By Piotr Bednarczuk, Practice Leader, Corporate Transactions and Transformations, Greater China
and Tobias Plafky, Senior Consultant, HR Effectiveness

In this article HR Effectiveness Building Blocks Case Study Making the Difference Contact

As companies in Asia continue to rapidly expand headcounts and revenues, the impact of support functions such as Finance, IT and HR, becomes ever more critical. Taking a deeper look at the HR Function, research conducted by Aon Hewitt shows that companies operating with an efficient and effective HR function outperform their peers in terms of revenue growth and profitability, thus solidly contributing to overall corporate success.

With companies across Asia identifying people as a key bottleneck to corporate growth plans, building and maintaining an effective HR function is business critical. Tapping into this topical issue, Aon Hewitt recently conducted research based on data of the Best Employers Study with 140 companies across Asia, looking at the link between the effectiveness of the HR function and business results. As Figure 1 shows, those companies identified as having a highly effective HR function benefited not just from higher employee engagement scores relative to their peers, but also from higher growth and profitability rates. 

So what constitutes an effective HR function and how can companies improve the effectiveness of their own functions? The Aon Hewitt research highlighted three areas that companies have focused on when building an effective HR function. Companies with an effective HR function have:

HR Effectiveness Building Blocks

There is no single solution to building an effective HR function; all of the companies that we surveyed had varying degrees of effectiveness in their HR systems. The key to improving effectiveness is a consistent habit of continuous improvement that starts with the following basic building blocks:
	1.	The formalization of HR governance and HR organization structure: While the HR organization encompasses the structure, roles and responsibilities, and staffing levels of the HR function, HR governance helps to effectively manage the HR function based on jointly agreed upon rules and norms.
	2.	Consistency and transparency in HR service delivery: The HR service delivery model defines how HR organizations provide services to their customers. The model should clarify the roles of the centers of expertise and HR shared service center. It also should influence how HR segments its customers. The right balance between all roles ensures that HR is able to provide value to the business.
3. Process performance and utilization of technology: Organizations need to embed processes and IT-systems in an overall framework to increase the transparency of the overall HR delivery model. The effectiveness of its various programs should be routinely analyzed and updated. The utilization of different services should be analyzed to understand the priorities for improvement.  4. The level of HR capabilities: Partnering with the business and aligning initiatives and programs to the needs of the business requires different capabilities than just administrating HR programs. HR professionals need to devote considerable attention to understanding the business and its needs. Only once this business context is understood can the HR function properly support the front-line service teams.

Case Study – Leading Chinese Multinational

Aon Hewitt recently conducted an assessment of HR effectiveness for a leading multinational company headquartered in China. The organization has over 60,000 employees globally and is rapidly expanding both domestically and overseas. The client felt that the HR function was unable to cope with the increasingly complex demands for workforce solutions or to partner with the business leaders regarding such workforce solutions. Aon Hewitt helped to make recommendations on how to improve and optimize the performance of the whole HR function.
The starting point for the project was an "HR audit" with inputs (via workshops and interviews) from business and HR leaders as well as a detailed study of the actual HR activities being performed. On the back of this diagnosis, Aon Hewitt then provided a comprehensive review of the business requirements and the current effectiveness and efficiency of HR in all four of the building block areas (described in Figure 2).

One of the outputs from our diagnosis was the chart shown in figure 3. The key message was that compared to the benchmark companies, our client's HR function was significantly less effective in supporting the business and executing day-to-day HR programs. Results also showed that there was no clear definition of HR's role and its value proposition in terms of overall business performance. In addition, the fast growth of the organization had led to a very fragmented HR organization with unclear deliverables and responsibilities, which made decision-making processes and global alignment very difficult.

On the back of the diagnosis, four key areas were identified that could radically improve the short- and long-term effectiveness of the HR function. The identified areas are described below and Aon Hewitt is supporting the client to:

• Create an HR Organization and Governance model that is efficient and delivers the needed capabilities to the front line.
• Shift the company's service delivery from a "China-centric" model to a global model with Chinese character - enabling success for both Chinese and non-Chinese employees.
• Retool the company's HR operations and processes to be more globally consistent and capable of scaling up with its growth.
• Enable HR to perform as a strategic partner to the company and its businesses through capability building and retraining.

The key for the client is now turning these recommendations into practical solutions – and implementation work has started in all four areas.

Making the Difference

It is often said that HR needs to be a stronger partner to business and this is definitely true. The rapid growth in Asia though, means that the HR function actually needs to go beyond partnering with the business and actually become a business driver. Through client conversations with business leaders across Asia, it is clear that "people" or "talent" issues are a bottleneck to corporate growth plans. Transforming the HR function is critical to a company's future business success.

Contact

Piotr Bednarczuk, Aon Hewitt's Greater China Corporate Transactions and Transformations practice leader and can be reached at piotr.bednarczuk@hewitt.com.

Tobias Plafky, Aon Hewitt's Senior Consultant HR Effectiveness and can be reached at tobias.plafky@hewitt.com.

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