Transforming HR

Today’s HR departments have more on their plates than ever before—from maintaining the corporate culture even as the company grows globally to integrating new employees while not losing the regional nuances or niche talent that is so vital to a global organization. In addition, HR is charged with capturing synergies from acquisitions, balancing technology, services and cost-saving measures, and standardizing requirements across business units. All of this is taking place against the backdrop of an escalating war for talent, a complex global business environment and changing regulatory requirements. HR must transform its own organization to address new business challenges while continuing to support the transformations of other functions within the company.

HR Transformation Approach

FIGURE 1: A.T. Kearney HR transformation approach

A.T. Kearney understands HR and its importance to value creation. We help companies find solutions to their HR challenges. Through benchmarking and best-practice comparisons, stakeholder interviews and activity-based assessments, we identify the root causes of problems and improvement opportunities. We then define a detailed HR service delivery model and design a multi-year implementation roadmap (see figure 1). While HR transformations are often a means for reducing costs, our approach goes further by addressing ways to increase capabilities—adding value in talent management and organizational effectiveness—to make HR a true strategic business partner.

Major Focus Areas

The following are key levers of an HR transformation. Figure 2 illustrates these and other aspects of a transformation.

Align service delivery model and strategy. Service is the cornerstone for setting the vision and objectives for an HR transformation. Service-delivery models are typically aligned by business unit, geography or shared services. We believe a center-led shared services model, with a combination of self-service and outsourced services, is the most effective way to balance HR service quality, strategic value-add and costs. It maximizes synergies across units and geographies, and addresses local requirements through a network of partners supporting local business leaders.

Although all HR processes should be “best in class,” becoming best in class can be expensive. So decisions must be based on where HR most needs to stand out.

FIGURE 2: Elements of HR transformation

Invest in technology. Investing in new technology can ensure high-quality data, reduce manual processing and enable self-service. Companies can make big investments to make major changes, such as HR modules for their ERP systems. Or they can make small investments for measurable improvements, such as integrating existing tools and systems to speed up processes and increase efficiency.

Investing in tools and applications is just a start. Accurate data is a foundation of HR services so it should not be spread among different tools and systems. Self-service tools with user-friendly interfaces can improve data quality and eliminate HR handholding on transactional activities.

Standardize policies and processes. Technology can help reduce manual operations, but it is only effective if policies and programs are standardized across units and geographies. The goal is to reduce complexity, decrease work performed locally, and capture the advantages of cross-unit, cross-geography synergies and shared services. A thorough examination of current HR policies, programs and processes will point to activities that can be consolidated, streamlined and integrated.

Outsource for success. The question about business process outsourcing and offshoring is not “whether or not,” but “when,” especially for large, global companies. Successful outsourcing requires using multiple vendors (to support different areas or regions), developing a holistic plan and centralizing management (to ensure appropriate scale, risk management and vendor selection). An unexpected benefit is that outsourcing can add functionality and expertise to the HR department.

Manage talent. As top executives have shorter tenures, which can adversely affect company performance, boards of directors are paying more attention to managing talent and protecting their top people. The key is to identify people both inside and outside the organization who will become leaders, and to involve all relevant stakeholders in hiring decisions. Rather than simply slashing headcount, smart companies challenge their HR leaders to nurture a culture that reinforces the company vision. Leaders drive change management, realign performance management, and focus on retaining top performers while also finding new talent.

Case Studies

We have helped many companies improve their HR effectiveness.

Global health product manufacturer and distributor. As growth slowed and the market softened, this company had to increase cost efficiency, elevate earnings and win an intense war for talent that was pushing HR to improve its capabilities and execution.

Through workshops, “voice-of-the-customer” interviews and activity-based assessments, we identified the major issues contributing to HR’s high costs and inability to manage talent effectively. For example, there were:

• Fragmented policies, processes and technology
• Poorly defined roles and responsibilities
• Limited HR knowledge-sharing across and within business units
• Too many vendors, requiring significant coordination efforts
• Lack of uniform metrics to track performance

Working with the client, we designed a new operating model, identified and prioritized improvement initiatives, and devised a phased implementation. To ensure long-term success across functions, we created a change management approach and toolkit, and trained select HR business partners to be change champions for the business units and functions they supported.

The result: Reduced HR costs by 15 percent while expanding the breadth of strategic HR activities.

Global packaging solutions company. To improve the efficiency of HR and other G&A functions, we helped this company design a global service delivery model that aligned HR with the company’s global business model. We also outlined process and technology improvements, identified outsourcing opportunities and developed an RFI to engage suppliers and get their ideas for savings potential. A transition roadmap guided the phased implementation.

The result: 30 percent reduction in full-time employees (workload reduction), reduced HR costs by 20 percent (outsourcing).

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