How to transform HR. It’s an issue that’s always on the minds of HR leaders. After all, when done well, your investments in HR have the potential to impact every aspect of your organization’s operations and build customer and investor confidence that your organization can deliver on its promises well into the future.
One of the things that we’ve seen over the decades is that HR departments constantly transform. Why? Because changes in your organization, customers, and the broader business environment require new things from HR. Given that these changes are accelerating, ongoing HR strategy and transformation will always need to be priorities for any HR leader.
That said, rarely do we find an organization where HR is being done as well as its leaders hope.
What are the secrets to improving HR and doing strategic HR transformation well?
Since 1987 The RBL Group has co-sponsored the Human Resource Competency Study (HRCS). Working with the University of Michigan’s Ross Executive Education, every four to five years we have gathered and analyzed data from thousands of HR professionals worldwide. The most recent report, “Navigating HR’s Impact,” presents the findings from Round 8 of this ongoing effort. Among other things, the latest HRCS research provides important insights into the characteristics of an effective HR department.
This research has identified five keys to success that can help you transform HR to make sure you can help your business deliver the results that business leaders, employees, customers, and investors care about, even in the midst of constant change.
#1: Build a business case for HR department transformation
The purpose of an effective HR department is to create stakeholder value. This means that when thinking about how to improve HR, the real question is how to improve HR in a way that creates value for outside stakeholders. Your starting point, therefore, needs to be an understanding that successful HR department transformation is not just about your HR department itself. It’s about how you can maximize HR’s impact on external customers, investors, business leaders, and employees.
Begin your HR strategy development with outside in thinking—start with current market realities. What do the customers of your business care about? What would increase investor confidence in your future? Be clear about your business strategies for growth and how HR can help make those strategies happen. What are the business priorities? How can HR support these priorities? This approach will keep your department focused on what matters most: the things that will drive business impact. This, in turn, will enable you to create a clear business case for the value of your HR department transformation.
#2: Create a desired reputation for your HR department
We have learned from past HRCS research that HR department credibility is extremely important to business results. While this research shows the tremendous value that effective HR departments can bring to their businesses, it also shows that not all departments have yet achieved that credibility.
HR department transformation is much more than “just” requiring that individual HR professionals get better (although that is certainly important). It also points to the need to transform the HR department to have the right processes, perspective, and position in the organization.
Reputation matters. Ask yourself, “What is our HR department known for right now?” Is it known for policing manager decisions to be sure they are in compliance? Having excellent COEs that understand HR best practices? Working with other HR professionals to execute the HR strategy? Anticipating how stakeholder needs are guiding the development of unique and differentiating capabilities that will be needed for success?
However basic the expectations are if your HR department does not have a reputation for delivering on what stakeholders expect, working quickly to transform HR processes and professionals to be able to meet those expectations must be your first priority. Until HR is seen as delivering on current expectations, you will struggle to have an impact on the business and the market that you want and need. You need to be seen as a credible organization that can be trusted by everyone from your front-line employees and line managers to your C-suite executives.
How do you create this positive reputation? Start by exploring and declaring exactly what you feel HR should be known for both in and out of your department. Then take the appropriate actions to build and reinforce this reputation. For example, do the foundational HR work well? Deliver functional excellence. Align with the business strategy. Be a partner to the business with a point of view about what will move the needle with customers, investors, and the communities you live and work in. Help the organization succeed in the marketplace by delivering outstanding talent, organizational capabilities, and leadership.
#3: Audit and measure your HR department
Just like all other aspects of the business, if you are working on how to improve HR you need to audit and measure your department. In part, this is why the business case and advisory group are so important. Without a focus on business outcomes, measurements of the improvement of your transformation tend to focus on user satisfaction with various HR systems and processes. While user satisfaction is clearly important, it is not the reason that most HR systems and processes exist.
For example, most organizations generally don’t invest in leadership development programs because they want to entertain their leaders. Instead, they know they need to build a pipeline of leaders who have the skills and knowledge to lead the company into the future. Measuring satisfaction with leadership programs is incomplete. Measuring the number of ready-now leaders is getting closer, and measuring investor confidence in the leadership pipeline helps you see whether you’re on track.
Instead of simply looking at user satisfaction, you need to track the progress of how the HR department transformation delivers outcomes that matter and if HR is continuing to deliver these desired outcomes over time. RBL’s Organization Guidance System HR pathway provides an excellent tool for collecting data and then setting both a baseline and desired state for your HR transformation.
#4: Form and rely on an HR transformation team to set an agenda and monitor progress
To keep the transformation focused on enabling business outcomes, it is helpful to create an advisory group from across the organization. As HR leaders explain their priorities, investments, and progress to business leaders, employees at large, and even external stakeholders (such as investors), they are better able to stay focused on what we like to call the “so that.”
The multi-stakeholder composition of the advisory group will either proactively or reactively shift the conversation from, for example, “We are over-hauling our performance management process” to “We are over-hauling our performance management process so that we can improve accountability to our customers and drive faster execution of our promises to investors.” This conversational shift creates a greater focus on the outcomes the business needs as the transformation is executed. As pointed out in “Navigating HR’s Impact,” broad representation will help ensure that your HR agenda aligns with business, offers systems solutions, and enacts changes, and that progress is monitored and reported in business terms.
#5: Build a structure that enables and supports relationships
One of the interesting findings of both our research and our experience is that when it comes to HR effectiveness, relationships are as important for achieving business results as roles. Relationships, in turn, are enabled by an organization’s structure. One of the capabilities of HR is building relationships within and outside of the business. But when you change the structure of your HR organization, regardless of what roles you may assign to people, you change these relationships. Because of this, as part of your HR transformation process, you need to be intentional about the design of work interfaces and relationships.
The question is, when it comes to best support the business, what types of relationships are you trying to organize people to have, whether that be with internal or external stakeholders? How can you build a structure that supports this?
Your people are most likely your greatest asset, which is why HR is at the heart of your company. After all, HR can deliver the human capabilities and leadership that will impact all other departments organization-wide and influence the impact on external stakeholders. As your organization changes, however, your HR department must constantly transform as well. Because HR department transformation will always be an ongoing effort, knowing the best way to go about this process is vitally important. Focusing on the five things identified in the most recent Human Resource Competency Study will help you achieve success.
If you need guidance to start an HR transformation, we invite you to explore our HR transformation offering and contact us to learn more.