What Makes an Effective HR Function?

Key Takeaways: 

  • Build a business case for how people and organization issues are pivotal to stakeholder value
  • Review emerging ways to create an HR operating model from 9 leading consulting firms that creates value for stakeholders
  • Recognize and rely on rigorous and relevant research to identify 10 dimensions for an effective HR function that delivers value
  • Assess and invest in actionable insights that will deliver a more effective HR function in Leading for HR Excellence

In this article, we review the value of HR for key stakeholders, nine approaches to characterize the HR function, recent research and insights by RBL on HR effectiveness, and implications for HR value creation. Apply the findings and insight of this article in Leading for HR Excellence, RBL's newest guided-learning journey. 

The value of HR for key stakeholders to build the business case.

We show why human capability (talent + leadership + organization + HR) delivers value to all stakeholders in today’s changing business context, thus building the case for HR functional excellence from a value logic. This value logic means that the “customer” of HR is not just the employee inside the company, but customers, investors, communities, and boards outside.  

Nine recent approaches to characterize today’s HR function.

We review and synthesize nine leading consulting firms' positions on the HR function to show the commonly held views of HR.  

Recent research and insights by The RBL Group (RBL) on HR effectiveness leading to an HR value creation logic.

We share three comprehensive recent research studies with tens of thousands of individuals in and out of HR and thousands of organizations that define our HR value-added approach to functional excellence. From this research and experience, we identify 10 dimensions of HR functional excellence. Our work integrates and expands other work. Our research shows that HR design (dimension #4) is necessary but not sufficient for HR value added and that while using different labels, HR design has commonly accepted approaches. We update each of the other 9 dimensions so that they add value to stakeholders.

Action implications for diagnosis and improvements for HR value creation.

We suggest specific actions to improve HR value creation. These actions include diagnosis to assess your HR function and tools/actions to upgrade your HR function.  

In brief, we believe that HR functional effectiveness is about creating value for all stakeholders. Through extensive research and practice, we have identified 10 dimensions to create value-based HR. By using these ideas, HR is not about HR, but about creating value. This work integrates and advances how to deliver HR functional excellence. 

The Value of HR for Key Stakeholders

In our work, HR is not about HR but about the value HR creates for stakeholders. This simple mantra means that we connect the business context and the HR function. We call this the HR value creation logic (See Figure 1) because it has an outside-in logic with HR actions designed to create value for stakeholders.

Given this logic, Figure 2 summarizes what stakeholders receive from human capability (talent, leadership, organization, and HR department) initiatives, which defines the effectiveness of the HR function.

Figure 1: HR Value Creation Logic: Function Connected to Business Context 

Figure 2: Stakeholder Value from Human Capability 

Nine Recent Approaches to Characterize Today’s HR Function

Because of the increased attention to human capability, most leading consulting firms have expanded their HR services to offer clients ideas that will improve the HR function. Each consulting firm suggests a theme for improving HR and focuses on dimensions of the HR function. We have synthesized this work to help discover what thoughtful colleagues recommend for HR functional effectiveness (See Figure 3). More details are available from The RBL Institute by contacting Joe Grochowski at jgrochowski@rbl.net.

Figure 3: Overview of Views of the HR Function Themes and Focus 

Accenture Business operating model
  • Resilience / Make the change
  • Six key capabilities: agile, technology, configure, ecosystem, decision making, reskill
  • Six CHRO skills: systems thinking, financial acumen leadership, technology/data, strategic talent, business acumen
Academy To Innovate HR (AIHR) HR operating models
  • Five HR operating models from HR centralization to decentralization
  • Best practices: link to business strategy, collaborate, map competencies, redesign operating model and structure
Deloitte High impact HR operating model Core elements/philosophies or base assumptions:
  • 1. HR customers: workforce experience

  • 2. Digital workplace empowers the workforce

  • 3. Workforce insights inform business strategy

  • 4. Fluid interactions: breaking silos

  • 5. HR operational services: deliver data and services

  • 6. Business HR: deploy workforce solutions

  • 7. External networks to add workforce solutions

8. Communities of expertise: relevant, data-based, experience-designed workforce solutions

9. HR leadership sets vision and priorities

10. HR enablers

Gartner Agile HR: Flexible Agile principles:
  • 1. Create space for strategic thinkers
  • 2. Implement customer-centric model
  • 3. Manage portfolio, not set agenda
HR operating role:
  • 1. HR business partner
  • 2. HR problem solvers
  • 3. Agile COEs
  • 4. HR shared services center for service delivery
HR technology:
  • 1. Connect with employees
  • 2. Manage employee performance and productivity
  • 3. Conduct workforce planning and deployment
Josh Bersin HR Capabilities (competencies) 94 individual competencies in 20 domains Priorities:
  • Develop leaders and managers
  • Change management and communication
  • Apply principles of organization design
  • Coach individuals for performance
  • Operate as business partner
  • Understand global cultural issues
  • Terminate senior executives
KPMG Pathfinders HR functional model:
  • Remove boundaries
  • Meet employee expectations
  • Digital drives processes
  • Live values, connect with employees
  • Evolve/adapt employee experience
  • Lead with humanity
  • Adapt to change
  • HR strategy/operating model
  • Workforce strategy
  • Experience
  • Talent marketplace
Areas of impact:
  • "S" in ESG: talent pool
  • "Total workforce": talent management, personalized employee experience, skill gaps
  • Reimagine the world of work: employees adapt, workforce, employee experience
McKinsey HR Operating Model Five HR operating model options:
  • Ulrich+
  • Agile
  • Employee experience
  • Leader-led
  • Machine powered
Mercer Target Interaction Model People-centric HR operation model:
  • Employee lifecycle
  • Place people needs at front of HR agenda
  • HR transforms around people
  • Measure employee satisfaction
  • HR customer: candidate, external workforce, employee, people leader, top management

  • Operations: people operations platform, personal support, functional expertise
PwC Shaping next-generation HR Next-generation HR:
  • Adapt to pace of change
  • Put advisors close to business to adapt to business needs
  • Be flexible and resilient
  • HR experts
  • HR advisors
  • HR leadership
  • HR partners

Recent Research and Insights by RBL on HR Effectiveness Leading to an HR Value Creation Logic

We appreciate, learn from, and build on the outstanding work done by our colleagues in these nine (and other) consulting firms, plus exceptional research by so many academic scholars. We believe that HR functional effectiveness requires theory, research, and practice. From theory and research emerge practices and solutions that offer evidence-based insights to make knowledge productive.

We have crafted both long-term and short-term insights through three major research projects that shape HR functional excellence (See Figure 4).

Figure 4: Overview of RBL Insights Research 


HR Competency

Study (HRCS)

Over 120,000 global respondents in 8 rounds of data collection over 35 years

  • Organization/business capabilities
  • HR department
  • HR competencies


Guidance System


Over 1,000 organizations

37 human capability initiatives in talent, leadership, organization, and HR (www.rbl.ai)

Governance and

Guidance for Growth through Human

Capability (G3HC)

7,000 firms reporting SEC data using machine learning NP analysis

Four human capability pathways and impact on financial, employee, and citizenship outcomes (double traditional results).

RBL’s View of Characteristics of an Effective HR Function: HR Value

Analyzing the nine models of HR function and our research reported above, we would suggest that any effective HR function has ten dimensions that make up the HR value logic, as highlighted in figure 5. In this figure, we highlight the question for each of the ten dimensions and our contribution on how to answer these questions.

Figure 5: RBL's HR Value Contribution to HR Functional Effectiveness on Ten Dimensions

1: HR Reputation What is HR known for by stakeholders?

Build the reputation from efficiency - innovation - practices - strategy - customer value

2: HR Customers Who are HR’s customers?

Create value for stakeholders inside (employee) and outside (customer, investor, community)

3: HR Purpose What is our HR Mission? Why do we exist?

Define purpose/mission as who we are; what we do (human capability); why we do it (value creation)

4: HR Design How is the HR department organized?

Match HR to business design; connect specialists (experts) to generalists with agility

5: Human Capability How does HR facilitate the right human capability for the business?

Deliver talent, leadership, and organization to create stakeholder value

6: HR Analytics How can HR access information to make better decisions?

Provide rigorous and relevant information to improve decision-making by offering guidance and not just benchmarking or best practices

7: HR Digital Technology How can we use technology/digital tools to manage outcomes?

Use digital tools to be efficient, innovate, share information, and form relationships even across boundaries.

8: HR Practices How do we create and deploy HR practices?

Innovate, align, and integrate HR practices (people, performance, information, work)

9: HR Professionals What do HR professionals need to be, know, and do to be effective?

Upgrade the quality of HR professionals with competencies that have impact on stakeholder outcomes

10: HR Relationships How does HR go about doing its work?

Form positive and collaborative relationships among HR and between HR and others

RBL Comparison to Other HR Functional Models

Given our work on defining HR functional effectiveness into ten dimensions, we highlight how the nine HR operating models compare to RBL and each other in order to help HR leaders know where and how to focus to build functional excellence. Figure 6 shares each of the nine models (columns), the research behind the model (as reported in row 1), and the concepts from these nine models as they relate to the ten HR functional effectiveness work we have done.

Figure 6: Overview of HR Operating Models

  • HRCS (round 8) with 28,500 people
  • OGS with 1,000 orgs
  • G3HC with 5,700 firms

Executive surveys 570 CHRO surveys


Research by Bersin Deloitte


18 HR leaders

4,000 Academy members

Survey of HR leaders

Case study




Build reputation from efficiency to innovation to strategy to customer value outside in








Target interaction




Create value for stakeholders inside (employee) and outside (customer, investor, community)



HR customer (workforce)




Business led

Employee experience

Global trends, business



Define purpose/mission as who we are; what we do (human capability); why we do it (value creation)


Let Strategy Lead

Change, new products, cost, customer


Employee experience


Employee experience; agility

Employee and Workforce



  • Match HR to business design
  • Connect specialists (experts) to generalists with agility


5 approaches to HR governance

Operational, COE, business HR partner, digital

Specialized roles/service team; shared services

HR service delivery


Five models based on goals

Manage employee

HR experts, advisors, ops, partners

Compares 5 models with similar logic

Human Capability

Deliver talent + leadership + organization to create stakeholder value

Workforce 6 org capabilities

Focus on skills, not roles

Drive talent and workforce; culture

Employee well-being/workforce plan; agility

Workforce/talent Agility, culture


Front-line employee, agile


Adaptability, Agility, Change/Flexibility



Provide rigorous and relevant information to improve decision making by offering guidance, not just benchmarking or best practices

Workforce insights


Insights; analytic capabilities



High growth companies

AI, big data





Use digital to be efficient, innovate, share information, and form relationships even across boundaries

Digital connects workplace


Digital access to information




Machine learning automate, machine led

Fully digital experience

Modular apps



Innovate, align, and integrate HR practices (people, performance, information, work)







Personalized, cafeteria



COE: Talent, DEI, Comp


Upgrade the quality of HR professionals with competencies that have impact on stakeholder outcomes

Systems leadership, talent, technology, business, finance

Have capabilities (not listed)

Customer, digital, adaptability, agile

Strategic thinkers

Live values; humanity; flexibility

94 skills in 20 domains mostly on HR tools




Know and love business


Form positive and collaborative relationships among HR and between others

Fluid interaction / Braking silos

Partner to implement

Beyond structure to ways of working




Business led



Mortar not bricks

We identified a number of observations from this chart. First, the nine operating models use a host of research approaches (some did not report their research) from case studies to targeted interviews to surveys of senior HR leaders to participants in training programs. We are confident that our ideas come from a rigorous research base that guides actions.

Second, while most approaches used the term “customers” of HR, the primary customer is the employee, and HR is designed to increase employee experience (measured by satisfaction, productivity, and retention). Little mention is made of defining HR success through value created for external customers and investors or of including customers and investors in designing and delivering HR practices.

Third, as noted above, almost all discuss a mostly similar design of the HR department (or operating model) using different terms to highlight how HR expertise (specialized knowledge) can be applied to business problems. Roles in an HR department include specialist, generalist, and technology experts. As Marc Effron, a thought leader in the HR space who summarized five of these models, said, “The striking consistency in these approaches to existing HR design suggests that the debate around design is largely settled and HR should now focus on what enables the success of its structure. . . A new approach to HR design isn’t needed to stay competitive. The model originally championed 20 years ago is still relevant to managing today’s workplace and workforce and can be easily adapted to a variety of situations, as seen in our examination of the identical models used by top consulting firms” (Marc Effron, “It’s the Mortar, not the Bricks: The State of HR Organization Design,” May 14, 2020). We agree.

As we have said previously, HR as a department operates like any professional service firm that turns its knowledge and expertise into its client’s success. The HR department structure or design should match the business structure or design. If a business is centralized (single business), HR is likely to be organized by function (staffing, training, compensation, organization design) for the entire business. If a business is completely decentralized (essentially a holding company), then each business would have its own unique HR functional experts. Since most businesses are some version of both centralization and decentralization (called a multi-divisional firm, allied/related, conglomerate, or diversified), HR’s most common design response is to have specialists (centers of expertise, experts) who have deep expertise and then transfer or adapt their knowledge to HR generalists who work in the business, geography, or functional organization units (see Figure 7).

Figure 7: Align HR Department Structure to Business Strategy and Structure

Fourth, the human capability outcomes both within the HR department and what HR offers to a business are focused almost exclusively on employees (at times called workforce, people, or talent) and on the organization capability of agility.

Fifth, analytics plays an increasingly critical role to deliver HR. Most of the analytics is about reporting what HR does more than what it delivers, leading to benchmarks that offer comparisons more than guidance about what actions a specific company might take.

Sixth, we are seeing a dramatic increase in the utilization of digital information through technology to drive efficiency, improve HR practices, and to connect employees who may be working remotely. The digital and technology agenda affects both how HR can help a business integrate technology into its strategic agenda and how HR can use digital information in doing human capability work.

Seventh, we see many lists of competencies that HR professionals should demonstrate, often defined by HR people as knowledge, skills, and abilities they should possess. Few link these competencies to personal, stakeholder, or business outcomes, but we have a call to upgrade HR.

Finally, most models recognize that HR professionals need to work together (with agility, fluidity, collaboration) to bring the elements of HR into an integrated solution.

In brief, the literature of outstanding thinking is growing, and ongoing work continues to deliver HR functional excellence. Like a piano keyboard with 88 keys and some played more than others, many of these HR models are touching on a subset of the ten characteristics of an effective HR function. Our G3HC work on 5,760 companies shows that when human capability work is integrated and complete, better outcomes occur.

Action Implications for Diagnosis and Improvements for HR Value Creation

Our value logic and research for HR functional excellence builds on previous work, relies on rigorous research, and leads to relevant actions. We propose a six-step logic for improving HR value creation for any organization (See Figure 8).

Figure 8: Steps to a More Effective HR Function 

Measuring the ten dimensions is helpful in getting started. Begin with the survey in figure 9 to diagnose and help prioritize where to focus. This is a perceptual survey that can be filled out over and over by both HR professionals and other stakeholders to track current state and progress.

Figure 9: Assessment of Ten Dimensions of HR Effectiveness

Diagnostic question How well do we do?
Low 1 - 5 High
How important is it?
Low 1 - 5 High
1: HR Reputation Have a reputation for creating value for all stakeholders?    
2: HR Customers Serve all stakeholders inside (employees) and outside (customers)?    
3: HR Purpose Share an HR mission about who we are, what we do, and why we exist?    
4: HR Design Clearly allocate roles and work together to make knowledge productive?    
5: Human Capability Build human capability (talent, leadership, organization) in businesses?    
6: HR Analytics Access relevant and rigorous information to make better decisions?    
7: HR Digital Technology Invest in and use technology/digital to do work and connect people?    
8: HR Practices Innovate, align, and integrate HR initiatives?    
9: HR Professionals Define and upgrade HR professionals competencies to be effective?    
10: HR Relationships Form positive working relationships within HR and with others?    


Making the HR function more effective becomes ever more critical in today’s changing business context. My thoughtful colleagues are engaged in upgrading HR work with the development and launch of our latest guided learning journey, Leading for HR Excellence, which engages your organization's most experienced HR leaders in understanding and implementing these ten critical dimensions. As we review these nine models and our research, we propose an HR value logic with ten dimensions of an effective HR function. By improving on these ten dimensions, HR leaders will help create human capability (talent, leadership, organization, and HR department) that will then be used to deliver stakeholder value. 

The best is always yet ahead. We hope we can help you create your value-added HR function. We’d love to partner with you to ensure your HR Transformation delivers optimal value. If you're ready to explore this offering, contact us.

Dave has published over 30 books on leadership, organization, and human resources. These ideas have shaped how people and organizations deliver value to customers, investors, and communities. He has consulted and done research with over half of the Fortune 200 and worked in over 80 countries.  He has received numerous public recognitions and lifetime awards for his work. 

About the author

Joe is the Managing Director of the RBL Institute, a think tank for senior HR professionals from the world’s top companies. He has over twenty years of experience partnering with senior HR & IT executives in the areas of leadership development, executive education, research, and consulting.

About the author

Norm Smallwood is a partner and co-founder of The RBL Group. His research and consulting focuses on helping organizations increase business value by building organization, leadership, and people capabilities that measurably impact market value. He has written extensively about leadership and organization effectiveness in eight books and over a hundred articles. 

About the author

Joe Hanson is a Partner with The RBL Group and an experienced consultant recognized for his work leading businesses through turnaround and transformation.

About the author

Ernesto is a Partner and Managing Director, Latin America with The RBL Group. His work currently emphasizes the development of strategic leadership, executive teams and HR practices in the Hispanic markets. 

About the author
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