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Ready or Not: Transform HR Now, or Wait for Business Conditions to Improve?

Deloitte Debates


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Over the years, HR organizations have made significant progress to reduce costs and increase operating effectiveness through system and process improvements, shared services, outsourcing and employee self-service. Yet many HR functions remain focused on transactions and administration and have yet to develop the strategic capabilities to support business growth. Is this the right time to take HR to the next level? Or should companies focus their attention and limited resources on more pressing issues such as rebuilding the product portfolio and increasing market share? 

Here’s the debate that is unfolding in HR organizations and boardrooms around the world.

  Point Counterpoint
Transform HR now
“This is the perfect time to make HR more efficient and improve its ability to effectively support the strategic requirements of the business.”
In times of rapid growth, traditional HR has trouble supporting the needs of the business and can even become a bottleneck. HR Transformation can make HR an enabler for growth, rather than a barrier. That’s fine, in theory. But most HR Transformation efforts focus on cost reduction and never build the advanced capabilities necessary to support rapid growth.
Right now, every organization wants to do more with less – which is exactly what HR Transformation can deliver. If we’re talking about staff cuts, that’s already been done. HR needs to focus on improving and expanding its strategic role, not just doing more of the same.
As the economic crisis passes, businesses will expand into new geographies and markets and will require new kinds of talent. Transformation can enable HR to support these changing needs more effectively. Some experts are predicting a jobless recovery, which might diminish the importance of HR. We should wait and see what happens.
  Point Counterpoint
Wait for the economy to improve
“Hold off on HR Transformation until the business environment improves and talent becomes an urgent issue.”
Right now, HR Transformation is a relatively low priority. We need to focus our attention and resources on critical business issues such as grabbing market share and rebuilding our product portfolio. The downturn pushed talent issues into the shadows. But once the economy starts to recover, talent will quickly reemerge as one of the main barriers to business performance and growth. HR needs to get ready now.
In this challenging economy, we just can’t afford the cost to transform HR. We can’t afford not to. HR Transformation can enable significant cost reduction across the entire business, not just within HR, which makes it a critical priority in both the short and long term.
HR Transformation seems to take forever. If we do it, we need to see immediate benefits. A phased approach to HR Transformation can deliver benefits in months, not years.

My Take

Jasin GellerJason Geller, Prinicipal, Deloitte Consulting LLP

In an unpredictable business environment, decision-makers face a lot of tough choices. Many companies believe they don’t have time to transform HR because they need to focus on surviving and positioning to capitalize on the recovery. The good news is HR Transformation is an effective way to tackle both of those challenges. In the short term, it can help achieve significant cost savings through improvement in the efficiency, effectiveness and compliance of HR services globally. And as the economy bounces back, it can help companies attract, manage, develop and retain the kind of talent they need to execute their growth strategies now and in the future.

To achieve these goals, HR Transformation must look beyond the HR function and focus on the needs of the business. Here are four keys I believe are necessary for effective Transformation:

  • Align HR with strategic business priorities. Focus the HR organization on the right priorities and on building programs that are meaningful to the business. If HR is not addressing the right business needs, then improving the HR service delivery model will have little impact.
  • Build consensus about HR’s direction. Effective transformation requires agreement in the C-suite and with other business leaders that the proposed vision, services and delivery model align with their needs. It also requires consensus within the global HR organization about the plan for moving forward.
  • Help shape business strategy. Many of today’s biggest business challenges – including cost reduction, customer service, financial performance and regulatory compliance – revolve around people. This has created an opening for CHROs to step up as strategic leaders and advisers to help the board and other business leaders with effective strategies that reflect challenges and opportunities related to people and talent.
  • Develop new HR capabilities. In a challenging business environment, HR must do more than process paperwork and administer benefits. It must identify the strategic people challenges most likely to undermine the company’s business strategy and then develop solutions to overcome them. This new role requires HR to take on new responsibilities: anticipating critical workforce trends, helping to shape and execute business strategy, identifying and mitigating people-related risks and regulations, enhancing workforce performance and productivity and offering new HR solutions and services to help the company grow. Business as usual is not an option.

Done right, business-driven HR Transformation can help create an HR function that is efficient, compliant and operationally sound. Even more importantly, it can help HR get tightly aligned with the company’s strategic objectives. Those are smart things to do, no matter what is happening with the economy.

Global HR Transformation viewpoint

Hugo Walkinshaw, Principal, Deloitte Singapore

In the Asia Pacific region over the last few years, many companies have come to understand that HR holds the key to one of the more pressing challenges organizations are facing: sourcing, developing and retaining talent at all levels of the organization. For those still waiting to make that transformation, the current economic climate provides an ideal opportunity to put in place the building blocks on which future regional growth will be based. As you move forward, keep these ideas in mind:

  • It’s not just about money. It’s essential to have a robust business case for any transformation, but business leaders should recognize that transforming HR will be more of an investment in building capabilities than a cost management exercise.
  • Build versus buy. Strong global HR organizations generally feel they have the internal capability to develop a captive shared services model, while those with less mature HR capabilities tend to look to external resources. With the growth of global providers and the emergence of Asia-Pacific focused providers, companies today have more options on both fronts. Take time to think them through carefully.
  • Deliver value. Some HR Transformation programs have suffered from the stigma of not yielding value for the business. The next generation of HR Transformation programs needs to ruthlessly focus on how and where they will deliver benefits to the business – and then deliver on that promise.

As organizations look to the future, it’s clear to me that the HR structure of yesterday will be no match for the demands of tomorrow. Moving to a lean, flexible HR organization with the ability to address the unique complexities of the Asia-Pacific region is no longer a differentiator, it’s now a necessity. You can’t afford to wait.

Large, global project view

Randy Di Bernardo, Principal, Deloitte Consulting LLP

We know that during the recovery phase of an economic downturn there is an irregular increase in voluntary turnover as employees explore opportunities elsewhere in the marketplace. That’s why retaining top talent is top-of-mind for so many executives today. Waiting for business conditions to improve before getting HR transformed and engaged in helping retain top talent is not the way to go. If you believe managing talent more effectively is essential for maintaining a competitive advantage in today’s marketplace, then investing in this capability now is a smart choice to make.

How do you build a viable talent management capability when resources are so scarce? It’s not an easy problem to solve. In fact, many HR leaders have tried and failed.

However, the case for change can’t be made without changing the efficiency of the underlying processes that comprise talent management. The processes are Workforce Planning, Talent Acquisition, New Hire/Onboarding, Performance Management, Learning & Development, Succession Planning and Leadership Development. The large, global companies I work with often see clear opportunities to simplify, standardize, automate and integrate these processes – and that’s how they make a strong business case.

Many of the companies I work with have already made significant investments in improving their operating efficiency (e.g., ERP systems, process redesign). Now they are focused on leveraging those investments. Call it “optimization” or “transformation” – it’s your choice. What really matters is that they are building a solid plan for driving the business outcomes and savings they need.

Related Content:

Library: Deloitte Debates
Services: Consulting
Overview: Human Capital, HR Service Delivery, Organization and Talent

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