HR needs to keep evolving to tackle future challenges

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(Business Day (South Africa) Via Thomson Dialog NewsEdge) HR needs to keep evolving to tackle future challenges Organisations are getting flexible in the wake of globalisation, says , and human resources have a key role ARECENT Deloitte report on global human resources (HR) transformation says that while HR management practices have developed significantly over the past decade, these changes may not be sufficient to meet critical future challenges. More needs to be done.



The early 1990s marked the start of first generation (First Gen) global HR transformation. This movement focused primarily on changing the existing relationship between employees, managers and HR. Technology and process reengineering characterised First Gen efforts that aimed to render employees more self-sufficient, while also asking them to assume increased responsibility for their careers. It also sought to make managers more responsible for handling their employees' HR needs. Essentially, the main principles of First Gen HR transformation were to: provide employees and managers with direct access to information and tools; standardise and simplify HR administrative processes; and provide the right level of HR support where and when it was needed.

First Gen HR transformation represented a major shift in HR's role, from transactions and administration to strategy and business transformation, says Walsh. It was characterised by several objectives: Reducing costs through shared service centres, self-service, and outsourcing. This entailed developing uniform HR processes to lower administrative delivery costs, as well as creating a self-service culture, says Walsh. Companies also outsourced key services that could be managed more efficiently externally. Self-service applications were delivered to an electronic desktop.

Streamlining technology and hardware support to improve access to information, which resulted in a single, integrated global HR management system for standard transactions and reporting. Managing people globally. According to Walsh, three related developments influenced First Gen HR transformation. The first was Prof David Ulrich's work regarding specialised HR roles (as described in his book, HR Champions, in 1997). Ulrich proposed that specialised HR roles would be more efficient and effective than a generalist approach, says Walsh. He advocated specialty roles such as compensation, benefits, training, administration and business support. The second driver was a three-tier structure for customer service which included: Tier 1, where employees and managers serve themselves for routine inquiries and transactions; Tier 2, where organisations provide basic assistance for issues that cannot be addressed through self- service; and Tier 3, where specialists manage complex issues and provide strategic support to the company.

The third factor was process re-engineering which emerged in the mid to late 1990s and encouraged organisations to rethink, restructure, and consolidate business operations, including HR administration. Software vendors subsequently developed programmes to facilitate enterprise-wide transformation.

All this introduced a new vision for HR including a 'service delivery' model, says Walsh. But the transformation was more difficult to execute than most organisations imagined. A roadmap for HR transformation did not exist. Companies were still deciding how to operate their businesses globally, and many of the systems, tools, and services that formed the foundation for HR transformation were still nascent. According to Walsh, many lessons have emerged from First Gen HR transformation. There is no one-size-fits-all regarding how to transform an HR function. Every organisation is unique, and change management is an integral component. HR cannot drive transformation alone; strong leadership is needed. Early pioneers were probably too ambitious trying to do too much too soon without paying enough attention to the business and managing expectations as the face of HR withdrew, says Walsh. Undoubtedly, companies today face significant HR challenges that did not exist a decade ago, including global competition, shifting demographics and an ageing workforce that will initiate a talent shortage. More and more, organisations are recruiting nontraditional sources of labour (retirees, Generation Y-ers and offshore workers) and engaging in more flexible working arrangements. Emerging markets are becoming sources of skilled labour and revenue growth. Organisations face greater legislative scrutiny and compliance reporting. And, as always, the pressure to cut costs ensues.

In this scenario, HR's role needs to encompass the ability to anticipate workforce trends, recruit the right talent and exploit the potential of workers.

How will HR successfully manage this challenge? Where First Gen HR transformation focused inward, seeking to render HR services more efficient, faster and cheaper, the next generation of HR transformation will look outward, with the objective being to help companies achieve their desired results while growing in an environment typified by global competition and a skills shortage.

In addition to finding new sources of labour, HR will play a role in developing an organisation's capabilities and infrastructure to ensure its scalability in an economic arena characterised by increased mergers and acquisitions, says Walsh, noting that mergers and acquisitions activity in Europe increased 52% in 2004-05.

It will also need to improve its ability to operate quickly and effectively in new markets, while adapting to the changing demands of a global marketplace.

First Gen HR transformation focused on establishing and deploying a new HR service delivery model with a strong emphasis on technology, process design, and efficiency that would create a solid infrastructure for the future and baseline HR capabilities, says Walsh. Next Gen HR transformation will build on that foundation by focusing on creating additional HR capabilities and developing HR solutions directly tied to business issues. NEXT Gen HR will include new roles for HR, such as business partner and vendor manager. The former implies having an understanding of the company's business, industry, and strategy and thinking like a business person; using financial measures to help determine results; acting as a broker of HR-related services by connecting the company to needed resources; consulting to the organisation regarding people issues; and helping to craft the right business strategy.

As a vendor manager, with companies increasingly outsourcing HR activities, HR will need to improve its vendor management capabilities. HR will ultimately be responsible for service quality and results. Outsourcing selected administrative activities will not automatically make HR more strategic, says Walsh. According to the Deloitte report, companies that develop an HR service delivery model before deciding what to outsource are much more likely to achieve their desired results. The model helps HR to identify and evaluate different options, instead of assuming business process outsourcing is the only alternative. It also helps provide a blueprint to define clear roles, says the report. Next Gen HR transformation will also tackle several future people- related issues such as workforce planning, talent management (helping companies make themselves more attractive to top talent and finding ways to boost the capabilities of the existing workforce); new market entry; global mobility (having access to the right talent, wherever it happens to reside); merger integration; global programme management; change management; and global workforce security.

Before embarking on its journey towards Next Gen HR, Walsh advises the HR function to align its priorities with the needs of the company. To focus on improving overall business performance and competitiveness, HR will require a deep understanding of business challenges and strong alignment with business strategy, says Walsh. HR must also be confident it has the skills and competencies needed to fulfil its new role. Simply re-branding HR as 'strategic' is not enough. Effective results require the right people with the right skills. Of course, HR must also have agile systems, processes, and infrastructure to support the changing needs of the organisation. Walsh advises companies to develop the vision of the future before doing anything knowing where there is, is critical. Recognise systems implementation as an enabler. Clarify the business drivers for transformation. Engage stakeholders and acquire business sponsorship. Promote the role of the service centre to attract talent. Deliver the basics at employee level well. And, to ensure an organisation's natural tendency to revert to old behaviours does not impede the journey, keep the change management team and governance structures for long enough after go-live.

In the future, HR's performance will be measured not by its administrative efficiency but by how well it enables the business strategy and maximises workforce performance. Walsh is head of European human capital practice at Deloitte.

Copyright 2006 Times Media Ltd.. Source: Financial Times Information Limited - Europe Intelligence Wire.
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