organisation to obtain practical
experience, preferably at the front end of the business
155
research
11
HR should be held accountable for those activities on which the function claims to have some
significant insight and expertise. Nick Starrit, PARC and Sirota.
recruitment leavening the mix with external recruits, and with talent recruitment from
inside the organisation, either permanently or for a period
CPD the question, what significant personal development initiatives have you completed
this year?, needs to be asked of everyone in the function.
3 HR cultural shift
A programme should be devised to modify understanding and behaviour within the function so
as to build ownership of HRs new paradigm and create a service culture. Similarly, there should
be communication with managers and employees, so they
are clear about why the shift has taken place
can see that their own needs and views have been covered
identify the shifts in behaviour they themselves may need to make.
4 Role clarity HR and management
Clarity about who does what and working to shared objectives is essential. Fewer but more
critical initiatives should create better embedded practices. People governance should stipulate
the points in the column.
The end result should be a clearly defined mode of partnership in people management, to be
evidenced in functional reviews and internal customer surveys.
5 People management skills
The re-alignment of HR should be reflected in people skills development programmes for
leaders and managers. The focus should be on
performance management and development planning capabilities, including objectivesetting, fair rating, how to give careers advice, etc
giving and receiving feedback, and coaching skills
a solid understanding of OD and psychology, to equip managers to be good customers of the
OE function.
A commitment to people skills starts with selecting, growing and promoting great people managers.
6 Organisation transformation
In any fast-evolving organisation, a top executive or team could be appointed to stimulate
thinking about future organisational re-invention, and integrate efforts to plan and implement
radical change. This will address the third, future-focused, lens.
OE/HR should contribute expertise to this multi-disciplinary function which may act in part as a
virtual team.
156
research
11
HR directors can end up being the HRO for top level people dont
let yourself get sucked into the minutia. This should be nearer 5% of
your time, not 70%. Peter Howes, InfoHRM.
Integrating metrics across functions to improve the visibility, quality and assimilability of
management decision information.
Better metrics ability will also support the provision of data to investors, demonstrating the
organisations efficiency and resilience over the longer term.
Whether or not such a title is adopted, the concept should guide the CHRO/HRDs contribution
to top team and strategy formulation.
Working with function and business heads on the design and operation of their areas from
people and organisation perspectives.
Day-to-day effectiveness is supported by efficient and customer-focused HR services but where
service centres become multi-disciplinary, direct responsibility will move away from the HRD.
Top team effectiveness
research
11
I spend a lot of time away from head office meeting business teams and our business partners, to help
embed the changes we are making. Tom Brown, Rolls-Royce.
HR directors must balance their work among top team members with leading the function. It is
they who must drive the new OE/talent focus and function culture change, and act as role
models. Building a strong team which can work at top executive level will help spread the load.
9 HR and corporate governance
We recommend the following role parameters for HR directors, providing they are suitably skilled
and experienced.
Responsibility, in support of the CEO, for board oversight of the people component in business
strategy, particularly talent and succession which usually requires one or two discussions a year.
Tom Brown - HR Director
Rolls Royce
HR is expected to take a stand, and not be compliant or simply do the bidding of senior
executives. We have to dig in our heels occasionally, on issues such as senior
appointments. David Russell, William Hill.
Often, an HR person is not present at board meetings, yet HR insights and knowledge are
needed. The board should insist on this. However, beware if the CHRO is not an HR expert.
You wouldnt make a non-lawyer head of the legal department. Steve Kerr, Goldman Sachs.
research
11
Supply of talent will only improve if it is widely understood what it means to be part of
tomorrows HR function.
As HR experts see it
Differences in global HR standards are best addressed by world-class companies setting the
pace, communicating good practices and thus overcoming cultural biases.
As the appointer and line manager of the HR director, CEOs must know what an effective HR
function and HRD looks like. That includes understanding the future-facing concepts about
structure and roles, as described in this report.
Given the pressures on CEO jobs and senior executive relationships, they will benefit from
recognising the wider role that experienced HRDs can offer. They should actively seek help,
profiting from the insights of a well-connected HRD and welcoming challenge. Without this, a
CEO will miss potentially vital feedback. Selecting such an HRD is an important contribution to
managing top team risk and productivity.
Role model for people management and capability development
Effective people management is dependent on line managers having the right attitude and
skills. The CEO is primarily responsible for this, with the support of the HRD. The more that this
can be done by example, not just exhortation, the more credible it will be that this is a priority
even the CEO does it is a powerful line to use!
12 Investors, analysts and fund managers
Wise investment decisions will be based on an understanding of future potential, not just past
performance. This requires knowledge of what
creates long-term resilience and the ability of the organisation to re-invent itself
productive top team processes and behaviours look like
represents sound and well-targeted investment in capability
drives engagement
the people metrics are that indicate long-term organisational health.
Investors should be aware that the flimsiness of much broker research means it is not fit-for-purpose.
159
research
11
11.3
Conclusions and recommendations high level summary
Overall conclusion interviews/surveys reveal HR has a continuing reputational problem. Longstanding concerns persist about competence, lack of business focus, service quality, courage,
added value. Move towards three-legged structure has not yet clarified managers/employees
confusion about what HR does. The fundamental challenge is to up-skill and re-orient HR, enabling
it to seize the opportunity offered by greater understanding that people make the difference. But
only a few progressive companies and HR directors are moving in that direction as yet.
160
Seven themes
Actions
Roles to fulfil are business problem-solver, organisational architect, workforce planner and
resourcer, talent manager and capability raiser, performance management expert, change
agent, collaboration and innovation facilitator, engagement champion, employer brand
manager and culture steward
Currently too much about the here and now. Use three lenses to re-focus objectives and delivery:
- sustaining current performance
- stimulating and guiding improvement
- driving and designing transformation
Create a transformation role to develop and embed organisational capability for change and
reinvention
Re-skill HR people
a new employer brand for HR
talent focus: a place for high achievers
Institute a culture change within HR, raise the sights and ambitions of current and potential
HR managers
Primary focus on business and OD skills a theoretically-underpinned and experiential
learning programme
Rotation within the function, and secondments in and out of the function
- Recruit from non-HR disciplines to boost business competencies, metrics skills, etc
- Selective external recruiting and interim appointments experienced consultants who
can teach/coach the new skill set, for example
Insist on continuous learning broadening and deepening throughout your career
research
11
Seven themes
Actions
Re-shape HR relationships
Refresh HR processes
Raise their sights in order to be seen as leading, not lagging, in raising HR calibre
Work with leading HRDs and progressive organisations to create a new tipping point to
improve HRs reputation
161
APPENDICES
12
research
12
APPENDICES
APPENDIX 1
HRs roles Ulrich updated
In recent lectures, Dave Ulrich has updated his original 1997 definitions of business partner,
change agent, employee champion and administrative expert.
HR Actions, Roles and Competencies
Business Ally
le
Bu
sin
op
Pe
Operational
Executor
Strategy
Architect
es
Systems &
Processes
Culture and
Change
Steward
Talent
Manager and
Organisation
Designer
Organisation
Capabilities
Credible
Activist
Relationships
HR Professionalism
The RBL Group
163
research
12
APPENDICES
164
research
CORPORATE RESEARCH FORUM
12
APPENDICES
APPENDIX 2
New CIPD HR capability framework
The UKs Chartered Institute of Personnel and Development has undertaken an in-depth
project to define a more forward-looking capability framework for HR. Among other uses, this
provides a platform for devising a new syllabus for colleges providing CIPD qualification.
Project Frames involved
market research desk research, interviews with senior HR professionals, consultation with
industry
a literature review
obtaining feedback on findings from the project senior advisory board, employers, and CIPDs
research and policy department.
The aim is to produce an HR profession map for the UK which is market-led and evidencebased. The architecture of this profession map comprises
a definition of the purpose of HR
10 professional areas
4 bands of competence from arrival in the profession (Band 4) to senior practitioner (Band 1)
12 behavioural competencies.
The 10 professional areas comprise the nine listed below, all supporting the realisation of the
tenth Business solutions.
Leading and managing the HR function
Resourcing and talent management
Performance and reward
Strategy and planning
Organisation development
Employee relations
Organisation design
Learning and development
Information and service delivery
165
research
12
APPENDICES
Within the HR profession map, each professional area, for each band, will explain the activities
to be assessed at that band, the technical knowledge required at that level, and the behavioural
competencies to be displayed. There is also a useful articulation of what is required to transition
between levels.
The 12 behavioural competencies are as follows.
Setting the agenda
Personally credible
Trusted partner
Relationship manager
Skilled influencer
Making it happen
Driven to deliver
Collaborative team player
Clear communicator
Change agent
Each of the 12 behavioural competencies then has a set of indicators and contra-indicators for
each band.
Note that CIPD recognises that the current provision of development programmes and services
to HR professionals in the UK at least are considerably skewed towards the less senior bands
(3 and 4).
166
13
research
13
HR in general
Wright, P. M.,
Restoring Trust: The Role of HR in Corporate Governance,
Christensen, R.,
Talent
Capelli, P.,
Business Intelligence,
2008.
Kates, A.,
2006.
Butterworth-Heinemann, 2005.
Performance
Merritt, L.,
research
13
Hirsh, W., Carter, A., Gifford, J., Strebler, M. and Baldwin, S.,
What Customers Want From HR: The Views of Line Managers,
Senior Managers and Employees on HR Services and the HR
Function, Report No 453, Institute for Employment Studies, 2008.
Change
Hamel, G.,
The Future of Management, Cambridge, MA, Harvard Business
Kotter, J. P.,
Leading Change, Cambridge, MA, Harvard Business School Press,
HR services
1996.
Business Intelligence,
Society for Human Resource Management,
Change Management: The HR Strategic Imperative as a Business
Partner, HR Magazine (US), Vol 52, Issue 12, pp 1-10, 2007.
Anderson, M. C.,
Block, P.,
Orion Partners,
1999.
www.orionpartners.co.uk
169
research
13
Measurement
Cunningham, I.,
McGraw-Hill, 2002.
2005.
Hesketh, A.,
Outsourcing of HR Possibilities and Pitfalls, 2006.
HR function development
Lambert, A.,
Jamrog, J. J. and Overholt, M. H.,
Building a Strategic HR Function: Continuing the Evolution, Human
Resource Planning, Vol 27, Issue 1, pp 51-62, 2004.
Lambert, A.,
Embedding Creativity and Innovation, 2007.
Sparrow, P., Hesketh, A., Hird, M., Marsh, C. and Balain, S.,
Lambert, A.,
Vickers, M.,
Morton, L.,
Briefing, 2005.
research
13
Ulrich, D.,
CIPD
A Barometer of HR Trends and Prospects, 2008.
Hewitt Associates
European Ways to HR Transformation, 2006.
PricewaterhouseCoopers
Global Trends in HR, 2006.
Scholz, C. and Bhm, H., and European Association for
Personnel Management,
Human Resource Management in Europe, Routledge, 2008.
SHRM and The Hay Group,
Strategic Research on Human Capital Challenges, October
2007.
171