Is HR Transformation a Reality?

Survey indicates that transformation is possible, but a gap exists between those who hope to achieve greater focus and those who actually achieve it.

by Synco Jonkeren

Is HR transformation a myth or a reality? This was the topic of a lively debate, organized by the HRO Association Europe and SharedXpertise Forums recently in Brussels, inspired by a survey conducted by HROA Europe in association with TPI.

Just in case you think all there is to learn about HRO comes from the U.S., think again. Grouped together to discuss HR transformation were representatives from more than 20 of Europe’s largest firms and some of its most distinguished HRO proponents.

The survey addressed the actual achievements of HR transformation within organizations and the impact on areas outside HR. With HR under increasing pressure to provide more strategic, value-added services to support core corporate strategy, transformation has consequently been high on many corporate agendas for years. But how successful are these transformation projects? What has been the impact on the organization as a whole?

Respondents came from all company sizes, industries, and geographies. To transform HR, most organizations—in the survey as well as at the table in
Brussels—have adopted a hybrid model: a mixture of shared services and selective outsourcing. Rules-based processes or speciality-skill processes (e.g., payroll and pensions) are most often the focus of HR transformation. So, how successful were they?

Well, organizations that outsource most of the services they want to transform report the highest cost savings. Organizations that employ a hybrid approach report the lowest achievement in productivity improvement goals. The biggest actual achievement in HR service improvement and efficiency was reported by organizations that focus their transformation efforts on outsourcing.

So, the results suggest that outsourcing yields better results. But the survey data also demonstrates that we’re still in the early stages of transformation. This is evident, among other facts, when we look at the discrepancy between aspired achievements and realized benefits. The results do not always live up to the promise. Nearly 80 percent of the respondents believed that transformation can affect HR’s ability to focus on strategic goals “very much” or “somewhat.”

However, only 56 percent say transformation has actually been effective or very effective at driving this kind of change.

Is HR doing a good job in bringing this transformation to its own organization? Not in all cases. You might expect that HR by its very nature would be good at change management, goal setting, and measuring performance. While an increased focus on strategy is a key driver for HR transformation, a majority reports that there are no goal sets, no metrics in place, and no clear understanding of what “strategy” constitutes. Here the old saying holds true that what doesn’t get measured doesn’t get done. At least not as good as those that do get measured.

The survey also indicates that the impacts of HR transformation on organizations are predominantly confined within HR itself, transforming how HR operates rather than adding value to the business—which means an unfinished job.

Clearly, the results of the survey—to which the summary above cannot do justice—provoked intense debate among the participants. Of particular interest to me is the clear link between sustainable transformation and the deployment of technology. Actual cost reduction and ease of migration and transformation are largely facilitated by a smart deployment of adequate technology, especially in the hybrid model where interdependencies between what’s outsourced and what’s retained in-house exist. Often this creates an artificial separation, which at the data level needs to be re-integrated. HR organizations that want to become strategic need to use components such as a common skills inventory and other organizational data across the enterprise to bridge this process boundary with an outside provider to obtain better resource allocation and a global view of company performance. Technology, therefore, must ensure the cost-effective integration of processes and establish the link between the outsourced and retained organizations. This aspect of HR transformation plays an underestimated key role in achieving sustainable transformation.

While the survey results indicate that HR transformation is not a myth but a maturing reality, the discussion clearly demonstrated that European organizations are actively engaged in raising the bar, finding new ways, and learning and improving on a continuous basis when it comes to deploying shared-services centers and business process outsourcing. HR transformation is truly global. So are the technologies that enable it.

For copies of the HROA Europe/TPI survey results, contact the author at synco.jonkeren@sap.com.

Posted March 10, 2007 in Sourcing

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