NEW YORK, December 11, 2007 – More than 84 percent of 150 global companies surveyed in a new Deloitte Consulting LLP study say they are revamping their HR functions, but many are missing an  opportunity to build long-term value and make HR an integral part of the company’s business strategy.

In fact, the survey results found that revamping HR is still mostly about savings, systems and processes, despite rising demands from the C-suite for HR function to support overall business objectives to meet the challenges of an increasingly competitive business environment.

 “We believe companies lose out on the true value-add when HR improvements focus almost exclusively on improving HR operations. That’s merely a solution in a vacuum – not a long-term strategy that will have a significant impact on the bottom line and help a company achieve its business goals,” said Robin Lissak, Deloitte Consulting principal in its Human Capital Service Area and director of the survey.

“HR needs to focus more on supporting business objectives -- revenue growth and talent. For instance, new market entry is an important growth strategy for many companies and is often a risky proposition because talent can’t be sourced, retained or trained in the company’s culture. It is clear to us that a long-term focus can have a bigger positive impact on corporate results,” said Lissak.

Key drivers behind HR improvements continue to be cost savings or efficiency (85 percent) and effectiveness of service (75 percent).  Only one-third of respondents cite building HR capability as a driver for the overhaul and even fewer (30 percent) responded that they were making improvements to free HR to undertake a more strategic role.

More promising, the survey results show that some respondents are moving toward business-HR alignment and are identifying key business issues that are driving future HR improvements – training the next generation of leaders (40 percent); building and managing a global workforce (33 percent); mergers and acquisitions (31 percent); and an aging workforce (27 percent).  However, only 40 percent of respondents have structured processes for future HR planning. This is clearly an area that needs improvement as HR will likely find it difficult to support business strategy without a formal mechanism to solidify this alignment.

Outsourcing Is Still Hot
According to the survey, one strategy that companies are still using to improve their HR functions is outsourcing administrative activities while retaining HR’s strategic capabilities in-house.  Approximately 40 percent of surveyed companies that are transforming HR have outsourced some activities or plan to – primarily routine, administrative operations, such as: 

• Compensation and benefits (94 percent)
• Basic HR Administration Inquiry (94 percent)
• Shared Service Center Operations (88 percent)
• HRIS (88 percent)
• Payroll (85 percent)

Surprising to us, some companies are now looking to outsource more strategic HR activities, such as training & development (42 percent), recruiting and staffing (36 percent). compliance (36 percent), talent management (27 percent) and global mobility (21 percent).

What We Believe the Future Holds for HR
“In our experience, HR transformation is still moving too slowly while market forces are moving much more quickly,” Lissak said.  “In addition, we see that HR’s contribution to the company is increasingly being measured not by its administrative efficiency and cost control capabilities, but by how well it supports the company’s business strategy and plan and addresses people issues.”

To this point, Deloitte Consulting offers several recommendations within the survey report to consider for improving the HR function:

• Speed the transformation of core services. HR will most likely not realize its strategic potential or enhance its impact on HR unless it can continue to improve the efficiency and effectiveness of HR products and services.
• Balance HR’s portfolio. HR leaders should balance their portfolio of services and programs, adding capabilities to address strategic people issue to their current programs centered on administrative activities.
• Align HR’s portfolio. HR leaders will need to manage their portfolio in ways that will align it with the company’s strategic objectives. To make the workforce a unique competitive advantage for the company, HR should invest in areas that will contribute most to overall business goals.

Methodology
Deloitte Consulting professionals worked with HR and business leaders from 150 global companies to complete the surveys.  The participating companies have more than $2 billion in revenue and are Deloitte Consulting clients. 

A full copy of the “HR Transformation Survey: A Case for Business Driven HR” report, as well as industry specific breakouts for Life Sciences/Health Care and Technology, and Media and Telecommunications are available at www.deloitte.com/us/hrtsurvey or by contacting Britton Josey at bjosey@deloitte.com.

Deloitte Consulting LLP is not, by means of the survey results and report, rendering business, financial, investment, or other professional advice or services. The survey results and report are not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte Consulting LLP, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on the survey results or report.

Related Content
Report: HR Transformation Survey - A Case for Business Driven HR
Overview: HR and the Business - Becoming a Strategic Partner 
Services: Human Resources Transformation 

About Deloitte
As used in this document, “Deloitte” means Deloitte & Touche USA LLP.  Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte & Touche USA LLP and its subsidiaries.