cover illustrationThe Changing HR Function
Transforming HR?

Reilly P, Tamkin P, Broughton A
Research into Practice, Chartered Institute for Personnel and Development, November 2007

commissioned by the Chartered Institute of Personnel and Development

This Research Report describes the evolution and current state of the HR function and provides practical guidance for organisations on how best to structure and staff the function to achieve future success. It is the final stage of a larger project within the CIPD’s research programme on the HR function, and its particular focus is on the impact of HR transformation. This research stage has used case studies and a quantitative survey to examine how HR functions are meeting the challenges of changes to structure, roles, skills and relationships.

A number of key messages emerged from the research. Firstly, it appeared that HR’s main contribution comes from two sources: its service delivery and facilitation roles. The former encompasses the recruitment and retention of staff and ensures that they have the requisite competencies to do their work. The facilitation role of HR is perhaps less clearly defined, but it concerns encouraging/coaching managers to get the most from their staff. Both these inputs can be at the operational and strategic levels. How these roles are balanced depends upon the business objectives and the way they relate to people.

Moreover, some organisations believed that HR has a governance role to play in order to protect organisational values. While it is clear from the research that HR might not champion employees, or normally deal with individual cases, many organisations are interested in the collective performance of employees through employee engagement, corporate social responsibility (CSR) and employer branding – although HR would seem to be more active in the former two than the latter. Nevertheless, some HR managers worried that the function was becoming too distant from employees, and, indeed, some case study organisations had taken steps to find ways of being more approachable.

A second finding was that the three-legged stool model (shared services, centres of expertise and business partners), attributed to Dave Ulrich, was the most common HR function structure, although fewer than 30% of our survey respondents said that they had introduced the model in full and an equal proportion had only partly introduced it. As to the legs of the stool, the use of business partners is much more common than either shared service centres or centres of expertise.

Where such a model had not been introduced, the most common type of structure was a single HR team incorporating generalists, specialists and administration. Although some contributors worried that HR is tending to ‘follow the Ulrich fashion’, these figures suggest that this concern is overstated. Yet there were also worries that HR’s change programme is disconnected, both from the business strategy and any other structural modernisation taking place elsewhere in the organisation. This concern is compounded by questions over whether HR is setting its change objectives clearly enough and sufficiently engaging managers, executives and the HR community effectively in change design and execution.

This point is perhaps reinforced by the fact that the primary driver for structural transformation is the desire for the HR function to be a more strategic contributor. This came out top in the survey – above the need to improve service standards, to increase business focus or even to reduce costs. In fact, according to the survey, the HR function has doubled the proportion of time it spent on strategic inputs over the last three years, at the expense of administrative activities. Whether structural change is the cause of this shift is less clear. However, although developing HR strategy and policy and contributing to business strategy were the most important tasks for survey respondents, providing support for line managers and HR administration were still their most time-consuming tasks, suggesting that further progress in rebalancing the workload is indeed necessary.

Looking at the components of the three-legged stool structure, from our case study organisations we found a great deal of variation in the formats used. There were different conceptions of the business partner role: business partnering may involve, to varying extents, operational delivery to and support for the line; business partners may be solo operators or part of a team; and business partners might report to HR or to the business unit head. Moreover, although there was a positive appreciation of the work of business partners, there were a number of challenges faced regarding their role and relationships with others.

We found, as expected, that shared services is a phenomenon for large – rather than small – organisations. Overall, the structure of shared services varies by organisation, especially in a global context. Only 4% of our survey respondents said that they wholly outsourced their HR shared services operation, and around a quarter outsourced part of their shared services activities. We came across other examples where HR shared services had been transferred out of the function but not out of the organisation, and we found cross-functional as well as single HR service centres.

Outsourcing therefore remains a tactical rather than a strategic matter for most organisations, limited in scope mainly to specific activities where specialist skills are not available. The exception was where outsourcing was considered to fund technological investment.

Our survey results indicate that nearly two thirds of those organisations that have introduced shared services have also created centres of expertise. Learning and development was the commonest centre of expertise, followed by recruitment, reward and employee relations. In some organisations, expertise is held within the business unit, so that it aligns with specific unit needs, or performed corporately, rather than in separate subject-based units.

Problems associated with the introduction of the three-legged stool model particularly relate to include the difficulties posed by segmented service provision. So gaps in service provision, boundary management and communication were the principal problem areas, according to the survey. Role definitions in practice, rather than theory, and skill (or resource) shortages were also cited as key challenges. Filling cracks in the system – especially to provide operational support for line managers – was identified as the most likely effective solution.

The overall impression from the survey was that structural change had little impact on development upwards or sideways, or in joining the function. Two thirds of our survey respondents said that the changes gave more opportunity to staff compared with only 17% who thought that it was harder to develop people into new roles. There were different views expressed by more junior members of the HR community. They were apparently more concerned than managers about the implications of new organisational structures on career development.

Besides structural change, process modernisation was a priority in many organisations, not least because the quality of HR processes was perceived as its weakest area by CEOs, in the view of HR managers. Technology was frequently a key enabler of reform, although securing the necessary financial investment was not always easy, even where there were demonstrable savings, and successful implementation was a challenge for a third of the survey respondents. There was debate about whether process change should precede or follow structural change, and where systems investment sits in the sequence. No clear picture emerged from our research as to best practice, because much depended on the organisational starting point and characteristics. Process automation had brought real benefits, but we found that care was needed with self-service to avoid managers feeling ‘dumped on’. Standardisation of processes was an important driver for change (especially in global organisations) and brought benefits in terms of simplification, use of good practice and benchmarking, but concerns were expressed that, if extended into the policy arena, a single approach to a varied work environment might be imposed.

Looking at the relationships of the HR function with managers, we found that the division of people management responsibilities between HR and the line was largely unchanged since 2003, despite HR’s wish to have more work transferred to line managers. HR still takes the lead on remuneration and implementing redundancies; the line has prime responsibility for work organisation; whereas for recruitment, employee relations and training and development activity is more shared. Overall, the principal reasons for HR’s lack of success in achieving greater transfer of tasks to the line appear to be line manager priorities, their skills, the time available to them for people management tasks and poor manager self-service.

On measurement, it was noteworthy that HR appeared not just to be assessing its process performance but also considering its broader effectiveness. Thus, virtually all organisations measured HR’s efficiency, and over half examined HR effectiveness through people management practice and its effect on outcomes such as absence. The main indicators used were business performance, surveys of managers/employees and customer satisfaction metrics. System or policy evaluation still did not appear to be particularly common, which is problematic when considering the success of HR transformation.

We found that there has not been a great deal of change in terms of the skills needs of the function since 2003. In general, senior HR managers seemed more concerned with the skills required of the business partners – such as political and influencing skills – than the general (interpersonal) skills required of the function.

Finally, where development takes place, the emphasis appears to be more on formal training than on experiential learning. Moreover, there was not a great deal of evidence in the survey of a policy of challenging staff or encouraging learning through measures such as short-term assignments, project work and covering absence.

The Changing HR Function: Transforming HR?, Reilly P, Tamkin P, Broughton A. Research into Practice, Chartered Institute for Personnel and Development, 2007.
ISBN: 978-1-84398-197-8. Bound copy: £49.99

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