Virtual HR is on the way. But don’t panic: Even with companies increasingly turning to outsourcing to improve service and reduce costs, the futurized organization will rely on a mix of in-house and external solutions.
I’ve written a lot about the importance of embracing services globalization for its benefits beyond cost savings. I believe that true leaders recognize the opportunity (i.e., services globalization) as a means of business transformation, as a competitive differentiator, and as an enabler of growth strategy.
So how does one do that? How does one futurize his or her company? What does it look like?
Vertical integration was the norm for success a few decades ago, and so most organizations were monolithic as depicted in Fig. 1. For example, HR functions were performed by the in-house HR department—and no one else. Today, many companies leverage the global services economy to provide some HR services. Large HRO firms that provide customer-centric technologies for a number of employers have economies of scale that individual companies don’t. So companies can offer their employees, for example, online benefits access by outsourcing benefits administration.
An HR department may leverage external groups for employee portals and other mass customization technologies. But companies today still have a largely traditional form of organization. Business functions, including HR, still insulate the company’s core. In the future, companies may not hold many of the traditional business functions in house. An organization’s HR department may be completely virtualized, with all services performed by a mix of third-party providers, captive centers, and joint ventures. Employee portals and mass customization will yield to full self-service models. All that may remain is strategic leadership.
Strategic leadership is the ability to successfully manage a virtualized supply chain that stretches from production to customer experience in order to seamlessly integrate services provided by different parties into self-standing business functions. That ability is where competitive advantages will lie in the future; winning this edge is not just about a new gizmo or feature but about agility and customization.
One key to successful strategic leadership is effectively engaging a number of service providers to seamlessly integrate services so that they function as the business units did before virtualization (so that the virtualized HR functions, for example, serve the employees as well or better than the in-house HR department did in the past). To serve the futurized corporation, service providers will be highly agile, capable of providing the composable services that futurized corporation needs.
Another key is a company’s development of unit-by-unit accountability. Sometimes, the futurized corporation may find that its business units can actually provide a service more effectively and more cheaply than any service provider, so it is retained. The difference between the futurized corporation and the corporation of today is that in the future, “in house” is no longer the default. To survive, the company’s business units must be able to justify their existence against competition (and in comparison with competing
But futurization is ultimately about vision and agility, not about outsourcing. The benefit of futurization is that it will allow corporations to offer more customer-centric services. As the talent shortage intensifies, the ability of a company’s HR department to offer customized services can be an important differentiator between companies competing for talent. And, a company’s ability to meet consumers’ increasing demands for customization will allow that company to grow and profit, and thus better serve its stakeholders. To futurize a corporation is and will be a win-win proposition.