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Transforming HR: Becoming a Strategic Partner

It is widely agreed that people are a company's most important asset and a source of competitive advantage--everything else can be replicated. This is by no means a radically new concept. If that's the case, however, why isn't the human resources department--the traditional keeper of the people function--considered a company's most valuable strategic function?

In this article, we explore how HR can transform itself into a more effective resource for the organization, enhance its credibility, evolve into a strategic partner, and potentially earn a place at the table.

The Critical Importance of HR Service Delivery

Many HR organizations are challenged by the need to strike a comfortable balance between achieving greater HR service-delivery efficiencies and maintaining the "personal touch" culture. Experts believe that HR professionals' continuous struggle to evolve into strategic partners within their organizations often causes them to dismiss the service delivery component of HR as something tactical. The irony, of course, is that effective service delivery is considered the very criterion through which HR can become a strategic partner.

Barriers to excellent HR service delivery include HR's penchant for building greater complexity into program design rather than convincing business leaders that they're better served with a simpler, well-executed approach. Another obstacle to successful delivery efforts has been HR's ineffective use of technology, that is to say, not fully understanding the benefits of existing technology or inappropriately using technology to do the wrong things faster.

According to Hewitt consultant John Sanders, HR service delivery will become all the more critical over the next decade due to factors such as increasing cost pressures, global workforce and processes, demand for 24/7 information and answers, flexible and fuzzy organizational boundaries, and rising customer expectations.

The potential negative effects of these external forces underscore the importance of executing HR service delivery extremely well. HR's transformation into a strategic partner for the organization absolutely depends on it.

Creating Excellence in Service Delivery

Hewitt partners with companies to develop ways to take advantage of the opportunities HR service delivery offers. Here are some success strategies that have emerged from these partnerships:

Meeting customers' needs may mean saying "No." Instead of falling victim to a "one-off" or crisis-driven approach to HR management, Hewitt suggests taking a more cost-effective approach by narrowly defining which customers should be served exceptionally well in accordance with business needs and HR's overall philosophy of operation.

Design for the 80% solution. Hewitt describes the term "80% solution" to mean that a delivery process should be designed to meet the needs of the majority of customers, and that outlying situations should be handled separately.

Get out of the middle. Sometimes HR's role in an organization lacks clearly defined accountability, which may hinder efforts to provide superior service delivery. Hewitt suggests establishing expectations for HR's involvement up front. Four options that can define HR's involvement in the organization are as follows:

  • HR maintains total control of the work, from "concept to customer.

  • HR develops the strategy and implementation plans and manages the service delivery process.

  • HR designs and provides the tools that enable other professionals to do the work.

  • HR ensures that service-level agreements are maintained.

Organize for effective service delivery. Many HR organizations have moved to shared services models in which there are centers of expertise to do program design and an administrative service center to handle service delivery across all areas of HR. Consolidating all the components of service delivery allows the organization to make better design and technology decisions.

Leverage external providers. According to industry experts, outsourcing is one of the fastest-growing alternatives to internal administration of HR services. In addition, some organizations are now offering "total HR delivery" outsourcing services, including administration of recruiting, compensation, training, on-boarding, and performance management. Leveraging external providers allows companies to improve service delivery dramatically by placing the onus to maintain high standards on the service provider.

Take the cost out of service delivery. Research shows that delivery of HR services is the largest cost incurred by the HR function and typically includes the use of vendors, technology expenses, and internal people costs. Hewitt recommends that companies use HR activity-based costing tools to assist HR in understanding service delivery costs. To further ensure cost efficiencies, companies should also make sure the right people are focused on the right activities and processes.

Leveraging Best Practices

Hewitt identified several common themes after conducting the HR activity analyses. When viewed in aggregate, they point to very tangible ways in which HR professionals can improve processes. Here are some of the messages that emerge.

Spending money on the wrong things. Even when the proper strategies are in place, if they're not administered effectively, excess spending still can occur. For instance, Hewitt's activity analysis at a large electronics manufacturer showed that the largest delivery expenditure was on recruiting and/or staffing-despite the fact that a hiring freeze had been in place for more than a year.

Expensive people performing administrative tasks. In the spirit of providing outstanding customer service, managers, directors, and other highly compensated employees (HCEs) may handle more routine administrative tasks. One organization discovered its managers spent 45% of their time performing "level-one" customer-service tasks. A less expensive delivery solution might include making the information available via a self-service, Web-based application, or through a call center.

Unqualified people handling areas better addressed by trained specialists.  A company discovered that nonexempt associates were spending significant amounts of time addressing diversity questions. Often, responsibility for handling issues of this sensitive nature is given to highly trained subject matter experts. Relying on someone not as knowledgeable in corporate policy may expose the company to costly litigation.

Inefficient processes. Activity-costing studies frequently identify situations in which too many people are involved in relatively simple processes, resulting in inconsistencies and redundancies. Streamlining these processes would reduce cost, and improve efficiency and accuracy.

"We do that?" HR professionals are frequently surprised to learn that significant time is spent on activities that have limited strategic or customer value. What's more, many times HR is unaware that the activity has already been delegated to another department or has been outsourced, suggesting that excessive duplication of effort and lack of communication exist.

Other cost drivers in HR organizations include a lack of standardization of programs across the enterprise, the use of multiple vendors for the same work in different parts of the company, and
failure to leverage investments in technology.

Peering Into the HR Crystal Ball

How will HR delivery look decades into the 21st century? Experts predict that the opportunities technology will provide HR professionals will dramatically improve and automate processes, while at the same time, streamline delivery services. Here are other predictions:

  • As the workplace embraces more aspects of technology, employees' experiences will become more enhanced as well.

  • It's believed that an increasing number of routine HR tasks will be outsourced.

  • The concept of "total HR outsourcing" will continue to gain traction and become a more common approach to improving efficiency and accuracy to reduce costs.

  • Many companies are moving some or all of their HR activities to a single outsourcing partner to take advantage of the integration of services, data, and cost savings the partner can provide.

According to Hewitt consultant John Sanders, here are five valuable ways in which HR professionals can position themselves for the HR industry changes that lie ahead.

Understand your direction. Formulate a clearly defined HR strategy and tactical plan showing how HR will add value to the business and how it will begin the transition to exceptional service delivery. This strategy should be shared with business leaders and key HR leaders to gain their support, to illustrate what various stakeholders and process owners can expect, and to clarify their role in implementing the strategy.

Understand your customers. Strive to fully understand clients' business issues and how HR service delivery - directly or indirectly - can help managers and employees better contribute to business success.

Provide HR leadership. Urge internal HR leaders to provide direction, improve operational efficiency and effectiveness, and empower HR staff to collectively make decisions for the overall good of the enterprise.

Get the processes right. Evaluate current administrative processes against this context: Do they add value to the business? Can they be reduced or combined? Can technology help save time and money? Can they be done better and more efficiently outside of the organization? If outsourcing is appropriate, what role does HR want to play in that process?

Recognize it's a mind-set. HR professionals may need some time to embrace this revolutionary way of thinking about HR service delivery. Once these new strategies are in place, however, HR will be better equipped to cut costs and elevate the level of service to its internal customers.