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C O R P O R AT E R E S E A R C H F O R U M

February 2009

Coaching
Configuring HR for Tomorrows Challenges


"HRs role is to understand the business and its external
environment, ask challenging questions and bring
'does anyone have someone who
innovative solutions to business
problems.
would benefit from six months or a
year's experience in my function?'"

Alistair Imrie, Group HR Director, BAE Systems

Report sponsored by

Mchenzie

CORPORATE RESEARCH FORUM

All rights reserved.


Configuring HR for Tomorrows Challenges
No part of this publication may be reproduced, stored in a retrieval system or transmitted
in any form or by any means without prior permission in writing of the publisher.
Corporate Research Forum One Heddon Street Mayfair London W1B 4BD United Kingdom
ISBN: 978-0-9553273-7-7

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C O R P O R AT E R E S E A R C H F O R U M

February 2009

Configuring HR for Tomorrows Challenges

Andrew Lambert

Report sponsored by AdviserPlus and Sheppard Moscow

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CONTENTS

Contents
Foreword

Acknowledgements

Executive Summary

Introduction

10

1. HRs challenges

14

2. New context for HR

27

3. HRs purpose and mission

35

4. The HR directors role

42

5. HR priorities

59

6. HR and corporate governance

79

7. HR services and people support

85

8. Measurement

97

9. HR function and capabilities

107

10. Case studies

129

11. Conclusions and recommendations

151

12. Appendices

163

13. Reading list and references

168

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FOREWORD

Foreword
My HR colleagues in AdviserPlus call me a recovering CEO, although I suspect they live in fear
of a relapse! Recovering because I now, apparently, get what is possible for HR to achieve if the
function is properly enabled and if it adopts a manager-centric approach.
As a CEO of a quoted plc in the 1990s with over 2,500 people, I was largely guilty of regarding
HR as a discrete function, and one which under-estimated the ability of managers to deal with
people issues. I saw the role of HR to protect liability, rather than drive performance.
This resulted in a reactive, rather than proactive HR function. HR perpetuated itself in largely
unproductive activities which should have been dealt with by managers. In turn, HR allowed
managers to abdicate responsibility because they enjoyed picking up those matters it made
them feel needed. Neither party had many good words to say for the other and much of, what I
now understand as, failure demand was created.
We set-up AdviserPlus to solve these issues. And thats why we are keen to be associated with
this report.
Configuring HR for Tomorrows Challenges is a balanced, constructive and timely challenge to

the role of HR. It asks many of the right questions. It challenges some of the givens of fashionable
HR models, some of which, in my view, reinforce and perpetuate the failure demand noted above.
The report provides recommendations which recognise there are few silver bullets. While
organisations have more similarities than HR would care to admit, they do have different
cultures and they are at varying stages of evolution which requires tailored responses.
It also recognises that HR cannot be seen in isolation, but is rather an essential ingredient of an
effective organisational team. This is particularly relevant today given the challenging
economic climate. Indeed, there have been a number of once-in-a-lifetime moments for HR to
increase its contribution. Now is another such moment. We hope that more HR leaders grasp
the opportunity with both hands.

Karl Chapman
Chief Executive
AdviserPlus Business Solutions
karlchapman@adviserplus.com
www.adviserplus.com
mobile: 07976 840298

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ACKNOWLEDGEMENTS

About the author

Acknowledgments

Andrew Lambert is a co-founder of the


Corporate Research Forum, and has been
a consultant on the management of
change, mergers and acquisitions for
some 25 years, working with over 80
clients. He was a director of Smythe
Dorward Lambert, People in Business and
Wolff Olins, has headed communication
functions at Midland Montagu and TSB
Bank and, until recently, was visiting
professor at the University of Lugano,
Switzerland. His many reports for CRF
have covered topics such as the future of
HR, performance management, HR
evaluation and measurement, the
management of coaching and mentoring,
the use of employee surveys, the
management of global organisations,
innovation and creativity, and the role of
HR in M&As.

Contributing researcher, Ben Reid, is a Research and Consulting Fellow at Henley Management
College and previously a Lecturer in Business Analysis where he has undertaken projects for
numerous clients. They include Ford, Aegon, United Biscuits, Department of Work and
Pensions, Qinetiq, European Commission, BBC, Department of Education and Skills. He has
recently completed a PhD at Henley/Brunel in Business and Management.

Our thanks go to these contributors to this report.


HR directors, CEOs and practitioners we consulted included Tom Brown (Rolls-Royce), Tim
Miller (Standard Chartered) , Mark Tucker (Prudential), Priscilla Vacassin (Prudential) , Alex
Wilson (BT), Paul Chesworth (Vodafone), Stephen Dando (Thomson Reuters) , John Whelan (BAE
MAS), Geoff Lloyd (Serco), Noel Keeley (Musgrave), Daniel Kasmir (BDO Stoy Hayward), Doug
Brown (Scottish & Newcastle), David Russell (William Hill), Quintin Heath (Twinings) , Elizabeth
Bolgiano (Smith & Nephew), Leslie J Berkes (Hewlett-Packard), Geoffrey Matthews (Merck
Serono), Vincent Thomas (Barclays), Kai Peters (Ashridge), Mark Judd (Rolls-Royce), Mike Watts
(CIPD), and several others who provided their views.
Subject experts interviewed included Ed Lawler, Bill Pasmore, Vladimir Pucik, Gordon Hewitt,
Pat Wright, Steve Kerr, Gary Dibb, Don Young, Nick Starritt, Rick Emslie, Andrew Mayo, Stuart
Winby, Wendy Hirsh, Brian Hackett, Bob Cowell, Peter Howes, Elizabeth Lank, David Creelman,
and a number of others who contributed views, including CRF colleagues, Mike Haffenden,
Chris Ashton and Gill Grant.
Our thanks also go to Chris Ashton, Linda Breakes, Louisa Mathie and the team at Artisan for
their help in producing this report.

Editor: Chris Ashton


Layout and production: Artisan Studio
Print and distribution: Artisan Design and
Print
Diagrams: Louisa Mathie

And finally, CRF wishes to thank Karl Chapman, Managing Director of AdviserPlus, whose
company is the main sponsor of this report, along with Sheppard Moscow who also provided
sponsorship.

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ACKNOWLEDGEMENTS

About CRF
Since 1994, CRF's membership has grown to well over 100 international companies and
prominent public sector organisations. The Forum brings together subject experts and
experienced practitioners through research projects, events and publications to share ideas,
good practice, objective analysis and recommendations. As part of CRF, member organisations
develop and implement more effective business-focused HR/OD policies
actively participate in cutting edge research projects such as this report that address issues
relevant to large employers
develop senior executives, HR leaders and the HR team
improve organisational learning and knowledge
engage in networking, peer learning and sharing experiences with other members who face
similar challenges
enjoy unlimited access to CRF's extensive resource base of research and publications, and the
resources of our partners.
Member organisations are typically represented by their director of HR or OD, or a senior
executive in those functions. They often comment on how CRF's work makes a real difference
to organisational performance and effectiveness. To join CRF or to find out more, e-mail
info@crforum.co.uk, call (+44) 020 7470 7104, or see www.crforum.co.uk.

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Executive Summary
Some HR executives in progressive organisations are exasperated or bored by the long-running and
backward-looking debate about whether HR drives performance and improvement.

Whats the issue?


There is an ever-changing new business world that HR must
understand and make sense of. The purpose of this report is to
indicate how progressive functions can raise their sights and be ahead
of the game, working with the CEO and top team
The bar of required HR expertise is moving ever upwards. A tsunami
of events and uncertainties is creating relentless pressures on leaders,
the workforce and HR.
As technology drives new business models and ways of working and
globalisation adds layers of complexity managers need more help
than ever to see beyond task requirements and operational pressures.

Its objectives should be framed using three lenses - sustaining current


performance, stimulating and guiding improvement, and driving and
designing transformational change.
2 Re-focus HRs portfolio
HRs portfolio of activities should reflect demonstrable business
priorities. Important roles to fulfil are
business problem-solver, organisational architect, workforce
planner and resourcer
talent manager and capability raiser, performance management
expert, change agent
collaboration and innovation facilitator

HR under pressure
For years, HR has been under pressure to become more efficient and
add more value. Long-standing angst is felt within HR about its
position in the corporate pecking order, and the difficulties it feels it
faces in tackling poor people managers.
Critics have seen the function as overly process-oriented, fad-prone,
insufficiently business-focused, poor at customer service, and timid in
the face of challenges.
Some HR executives in progressive organisations are either
exasperated or bored by this long-running and backward-looking
debate. They feel confident that they are central to driving
performance and improvement. They do not wish to be held back by
the slower ships in the HR convoy.
Whats the solution?

engagement champion, employer brand manager and culture


guardian.
3 Re-skill HR people
HR urgently needs to tackle its own talent issue. This requires culture
change within HR, and a more demanding capability framework that
highlights business knowledge and organisational effectiveness skills.
Emerging from assessment and development processes should be a
slimmer but far higher calibre function and one that high achievers
will want to join because of the rewarding work it does.
4 Re-define responsibility for people management
A people governance structure should be adopted that defines
managers being responsible for doing and engaging
HR as guide, goad and guardian of quality

1 Re-frame HRs purpose


We conclude that HR should re-define its purpose as organisational
effectiveness creating a high-performance work environment, not
just high-performing people.
8

a calendar and process for developing a compelling people strategy


no longer a separate HR strategy, but owned by leadership as part
of business strategy

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EXECUTIVE SUMMARY

The HR director is pivotal in positioning and leading a business


and future-focused HR function which is efficient in operation
and effective in delivering value.

measures for the effectiveness of both managers and HR.


A continuous drive to strengthen managers people skills is essential
in areas such as performance management, feedback, capability
development, and understanding organisational effectiveness.
5 Re-shape HRs relationships
There are three critical relationship areas for HR to work on.
HR and managers co-creating more effective ways to get the best
out of people, rather than HR just telling managers what to do.
HR directors and CEOs/top teams the ideal HR director will not only
drive functional renewal but will be expected to improve top team
effectiveness, and play an important role in advising the board.

CEOs and investors


As the appointer and line manager of the HR director, CEOs must
understand what an effective HR function and HRD looks like. That
includes being up-to-speed with future-facing concepts about
structure and roles, as described in this report. CEOs must also be
conscious of their responsibility as role models for effective people
management.
Investors should note the mismatch between in-depth discussion of
how progressive HR can drive value and the low level of interest taken
by financial analysts, whose research often appears flimsy. We
recommend a higher degree of understanding of what creates longterm value in organisations, and also point to HRs responsibility for
providing convincing data about capability and resilience.

Within HR and head office ensuring collaboration between parts


of HR, and also helping head office functions to work together as a
joined-up team.
6 Refresh HR processes
Our research indicates that people processes need to be designed
with more rigour backed by evidence that they really work and
tied more directly both to corporate goals and the needs of
managers/employees to perform effectively.
Therefore, all important processes should be mapped and their
rationale, owners, customers and success measures identified. There
should be a strong focus on measurement and evaluation to underpin all
HR activities, supported by developing better HR analytics capabilities.
7 Re-align HR professional bodies
HR professional bodies need to raise their sights if they want to be
seen as leading, not lagging, in raising HR standards and calibre. They
should work with leading HR directors and progressive organisations
to create a new tipping point to improve HRs reputation.
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INTRODUCTION

Introduction
Discussion of the role, shape and capabilities of the HR function has always formed an
important part of CRFs work concerning organisational effectiveness through masterclasses
with eminent authorities such as Ed Lawler, Vladimir Pucik and Gordon Hewitt.
In 2002, Andrew Lambert wrote a CRF report on the career issues of corporate functions, which
included some 60 interviews with mainly senior HR executives. Both in the report and at a
subsequent meeting to discuss its findings, it was evident that HR executives in progressive
companies that typify CRF membership were unhappy about the functions reputation. HR was
clearly the butt of much criticism from the chairmans office to the staff canteen.
This was galling to the many ambitious and capable HR people who had contributed to the CRF
work. They were frustrated both by the low level of expertise among HR professionals and by
the HR tendency to navel-gaze and complain year on year about the functions status without
actually doing anything substantive to raise the game.
Additionally, as the report pointed out, professional bodies in management accounting, for
example, appear to be more successful than their HR counterparts in orienting their members
towards a broader business perspective and contribution, often on an international scale.
In consequence, a CRF working group examined HRs future which, as a side benefit, helped to
prompt a new approach to raising standards in the UK Civil Service. This CRF initiative led in
turn to CRF Publishings report, The Future of HR: A Fit For Purpose Function (2005), by
Chris Ashton and Andrew Lambert.
While many of that reports findings and recommendations are still valid, its principal messages
were not successfully implanted in the collective consciousness of the HR world. HRs
reputation continues to be an issue and yet the need for people and organisations to be better
managed is as pressing as ever.
For this report, CRF had substantive discussions with 20 thought leaders, and 20 senior HR
practitioners and CEOs in international organisations. As a result, we provide some pointers to
how HR can win the respect it desires. The opportunity to add real value to their organisations
future success beckons, for those with the courage and skill to seize it.
This report addresses our messages to those best able to shape the functions future HR
directors or chief human resource officers and the CEOs who hire them. There are also
messages for those with the ambition and talent to be part of the necessary change process,
and to stakeholders who influence how organisations are run.
We have found a strong consensus not only about the problem but also about HRs future direction
through examples of what this should look like. Now we all need to start spreading the message.

10


HR should be re-cast as the
organisational effectiveness
function. But this time, dont
change the name on the tin
until it is matched by the
contents.
Andrew Lambert , CRF

HRS CHALLENGES

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HRS CHALLENGES

Introduction

Topics covered

14

1.1 The capability challenge for HR

15

1.2 The capability challenge for managers

19

1.3 The challenge for professional associations

22

This chapter summarises the case for


changing and improving the HR function. It
examines this through three themes the
need to rethink HRs role, orientation and
capability, the need to address the role and
capability of managers, and the impact that
professional associations make. For each,
developments and issues are reported.

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HRS CHALLENGES

Being an organisational function is not a popularity contest but HR tends to be the most criticised of all.

1.1

HRs self-doubt or under-appreciation?

The capability challenge for HR


A function under fire
HR has long been criticised for being overly process-oriented, fad-prone, insufficiently businessfocused and timid when it comes to tackling important challenges, especially in terms of
managerial behaviour.
The personnel function of the past tended to be unpopular within their organisations for being
rule-bound, secretive, controlling, fixated with designing one-size fits all processes, and having
to re-design these at regular intervals because they were not fit-for-purpose.
This report demonstrates that it doesnt have to be like that, by revealing how progressive HR
leaders are taking their functions into the future. However,
surveys show that many managers and employees still view HR functions in a relatively poor
light. Despite many books and articles about how HR can improve, there is still much work to do
the widespread adoption of the name Human Resources in the 1990s was intended to
indicate a shift to a more strategic contribution. Cynics say that, too often, this was merely
re-badging. Some also feel that it coincides with the function distancing itself from internal
customers and being more focused on resources than people.

HR people themselves most want their function


to be respected. Like anyone, they seek to do
good work and be recognised for it. But, debate
in HR circles concerns not being taken
sufficiently seriously.
Some of this debate airs complaints about the
quality of management HR has to work with.
HR people typically feel lower in the pecking
order than finance, in particular, and proper
professions. For the UKs CIPD, obtaining
chartered status was important to boost selfrespect, even if this was not much noticed.
Perennial chatter concerns how few HR
directors gain board positions. Rather more at
issue is that some senior executive teams do
not include HR.
However, many higher achievers in HR regularly
dismiss this long-running debate as self-pitying
and navel-gazing.

These generalisations are, perhaps, unfair to progressive HR people and functions. Examples
from leading organisations in this report show how different this picture can be.
In addition, being an organisational function is not a popularity contest, and there are plenty of
critics to be found of finance, IT and other functions. However, HR does tend to be the most
criticised.
Why does this matter?
Many organisations state that people are their most important asset, and much of the intangible
value of publicly-quoted firms can be ascribed to the estimated worth of employee knowledge
and capability.
Furthermore, talent is now recognised as a critical differentiator and driver of long-term
organisational success. Being able to attract, retain and get the best out of its people represents the
core of an organisations employer brand value. City analysts may struggle to put a number on this
value, but common sense tells everybody else that the way people are managed really matters.

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HRS CHALLENGES

Top leaders, C-suite executives, managers and employees all want HR to be well-run, capable and well
thought of.

World-class HR costs less


A report from a US-based consultancy, Hackett
Group, compared companies that it defined as
having world-class business practices with
others from its total database of 2,400 client
organisations. It concluded that HR functions in
world-class organisations
spend 27% less per employee on HR than their
peers and operate with 35% fewer HR staff
provide higher value through improved HR
productivity and strategic alignment
all align business strategy to people strategy,
compared with only 60% of median companies
are 87% more likely to have an explicitly stated
workforce strategy
manage their workforces more effectively and,
as a result, experience 61% fewer voluntary
terminations and 43% fewer involuntary
terminations.
Hackett found that there is no single silver
bullet to achieving world-class HR performance,
though a holistic approach is needed. Worldclass HR functions spend almost exactly the
same amount per employee as median
companies on technology and 10% less per
employee on outsourcing. However, they use
technology and outsourcing more effectively
than median companies to enable
improvements in other areas.
The Hackett Group, 2004 HR Book of

Obviously it is inherently unhealthy if there are doubts about the orientation and capability of
the one function that should be expert in this field.
From an employee perspective, there are clear reasons why it is important that they should think
well of their HR function.
HR is typically the part of the organisation they first have dealings with when they join.
HR is also the function that employees feel has a duty of care towards them throughout their
employment to whom they should be able to turn if in difficulty, and to obtain advice on
careers and development.
They also expect HR to ensure that managers are well selected and trained.
Managers, at every level, have many expectations of HR to help them in managing their people
as a provider of advice and direct support as well as helping in their own development.

Leaders will have the most expectations although these will be tempered by their
experience in working with HR people before and since they reach their leadership
positions. They will at least demand that HR is efficient. But at a time when every
function must prove its worth, what they really want is substantial help from HR in
improving their organisation.

Thus everyone wants HR to be a well-run and capable function, sensitive to the needs of
internal customers.
Drive for value debate
The debate about the HR function over the past 10-15 years has resulted in one particularly
clear trend the move to reduce what an organisation pays for personnel administration.
Technology is an enabler, but the debate has been as much about what HR should stop doing,
and also what line managers and employees should do for themselves. There are fundamental
tensions about whos job is it?, as well as whether the driver is cost-reduction rather than what
is genuinely effective.

Numbers, www.thehackettgroup.com.

An important strand of the debate concerns the widespread view that HR should become more
strategic, if it is to be taken more seriously. This tends to reflect also the notion that day-to-day
administrative workloads can be reduced by automation, to enable HR to concentrate on more
important matters.

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HRS CHALLENGES

Can HR make itself into a strategic asset that is, by adding demonstrated value to the organisations
capability? Professor Gordon Hewitt.

Thus the drive for value represents two dimensions lower cost administration and more added
value through higher expertise. However, two questions arise.
Is personnel administration actually being done better through models such as service
centres, whether in-house or outsourced?
Has HR actually demonstrated that it understands critical business issues and provides better
value through resolving these from a people perspective?
Both issues will be examined in the course of this report.
More business focus is the mantra
Time and again, in articles, books and discussions with and about HR people, we hear the same
overall message HR must be more business-focused, as an essential pre-requisite to becoming
more strategic. The criticisms concern these points.

Ed Lawler - Professor
USC

Too little knowledge of business essentials finance, accounting, operational methods, sales,
marketing and technology.
Too little experience of work outside the HR function.
A tendency to set objectives, and design and implement practices that are not tied clearly to
achieving worthwhile business outputs.
From the perspective of CEOs and business managers, this is reflected in procedures that appear
overly-complex and couched in HR language they find arcane. They comment that what HR
does, or recommends, too often does not start and end with genuine business challenges.
This may appear to HR executives as shooting the messenger, in that it falls to them to ensure
that their organisations adhere to legislative rules and labour agreements that some line
colleagues find unpalatable.
The HR problem
The problem is that HR does not seem to be able to position itself as a business partner.
Even the most recent studies of its position in major corporations suggest that it is
struggling to be more than an administrative function that is viewed as a cost centre,
rather than as a value-added strategic function. Ed Lawler.

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HRS CHALLENGES

PwC Global Trends in HR 2006


This report from PricewaterhouseCoopers draws
on data provided to the Saratoga Institute from
some 15,000 organisations worldwide.
It finds that the reputation of the HR function
was at a low ebb. It noted that human capital
issues are now recognised as having a powerful
impact on all businesses competitive abilities.
However, there is little evidence that the HR role
is similarly to a higher level of strategic influence.

Frustrating for the best


The best HR people have been frustrated for years by being tarred with HRs historically poor
reputation and introspection, as well as by accusations of poor quality and a lack of ambition.
CRF found this back in 2002 with its report, Careers in Corporate Functions. Many of the 60
mostly senior HR people contributing to that research felt they had achieved respect for their
abilities. Some could point to solid achievements where they had made a real difference to
their organisations.
That is arguably because CRF member organisations and those reviewed in the research are
among the more progressive in outlook and practices CRF, after all, is a meeting place for
those wanting to improve organisational effectiveness.
Nonetheless, leading practitioners and rising talent in HR are still well aware that the functions
reputation and levels of capability are lower than desirable indeed, some are among HRs
harshest critics.
In addition, globalisation has highlighted the variable standards and approaches to HR around
the world see the column.
Improving HR capability a vicious circle?
All HR leaders we spoke to in 2008 are concerned to improve the quality of talent in their
functions as they were in 2004 when we asked similar questions in writing the CRF Publishing
report, The Future of HR. So, whats the issue?
Some refer to the poor standard of entrants from colleges generally feeling that the quality
of teaching, course design and content does too little to prepare vocational HR students for
the realities of the work they will do. Yet this comment is made about both the USA and UK,
which are perceived to be among the most advanced countries in terms of HR education. Note
that only Australia and Canada rate as highly.
More widespread is the view that many HR functions still have large numbers of people whose
skills and orientation reflect HR standards and expectations of the past rather than the future.

Ive got a great talent programme underway for new entrants, commented one Group
HRD, but the problem is that I still have to address the quality of the HR managers they
will report to. That takes longer to sort out. Other HRDs made similar comments.

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HRS CHALLENGES

The more line managers understand what good people management is, and the better they do it, the
easier it is for the HR function to refocus on more challenging and interesting organisational
improvement work.

Three ways for HR directors to address capability


External recruitment

HR directors have been scouring the market for talent with


which to upgrade or re-stock their HR functions. They all
report difficulties in finding genuine HR talent in the
marketplace. Ive had to kiss an awful lot of frogs, as one
said colourfully.

Internal recruitment

Another alternative is to seek internal talent that might want


to move into HR from other functions or from business
operations. This can be hard work, as many HR directors
attest partly because of the historic view that HR was not
particularly a place for high achievers to get ahead. It is part
of HRs challenge to rid itself of these past connotations
and to promote a new vision of a function where people can
have a positive impact on their organisations.

Capability programmes

This is the make rather than buy route. Both current HR


and non-HR executives can develop through programmes of
knowledge and skills development. We discuss this further in
Chapter 9 while, in Chapter 4, we review the capabilities
required of HR directors themselves, and the example they
must provide.

1.2
The capability challenge for managers
While managers tend to be critical of HR, the converse is that the shortcomings of managers are
regularly observed by HR people.
People is a management responsibility
The reality is that managers, in aggregate, are responsible for managing people, not the HR
function. There is no shortage of evidence that there is room for improvement in how they do so.

HR a place for real achievers


In many organisations, Personnel has
historically not been seen as a place for the
ambitious. However, in certain more peoplecentred organisations, the opposite has long
applied.
In Mars Corporation many talented corporate
leaders have had HR responsibilities HR is a
core leadership competence, and is a way to
the top.
The same applies, ironically, in the British Army
while naturally an organisation of disciplined
command, it also values motivation and
people leadership extremely highly. Similarly,
some of the more sophisticated HR work
underway is currently to be found within
todays US and Canadian armed forces.
The secret is in part to instil critical HR
principles within line management, as HewlettPackard currently does in its leadership
programme.
Leaders who have a good understanding of
OD principles will make better use of an HR
function.
The entire atmosphere behind recruiting
talent into HR improves.
The more line managers understand good
people management and the better they do
it the easier it is for HR to refocus on more
challenging and interesting organisational
improvement work.

Even the best organisations spend considerable time and effort ensuring that managers exercise
this responsibility with skill and conviction. Just as HR might need to understand more about
business, so managers generally need to learn more about psychology and motivation, both in
theory and practice.

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HRS CHALLENGES

Some managers over-rely on HR to support them in managing people and relationships in part, they
abdicate their responsibilities.

Hand-holding is bad for your health


Where managers regard HR as helpful it may,
unfortunately, be because HR executives can be
asked to sort out little messes that, in reality, are
created by defects in managers own style and
behaviour.

The most common inhibitors to good people management include


a tendency to focus on task at the expense of motivation both are important
stronger interest in technical issues than in relating to colleagues
shyness and fear when handling difficult relationship issues
excessive ego and self-absorption.

Often the worst examples of those little messes


occur at the top of organisations, soaking up the
time of HR leaders, commented Bill Pasmore, a
seasoned observer of leaders and HR functions.
And, of course, leaders are the people who
should be setting a good example for others.
Of course, it is arguably worse not to call on
expertise to tackle genuinely difficult issues. It is
a culture of dependence that should be
avoided. Inevitably, some managers will be
better than others at handling tricky people
issues.
The important point is that they truly embrace
this as their responsibility and make it part of
their own development plan to become more
self-reliant.

The example set by leaders is of overriding importance. How they speak and behave sets the
priorities and behavioural standards for managers at all other levels. If top executives are too
busy or culturally ill-equipped to be role models as people managers, any HR function will
struggle to make an impact. Note that
surveys of trust in leadership regularly poll below 50% in the UK and USA
the less visible managers and leaders are, the less they are trusted
on average, immediate managers rate better than more senior managers because their staff
know them.
Clarifying accountabilities, reducing dependence
Organisations must make clear who is accountable for what, for people management to avoid
falling between two stools the line manager and HR. Recent evidence shows some positive
steps forward, with increasing recognition of three basic principles.
People are my job although many organisations have struggled in the way they have
adopted competency frameworks, the overall trend is to make it clear what is expected of a
manager in general, and to place the primary responsibility for managing people on line
managers.
Employee engagement starts with managers the widespread adoption of engagement
as a set of guiding principles has helped to provide some rigour, and sharpened the
measurement of the quality of people management.
Managers are responsible for developing capabilities CRFs 2008 research report on
developments in coaching and mentoring found that more than half of the 36 companies
consulted stated explicitly that managers are formally responsible for actively coaching their
staff, not just reviewing development plans.

Bill Pasmore
CCL

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For many years, managers have over-relied on HR to support them in managing their teams in
part abdicating their responsibility for managing people and relationships, and avoiding the
chores that may accompany people planning and review.

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This issue is at the heart of the widespread attempts to reduce HR manager headcount.
The strategic shift that HR functions still struggle to make is to reduce hand-holding activity
with line managers and employees by moving towards self-service, using the intranet and
telephone advice from HR service centres. At the same time, some re-frame HR manager roles,
so they spend more time on advice and support that really adds value.
Survey results in the 2007 CIPD report, The Changing HR Function Transforming HR?,
found the main reasons for HRs difficulty in transferring work to the line appeared to be line
manager skills, managers having other priorities, a lack of time devoted to people management
and a reluctance to adopt self-service.
This tension also skews the debate about business focus, in that
on the one hand, if managers are asked what they want, some will regret the perceived
diminution of support and feel that HR is distancing itself
conversely, most will support the reduction of spend on overheads, particularly if internal
accounting makes clear how this affects managers bottom line.
Only by clearly framing the requirements of both managers and HR can organisations set a
course for better value outcomes. Managers, for their part, must feel convinced that
arrangements to support them are effective which we discuss in Chapter 7. For HR, the
challenge is to be successful both in re-positioning the function and to ensure that the calibre of
staff matches higher expectations.

Who tends to do what?


CIPDs 2007 report, The Changing HR Function Transforming HR?, indicates that
HR generally takes the lead in remuneration and handling redundancies
line managers tend to lead on work organisation
responsibilities are most likely to be shared in recruitment, employee relations and
development.
However, it is also important to clarify how more strategic people issues are tackled, such
as organisation design, workforce planning and talent management.

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Leading professional HR bodies

1.3
The challenge for professional associations

WFPMA the World Federation of Personnel


Management Associations. Founded in 1976
to aid the development and improve the
effectiveness of professional people
management. Comprises five regional
groupings of national associations Africa,
Asia-Pacific and Australasia, Europe,
InterAmerica and North America. Collectively,
claims to cover over 400,000 HR professionals
although over 75% of these would be
accounted for just by the memberships of
SHRM and CIPD.
EAPM European Association of Personnel
Managers. The largest country grouping in the
WFPMA, with the CIPD being by far the largest
member.
SHRM the Society for Human Resource
Management is the main professional body in
the USA, with some 250,000 members. It has
an independent arm, the HR Certification
Institute (HRCI), which manages professional
qualifications. Note that the L&D community is
mainly served by the American Society for
Training and Development, with some 70,000
members. Both have international chapters,
reflecting their global reach.
CIPD the Chartered Institute of Personnel
and Development claims around 125,000
members in the UK and Ireland, and some
4,000 members internationally.

Discussed in this section is the part that professional associations have so far played in helping
HR to transform itself into a more business-focused, high achieving function. The main players
noted in the column have sponsored many recent studies concerning HRs priorities and future
challenges. See the column opposite. These are aimed partly at the HR world but also at general
management and governments. A secondary aim is to promote their profiles.
Despite worthy intentions and much good content, it is hard to identify any significant impacts
yet from this large catalogue of work on HRs reputation or capability.
There is no evidence to indicate that managers in general and CEOs in particular are aware
of such surveys and literature. They are generally too busy with other priorities to take much
notice, even those who might be interested.
Awareness among key HR audiences, including HR directors, is also low even though some
will have been consulted. Studies consistently reveal that most HR managers are generally too
busy doing to read much beyond sound bite material.
Reports in the media are fleeting and brief, and the small number of journalists who write
about management and people topics are awash with books and reports from academics,
consultancies and trade bodies.
Additionally, the surveys of HR priorities by and large say much the same thing, in the course of
listing topics that HR directors, and possibly their CEOs, feel are important. Managing change,
leadership development and talent generally head the list, except that the PwC study contrived
to leave talent out altogether. These surveys do not tend to communicate anything memorable
about how HR might successfully meet and resolve its challenges.
That said, the CIPD research programme, along with the BCG and Cranfield reports for WFPMA,
stand out in terms of directly addressing HRs future roles.
Raising capabilities
What impact do these professional bodies have in raising the capabilities of HR?
SHRM and CIPD are the largest and among the most sophisticated of the professional bodies.
The qualifications they devise most visibly spell out what an HR professional is expected to
know, the curricula being determined through extensive consultation. They also provide
conferences, training programmes, chapter meetings and many publications and newsletters
all aiming to influence HR thinking and behaviour.

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Surveys of HR priorities, by and large, say much the same thing. They dont tend to communicate
anything memorable about HRs challenges.

However, in terms of raising HRs game and addressing long-standing criticisms, the evidence is
not encouraging.
First, all the studies indicate that the profile, reputation and skill set of HR people has changed
little over the past 10 years or more.

Association studies
WFPMA a recent study with Boston
Consulting Group (BCG) is Creating People
Advantage How to Address HR

Second, CRFs research in 2008 reveals exactly the same ambivalence and occasional
disregard for professional associations among top HR directors, as we also found in our 2002
study. In the UK, while HR directors generally support people who want CIPD qualifications
and mention these when recruiting, they ascribe no great importance to them.

Challenges Worldwide Through 2015. In

Well-placed US experts tell us that associations there do not have as much penetration of their
marketplace as CIPD, and tend to attract more medium to smaller-sized organisations and the
public sector than influential corporations.

Professional Standards.

There is a considerable gap between what progressive companies want and what professional
association qualifications deliver. HR directors complain that they lack the rigour required, say,
for legal and accounting qualifications.
Indeed, the contrast with bodies such as ACCA and CIMA that serve the management
accounting area is striking. They make it clear that they provide a route into general
management, and build in considerably more general business content. They are also more
extensively involved in supporting in-company programmes than their HR equivalents.
Are colleges the weak link?
A further issue is that, although professional bodies determine the curriculum, it is hard for
them to govern the standard of teaching in colleges. While self-study or in-house courses are
available, the usual route for young entrants is through training in colleges.
Quite simply, college lecturers are hardly at the forefront of HR thought leadership, nor do they
teach courses that prepare future HR managers for the reality of the challenges they will face.
As mentioned above, our US and UK interviewees including students raised concerns over
the variability of standards in educational institutions.
Hewlett-Packard, for example, described their extensive efforts to identify better colleges and
business schools, but then also have to try to entice the better students to apply for HR see
the case study in Chapter 10.

2005, PwC helped produce Survey of Global


HR Challenges Yesterday, Today and
Tomorrow. A WFPMA study in 2000 with

Cranfield, examined HR Competencies and

EAPM launched an initiative in 2006 called


Professionalisation of HRM in Europe,

comprising studies undertaken by BCG. A


report due for publication in June 2009, The
Future of HR in Europe 2009, will focus on
the multiple routes in creating people
advantage. It will also address issues such as
managing talent in a downturn,
competitiveness, mobility and retraining in
turbulent times, and doing business in the
emerging markets of Central and South Eastern
Europe.
SHRM a major study was undertaken in 2007
with Hay Group entitled Strategic Research
on Human Capital Challenges.

CIPD a comprehensive range of research is


commissioned on a rolling basis, but the most
prominent initiatives are a two-year study
process called The Changing HR Function,
and a three-year programme, Shaping the
Future, which explores how to build
sustainable high-performing organisations.

Brian Hackett, an experienced US observer of HR, remarked: Colleges with HR courses have
pretty much the same curriculum as 20 years ago, especially regarding compensation and
incentives. And most MBA courses dont yet teach anything worthwhile about leadership or HR.
Even UK universities with good reputations for business and management courses provide
mixed experiences.
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What standard do HR directors want?


HR directors want talent that is
highly commercial in outlook
grounded in organisational development and
design skills, including change models
numerate and analytical
technologically-savvy and, in terms of
personal capabilities, is
action and results-oriented
with good influencing skills.
Further, they would like young entrants to a
function to have acquired insights into how to
put their learning into practice for example,
through project work.
This is not yet what HR directors see emerging
from professional education.

One informant told us: Having studied there only a few weeks, I realised it did not live up
to its reputation. All results, both for assignments and exams, were always later than
promised. Dissertation assignment and feedback was poor. The course required a lot of
work which was made harder by the fact that the teaching was not up to standard and way
below what it should have been for 8,000.

Achieving greater business and future focus


How are the professional bodies addressing the need to provide HR people with business skills
and other knowledge for the future? We will focus mainly on the USA and UK.
SHRM/HRCI

There are three levels of qualification - the Professional (PHR), Senior Professional (SPHR) and
Global Professional (GPHR). The examinations are experience-based, and are only open to
those who are already working in HR.
Every five years, the HCRI updates the body of knowledge on which professional qualifications
are based new requirements for its higher level GPHR qualification will be released in 2009.
This is based on extensive consultation among HR executives and a panel of subject experts.
It has strengthened the global aspects of HR, and is targeted at those with cross-border
responsibilities.

The 10 new CIPD HR practice areas


Business solutions
Leading and managing the HR function
Strategy and planning
Resourcing and talent management
Organisation design and development
Learning and development
Performance and reward

Overall, a gap is evident between our interviewees who envisage MBA-level entrants in the
future and the flavour of what is required. All three qualifications demand business knowledge,
but are relatively weak in organisational effectiveness. There is little obvious recognition of the
need for service management, despite the adoption of HR service centres. The separate position
of ASTD vis a vis SHRM also means that its focus on L&D is light.
SHRM does provide a suite of three-day business education workshops using professors from
leading business schools. They feature more contemporary HR challenges such as change
management, employer branding and talent management, and business disciplines such as
finance and metrics. These are not formally tied to a qualification process.

Employee relations
Employee engagement and employer
branding
IT and service delivery
Note that these terms may undergo
modification by the time of official publication.

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CIPD

By contrast, there is little in CIPDs training portfolio that features the business and
organisational effectiveness agendas in any depth although it provides optional courses,
including workshops for line managers on people skills. Additionally, the CIPD standards
published in 2002 were, in hindsight, not seen as addressing the criticisms of HR.

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However, now under new management, the CIPD will launch a new framework for
professional standards in 2009, following extensive consultations. Although, as with
SHRM/HRCI, that consultation has not particularly focused on feedback from HRs
customers, the intention is to place organisational needs as the starting point of HRs
agenda not just something to be taken account of. CIPD felt its market position would
deteriorate unless it took action.

The CIPD Framework


The aims of the framework are to
reposition HR as a business discipline
attract higher quality entrants into HR
extend and make more coherent CIPDs offer,
on an international basis.

It appears that CIPD is now reflecting key HR developments such as the emergence of service
centres and the increased focus on organisational effectiveness.
Internally, CIPD acknowledges that gaps in its offerings for more senior practitioners need to be
tackled, as do those in emerging practice areas such as organisation development and design,
business solutions, and IT and service delivery. In addition, the framework is aimed primarily at
the generalist, rather than the specialists who may operate in centres of excellence. CIPD also
acknowledges it is light on behavioural offerings.
While adopting a more aspirational agenda, CIPD is aware that it has much to do to achieve a
significant impact.
The main impact will be on college curricula CIPD cannot realistically rely on college
lecturers to lead a cultural revolution.
The experiential element is particularly important in developing the right HR orientation and
that is the part that CIPD has least control over.
There is a tension to be managed between the desire to meet the needs of more progressive
companies, and the reality that most of its membership will likely struggle to meet new and higher
standards there are obvious dangers if CIPD goes too far ahead of its subscription payers.
In overview, there are limits to the extent to which professional associations can realistically
address the upskilling of HR, despite their prominent position. HR directors collectively can also
play a critical role, since they determine the standards their organisations require. This point is
expanded on in Chapter 9 and some of our company examples in Chapter 10.

These are the main points to note and more


details are provided in Appendix 2.
10 professional areas now focus on the new
priority areas in the previous column.
12 desirable personal competencies are
described, including attributes such as
influencing, personal credibility, curious to
learn, challenging and various making it
happen qualities.
A four-level competency grid has been
devised, setting out expected interactions
with line managers at each level, the focus of
activity including the balance between
behavioural and technical input where
time should be spent, and what success at
each level will look like.
The requirements for moving between levels
are clarified in terms of time spent, the new
skills required and the activities that should be
discarded.

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NEW CONTEXT FOR HR

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Introduction

Topics covered
2.1 Contextual challenges

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2.2 The operating environment

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2.3 Market forces shaping strategy and competition

29

2.4 Staying competitive

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2.5 Shifts in corporate culture

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2.6 The implications for HR

33

This chapter highlights some of the factors


which are affecting organisations, people
and work and which set the parameters of
an ever-changing HR context which should
guide what a function does. The implications
for HR are considered as are the priorities
on which HR directors are focusing. HR has
clear choices to make.

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Organisations seem more than ever to be driven by events rather than shaping their own destinies.
Is it the same for HR functions?

2.1
Contextual challenges
In any age there are new challenges confronting organisations and people. However, at a time
of constant financial and market turmoil, organisations seem more than ever to be driven by
events rather than shaping their own destinies.
Nonetheless, while planning ahead is undoubtedly becoming more difficult, organisations that
fail to understand and then prepare for what may lie ahead will surely become a casualty on the
list of past corporate names.
What governs survivability is entirely human attitudes of mind and collective organisation.
Hence the opportunity beckons for HR to develop expertise in enabling people to be fit for
whatever their challenges turn out to be.
The question is whether HR is ready to do this and specifically whether it has developed
its thinking about how to handle the many difficulties that confront their organisations and
the nature of work.
From our interviews and literature sources, here are the groups of factors that should be considered,
along with pointers to related people issues. The questions we ask readers to consider are
what responsibility has HR taken to tackle each issue, either itself or shared with others?
what active steps has it been taking as a result?
We group these factors into four categories, as shown in the diagram.
Forces Shaping the World of Work
External
Forces
Operating
Environment

Market
Forces

Work

Corporate
Culture

Staying
Competitive
Internal
Forces

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HR needs to devote serious thought to how changes in the operating environment affect organisations,
people, work, and HR itself otherwise it will be flying blind.

2.2

HR in tough times

The operating environment


These are some factors that affect all kinds of organisations, people and work.
Scarce resources
The world is a more crowded place, with resource constraints starting to accumulate. Among
these are people, particularly talent, of which there is also a finite amount. As demographics
change, organisations have to be far more flexible in their employment and location strategies.
They must also learn how best to use economic migrants and raw talent from different cultures.
Generational differences
On the one hand, organisations are increasingly populated with Generation Y people, while also
confronted with the need to retain Generation X and Baby Boomer talent to cope with
demographic changes. Old assumptions about how to use the young and the old are no longer
safe. Blending these contrasting and potentially fractious elements into an efficient, lean and
competitive team requires a proactive and sensitive reshaping of organisational culture.
Geo-political and climate risk
The security of operations in all locations needs to be considered now, as governments can
change and terrorists may strike anywhere. The effects of climate change are liable to intensify
in coming years, including flood and storm damage. The viability and desirability of operations
need to be holistically assessed and regularly reassessed. Yesterdays good value relocation or
off-shoring decision can become tomorrows millstone.

HR is often busier in times of contraction than of


growth. Strategic insight and deep understanding
of business needs are just as essential, given
unpredictable conditions. This is a time to
take a hard look at performance people and
processes and focus on the best
strip out waste and bureaucracy, embed more
flexibility and maximise efficiency
invest in skills and recruit good talent to
prepare for the upturn.
Yet the emotional aspects are important too.
Organisations are more likely to survive and
recover if they build commitment and trust. Gutwrenching decisions may be needed, and stress
levels can soar for HR people too and
organisational values will be tested. We
recommend these steps.
Dont take people for granted recognise
hard work.

Rules and regulations


While markets and organisations may become more fluid and fast-moving, the latter will still
have to cope with government and regulatory action that can radically impinge on freedom of
movement. While some governments talk about lifting burdens from business, there are
counter-balancing pressures to regulate, whether political or in response to lobbying or
reactions to scandals. Most regulation has people implications.

Keep people informed and involved they can


take tough news far better that way.

2.3

Use contract workers and outsourcing


judiciously avoid short-term fixes that
embitter loyal staff.

Market forces shaping strategy and competition


These are some market-related forces affecting the way people work.
Globalisation
While globalisation is not novel, its intensity is increasing. Thus organisations must continuously
learn about its implications, and deal with their new consequences. While many opportunities
exist in terms of new customer groups and people resources, most organisations still have much
to learn about operating in different geographic markets and cultures.

Build confidence frightened people dont


contribute ideas or discretionary effort.
Cost-cutting that is genuinely in everyones
interest will be supported.

The evidence indicates that many organisations have


learnt from the past, bending over backwards to
retain employees, and thus the capacity to recover.
Adversity can be a great motivator. HR should be
to the fore with ideas about how to turn difficulty
into advantage.

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Developing capability to implement the wrong game more effectively is not a recommended solution
to the elusive challenge of creating corporate value and competitive advantage. Professor Gordon Hewitt.

Competitive advantage
new sources

Its not just technology, its what people do with it. The music and media industries are visible examples of how
the ways of doing business are being reinvented, with organisation structures and job types being swept away.
Established players find themselves challenged by new players with less bulk and more agility, working in very
different ways and changing the rules of the game. What is HR doing to anticipate such threats? How does
scenario planning allow for left-field challenges that will require a complete organisational re-think?

New value chains


and business models

Measures of performance, reward and appraisal systems have hitherto been rooted in vertical and hierarchical
management control systems. Increasingly, projects, initiatives and value creation depend on a more fluid and
horizontal way of working. As Professor Gordon Hewitt, of Michigan and Glasgow universities, told us, There are
tensions to be managed about how much autonomy to allow and how responsibilities are allocated.
Collaboration across business units, or across company boundaries, needs to be accounted for in different ways.
People systems need to be rethought to match a business world that works in more of a networked than
command-and-control way.

2.4
Staying competitive
These are some things that organisations do to respond to or anticipate external forces.
Emergent strategy
Traditional strategy formation and planning processes belong to an era of relative predictability
where regular cycles dictate the rhythm of organisational rituals such as budgeting and
performance appraisal. When events move so fast that yesterdays stable and respected business
is tomorrows casualty, new ways of thinking and organising are required.
Many years ago, Mintzberg proposed that strategy should be seen as emergent, a continuous
process of dialogue and a resetting of the course.
Gordon Hewitt - Professor
University of Michigan

Professor Hewitt adds the notion of strategy as a process of discovery.


The implications are deep and emphasise the need for HR to be part of the ongoing debate
on strategy and the constant horizon scanning and sensing research that are required
and not sitting and waiting to be told what will happen next.
Continuous change
Organisations need to be attuned to managing continuous change, which includes
being prepared attitudinally and in organisational systems
anticipating externally-driven change the foreseeable and unforeseeable
stimulating internal change from improvement to breakthrough.

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Disruptive innovations are putting pressure on established companies to increase the pace and type
of innovation. Its becoming impossible for established companies to adapt fast enough. Martin Sorrell,
CEO, WPP Group, at Davos, 2006.

Steve Kerr, drawing on his time working with Jack Welch as Chief Learning Officer at GE, told us
that, some 10 years ago, they concluded it was futile to try to anticipate in any detail what
extrinsic change lay ahead. Rather, their task was to prepare the organisation for anything that
might occur, which then guided their management processes and L&D activities.
Speed and quality of execution
As many strategy writers point out, nine-tenths of a successful strategy derive from how well it is
implemented. Having strategic ideas is the easy part, Professor Hewitt notes. Its deploying your
people and systems faster and better than rivals that counts, especially when ideas are so rapidly
copiable. Teamwork and training are important elements, together with collective experience.
Differentiation
In a world of ideas, marketing noise and rapid cloning, what is HRs contribution to enabling
its organisation to stand out?

Staying competitive innovation and


collaboration
Two areas where interviewees particularly felt
HR should be more expert and proactive.
Innovation

Creativity and innovation are vital contributors


to long-term resilience.
As CRFs 2007 report, Embedding Creativity
and Innovation, noted, these attributes are
fundamentally about attitudes and creating a
culture in which innovation can flourish, and
supporting systems can be effective.

What is distinctive, appealing and lasting about the organisations employer brand?
And, as Professor Vladimir Pucik challenged members at a CRF masterclass in 2005, what is
different and better about the way you manage your human capital and run your HR function?
Resilience
With the speed of change increasing inexorably, one of the most desirable characteristics an
organisation can possess is the capacity to reinvent itself. True resilience is more than being able
to take hard knocks, or achieve sustainability. In discussions with Sir Andrew Likierman of the
London Business School, CRF and its sister organisation the Performance and Reward Centre
have identified resilience as the most important contributor to organisational survival and
long-term success. This, in turn, is fundamentally based on the way that people and people
systems are managed.

2.5
Shifts in corporate culture
These are some aspects of organisational culture that have a major impact on the way people work.
Corporate culture as a strategic tool
As organisations grow and change at an ever-quickening pace, they come to realise the value of
focusing on shared beliefs and ways of doing things if they are to retain cohesion, while allowing
flexibility. Hence the management catchphrase, culture eats strategy for breakfast a cohesive
organisation can handle strategic challenges as they emerge. Additionally, as a growing
organisation absorbs people from many country and company cultures, developing its own
strong culture to trump others and prevent fracturing is crucial.

Organisational size, complexity and diversity


can be strengths as well as blockages.
What is HR doing to support the former and
reduce the latter?
Collaboration

The word organisation means groups of


people doing something together. In practice,
silos, power games, poor communication and
negative competition are among a variety of
behaviours that contrive to shape disorganisation.
Yet, internal collaboration is critical to
organisational productivity, while joint
ventures and partnerships are increasingly
essential ways for organisations to foster
innovation, spread risk and gain competitive
advantage.
This is also a question of shaping the right kind
of mentality and behaviour.

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Implanting managerial excellence


Many organisations start with a particular technical competence. As they grow, they need
managers who are capable of handling more complex structures and activities, and even
business models. Even professional firms like lawyers and accountants have had to learn to
manage themselves much like any other business, and introduce management skills. Public
sector bodies and charities meanwhile also have to make a shift from administration to
managing resources, complex operations and change much like private sector organisations.

Vladimir Pucik - Professor


IMD

New economic players with different philosophies


Shifts in the global economy mean that major players in the new world economies are emerging fast,
and are acquiring US, UK and European operations. Some have different people management
traditions and conceptions of what HR is. These include large, family-owned companies, corporations
run by Russian oligarchs, and state-owned enterprises. Some, like certain Indian companies, go to
great lengths to learn and adopt sophisticated management approaches. Others will not.
Insulated organisations with old game rules
At the same time, some organisations are largely removed from the pressures of competition
and innovation. These include many public sector and multi-national administrative bodies, still
with arcane management and people practices. They may also have complex and dysfunctional
governance structures, and political interests that hold sway over any rational attempt at
effectiveness and value-for-money. When economic pressures finally bite, employees tend to
remain toward the bottom of the hierarchy. Typically, the HR function is more likely to be
administration-oriented and unchallenging. Better management will also require better HR.
Thus, the range of contexts in which HR must operate has become more varied. Old ways
persist, while elsewhere there is the requirement for constant re-invention.
The changing context and agenda for value creation
Competing in the New Landscape
from forecasting to shaping

HR Processes
and Practices

Discovering New Sources of Value/


Advantage
from best practice to next practices

Changing Managerial Frames of Reference


from improved processes to new mindsets

Resolving Tensions in Internal Governance


from resource allocation to resource leverage

Creating New Forms of Globality


from geography to competence
Professor Gordon Hewitt

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Role &
value
added
of HR?

Organisational
Capabilities

Business
Value Creation

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The challenge is that many HR people are being dragged into competitiveness rather than leading it.
This requires a shift in mindset, knowledge and HR capability amongst practitioners and especially
function leaders. Professor Vladimir Pucik, IMD.

2.6

HR directors: critical people issues

The implications for HR


The commercial world has become characterised by ambiguity, complexity and volatility. Leaders
need increasing help to interpret the external environment, and to understand the strengths and
weaknesses of their organisations.
Leaders want their central functions to provide them with levers to achieve greater performance,
and to manage change, observed Gary Dibb who, as COO in successive organisations, saw his
role as ensuring those levers worked well and in harmony.
HR has a choice.
To leave the challenge of navigation to others, and to concentrate more narrowly on following
whatever the business strategy dictates, providing whatever support is asked for by managers
essentially a reactive role. The traditional HR function will examine the strategy to assess
whether it needs to change anything in the classic areas of personnel practice such as
recruitment, pay, employee relations, training, welfare and health and safety.
Alternatively, HR can re-invent itself to become a guide to leadership by investing in
analytical expertise in organisational effectiveness, change and other areas. In this scenario,
HR plays a key part in preparing for the future.
There is little doubt that most CEOs prefer the latter, assuming HR is fit for such a purpose.
They often comment that they want their thinking challenged, or at least augmented. They
want authoritative advice otherwise they will continue to turn to external consultants.
While we feel the majority of HR executives would also prefer the second option, it is hard to find
an HR function whose staffing is equipped and organised for this role.

Those we interviewed agreed that the following


were of critical importance.
Talent and capability, especially in leadership.
Performance organisation, team and
individual.
Managing change.
Providing smarter ways to tackle
administration.
Provide better measures of people
management and capability.
Most were focusing hard on engagement as a
way to underpin work across these areas, and
provide a measurement system that applied to
both line managers and HR.
Similarly, they were concerned to develop the
reputation and features of their employer
brand to convey distinctiveness.
There is also increased focus on workforce
planning, since this has become more difficult
in a context of accelerating change. It interrelates strongly with talent management and
business strategy. CRF will publish a report on
this topic in late-2009.

The organisations and HR directors we consulted were all at various stages of moving in this
latter direction and they agreed on the critical business-people issues cited in the column.
We will comment on the topics in the column and provide examples of good practice in the
chapters that follow.
As regards the HR function itself, we will discuss in Chapter 9 the issues when developing
future-facing characteristics, supported by practical examples. However, a first requirement in
repositioning HR is to determine what the function will now prioritise and why for people
inside HR, its customers and stakeholders. This is the theme of Chapter 3.

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HRS PURPOSE AND MISSION

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Introduction

Topics covered
3.1 Framing the question

36

3.2 What HR directors told us

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3.3 What managers and employees say

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3.4 What business academics say

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3.5 What professional associations say

39

3.6 What we propose

40

Discussed here are the issues and


developments underpinning how HR frames
what it should be known for in the future
from the points of view of CEOs, C-suite
executives, managers, employees and
professional associations. We then propose
an example HR mission.

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The question on HR purpose is what do the CEO, C-suite executives, managers and employees want
from HR?

Understanding HR terminology

3.1
Framing the question

Purpose what HR is there to do, the role it


has to play.
Mission what aspirationally HR aims to
achieve, the difference it seeks to make.
Deliverables the specific outcomes are
expected of HR.

We particularly wanted to hear from HR directors what their functions felt accountable for, and
also asked questions such as
what does a chief executive and top team colleagues want from HR?
what do managers and employees want from HR?
since we felt the answers should be essential in shaping HRs purpose.
We invited respondents to be future-focused and, if necessary, aspirational, should they not be
satisfied with current expectations. The intention was to identify any major themes HR directors
were conveying to their stakeholders and how these might shape the understanding of their
people in what they should do and how.
We were concerned with the question if the HR function had not been invented, what would
we now construct unencumbered by legacy issues?

3.2
What HR directors told us
These are examples of the language being used.
Execute the business model from a people perspective.
Everything related to the people side of strategy shaping it and implementing it.
Pulling the people levers of organisational performance.
Help management and employees to engage collectively to perform and prosper as an
organisation.
Catalyse and unleash the energy and contribution of people, to create discretionary effort.
Guardians of the employer brand, and being a great place to work.
In interpreting these phrases, we should distinguish between purpose, mission and
deliverables. Most of the language used is aspirational, and should thus be seen as indicating
HRs mission see the column.

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The themes that emerged from our interviews

What customers want from HR

reinforce the main areas where HR should deliver for their organisations talent and
capability, resourcing and workforce planning, performance and managing change

Listen more and be more responsive.

challenge the organisation to create conditions for lasting performance by using concepts
such as engagement and the employer brand which also provide measures of progress

Engage more seriously with its customers to


find out what they need, and about their
experience of current HR services.

convey roles for HR for example, acting as a catalyst, and providing drive and energy, which
go beyond traditional, passive forms of HR.

Be clearer about what it does.

Every HR director we spoke to is taking steps to ensure their function considerably


increases its understanding of the business context, its orientation to meet business
needs, and the quality of its contribution to business performance. The direction is clear.
How they achieve it is the challenge.

Be independent-minded, in order to balance


employee needs with those of senior
managers.
Be proactive not remote or caught up with
minutia.
Be more strategically-oriented work on
issues that are important to the business.

3.3
What managers and employees say
What CEOs and top team members expect from HR is discussed in Chapter 4, since their view
tends to reflect their relationship with the HR director. This naturally influences the latters
perspective of what HRs purpose should be, as noted above.

Be professional demonstrate real expertise


combined with an understanding of the
business, in order to provide sound advice.
What Customers Want from HR, IES, 2008.

An Institute for Employment Studies report in 2008, What Customers Want from HR, provides
a useful perspective. Ironically, relatively little is said about what they want HR to do the
comments mostly concern how they want HR to behave, as examples in the column show.
Note also that if HR people concern themselves only with strategy documents, process redesign
and interactions with top management, they are viewed as remote. They may think they are
having a strategic impact on the business but, once out of touch with line managers and the
workforce, they are perceived to have little to offer, especially to senior executives.
While little is said that defines what HRs purpose should be, it emerges that the large majority
of staff do not know what HR does, and HR does not make a conscious effort to tell them, as one
senior manager interviewee put it. At least, managers and employees would welcome
clarification of what HR is there to do.

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"If organisations are calling people business partners, they need to be more commercially savvy and
more in tune with business imperatives. The profession has not yet developed enough HR people with
those skills." Sian Thomas, Deputy Director, NHS Employers.

The business partner debate

3.4
What business academics say

The term business partner spread in popularity


from the late-1990s, given Ulrichs initial model
and pressure on HR managers to become closer
to the business. However, CRF Publishings 2005
report, The Future of HR, reflected concerns.
The initial impression was that this
represented a senior management team
position. That became devalued, as many HR
managers just assumed the title.
HR directors found it hard to find HR managers
with the essential business orientation.
Ulrich then coined the term strategic partner
to distinguish HR directors at group or
divisional level who created strategies with
business colleagues however, some business
partners then wanted to trade up to this more
important title.
A 2008 poll of managers perspectives by Roffey
Park found that Ulrichs model did not work well.
He responded to these criticisms in a recent
Personnel Today article by reminding the HR

community that he had written about


partnering as an attitude that is business
focused, rather than trying to give anyone a title
pointing out that the real HR challenge of
upgrading skills and changing mindsets still
remains.

The most prominent voice of the last 10 years is that of Dave Ulrich, with some input from his
fellow professor at the University of Michigan, Wayne Brockbank.
Ulrich and Brockbank express their ideas as combinations of roles and characteristics, designed
to indicate more effective contributions from HR individuals and the HR function. While such
models have been hugely influential, they have suffered from misinterpretation and
misapplication and some of the desired effect to transform HR has been lost.
Ulrichs initial model in Human Resource Champions (1997), set out four roles business
partner, change agent, administrative expert and employee champion.
Business partner has become widely adopted as a job title, but with some controversy see the
column. By contrast, employee champion has been the least observed.
The most common misinterpretation is to see these as separate jobs, while Ulrich was referring
to them as qualities to be considered whatever the structure of an HR function.
What has proved most influential on HR structures has been Ulrichs three-legged stool
model business partners, centres of excellence, and service centres. Criticisms suggest that
this has created barriers between parts of HR. In reality, these barriers may be caused by
failing to address HRs silo behaviour, rather than the model itself.
Ulrich has since adapted his thinking and now talks about corporate HR, embedded HR, HR
specialists, and service centres.
He has recently introduced a new model of HR characteristics credible activist, culture and
change steward, strategy architect, talent manager and organisational designer, operational
executor and business ally. We examine this in more detail in Chapter 9, and in Appendix, 1.
Wayne Brockbanks thinking concerns five roles, as shown in the diagram on opposite page.
What we observe is how many in the HR world have selected the parts of these models that
appeal, and attempted literal applications when they were only offered as concepts. As
noted earlier, some blame the models when problems arise rather than recognising that
the underlying behaviours and competencies have not sufficiently changed. Some in HR
seem as confused as ever about what to aim at.

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The CIPD framework

Wayne Brockbanks Five Roles of HR

In the UK, the new professional framework from


CIPD is intended to move towards a businessneeds focus in HR. Developing the framework
included consultation on HRs purpose, which
resulted in these five themes.

Coach
Business
Leaders
HR Systems
Designer

Organisation
Architect

The individual and the organisation.

HR

Leading the way.


Facilitating the way.
Lead the HR
Function

Facilitate
Change

Short and long-term.


Impacting the business.

In short, the most important messages from Ulrich and his peers for example, Lawler, Hewitt,
Brockbank, Pucik, and Wright are the simple ones of starting with business needs, designing
effective organisations, focusing on talent and performance, raising service performance and
getting better at measurement.

While these themes are useful perspectives on


what HR can offer, there is still some way to go
before the very varied parish of CIPD
membership can be coaxed towards sharing a
more succinct statement of purpose.

3.5
What professional associations say
As discussed in Chapter 1, we find considerable cynicism among HR leaders about how much
professional associations have contributed to re-shaping HR. They see them as being middle-ofthe road, and lagging rather than leading in their efforts.
In practice, association leaders are conveying much the same messages as the more progressive
practitioners as noted here and in the column.
Says Sue Meisenger, recently retired SHRM President: HR professionals should ask CEOs what
keeps them awake at night. If the HR function is not focused on the same issues, it is not
adding as much value as it could.
Debra Cohen, Chief Knowledge Officer at SHRM, adds: Today and in the future, HR
professionals need to know how organisations work, how business operates, and what is
unique about their own industry.

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We propose that an HR function finds its own distinctive mission based on its own circumstances.

In conclusion, neither SHRM nor CIPD appear to have yet articulated anything memorable
about the direction of HR though the opportunity exists to convey a powerful and attractive
vision of HR as a place for high achievers. While the more progressive companies are tending to
do this, a tipping point may only be reached when all the key influencers in HR are aligned
around what they communicate.

3.6
What we propose
Every organisation will have particular needs and challenges that their HR function should
support. Taking this into account, HR will need to consider how far its capability development
meets future business needs, and then design its purpose and/or mission statement accordingly.
We offer as an example a form of words a straw man statement indicating the kind of
direction we advise HR to move in. This is based on the sentiments expressed to us by leading
HR directors, all pointing in the direction of organisational effectiveness.
HRs mission is to help management and employees to engage collectively to perform and
prosper as an organisation. We endeavour to do this by ensuring that the organisation
has the right people to meet current and future needs
provides a supportive environment for great performance
develops the skills and capabilities it needs
organises itself to meet future challenges
monitors and continually improves the way it uses its people resources.
Note that the word environment needs explanation as it covers aspects of HR and people
management such as motivating goals, recognition and reward for good work, supporting
people with resources, etc.
We propose that an HR function finds its own distinctive mission based on its own circumstances.
The models and terminology provided by business academics provide much food for thought in
doing so.

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Introduction

Topics covered

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4.1 Whats the issue?

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4.2 Membership of the top team

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4.3 Deliverables as a top team member

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4.4 Organisation design and effectiveness

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4.5 Relationships with the CEO and top team

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4.6 HR and the board

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4.7 HR, the HR director and strategy

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4.8 The HRDs personal characteristics

54

4.9 Non-professionals as HR directors

55

4.10 Scope of the role should it be split?

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4.11 The ideal HRD

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In this chapter, we examine in depth the HR


directors role as part of the senior leadership
team, and the deliverables expected. We
discuss how HRDs contribute to strategy, to
organisation design and effectiveness, and to
managing relationships at the top and also
the capabilities and personal qualities that a
top HR director should have.

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While CEOs unsurprisingly say they want an HR function that is commercial in outlook, thats not what
the majority yet feel about their senior HR people. This is in line with many surveys over the years of
CEO attitudes to HR. The Secrets of CEOs, Steve Tappin and Andrew Cave, 2008.

4.1

Stretching the strategic partner

Whats the issue?


As an HR director, CHRO or senior VP of HR inevitably shapes every aspect of the function, our
purpose here is to examine in depth the nature of the role, its capabilities and the aiming point
for future HRDs and the CEOs who appoint them.
We investigated issues such as these.
The scope and weight of the role.
The expectations of an HRD from CEOs, boards, the top team and other senior executives.
The contribution to strategy.
Their role in corporate governance.
The tensions HRDs typically have to manage.

In recent years, the HRD position has often been


described as that of a strategic partner, partly
to distinguish it from the business partner role
to which HR managers should aspire. Ulrich and
Lawler have framed expectations and
characteristics for these roles.
However, we go beyond this to examine the
interactions of HRDs with other key players in
corporate governance the CEO, board and
other executive team members.
Indeed, through discussion with Professor Pat
Wright of Cornell, we raise fundamental issues
about the HR leaders role in respect of
corporate governance in general. Chapter 6
discusses this in detail.

Legacy issues concerning those HR directors who have not been as influential as expected
affect others perceptions of the role.
Given the stated importance of people to most organisations, why has the chief people
person not been included in the top executive team? Why do CEOs and senior executives
regularly question what an HRD or a function has to contribute to shaping strategy?
These are what determines how HRDs are viewed.
The personal credibility of the HRD and how this reflects on both the function and the
organisation.
The capabilities, influencing skills and attributes they possess.
Perceptions of the HR functions effectiveness.
How such effectiveness shapes the licence to operate at the top.
The focus of this chapter is on the personal contribution of the HRD as seen by interviewees,
many of them Group HR directors. We found a strong consensus about the role, its
characteristics and the conditions for success

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I want functional directors like HR to be bold and bring me ideas. Dave Illingworth, CEO, Smith & Nephew.

When HRDs are not top team members

4.2
Membership of the top team

There are situations where HR directors are not


included in top teams, especially those that are
small. Why?
A lack of personal credibility and contribution
to top level decision-making simply being
good at the HR job is not enough.
The CEO and directors feel they know enough
to operate effectively without an HRDs
presence.
While these reasons are likely to be related,
interviewees agreed that such situations are
unhealthy considerable risks of poor decisionmaking may occur without the impact of an
executive skilled in organisation design, change
and employee engagement.
Gary Dibb, when a chief operating officer, had
HR reporting to him rather than the CEO. His
own background was in HR, so this perspective
was present in top team meetings. In Dibbs
view, if an HRD has the right capabilities, direct
reporting to the CEO should be the norm.

All interviewees agreed that an HRD should be a member of the top executive team as
occurred in all the organisations we interviewed for these reasons.
Because organisations run on money and people, the finance director or CFO and HRD should
be the CEOs key aides, particularly in managing change CEOs often say this.
Employees typically represent the asset with the highest cost and greatest complexity to
manage thus HRDs are intrinsically concerned with financial management.
An organisations reputation is interwoven with the way its people are managed and especially
how it shapes their behaviour.
People factors have become more crucial within the context of global competition, as have the
need to fight for scarce talent, focus on ethics, innovate and exploit ideas.
The HR directors we spoke to shared similar views to those in the column.
Knowledge of business is critical they are top team members as business people, with a
particular set of HR-related responsibilities.
The HRD should bring insights and experience that are fundamental to every organisations
success workforce planning, talent, performance, organisation design and effectiveness, for
example.
Few decisions do not require careful thought about the people component.
The HR function as a whole cannot operate effectively without a full place at the top table.

What CEOs want


Whenever Ive assumed top leadership positions in businesses, the first appointment I try to get right is the HR director. They, and the HR
people who report to them, should positively influence the organisations leadership and management at every level. They must, of course,
have the values and ability to do that well. I expect functional directors such as HR to constructively challenge me and other top team
colleagues. Theyre a total partner in key decisions. Mark Tucker, CEO, Prudential Group.
An HR director needs to be a member of an executive team first, and an HR specialist second. With some HR people this is not the case and
that will limit their ability to make it to the top job, or be an effective member of management teams at other levels. In my experience, there is
a triumvirate that drives an organisation forward. At my right hand is the finance director, at my left is the HR director. These are the two people
I spend the most time with, reflecting on the business and making change happen. Mark Wood, CEO, Paternoster. Quoted when heading
Prudential UK.

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Its impossible to manage a top team without a good HR director. They should be able to play the role
of an empathetic, holistic colleague, working with the business heads who report to me and who can
advise, listen and be trusted. Mark Tucker, CEO, Prudential Group.

4.3

Capabilities of HR directors as they see it

Deliverables as a top team member


From our interviews, we concluded these to be the core deliverables of an HR director.

Aside from the views expressed elsewhere in this


chapter, these ten core capabilities were listed
in the CRF Publishing report, The Future of HR,

Contributing to key decisions and strategy formation.

2005.

Guarding the organisations people reputation, including keeping it legal.


Organisation design.

They were agreed at a meeting of the HR


Strategic Issues Council, facilitated by noted US
consultant, James W Walker, in 2003.

Shaping top level roles.

Business acumen.

People policies.

Analytic capability.

Senior appointments and retention.

Systems thinking.

Reward and pensions.

Leadership.

Authority on the organisational climate and competence.

Coaching senior managers.

Working with SBU heads and their HR business partners on strategy, people issues and plans.
Functional performance.

Consulting.
Influencing.
Conflict resolution.

Regarding the last point, continuous attention to the cost-base, competence, quality and
contributions of the HR function is essential for an HRD to gain and retain peer respect,
which applies to any function head. Many we spoke to had been hired specifically by CEOs to
overhaul the HR function.
CEOs expectations of HRDs will also be influenced by the focus of boards and investors. These
days, thats a lot to do with senior executive remuneration and succession, observed Mark
Tucker, CEO, Prudential Group.

Measurement.
HR functional knowledge.
Many of these would now be desirable amongst
HR managers in general and not just HR
directors.

4.4
Organisation design and effectiveness
Aside from their own functions performance, any HR director should endeavour to maximise
that of the organisation at large. While some of this work is necessarily done at lower levels
involving HR business partners and/or OD specialists the tone must be set at the top.
Business and function heads may invite advice from HR colleagues in the course of regular
discussions.
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Whos responsible for head office


performance?
Who should take responsibility for ensuring that
the size, functioning and behaviour of central
support functions is optimised? Often the CEO is
the only common binding factor. At worst, the
business complains about its head office as a
collection of overheads and functional silos that
dont talk to each other.
We found this to be an issue that few had
addressed. Yet, it was also recognised as
something HR should tackle more in future.
Some organisations we spoke to have
undertaken head office reviews, but not
recently.
Some include internal service metrics in their
measurement systems such as staff surveys
but most said they could do more in this
respect. HR functions evaluating their own
services had often not considered a common
approach.
The creation of a shared services centre for one
function invites discussion about whether all
administration services should be integrated
the multi-disciplinary approach we discuss in
Chapter 7.
A few organisations focused on internal
collaboration, and adopted it as a core value.
This is an opportunity for HR to exert influence
and build organisational competencies
though few functions have yet seized this.
Where a chief operating officer position exists,
this naturally provides a focal point for central
functions to be managed in a more integrated way.

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However, increasingly formal organisational effectiveness reviews by the HR director and


CEO are used, to ensure that people strategies are devised and implemented well.
Similarly, HRDs and their teams in progressive organisations are intimately involved in change
processes within and across functions.
This positions the HRD as a critical influencer of structures and roles throughout the
organisation, breaking down silos and the historic tendencies of business/function heads to
operate as semi-autonomous barons, and thus achieving a more joined-up organisation.
In one large global corporation, a new CEO has actually charged HR with prime accountability
for the effective design of all functions and businesses. This clearly shifts the HRD role relative to
colleagues demanding far more than offering advice.

Thus, HRDs need to be personally knowledgeable in organisation design, and be able to


build this expertise in their function. For example, if an HR director or HR business partner
is assigned to support head office functions as occurs in large organisations they too
should have expertise in this field. See the column.

The degree of skill and experience in organisation design should be considered for any senior
HR appointment.
As CRF has pointed out in previous reports, skilled organisation designers are scarce. Without
this, politics, personalities and short-term pressures have driven many re-structurings in
government departments, public and private sector organisations, which has been reflected
in poor outcomes and further re-structuring.
Organisations have necessarily depended on external expertise. However, constant complaints
are heard about change that looks good on Powerpoints but is rather harder to execute
given that strategy consultants tend not to take responsibility for outcomes, nor have
implementation capabilities.
Good organisation design is not static. Like sailing a ship, it requires both setting a sound
course and the skill to trim the sails and make constant adjustments to cope with changing
contexts. This is best done by experienced insiders with skin in the game.
The HRDs we consulted were all involved in suggesting or guiding organisation improvements.
However, among HR directors generally, questions need to be asked. Well-placed organisation
experts are conscious of relative inexperience in organisational development and design among
HRDs which puts them at a disadvantage in working authoritively with business colleagues.

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The CEO is very open to the HR director being a prime source of personal feedback. Hes looking for
ideas regarding his personal style, because he knows this is critical to his success. HR director.

Indeed, part of the test of a strong HRD is their ability to analyse and improve the effectiveness
of structures at the top of organisations that is, executive and board committees.
Some Group HRDs spoke of the importance of achieving healthy power balances. For example,
their view is that parity between the number of business and function heads on executive
teams is better for decision-making similarly, decisions about the make-up of groups such as
Remuneration and Audit Committees are important.
Establishing behavioural and process ground rules in top teams and boards potentially pays
huge dividends, given the tensions that typically exist below and sometimes above the
surface. This tends not to be tackled effectively in many organisations senior executives need
someone with the courage and authority to draw attention to negative patterns of behaviour.

4.5
Relationships with the CEO and top team
Our discussions with HRDs revealed that they also played a number of other important roles,
often on an informal, unwritten basis.
Interlocutor for the CEO and top team on sensitive issues.
A coach to the CEO and senior executives or, at least, a provider of coaching.
Facilitator of top team processes.
David Russell of William Hill provides a picture of the transition that many HR directors have
been able to achieve in recent years. Eight years ago, HR wasnt at the top table. Its very
different now. Apart from having a close relationship with the CEO, Im a sounding board,
facilitator and coach for the whole team. Others expressed similar views, as the column shows.

Holding up the mirror


A chief executive needs to talk about his
challenges, and frankly his biggest headache is
managing the top team. Each day, there is some
big issue on which he needs feedback. He needs
to be able to speak his mind without being
judged or, potentially, misinterpreted. This is
true for other top team members too.
He looks to me for personal coaching about his
interactions with the board, chairman and
deputy chairman. I attend all board meetings
and guide his thinking on issues concerning the
executive team, appointments and exits.
The CEO knows I will tell him if theres an issue.
If he doesnt like what I say, I remind him its
what he pays me for. He knows I have no
baggage and my loyalty to the company is
unquestioned.
I have to be the thought leader on OD, talent
management, and executing change. Im also
the closest confidante of the CEO.
My CEO expects to be challenged and receive
insights about his leadership style. I tell him
things he wont hear anywhere else. Hes learned
the hard way that this is in his own interests.

Collectively, these roles help colleagues surface the difficult issues that any leadership team
experiences. Some might feel that, if top team dialogue is sufficiently open and honest, there
should be no need for an HR director to act as interlocutor between senior executives and the
CEO. However, this view can be unrealistic.
Many CEOs, particularly in global companies, are under huge pressures of time and travel, as
indeed their senior colleagues may be.
Power relationships inevitably distort conversations on sensitive issues, particularly if the
stakes are high.
A CEO can use an interlocutor to get across informal signals and advice, and to help induce
changes of behaviour without causing loss of face.

David Russell - Group HRD


William Hill

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Even though Im new here, and the team has been together for some years, they have welcomed me in
the capacity of both coach and challenger. HR director.

Being a coach to the CEO on relationships is a particularly valuable HRD role.


As a CEO drives an organisation forward, small tensions can easily grow into more
fundamental conflicts in high pressure, competitive situations.
Astute CEOs actively seek feedback and challenge, because there is a sea-change affecting
those seen as visibly powerful. Several high profile CEOs have lost their jobs in recent years as
a consequence and journalists, fund managers and stakeholders are particularly alert for
signs of excessive hubris and overly-controlling behaviours.

Paul Chesworth - HRD Europe Region


Vodafone

It may be harder for an HRD to be challenging when the issue is about committing to a
particular strategic course that is not primarily about people and relationships. Even here
though, a business savvy HRD should know how to pose tough questions and use the coachs
toolbox to induce greater reflection.
We found that many HRDs are formally involved in personal performance and development
planning reviews at director level and sometimes the next level down as part of talent
management processes. Both these and less formal interactions provide opportunities to
listen to and guide colleagues.
Other senior executive team members should be able to have off-line conversations about
their performance, development and career issues.
Being a confidante to the CEO places the HRD in a strong position also to coach peers
although they must have the time and skills to do this.
When external coaches or mentors are used, the HRD should be aware of this to ensure the
investment in leadership support is spent wisely.
Although being a confidante to a CEO and direct reports is naturally challenging, HRDs we
spoke to saw it as a litmus test of their effectiveness. Said Paul Chesworth of Vodafone, You
need to be clear about how you respect confidences. Trust is essential. People know youre
involved in hiring and dismissing them but they must also see that you dont take sides.
This aspect of the role is further strengthened if the CEO formally positions the HRD as a focal
point to facilitate teamwork and processes at the top, and minimise dysfunctionality. Working
with top teams is also where positive culture change typically must begin. Our interviewees
spoke at length about their efforts to

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replace a task focus with more strategic insight


develop leaders own coaching and mentoring skills
work with top teams to act as role models as performance managers and developers of
talent, for example.
Finally, to be trusted, any HRD must not be perceived as a rival for power by other top team
members. This is not generally understood by those who draw attention to the fact that few HR
directors become CEOs they assume it is just a matter of competence.

4.6
HR and the board
Despite the ostensible importance of good people management to any organisation,
experienced US and UK observers noted that few public boards of directors included people
with an HR background. Why?

Interactions and tensions as HRDs see it


This kind of interaction takes a lot of my time.
Its not in the job description, but its essential.
It can be a difficult balancing act [being a
confidante to the CEO and direct reports]. You
have to avoid being judgemental.
In every conversation, you have to show you
are an honest broker.
You cant easily write things down in a manual.
There are many judgement calls to be made
but it all comes down to doing whats necessary
both to be trusted and to provide frank,
informed advice.
Not every HRD makes a great coach. However,
we should make sure we know some.

People management has not been an explicit aspect of corporate governance, despite its
proven contribution to intangible value and employer reputation.
Relatively few HR people are in the pool from which non-executive directors are drawn, such
as past CEOs, CFOs or people with political networks.
Despite this, a gradual increase is evident in HR directors interacting with the board, for these
reasons.
The spotlight among investor and regulatory communities is focused on executive
remuneration and performance-related incentives especially since the 2008 financial crisis.
Greater importance is being given to issues such as talent benchstrength, succession and
engagement, all of which have become board concerns.
What potentially gives such interactions a sharper edge is where a board starts to pose hard
questions about executive performance and behaviours particularly in the US where they
tend to see the CEO on a regular basis, and where ethics has become part of the corporate
legislation framework.

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HR directors need to become partners with the board and not just management, but too many HR
professionals are not developed to work at board level. This is now a major issue.
From the report, Managing Executive Performance for Organisation Results, 2008, the Performance and Reward Centre.

The HRD red herring


HR on the board? Thats a red herring. So said
our HR director interviewees, in various ways,
when we posed this question. Why?
Because being a board member is an extra job,
particularly in a large, complex organisation,
an HRD will generally not have the time to do
both jobs.
The greatest need for the HRD is on the top
team where strategy and key operational
decisions are determined.
The confidante role discussed above is
considerably harder to perform if the HR
director is on the board. Corporate governance
in the US formally requires distance between
board members and executive directors.
However, the situation is different in these
circumstances.
In private companies, where the board may
actually be the top executive team.
On subsidiary or divisional boards, where
board membership for executives is good
developmental training for top roles.
Where HRDs become board directors of large
public companies or chairmen of major
subsidiaries they typically need to appoint an
HR director for day-to-day function direction.
This happened at Standard Chartered, where
Tim Miller took on extra responsibilities to HR.
Similarly, Prudentials Priscilla Vacassin became
HR director at BAA when Tony Ward was invited
onto the board.

`In the UK and elsewhere, there has been some debate about HR directors as board members
desired by some in the HR community to boost the functions standing. However, as noted in
previous CRF reports and confirmed by interviews for this one, this is a red herring. See the column.
We explored what a board expects of an HR director, about which little has been written.
In principle, boards should have a high level view of the people plan and the quality of its
employer brand people should always be considered in terms of risk management.
In practice, HRDs spoke of their boards not previously knowing what a good people plan
looked like a number had taken the initiative to provide regular briefings at board meetings
as part of ongoing strategy reviews.
Boards naturally want a good pipeline of talent for successors to top jobs. They want to be
reassured that we can provide the Executive Committee of the future, commented Prudentials
Vacassin. Topics include the balance of internal development versus external recruitment.
Some boards appreciate the role of an HRD in respect of executive directors. They expect me
to work with the CEO to select and develop a highly capable top team, and pay attention to
the teams dynamics, observed Stephen Dando of Thomson Reuters. The board also had
major expectations of him in facilitating the companys recent merger.
A board will seek reassurance that shareholders and regulators are not going to take them to task
for allowing soft executive pay deals it is the job of the RemCo to examine the detail of such
arrangements.
Increasingly and particularly in the UK, HRDs expect to meet the chairman and non-executives
for briefing meetings during the year. Should CEOs be concerned about what might be
discussed when they are not there?
Not according to Mark Tucker, CEO of the Prudential. If you run an open organisation, its
right that HR directors should have access to the chairman and discussions with the board.
For their part, HRDs see this as another aspect of the trust they have to establish with all senior
executives.
Priscilla Vacassin also points out that non-executives should be able to trust how decisions to
hire or fire executives are made, which requires an understanding relationship with HRDs.
As the selection and management of boards becomes less of a cosy club, the professional
knowledge of HRDs is increasingly needed for more rigorous selection of non-executive
board members, and advice on related remuneration and development.

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Geoff Lloyd - Group Human Resources Director
Serco

Comments Professor Pat Wright of Cornell University, a leading expert on HRs role in
corporate governance: The competencies of top HR executives, such as team building,
group processes, selection, training, and performance management, are all critical to an
effectively functioning board. Consequently, HRs role must expand to include all these
activities, not just at the organisational level. We discuss this further in Chapter 6.

People issues and strategy


Many organisations we interviewed could point
to ways in which people issues are built into
strategy and strategic change. For example
BAE Military Aircraft Systems moving from
manufacturing to a service organisation

4.7
HR, the HR director and strategy
The HR community has become preoccupied with the extent of the functions contribution to
strategy. This is regarded as a measure of whether HR is regarded as a core player or merely as
an order-taker. Horror stories are quoted of major decisions being taken, such as acquisitions,
with HR being informed just at the last minute and being lumbered with a long and messy
implementation.

Rolls-Royce transitioning from a UK-based


engine manufacturer to a global power
systems company
Musgrave developing its retail edge through
comprehensive investments in leadership and
talent development, and its employer brand
Hewlett-Packard workforce planning is
critical in supporting multiple business models

By contrast, the HRDs we interviewed participate fully, as executive team members, in all
strategy discussions and major decisions. Indeed, where HR initiates organisational
effectiveness reviews and is recognised as an internal authority on organisation design and
shaping culture it becomes centrally involved in organisation planning at multiple levels.

Thomson Reuters as a major international


employer of professional talent, talent is one of
three strands of its strategy.

Inter-relationship of business and HR strategy


Conventionally, many in HR talk of ensuring that HR strategy aligns with business strategy.
What this implies is fitting HR plans and priorities to strategy after it has emerged.

See also the case of Ciscos reorganisation into


Cisco West and Cisco East in CRFs 2007 report,
The Challenge of Operating Globally driven
mainly by having to acquire new engineering
talent.

HR directors we consulted have typically shifted to a quite different model. We no longer


talk about HR strategy as a separate entity, commented Alex Wilson of BT. Rather, we refer
to the people component of business strategy.

A good example of how HR in BT has a key role


in governance regarding M&As is in CRFs 2006
report, HRs Role in M&As.

Others used similar language, and the term HR strategy is on the wane Geoff Lloyd at Serco
represents this trend. I dont like to separate it from business strategy, but we do refer to
people strategy for others to identify with. We do not call it an HR strategy. See further
examples in the column.
We found that strategy formulation is becoming more of a collective process. Increasingly,
individual functions develop their plans in consultation with each other thus moving away
from the silo behaviour of the past.

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A Group HR director should ensure that business level HRDs have the necessary experience and
credibility to play an identical strategy role at their level. This can apply also to HR managers or
business partners at the next level down should those management teams participate in
formulating strategies as happens in devolved structures, for instance.
The people component of strategy
Some areas of people management should be major considerations in shaping strategic
direction, in which HR is a primary influence.
Workforce planning: comprehensive assessments of medium to long-term needs, specific skills
demand, supply factors in territories and business sectors along with the options and
associated economic modelling that arise.
Helping the board and executive team understand the external environment from a people
and workforce perspective, in addition to the internal climate and engagement.
Talent and capability: the organisations potential for attracting, using and retaining core
competence and management talent and the capability investments needed.
Performance: how the organisations ability to perform matches up to competitive threats and
opportunities to the expectations of owners and investors, and to the requirements of future
business models.
Change: assessing the organisations ability to cope with and manage multiple forms of
change, and mergers and acquisitions in particular.
John Whelan of BAE Systems expressed a sentiment common among HR directors. Of course
were there to ensure that people issues are thought through. But we should also offer a more longterm and conceptual viewpoint thats our particular contribution. Many HRDs point to instances
where strategic thrusts are, in fact, mainly about people, as the previous column showed.
A truly strategic HR function and director will make other important contributions to strategy by
being proactive, rather than simply ensuring people considerations are taken into account.
Facilitating the strategy process
From an OD perspective, influencing how strategies are formed and implemented, taking into
account both group strategies and sub-strategies at business and functional level.
Ensuring the right people are involved and defining particularly useful behaviours in strategy
formation learning to overcome the limitations of preconceptions, assumptions and fixed
positions, for example.

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HRs role in strategy is to facilitate debates, bring the right people


into the strategy discussion, and help shape strategy from a people
perspective. Paul Chesworth, Vodafone.

Acting as strategy meeting facilitators a number of HRDs said they and colleagues undertake
this role at times.
Priscilla Vacassin of Prudential, who has been a strategy facilitator at both BAA and Abbey, refers
to a new language and insight on organisational effectiveness thats often been missing at the
strategy table. She also works on getting the right issues addressed at the right level we call
it levels of work, with Group work being level five which helps to facilitate delegation and
avoid micro-management. Like other HRDs, she ensures that the governance of people has both
rigour and prominence, as the box shows.
People governance at Prudential
HR directors across the Group meet quarterly. They develop the People Strategy but it is
signed-off and owned by the Group Executive Committee (GEC), with a formal report to the
board every year.
The GEC meets three times a year as the People Forum, discussing issues rather than simply
reviewing metrics. The top 100 is a priority focus for discussion key roles, succession, the
proportion being filled internally and externally, and performance rating distributions.
Each business division echoes this process, with their top teams also meeting as People Forums.

Shaping strategic leadership


The strategy process arguably starts with the selection and development of leaders which
includes HR interventions such as strategy training, coaching and workshops. It should also
attempt to match leadership requirements with changing scenarios moves from growth into
recession or vice versa, for instance.

HR and strategy as HRDs see it


Your contribution to strategy correlates with
your relationship with the CEO, depending on
your capability and experience. The CEO must
also be a listener otherwise the HR director
has a bigger problem to tackle.
Strategy formulation is ongoing. As members
of management teams at different levels, we
provide constant inputs and challenge.
Being an engineering company, adopting the
concept of the HR supply chain in aligning
what we do with the business has worked well,
ensuring fitness for purpose. It is broader than
just resourcing, covering all forms of change
and improvement.
In banking, many strategic decisions relate to
judgement calls on markets, and this is not an
easy area for HR to comment on. However, there
are people aspects that need to be considered in
risk assessments.
Take the entry into markets like Hong Kong or
Japan, for example. Western banks spent lots of
money, failed miserably and had to retrench.
And now we, clearly have some major
leadership issues to discuss.

Note the case study on Hewlett-Packard, where Leslie Berkes describes how the top 80 line
executives have been trained in organisational effectiveness concepts.
Shaping the strategy function
This involves ensuring that those with specific responsibility for strategic thinking, scanning and
analysis actually have the breadth of competencies to develop rounded strategic proposals.
Specific points to note include
avoiding the traditional practice of locating this function within finance
ensuring that the strategy team has organisation development and design skills, whole
organisation perspectives and implementation capability
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HR skills and success factors

ensuring that strategy formulation is treated as an inclusive, collaborative process indeed,


strategy team members can be virtual, and be drawn from various functions.

Skill areas

Business.
Strategy.

The reality is that, in fast-moving operating contexts, strategy should be emergent


strategy discussions are a continuous way of thinking, not a time-limited planning exercise.
Hence the importance of ensuring that HR and other key functions are always part of that
continuing discussion.

Influencing.
Getting things done.
OD.
Understanding and effective use of numbers.
Success factors

Particularly in operating with colleagues at the


top, these success factors for HRDs are singled
out by our interviewees.
Being trusted by senior colleagues.

However, the importance of strategy implementation is not to be under-estimated. Experts


generally concur that the quality of execution is the differentiator. An HRD should help shape this
process and support it through performance management, development and learning loops.
Also, HRDs tended to agree that central strategy units should stay small, and source
expertise from other functions where appropriate. HR should provide analytical, research
and measurement capability, particularly in workforce planning and resourcing. This
includes labour market scanning, demographics and future regulations, supported by
internal assessments.

4.8
The HRDs personal characteristics

Integrity.
Courage and polite toughness.

Clearly HR directors have to be a role model in many ways, both for their function and their peer
group. They should set standards for functional skills and knowledge in areas listed in the column.

Knowing your stuff.

HRDs who have worked outside HR find that this often stands them in good stead, not just as
experience-building but also in terms of credibility. Having operated in different industries is
also valuable but so is having a deep knowledge of the organisations sector. You cant add
value in Vodafone unless you understand the telecoms business, observed Paul Chesworth.
Gary Dibb

People who get on in HR typically punch above their weight in managing relationships, said
BAEs Whelan. Like others, he felt that, by acting in an informal coaching and facilitating
capacity, an HR director should be able to demonstrate these skills.
While having the authority to advise on senior executive performance and prospects, it was
felt that the HRD must avoid politics and rivalries. You must not be seen as a threat, said
Gary Dibb, former COO at Barclays. That would compromise your position as confidante to
your peer group.
There was some debate about the extent to which an HRD should distance himself from business
heads in order to be able to stand back and make independent judgements.

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Priscilla Vacassin - Group Human Resources Director
Prudential

Its important for your credibility, however close to the CEO you are,
that you are seen to disagree where necessary, and that you are
respected for it. Its counter-productive for the CEO as well if this is not
the case. Priscilla Vacassin, Prudential.
One expressed this as standing on the edge of the circle. Another said: A Group HRD must
be prepared to be lonely.
Others felt that all directors should be free to speak their minds if not, then the leadership
team would have a problem.
Some HR directors emphasised the importance of close working relationships with other
functional directors.

Why non-professionals are appointed


as HRDs
This reflects an underlying concern at CEO
level that HR was inefficient and that its work
did not meet business needs.

My relationship with marketing is critical it needs both of us to shape and drive the brand.

An assumption here is that senior general


managers know enough about people and
that what they dont know they can learn quite
quickly, or use specialist colleagues.

I spend a lot of time with my strategy colleague its an important relationship.

There are downsides to this practice, however.

The CEO often says that finance and HR are the two key functions in driving change so its
no surprise that we work closely together.

Views differ on the importance of HR


knowledge. Some senior HR executives agree
that an experienced businessman might have
many of the required competencies and
insights though others cite instances when a
deeper knowledge is needed. Im not credible
unless I know my stuff, is the view.

It is important in discouraging silo behaviour.

For Group HRDs, an overall challenge is ensuring that HR directors and business partners at
other levels can mirror these behaviours and characteristics. Otherwise, they would spend
significant time working at other levels. The onus is on the HRD, through selection and
development, to build a strong HR leader pipeline.

4.9
Non-professionals as HR directors
A controversial issue in HR circles is the practice of appointing non-HR professionals to head the
function. There are many instances of this, particularly in the US. The point is made that the
equivalent hardly ever happens in finance, legal, IT or marketing and if it did, shareholders
would likely challenge it. Why does this occur in HR? See the column.
It is certainly the case that such appointments usually revert to an HR professional in order to
restore professional strengths.
It is difficult to generalise on this sensitive issue. Some organisations such as HewlettPackard train line executives in HR skills, and Mars has a long-standing policy of placing
managerial talent within HR for defined periods. HR functions with people from a range of
backgrounds will think differently from one comprising HR lifers.

A danger is that non-HR specialists may well


succumb to fashions and consultancy
marketing precisely because they lack
experience. This is ironic given the wide
criticism that HR is prone to fads.
It can be debilitating for function staff to be led
by a non-specialist because their lack of HR
knowledge means they cannot act as head of
profession. Far from inspiring a function, a rift
may occur.
An HRD also needs knowledge of HR
disciplines in order to manage HR
performance and develop the different
specialisms in the function.

The real challenge to tackle, our interviewees felt, is strengthening the HR talent pipeline to
ensure a flow of people with both a career anchor in HR and strong business skills.
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People trust me to be independent. They would be quick to spot it if this didnt happen. HR director.

Strengths of an ideal HRD

4.10
Scope of the role should it be split?

In discussion with a few CEOs and a larger


number of senior HRDs, a clear picture emerges
of the strengths of an ideal HR director.
Highly commercial.

Given the emerging agenda for HR change in this report, particularly in large organisations,
careful thought is needed about how the HR director role should be structured and resourced.
As a former chief operating officer (COO) at a number of organisations, including Barclays, Gary
Dibb makes these points.

An authority on performance.
Experience in different kinds of organisations.
Rapidly acquires deep knowledge of the
particular organisation and sector.

You can spend a lot of time working with the CEO and with the top team, helping them in vital
ways to manage the business and their own interactions. This is time well spent. However, this is
a job in itself particularly if you have to travel leaving little time to manage the function.
Theres always work to develop and shape the function and, if there are capability issues that you
arent getting time to address, that will undermine your peer relationships.

The best judge of people the organisation has.


Particular strengths in organisation design
and effectiveness.
Willingness to challenge and ask difficult
questions.
Outstanding influencing skills.
Can coach and facilitate at CEO and board
level.

He concludes that there can be at least one-and-a-half jobs to do in such circumstances.


Some organisations have moved in this direction, such as the highly-globalised Standard
Chartered, where Tim Miller includes HR within his portfolio of responsibilities as an executive
director while Tracey Clarke took his place in managing the function as Group Head of HR.
To some extent, this mirrors the situation of a CEO appointing a COO when increased
responsibilities justify it. Dibb adds further thoughts on the CEO, COO and HRD positions.

Skilled listener and organisation


temperature-taker.

As a COO, I am able to pull all the functional levers to help the CEO fulfil his objectives, allowing
him to be more outward-facing. Getting functions to work together in a more streamlined way is
another potential benefit. In addition being generally more accessible than the CEO a COO is
able to help facilitate faster decisions because he is an extension of the CEO. I can also bang
heads together if needs be. To be trusted, however, it is important not to be a rival for power.

Stays calm in a crisis, and maintains a longterm view.

If there is no COO, the Group HR director can do many of these things but he must have the
capacity as well as the skill.

Able to build trust with people at multiple


levels.

Compassionate and empathetic yet can take


the hard decisions without vacillation.

4.11
The ideal HRD
Chief executives know that the HR director they appoint has a determining effect on the
function. Typically, they want HR to be better at helping deliver performance, manage change,
and provide quality administration, while minimising costs. Beyond that, do CEOs know what
qualities a good HRD should possess? By all accounts, this depends on what they, and peers,
have experienced to date.

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Professional associations bring up HR people to be mandarins, and so thats what CEOs get used to.
Occasionally, CEOs think out of the box and thats when the fun starts. Daniel Kasmir, BDO, Stoy Hayward.

The HRD must be able to manage the many tensions that come with the job.
A member of the business team, yet will not be swept away by group-think.
While a trusted aide to the CEO, able to be objective and can be consulted in confidence by
other directors.
Takes a long-term perspective whatever the short-term tactical pressure and crises.
While encouraging open discussion and helping the CEO to be a good team manager, can act
as an interlocutor between the CEO and team members, when appropriate.
Being a friend to all senior executives including the CEO yet prepared to be rational in
finding their successors and taking an objective view of their performance.
Being a role model to other directors as well as the HR function.
Managing the function effectively as well as being a top team member and, in particular,
developing HR function talent so more can be safely delegated.
Managing time efficiently in order to be visible around the organisation to listen and get a
feel for the organisation.
The general view among recruitment consultants is that demand for such a wide set of skills
considerably outstrips supply. Are these the HRD competencies of the future? Certainly they
are, because few can claim to possess them all now.

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HRS PRIORITY AREAS

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Introduction

Topics covered
5.1 Designing the organisation

60

5.2 Managing talent and capability

62

5.3 Performance management

67

5.4 Managing change

71

5.5 Other priorities

77

In this chapter, we comment on what HR


directors agree are the most significant areas
of people management that a future-focused
HR function should concentrate on. It is not a
detailed review, but a summary of important
principles and practices that should guide
HR in organisation design, talent, leadership
and capability development, performance
management and change.

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Design capability and risk management

5.1
Designing the organisation

Expertise can and should be bought-in, but an


over-reliance on consulting firms and external
talent is dangerous, says Ed Lawler. He makes
these points.
Without internal organisation design
expertise, it is hard to know what
organisational concepts and thinking
represent state-of-the-art.
When such expertise is lacking, it is difficult to
change external providers if service levels
disappoint.
When consultants leave, corporate memory
can be lost and implementing their
recommendations will be difficult.
Thus, internal expertise greatly reduces risks
associated with involving external advisers.
It is crucial for ensuring that externally-derived
design ideas are both interpreted and
implemented well, and reflect the
organisations context.

A question that any board or any enquiring shareholder should ask of management is:
where is your source of expertise in organisation design?, given its importance to
ensuring future performance and managing change.
An essential capability
Busy senior executives facing multiple pressures are unlikely to be either in the best position to
make dispassionate decisions or able to study the subject in detail.
In Chapter 4, we drew attention to the role of HR director as organisation designer in chief,
guiding the CEO and senior colleagues in decisions about organisation and function structures.
In our view, a scientific understanding of organisation design and of organisational
psychology should be a requirement for all HR managers, enhancing their skill by work on
change projects in different scenarios.
The benefits from such capability include
keeping organisation design issues under expert review as part of strategy discussions and
thus reducing ad hoc design decisions
ensuring that the practicalities of implementation are incorporated into strategic decisions
about structures
knowing how best to use consultancy support note Ed Lawlers advice in the column
having a deep knowledge of, and being able to ascertain, what will and will not work
using design expertise to guide, or review, proposals for mergers and acquisitions.
Consultancies should be used to enhance, not supplant, the development of internal skills
though in a large organisation, expertise should usually be located
in a central organisational effectiveness unit or expert, working with the strategy team
at business level, to facilitate local design decisions
within business teams, with the HR director or manager being expert enough to guide
strategy discussions, and involve specialist colleagues.

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Stu Winby - Founder
Sapience

Organisation design is more than structures it is about whole systems.

Note that organisation design experts must protect their objectivity particularly if
executives have assumptions or special interests in the area while skills/knowledge should
be maintained by studying successes and failures elsewhere, and the environmental factors
that may affect design decisions. The current structure should be continually reviewed.
The HR director of a global firm we interviewed commented that his new CEO had required HR
to assume responsibility for the evolution of all business and functional structures. Its our job
now to take the initiative its not just down to the relevant director. This requires a high level
of OD skill with deep knowledge of the subject, which is scarce even in major consultancies.
Much more than a blueprint
In our view, organisation design is more than structures the capability we have described
above must interpret organisations as whole systems, which is the purpose of Jay Galbraiths Star
Model of 1973. This highlights the inter-connections between strategy, structure, processes,
people and the way people are rewarded. Subsequently, Lawler has added the dimension of
core organisational competencies and emphasises that these elements collectively comprise
an organisations distinctive identity.
The Star Model

Rewards

Stu Winby, a pioneer of organisational


effectiveness techniques during and since his
time at Hewlett-Packard, points out that the
world is rapidly moving into a design-based
economy process design as well as product and
service design.
This results in organisation models built more
around projects and networks. HRs traditional
mental model is based on a permanent world
but lifes not like that anymore. Many projects
cannot achieve a perfect solution one needs to
be comfortable with uncertainty and yet make
sense and profits.
This requires an understanding of work processes
rather than jobs, and of the way people interact
through social technologies such as Web 2.0 and
Wikinomics, for example.
For some, this is the future, but for the likes of
Google it is already now, Winby observed.

Strategy

People

Future organisation design perspective

Structure

Processes

Jay Galbraith, 1973

An organisation designer thus has to be a rounded expert to ensure that change in one part of a
system does not adversely impact on other parts. Leaders also need to be clear about the kind of
organisation they envisage to achieve their objectives and how the design model might
provide a source of competitive advantage. See the future view in the column.

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What are organisations now doing differently in talent? Too often, its grabbing a new label and not
fundamentally changing anything. Its become a water pistol fight for talent, not a war. Brian Hackett.

Leadership, talent and high performance


Alex Wilson, Group HR Director at BT, says that
his key deliverables are leadership, talent and
shaping a high performance organisation.
Talent is well-accepted as a priority and
managers are aware of the need to focus on
skills, he adds.
However, I see HR as having direct
responsibility for the quality of people too.
I dont want to hear HR people saying I tried to
tell them or I advised them not to recruit X.
I tell my people you are accountable for driving
the talent agenda.
And we need to do this with the same rigour we
use to drive any other aspect of the business
with measures of quantity and quality.

To be a guide and interpreter of new ways of thinking, HR should anticipate rather than react to
technological advances, and be able to identify the human implications before decisions are
made about structure and work processes. As the previous column suggests, hierarchical
structures are now shifting towards the concept of networked work systems, where behaviour
and culture are critical to build organisation cohesion. Management of capability, performance,
change and engagement will be critical enablers.

5.2
Managing talent and capability
Taking responsibility
Surveys of business and people-related issues frequently find that talent, leadership and
organisational capability are almost always at the top of a CEOs priorities and it is there that
responsibility for talent management and capability development begins.
Leaders will set the objectives that determine the capabilities the organisation needs, and
influence the culture or climate that either attracts or puts off talent and future potential
leaders.
Line managers play a key role in any talent system in how they develop capability, motivate
good performers, and identify and encourage potential.
What should HR be responsible for? Ultimately, providing the expertise that enables their
organisation to obtain and deploy the talent it needs to succeed. This includes
devising the talent approach that best fits the organisations objectives
helping shape strategy to align business and talent objectives
designing and supporting the core processes of talent management
devising a measurement system to guide management decisions and provide data on talent,
its capabilities and improvements
identifying opportunities, problems and queries regarding the effectiveness of the talent
system
encouraging, educating and refreshing managers on their roles in talent management.
How well HR succeeds in these areas depends on the authority deriving from its skills and
influencing ability and thereafter, its ability to shape leadership behaviours that
champion capability, talent and performance.

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Stephen Dando - EVP & Chief HRO
Thomson Reuters

Weve identified talent as one of the three defining characteristics


of the organisation. Stephen Dando, Thomson Reuters.

Defining talent and capability


A first requirement of talent management is for both HR and the organisation to be clear about
its terminology.
Capabilities and talent are both judgemental what qualities are being referred to, and how
do you know if those qualities are present in individuals, teams and larger work groups?
Talent and capability are inherently future-facing, as they refer to potential but to achieve
what, and why will that help the organisation succeed?
Talent in particular is an emotive word. HR should guide the organisation in reconciling two
potentially conflicting aims.
Identifying people who stand out for their value to the business, and making sure they are
recruited, motivated and retained. They should know they are valued, but should also avoid
any complacency arising from feeling chosen being in a talent pool, for example.
Avoiding employees feeling undervalued because they are not identified as high potential.
A sound talent approach clarifies what an organisations core competencies are the
capabilities that distinguish it and the talent needs of different parts of an organisation for
technical/practical, leadership and knowledge capabilities. It will also distinguish between
current results, potential and future performance. Above all, a one-size-fits-all approach must
be avoided, as organisational needs come in many shapes and sizes.
Future talent approaches
This brief summary provides pointers for what future-facing, talent-aware HR functions are
considering or prioritising.
Talent as a strategic priority

The number of organisations making talent a strategic priority continues to grow, as at


Thomson Reuters, for example. Weve identified talent as one of three defining characteristics
of the organisation, said HR Director, Stephen Dando, because we are now one of the major
employers of professionals worldwide.
Inclusion

Finding ways to make employees feel valued, while identifying specific groups as high potential
using a segmented approach.
Making clear that talent is not just about achieving senior management positions there can
be talent needs at many different levels.

The talent system 12 elements


Talent and workforce planning what
capabilities are needed, where and when?
Recruitment a differentiated employee
value proposition.
Assessment on entry and when a major
transition is planned tailored to specified
talent needs, and fed into the talent database.
Performance reviews setting stretch goals,
assessing behaviour as well as results, 360
degree feedback and ensuring objectivity in
senior management ratings.
Development on the job, off the job,
experiential projects, mentoring and coaching.
Job design interesting and challenging work
which evolves as learning takes place.
Career planning job assignments to give
both breadth and depth of experience, regular
career reviews, feedback and factoring in any
changes in circumstances.
Reward system how this ties specifically to
attracting, motivating and retaining talent.
Succession planning defining what
succession means, creating a pool to meet
different future needs, and identifying
potential replacements for critical positions.
Measurement maintaining an up-to-date
review of talent pool performance and activity.
Regular top level review at both board and
senior executive team levels.
Employer brand ensuring that the talent
system both reflects and supports this,
including culture reviews and the contribution
of managers to the organisations reputation.

Targeting development activity carefully and overtly so that employees feel supported.
Recognising all who perform well and show potential not just a favoured few.
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The challenge of embedding talent management and development disciplines among managers is
largely about behaviour.

Diversity

In global labour markets, using talent development activities to build a diverse and culturallyaware cadre of leaders, project managers and subject experts. An important aspect of this is
international mobility, as described in CRFs 2007 report, Operating Globally.
Movement in and out
of the talent pool

Progressive organisations make clear that inclusion in a talent pool is not an entitlement and depends on
continuing to progress as expected. If circumstances change, individuals can also choose to retire from the
pool. Entry should be possible for late developers. Managing such movements should be sensitively
handled with regular discussions.

Balance of internal and


externally-sourced talent

While recognising the value of new talent particularly when fostering culture change and performance
uplift most HR directors we interviewed aim to increase the talent they make rather than buy, thus
concentrating more on talent development.

Cross-fertilisation of talent

There is increased attention paid to movement of talent across the organisation to build experience
which also helps to reduce silos and foster a more shared culture. For example, Tom Brown of Rolls-Royce,
describes how, Weve created non-executive roles on managing boards within the business to develop our
own top talent, and also to facilitate more integration and cross-fertilisation. Shared learning experiences
also encourage cross-fertilisation, including working on business-critical projects, with director-level
oversight and coaching.
More focus on behaviour

Another trend is to emphasise talent behaviours the expectations communicated to talent


about what will be rewarded. Talent is not necessarily about being clever. Emotional intelligence,
service orientation and setting a good example are also important and this kind of message
helps to keep over-confidence and elitism in check. The challenge of embedding talent
management and development disciplines among managers is also largely about behaviour.
Employer brand and EVP development

We generally found more thought and rigour being applied to employer brand development
and employee value propositions. The Hewlett-Packard and Musgrave case studies are
examples. Positive differentiation through both brand and propositions contributes directly to
success in attracting and retaining talent.
Rigour of review

Our HR director interviewees regularly organise board and top team level talent reviews often
twice or three times a year. While boards attention is mostly on top management succession, they
are also concerned with employer reputation issues. An increasing trend is for business areas and
functions to undergo their own talent reviews, often led jointly by the HR director and CEO.

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Impact of recession

Nucor a people-centric organisation

In the current difficult economic circumstances, talent tends to be careful about considering job
moves. Companies are focusing more on the important value contributors and the different
skills required in recessionary conditions.
The importance of context
The internal climate, or context, is a major factor in good talent management, as shown in the
model below, devised by CRFs Mike Haffenden. This is as much about how things are done as
what. The message is that the cultural environment also needs managing. A failure to do this
effectively accounts for the poor talent management outcomes that some organisations have
experienced despite much talk about and investment in talent-related processes.

How do you
improve context?
Leadership
Stimulating
values
Appropriate
structure
Clear processes
for TM
Openness
Extrinsic
motivation

Context

Talent context and capability

Average people
encouraged to
do well by
great can do
environment

High calibre
people, high
performance
culture

Are you working


on the capability
or the context?

Low calibre
people, low
work ethic,
non-supportive
environment

Capable
people,
performance
stultified by
context

Is there value in
developing
great talent in
an environment
that stifles it?

Capability
How do you improve capability?
Hire intellect
Develop knowledge and skills
Give experience
Intrinsic motivation

Human centric or structure-centric cultures

Discussions with Ed Lawler raised strategic choices that organisations face about the context
for talent management, based on how they organise themselves. He sees these choices as
fundamental issues that HR professionals must be capable of addressing. Much of his recent
book, Talent, is devoted to distinguishing between structure-centric and human-centric
organisations.

US steel company, Nucor, sees itself as the


safest, highest quality, lowest cost, most
productive and most profitable steel and steel
products company in the world. Despite the
2008 economic crisis, it remains in a strong
financial position. Its over-riding mission is take
care of our customers, and it prides itself on
innovation.
Nucor sees its commitment to employee and
community relations as critical to achieving its
goals. These points illustrate its approach.
Committed to lean manufacturing and
management, it has a workforce of 20,000
team mates, but a head office of 75. There are
just four layers of management below the CEO,
with decision-making delegated to the
operating level as much as possible
particularly in dealing with customers.
All employees names are listed in the annual
report.
Nucors employee relations principles strongly
promote local problem-solving and ideas.
"Workers excel here because they are allowed
to fail. Sometimes ideas work and sometimes
they don't. But the freedom to try gives us one
of the most creative, get-it-done workforces in
the world.
Compensation and benefits principles are
egalitarian. Production workers and managers
all have bonus schemes, tailored to relevant
work goals. Bonuses in production are, on
average, 80%-170% of base pay. Extraordinary
bonuses are paid to all in years when the
company does particularly well.
Continued in next column.

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Some companies make no apologies for offshoring jobs. Its a natural consequence of needing talent
at the lowest price available. Ed Lawler.

Nucor a people-centric organisation


(continued)
Nucor is built on teamwork and says that
eliminating distinctions between management
and hourly employees has resulted in the latter
responding positively to business needs. In
return, the organisation remains committed to
no lay-offs in slow periods. Absenteeism is low,
to the point where Nucor has had to
encourage employees to take time off.
For talent management, Nucors approach is
inclusive. All employees are encouraged to
succeed and make their mark. We not only
promote innovation from the bottom up, but
also promote innovators from the bottom up.
You can be the best engineer, accountant, or
salesperson you want to be.
The current CEO, Dan DiMicco, is cited as an
example of this, and he has become a
prominent speaker on industry issues and
leadership. New interns are given early
exposure to the business and important projects
to work on.

Structure-centric organisations include traditional hierarchical bureaucracies, and low-cost


operators such as fast-food restaurants. The shared characteristics are that power and
knowledge are concentrated at the top, with a command-and-control management
predominating. This is the classic parent-child and Theory X scenario, liable to involve low
trust and limited delegation.
Human-centric organisations are less rule-bound and more Theory Y. Talent management
and performance management are emphasised, as reflected in strategy, the employer brand
and the use of metrics. Investment in leadership and talent development is high.
Talent management is liable to be weak in structure-centric organisations. While they may
attract people looking for stability, their environments do not encourage innovation and
initiative. Lawler stresses that it is difficult to retro-fit talent management into a hierarchical
culture. Thats why, for example, change in public sector bureaucracies can be painfully slow
and the history of IBM exemplifies the radical extent of transformation required.
While the most ruthless low-cost operators such as Ryanair may inherently seem peopleunfriendly, Southwest Airlines exemplifies how human-centric policies can co-exist with low-cost.
Transactional or commitment-oriented cultures

Lawler also argues that organisations which depend on talented people for their future face a
crucial choice about the employee deal.
High commitment organisations focus on employer brand values and processes that bind
talent for the long term. Employee involvement and engagement are priorities, building a
sense of community and, perhaps, shared ownership. An interesting example is Nucor Steel
see the previous and this column.
However, in the context of globalisation, some organisations prefer to minimise their
commitment to geographic markets or business lines, but need highly-skilled talent to compete.
Investment banks are an obvious example though Lawler identifies this as a more general trait.
The talent proposition of transaction-oriented organisations is that they have a core of longterm business managers, and then hire skilled employees to fit business projects or ventures.
They are more likely to buy technical and managerial talent than make it. Thus they travel
light in terms of investment in talent, and offer different types of contract to suit circumstances.
Each approach has advantages and disadvantages.
High commitment organisations need to be sure of their ability to be successful, and believe
that greater mutual commitment yields benefits in tough times as well as good. Again, this
reflects Theory Y as opposed to the more mercenary approach of transactional businesses.

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The latter expect and reward high performance. On the surface, they may have many features
of the high commitment organisation in terms of benefits and employee support, for example
however, the main commitment is to flexibility rather than people. Innovation is more likely
to be bought in.
These companies make no apologies for offshoring jobs. Its a natural consequence of their
need for good talent at the lowest price available. Its a kind of creative destruction that they see
as necessary if they are to stay at the leading edge of their industry, comments Lawler.

Whoever specialises in shaping talent management and many organisations now appoint
a talent head or director within HR to do this they need to influence leadership thinking
about the fundamental choices raised by the business model and culture, along with the
impact of these choices on the way talent is sourced and nurtured.

5.3
Performance management

Standard Chartered and talent


management
Standard Chartered uses many forward-looking
talent management practices.
Regular oversight by the plc board which
discusses talent three times a year.
All managers have talent management
responsibilities.
Performance in talent management is assessed
by business area and geography.
An inclusive approach to talent classification is
used some 7% are classified as HIPOs, but
most are categorised as critical resources or
core contributors. Appreciative Inquiry and
diversity are embedded into the Banks human
capital processes.

There is a rich history of dissatisfaction about performance appraisal among end-users it is,
arguably, the least popular process associated with HR. Regular debates in management circles
focus on whether it should be dispensed with. Yet, there is general acceptance that a good
performance management system (PMS) is essential. So, what should a CEO and senior
executives expect from HR to improve confidence in the PMS?

Talent processes are well-segmented, being


designed around different phases of
development from new hire to senior
management posts.

Setting the foundations


CRF provided a comprehensive overview in the 2003 report, Bringing Clarity to Performance
Management. These are some fundamental principles for HR to observe in future.

All talent management efforts are


underpinned by a comprehensive metrics
system covering development and
performance.

Extensive self-help tools are provided.

Performance management as a system

Organisations tend to focus on the process of performance reviews when, in reality, performance
management involves understanding a set of inter-connected activities an entire system. Note
that a PMS should take into account both individual and team performance.
While understanding and managing an inter-connected system is complex, the component
parts should be as simple as possible. There is a tendency to over-design which should be
strongly resisted, as Tim Miller points out in the next column.

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Tim Miller - Director, People, Property & Assurance
Standard Chartered

Define thoroughly what


Any lack of clarity in what is expected of people individually and collectively is confusing and
you mean by performance demotivating, as well as dysfunctional. Both tangible targets and behavioural expectations should be
included, spelling out desired outcomes for both results and standards. In larger organisations, this can
require delegating expertise in objective-setting and defining standards every function and business area
needs to be clear about their interpretation of performance. People at a local level will often know far more
about what is required than those at the centre
The more employees own their performance goals and help to define standards, the more they are likely to
Build ownership of
performance at every level achieve. However, there needs to be a framework of general objectives and requirements which may be
integrated with values and strategy to clarify and stimulate local level responsibility for performance.
Reviewees should feel the process is designed to help them do a great job for the organisation.
Keeping PM simple

Performance is about culture behaviours as well as results

Tim Miller of Standard Chartered a highly


diverse organisation observes that
employees have universal needs, irrespective
of geography, culture and religion. In his view,
they want to know

How individuals and groups behave is as important as achieving results. Positive environments best
shape that behaviour potentially creating a platform for good results year-on-year whatever the
circumstances. This cultural context for performance is critically influenced by organisational
values, and how leaders articulate and role model them. As Jack Welch pointed out, those that
achieve results without respecting values are destructive to collective performance. Hence, many
high-performing organisations incorporate values assessment in their PMS.

what am I being paid to do?

Performance is a management responsibility

do I receive helpful feedback?

Those organisations that see a PMS as owned by HR or Personnel, by implication accept an


abdication of management responsibility for their work and people. However, a fit-for-purpose
HR function should be expected to contribute real expertise in designing and facilitating good
performance management.

am I being looked after?

Performance improvement is about learning

have I the tools and resources to do a good


job?

HR functions over-complicate this, he adds.


They develop elaborate tools and processes
that miss the point and, often, people in the
organisation dont want to implement them.
For example, theres no point publishing
lengthy performance management guidelines.
Good managers dont need them and poor ones
pay no heed.

Finding ways of doing things differently and better should feature in any interpretation of
performance. This leads us to conclude that a performance culture should be synonymous with
a learning culture if employees are to own their performance improvement.
Self-identified improvements are more lasting and inspiring.
High-performing organisations stress the importance of experimenting, learning from
mistakes, and the sharing of learning.
While a fear of failure can produce stretch performance when self-driven, fear of punishment
tends to undermine initiative and positive risk-taking.
Ensuring performance management is continuous

Rather than being an annual chore, performance reviews should be a regular process of
discussion, coaching, adjusting of objectives and development activities happening as often
as mutually agreed to be helpful. Monthly one-to-ones are common, as are in-depth yearly or
twice-yearly discussions.
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While we dont own the management of performance, HR professionals are the guardians of the
process and the challengers about how it is used. Priscilla Vacassin, Prudential.

Think team, not just individual

Many performance systems, especially the review and reward process, still concentrate
heavily on individuals, while much of the work done is through team effort. The PMS needs
to be re-thought where this imbalance persists.
Priorities for HR to work on
While managers have direct responsibility for performance, HR should have shared
responsibility for the effectiveness of implementation, and for quality outcomes. Design and
implementation could be through a beneficial partnership managers will respect a system
more if they have helped to create it and can see how their needs are met. HR functions have
been conducting PMS system audits for many years but how many can claim that managers
praise both the PMS and HRs contribution?
Focus on motivation

Just checking whether performance reviews and planning are completed and on time
achieves little. A truer test of PMS quality is whether they have motivated reviewees to achieve
more and whether employees look forward to them.
Develop performance management skills

Progressive organisations tend to invest in these skill areas objective-setting, feedback,


development and career planning, reviewee as well as reviewer skills, and leadership rolemodelling. There is always something to be learned, by new and existing managers, in their
knowledge and practice.
Feedback is the key

The quality of feedback determines whether performance reviews are motivational and, of
course, drives performance improvement. Openness, being honest with each other and creating
the right atmosphere to say difficult things where necessary, are success factors. The onus is also
on the manager to be self-confident and to build the confidence of the reviewee to provide
meaningful upward feedback.
See the Borealis example in the column. While some organisations struggle more than others
with open discussions because of their cultures, it is a challenge for any manager.

Taking performance skills seriously


Through internal surveys, international plastics
company, Borealis AG, identified that poor
feedback skills were undermining performance
management and capability development.
Scarcely a unique problem, and our managers
were pretty much at the same level as any other
company, observed Mads Ingholt, Group
Manager of Leadership Development. Processes
and skills were radically overhauled.
All managers were required to enrol on a sixmodule coaching and feedback programme to
foster coaching skills and improve the quality
of feedback.
Managers own appraisal abilities are assessed
by their reports as part of the performance
review process.
Borealis is now rolling out a more advanced
programme Leading and Coaching for
Innovation for managers keen to develop
further. This teaches them how their coaching
approach can be adapted for different
scenarios and employee characteristics.
External coaches have been used to work on
the strategic and coaching skills of the
extended senior team, so that they can act as
role models.
See the case study in CRFs 2008 report,
Whats New in Coaching and Mentoring?

Steve Kerr whos the expert?


When it comes to designing performance measurement, Steve Kerr of Goldman Sachs, and
formerly GE, notes that frequently the knowledge to do so resides with the line. This
particularly applies to complex organisations or those with many technical areas. HR cant be
expert in all the details. However, it can know the right questions to ask, have some generally
applicable models and disciplines, and be a catalyst for obtaining clear, workable measures.

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Ranking systems are no substitute for judgement and courage. Steve Kerr, Goldman Sachs.

Disconnects between reward and


performance
A 2008 report by the Performance and Reward
Centre, CRFs sister organisation, Managing
Executive Performance for Organisation
Results, found growing discomfort, suspicion
and anger from a range of stakeholders who do
not understand [executive reward schemes] and
their purpose.

Among many findings, the report notes


that the more senior the executive, the more
informal the performance review process
RemCos spend more time on reward than on
performance
poor linkages between performance measures
and reward
a disproportionate preoccupation with bonus
schemes
an over-emphasis on short-term results.
This implies a significant challenge to HRs
credibility, as well as that of top management.

Its not about the form

While the capture of agreed key points is useful for the parties in a performance discussion
and for tracking progress and plans over time the quality of discussion should be the focus, not
the documentation. This is an issue if HR is obsessed with the process rather than the outcome.
See CRFs 2006 report, Improving Performance Through Appraisal Dialogues, for guidance.
Skill and fairness in rating

The fairness of ranking is another indicator of PMS quality. Ranking occurs in a performance context
to determine promotion and reward decisions, and in talent and succession review processes.
Every management team has to learn how to do this well, and were no exception,
commented Prudentials Priscilla Vacassin.
One of the important things we teach managers is how to distinguish between performance
outcomes, effort and potential, observed Noel Keeley of Musgrave.
Favouritism and subjective judgement have to be eliminated for the process to be respected.
While some organisations still use forced ranking, logically this sends the message that artificial
rules are being imposed which distort reality. If managers cannot be trusted to rate fairly, it is an
admission that they have been insufficiently selected and developed and that collective
decision processes are poor.
Role modelling and recognition

Those who demonstrate skill and dedication in developing employee performance and potential
should be encouraged to act as role models and be recognised and rewarded appropriately.
At Standard Chartered, managers whose teams score highly in engagement may be asked to
advise peers, and thus help raise standards.
Though much time, effort and capital has been invested in financial incentives, relatively little
attention has been paid to non-financial rewards, despite evidence that they can be more
effective in motivating performance. That is not to dismiss variable compensation per se
properly managed, it communicates powerfully what is seen as important, and provides an
incentive in the short-term. However, the costs linger on after the effect has worn off.
Furthermore, there are other more meaningful ways for an organisation to show it notices
and cares when people do well. Aside from formal recognition schemes, a critical factor is
management behaviour a simple thank you and shared values, for example.

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Tailoring for different cultural contexts

While there are some fundamental principles for good performance management, organisations
with global structures and networks have to adapt their approaches to local needs and contexts.
We need to understand the drivers and motivations in different country and company
cultures, just as the characteristics and needs of different types of business and function
should be catered for in design and implementation, points out Vincent Thomas of
Barclays. HR itself should have the right attitude and accumulate experience in order to
guide leadership decision-making and behaviour.
MIS and measurement

Performance management data and information needs particular attention and an appropriate
management information system requiring HR to do more than just conduct occasional audits
on how performance reviews are done. Comparisons should be made between end-results
profit, sales and other output measures and measurements of people inputs and people process
indicators, providing a real-time dashboard of performance management quality. There are many
indicators to help build such a picture. For example, staff survey feedback on PMS effectiveness
can be correlated with engagement scores, as well as classic data on absenteeism and turnover.

BDO Stoy Hayward EQ and RQ


This firm is the UK arm of BDO, the worlds fifth
largest accountancy network. As it has grown
in recent years, it has also established a good
reputation as an employer, winning various
awards.
HR Director, Daniel Kasmir, examined how the
firm could make people management a source
of competitive advantage.
Clients want people to whom they can relate.
We have focused on building emotional
intelligence into our resourcing and
development in an industry thats not used to
it. We already have plenty of IQ.
What we needed was EQ and RQ to improve
relationships with colleagues and clients.
These are some of the changes introduced.
Weighting of partner selection.

5.4
Managing change
Having discussed in 5.1 above the need for organisation design expertise, similar points apply to
the role and expectations of HR regarding designing and implementing change.
The need for expertise
To a large degree, an organisations success and that of its executives depends on how well
change is managed, yet many studies and media reports cite a high rate of failure or, at least,
under-achieved goals arising from change processes. See CRFs 2006 report, HRs Role in
M&As, for reference. There is no shortage of advice either from literature, change tools and
authorities such as Porter and Kotter.
Ed Lawler told us that he found no consistent pattern in the way companies organised themselves
to manage change. Organisation design just doesnt exist as a discipline in many companies.

Re-designing partnership appraisal.


A partnership development programme,
including bespoke coaching.
A re-designed leadership development
programme for rising stars some three-tofour years before partnership, which also
includes a coaching element.
25% of the leadership team bonus now
depends on people performance.
Continued in next column.

This raises three important questions for leaders.


How much personal time can they devote to the design and implementation of change? All
leaders have to cope with and try to balance tensions in running the organisation on a daily
basis while also planning its future. The challenge here is one of capacity.
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Daniel Kasmir - HR Director


BDO Stoy Hayward

BDO Stoy Hayward EQ and RQ


(continued)
In addition, two further interventions focused
particularly on client service.
A one-day course for all employees, Energy
for Clients.
A three-day course for partners and
managers, Clients for Life.
Apart from client surveys, an engagement index
is now an important internal measurement tool
and Kasmir has recently brought finance,
marketing, IT and HR together to create a series
of integrated business intelligence measures.
Differentiation through people is our aim,
said Kasmir, and the evidence shows good
progress.

What qualifies leaders as designers and organisers of change? To what depth have they
studied the subject? How broad are their experiences and what do these tell us about how
effective they might be in leading future changes?
Does the organisation have specialists with proven expertise to support leaders in managing
change processes?
In terms of definition, change can be applied to entire organisations, functions or just to teams,
and there is a sliding scale between two extremes.
Radical or transformational change, with deep impacts on structures, work, jobs, prospects
and so on.
Evolutionary change through incremental improvements, adjusting the way existing things
are done.
Nonetheless, there are common factors, all of which require change expertise, as shown here.
There are increasing pressures to be able to handle radical change more often.

The bare essentials of change


Design what is the vision and shape that this takes?
Plan how will change be implemented, and risks or opportunities identified and catered for?
Emotion how will beliefs, behaviour and personal interests be tackled?
Project management how will implementation be orchestrated?
Measurement what are the indicators of success, and what lessons will help the
organisation progress?
Of these, the management of emotion and behaviour tends to be the most common
shortcoming. This should be thought about from the initial envisioning stage, rather than
being an afterthought

External stakeholders will make assessments of an organisations abilities to drive and handle
future change. Hitherto, some company analysts and fund managers, for example, have not
been searching enough in questioning organisational capability to manage change. Customers
and employees can usually provide insights from experience, but owning stakeholders dont
necessarily check their perspectives.

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HR and change? Its a constant it should be part of what we do all the time. We should be aiming to
develop the organisation as one continuous process. John Whelan, BAE Systems.

Our focus here is on how companies, public sector bodies and their functions organise and
prepare for change and on the specialist contribution that an HR function can and should
deliver.
All central functions have a role in managing change, either because change affects their area
or because they have a wider part to play in the change process. This begs similar questions to
those posed above about leaders.
How qualified are they in managing change? What does their track record suggest about
handling future changes?
How well do these functions work together in designing and implementing change?
How do those affected by change, internally or externally, feel about how well it has been
communicated, designed and executed?

John Whelan - HR Director


BAE MAS

The HR contribution
As all change involves people and people systems, in principle HR should be a key player in
managing change. However, other questions follow.
What roles should HR undertake?
How should it be organised to perform these roles?
What are the capability requirements for HR?
The more strategic or technical the change, the more important it is for HR to offer insights and
experience. Its ability to add value needs to be demonstrated.
We see five principal HR roles.
1 Management team
member

This is HR as a contributor to change decisions, planning and follow-through and ensuring that the people
implications are thought through and embedded in the change process. It applies to HR directors at organisation
level, and also to HR managers in businesses and functions.

2 Change manager for For changes in people processes, HR should naturally manage all the stages from envisioning to project managing.
people processes
But note this caveat. As people strategy should be owned by management teams, changes to the support processes
should be seen as business changes, and not HR initiatives. The point is how the organisation benefits, with
ownership lying with the management team and not HR. This should avoid any impression of HR having its own
functional agenda.

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There is a huge advantage from having a dedicated resource that works with a strategy unit to develop
the organisations capacity to change and be more agile.

Building GEs change orientation


Steve Kerr has been chief learning officer at
Goldman Sachs and GE where, for many years,
he worked closely with Jack Welch in managing
change. He was responsible for the renowned
Crotonville Learning Center.
Kerr explained that, by the late-1990s, GEs
leadership had already concluded that it was
impossible to predict many of the important
factors impacting on its businesses scenario
planning could only do so much. As a result,
they decided that
GE should make change a core competence
the concept was to be able to cope with
anything and everything
as a consequence, 1,700 senior GE managers
took part in an intensive seven-day change
skills course.
This included trying to think like a small firm,
which reflected our thought that there must be
a reason why dinosaurs disappeared but
cockroaches survived, Kerr commented.

3 Change supporter
Change processes have many practical people implications the elements that need to be redesigned as a consequence of decisions taken, whether about restructuring, new technology or
operating methods. Within HR, much work will have to be done to support implementation. In
contrast to being reactively involved after the fact, we envisage a well-prepared HR function
being proactive and thinking ahead by virtue of having been part of initial decision-taking.
4 Change skills champion
The more progressive companies tend to interpret change management as a core requirement
of managers attitudinally as well as in knowledge and experience. See the GE example in the
column. Leadership development processes reflect this, including the use of change projects as
practical learning opportunities with direct organisation benefits. L&D functions should design
and facilitate the change of culture as well as competence, working closely with HR heads across
the organisation. The irony is that organisations moving in this direction already have a good
change orientation at the top.
5 The organisational transformation unit
We posed the question above about organisations having specialists with deep expertise to
support leaders in managing change processes. We find that many have not yet filled this gap,
and have relied too much on external advisers, with mixed results. There is a huge advantage to
be gained from having a dedicated resource working closely with a strategy unit to develop the
organisations capacity to change and be more agile. In Chapter 9, we make a case for an
organisational transformation unit.
Change capability portfolio
A senior HR executive should be able to offer experience in these areas of change.
Creating a change-oriented culture: addressing behaviours, encouraging involvement,
instilling confidence and helping overcome insecurities, fostering adaptability, flexibility and
envisioning.
Innovation: both improvements and breakthroughs, understanding process and behavioural
issues, and how these interrelate with strategy and organisation structure. Note CRFs 2007
report, Embedding Creativity and Innovation.
Collaboration: how to align people around designing and managing change, develop a
collaborative mindset, and ensure that value is created as a result.
Project management: individual skills and collective disciplines.
Organisation analysis and process-mapping: taking into account the operational, financial,
human and reputational implications.

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Geoffrey Matthews - HR Director
Merck Serono

Communication: a core skill area, as perceptions critically influence change outcomes.


Measurement: the expert use of data both to evaluate and learn from change, and to provide a
foundation for further change.
Change models: being familiar with change models and knowing how to adapt them to
particular situations or to select their most appropriate features.
The HR executive should also be knowledgeable about the pitfalls of managing change. See
examples in the column.
CEOs will draw confidence if they see evidence that their HR teams have experience in steering
the organisation through troubled times, can be relied upon to see the big picture, and can offer
solutions rather than just warning about problems.

Award-winning ways at Merck Serono


Merck Serono is a good example of how to implement a merger, having won the SHRM
Strategic HR Leadership award in 2008. Why? The cultures were dramatically different,
explains Geoffrey Matthews, who leads the HR centre of excellence. The larger, more
traditional Merck could easily have suffocated the more entrepreneurial and nimble
Serono. But weve managed to retain talent from both companies throughout our
operations. Weve been ahead of the market in terms of growth and staff satisfaction has
risen by 10%. Part of the secret was to build on strengths business and individual rather
than just focusing on cost reduction. It may have been more time-consuming, but the
results were worth it.

Essentials for a change toolkit


These are some of the approaches and methods with which HR functions should become
familiar, as they are not yet widely used.
Fast-cycle change

This refers to the set of principles and pre-requirements used to speed up change processes
safely, thus improving outcomes such as competitive advantage, reduced costs, increased
customer satisfaction, and so on. Most aspects of fast-cycle change impact on people
management and organisational culture. As Gary Hamel explains in The Future of
Management, 2007, the emerging style of management in fast-cycle change situations is
processing information quickly and accurately.

Pitfalls of managing change


Failure to create a convincing sense of shared
need for change, leaving stakeholders
especially employees and customers
sceptical and uncommitted, and cynical about
phrases such as service improvement,
rationalisation and right-sizing.
Announcements of major redundancies:
although sometimes necessary, these reflect
a failure to achieve evolutionary change, and
convey an impression of crisis-driven
decision-making.
Being more concerned with outward
appearances than with the internal
commitment on which future performance
depends analysts have learned that figures
such as redundancy numbers are unreliable,
as circumstances usually change.
Inadequate preparation and resourcing: for
example, too little training on new systems,
weak testing and piloting, and failing to audit
stakeholder attitudes before change.
Under-estimating cultural issues: a significant
factor in M&A failures, for example.
Change for the sake of change: new leaders
of teams or whole organisations often
launch initiatives to try to make their mark
or bend an organisation to meet their
particular predilections, without analysis or
needs assessment.

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Its an important principle in managing change to respect the knowledge that resides in the line.
Steve Kerr, Goldman Sachs.

Co-creation

This principle advocates involving key stakeholders especially staff, customers, suppliers and
business partners. Apart from providing valuable insights, creating a sense of shared ownership
and responsibility for change considerably boosts the likely success rate.
Large-group decision-making

Steve Kerr
Goldman Sachs

David Cooperrider, originator of the Appreciative Inquiry approach to management, has


developed the practice of orchestrating rapid change through large-group consultations
and summit meetings see the CRF Masterclass notes from 2006. The telecommunications
company, 02, provided a case study on the technique at CRFs 2008 workshop, Managing
the Emotions of Change. The technique is one way of combining co-creation and fastcycle change.

Decision Accelerator methods


An emerging technique, for which Stu Winby must take much credit, aims to speed up analysis and decision-making by combining a conference
meeting with powerful software. Topics that can be tackled include M&As, enterprise-wide strategy development, development/implementation
of an innovative service or product, cultural integration and organisation alignment.
Interested parties are brought together, along with experts and stakeholders as needed up to 120 people in total, who are then organised
into work streams. They are supported by facilitators and an information processing team who use smart systems to provide data inputs,
capture outputs and enable the parallel processing of information. The net effect is that complex decisions which might take half a year can be
concluded in as little as two-to-three days and can create positive energy for implementation as a result.

Implications for HR staffing and capabilities


What should be the expectations for the different types of HR staff? We argue that all parts of HR
should examine their level of expertise in change management and consider strengthening it.
HR executives working as management team members should aspire to be seen as the
resident experts in managing change.
Specialists in policy areas or centres of excellence should be familiar with the essentials and
dynamics of change. They should be involved in working groups and negotiations. This
includes the more technical areas such as benefits and pension specialists, who need to
understand the changing business and people requirements in detail and contribute useful
ideas and improvements as a result.
Some of these specialist roles should be central to designing, planning and facilitating change.
This includes OD and L&D specialists, whose work on developing change capabilities among
leaders and project managers should ideally begin before any specific change initiative.

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Those involved in service delivery should understand the fundamentals of change to help
them be more effective. This applies especially to those working directly with managers and
employees. They are also ambassadors for the HR function, and should be able to act as skilled
listeners and data collectors.

As regards creating a centre of expertise in change management, we argue that this is best
done through an organisational transformation unit which works closely with the strategy
function. Its role is to focus continually on how to improve all aspects of the organisation
from work systems to structure and capabilities. This is where specialist expertise in
organisation design should be found.

Such a unit may or may not fit within an HR structure, as discussed in Chapter 9 where the HR
function itself is examined.

5.5
Other priorities
There are many other responsibilities and priorities that an HR function should address. These
include learning and development, HR technology, pensions, employee wellness, diversity,
ethics, safety, industrial relations, etc. Some have particular prominence in certain countries
healthcare costs are a major issue in the USA, for example or at particular times, such as when
a labour dispute or a health and safety incident occurs. Workforce planning is another key
requirement CRF will produce a research report on this in late-2009.

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Introduction

Topics covered
6.1 Whats the issue?

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6.2 What might HR do?

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6.3 Specific HR role and responsibilities

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6.4 On reflection

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HR and corporate governance is a relatively


under-explored topic, but one which is
increasingly relevant to HRs future given
the incidence of corporate excess and
malpractice over recent years. What is the
role HR might play? If not HR, whose
responsibility is it to ensure an organisation
behaves ethically and responsibly? This
chapter discusses these issues and proposes
a role outline for HR directors.

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HR must devote considerably more wide-eyed effort and attention to assessing the honesty and
integrity of the organisations decision-makers. Professor Pat Wright, Cornell.

6.1
Whats the issue?
Why might an HR director be asked to assume a formal role in corporate governance,
interacting as appropriate with the board, senior executive team and stakeholders? There are
four main reasons.

Pat Wright - Professor


Cornell

Ethics
A latent mistrust of executive management is evident, resulting from scandals such as Enron
and fuelled further by M&A deals that sometimes seem to benefit those at the top while others
lose their jobs. This has triggered regulatory measures such as Sarbanes-Oxley, including its
requirement for formal, evaluated ethics policies to cover all employees.
Given the financial mismanagement, excess and fraud exposed by the credit crunch, regulation
is set to increase, given the various failures of oversight.
Over-mighty leaders
A sea-change in attitudes concerning overly-powerful leaders is occurring. In recent times,
some have been fired for reckless behaviour Jean Marie-Messier of Vivendi, for example or
dishonesty, such as Conrad Black and Denis Kozlowski. Investors and commentators are now
alert to those leaders who dominate their boards or executive teams citing the danger that,
without challenge, hubris or complacency is likely to set in, and business failure may ensue.
Indeed, that conclusion is now drawn in the case of several major banks.

Corporate social responsibility


With varying degrees of enthusiasm, some organisations have adopted policies loosely referred to as CSR spanning ethics, community
relations, environmental policies and employee welfare all of which have a strong influence on corporate reputations and perceptions of
companies as a force for good. Co-ordinating responsibility for CSR policies and practices tends to be given to the HR director. That said,
corporate communications and legal directors may also be involved
Pay and performance
The increasing spotlight on executive remuneration and performance management is leading to
questions being asked about the role HR is playing in this area. Shareholder groups are more
searching in their enquiries, as are governments and regulators. In some jurisdictions, there are
threats of legislation.
For example, in the US it is predicted that the Employee Free Choice Act, which President
Obama supports, may enable unions to leverage internal sentiment about excessive executive
pay to generate greater union membership.
There is little evidence that high pay improves executive performance, as the column indicates.
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Don Young

Relevance to HR
Debate regarding HRs role in avoiding scandals and mismanagement or in challenging
executive behaviour has led to pointed questions being asked of HR and the HR director.
Does the HRD have the courage to stand up to a strong leader or a headstrong team?
Does the HRD know enough about the business to realise when a strategy is reckless rather
than bold?
What guarantee of good behaviour do investments in psychological assessment, leadership
training, executive coaching and talent development provide?
Why is it that inequities of pay and performance expectations between the top and employees
are allowed to continue?
What is the HRD role in this regard?

6.2

The pay and performance disconnect


Don Young, a former HR director and founder
of YSC, is an authority on pay and performance
issues. His analysis of data over a 15-year
period for the Performance and Reward
Centre, found no beneficial correlation
between directors pay and corporate
performance.
Yet directors remuneration has risen far faster
than profits and average employee pay.
Unsurprisingly, Young points out, this has led
to decreased trust levels in the UK as well as
reduced levels of productivity and added value
per head.

What might HR do?


Much depends on
the force of character, or courage, of the HR director
the behaviour of company chairmen, boards, CEOs and other executive directors
the formal or informal practices these people adopt
the specific expectations of the HRD.
In Chapters 4.5 and 4.6, emerging good practice regarding the HR directors position is described.
However, this is not codified and scepticism is apparent in situations where HR does not have the
qualities or the mandate to challenge senior executives.

Does higher pay positively motivate corporate


leaders? Theres no evidence to say it does, and
many pointers to the opposite including the
Kozlowski case.
For example, Daniel Vasella, Chairman and
CEO of Novartis, said to Forbes Magazine:
The strange part is that the more money I
made, the more I became pre-occupied with it.
Suddenly, I didnt need to bother about money
but found myself thinking increasingly more
about it. Money corrupts the mind.

Professor Pat Wright of Cornell University is a leading expert in corporate governance and HR.
He shares the views of our HRD interviewees that
boards are taking a greater interest in talent and engagement
they also seek to avoid criticism for bad senior appointments, poor succession planning and
unjustifiably generous executive remuneration as public pressure demands more accountability.
Wright stresses: HR must devote considerably more effort and attention to assessing the
honesty and integrity of organisational decision-makers. The function should be able to refuse
promotion, control behaviour or terminate. Assessments must be thorough, ongoing, and
cover all aspects of an executives life.

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While this may sound intrusive, it is the kind of examination that psychological assessments and
360s should provide and is the basis for rigorous performance and development reviews.
Those conducted at senior level in organisations such as Musgrave, Thomson Reuters and
others, are close to his view.
Wright also points out that experience shows how executives slip into positions and behaviours
which, with hindsight, they should have avoided.
Even bad apples were probably not always bad. Rather, as they constantly encountered
legal and ethical boundaries, they possibly found they had crossed them without knowing.
HR professionals need to keep their executives from getting too close to those boundaries
and speak up as soon as they cross them.
Our HRD interviewees said they were in a sufficiently influential position to do this, and also felt
they had access to the board. But, it is by no means universal. More generally, HR directors feel
they could be fired for taking such a stand and there is evidence to support this.

6.3
Specific HR role and responsibilities
Along with Professor Wright, CRF is among the first to explore the potential role of HR in
corporate governance, since there is no mechanism to create an agreed collective position, nor
is there a body that might realistically do so.
Based on what HRDs in progressive companies are starting to do, here are CRFs
recommendations for good practice. They reflect the view that boards and top teams should
face similar disciplines and principles concerning selection, development, performance review,
team processes, and reward, that other employees are expected to follow.
HRs expertise and responsibilities for these activities should include the board, as far as practicable.
HR directors should be involved in the selection and assessment of board members against
clearly agreed criteria. These should include agreed ethical principles that apply to all board
appointments potential conflicts of interest are an example.
HRDs should be accountable to the board jointly with the CEO for designing executive pay
systems that have clear linkages to performance, which are reviewed continuously. This
includes formal agreement about what effective executive performance is, with allowance for
updating to short-term targets. Reward levels may be relative, though the data that informs
judgements should be available on request to shareholders.

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HR professionals need to keep their executives from getting too close to [crossing] those boundaries
and speak up as soon as they cross them. Professor Pat Wright, Cornell.

HR directors should be formally consulted on board-level reward, with their views being
recorded.
They should be consulted on processes for board and executive team functioning, in view of
the professional expertise they should possess.
Boards should agree a formal performance system which, typically, HR directors should be
responsible for designing or, at least, their advice on its design should be recorded.
Boards should have collective and individual development plans, with HRDs being consulted
on their form and content.
HR directors should discuss the organisations people plan with boards at least annually, as an
integral part of approving strategy and operating principles.
Data should be available that indicates historic and projected performance in people
management.
Board members should have access to HRDs to discuss people and performance issues at
executive level.
HR directors must demonstrate their suitability for these responsibilities through business
knowledge and skills, and their understanding of corporate governance.
This list is indicative and is neither intended to be exhaustive nor precise. Our intention is to
provoke debate which could lead to incorporating the principles above into voluntary codes of
corporate governance. Making such standards publicly available would be an important step
forward in providing substance to the corporate governance debate.

6.4
On reflection
Although some Group HRDs are already doing much of this, the extra workload should be
recognised. As we indicate in Chapter 4.6, an HRD active at board level is probably already doing
a job and a half. The calibre of such a director needs to match the high-level responsibilities.
In conclusion, we refer to Professor Wrights suggestion that HRDs might take on the role of
Chief Integrity Officer. Their responsibility for challenging colleagues reflects an informal role as
the organisations conscience which could be formalised if responsibility for CSR is assumed. In
this context, Wright suggests that some form of contractual protection should be available for
an HR director who might be dismissed by a CEO for exercising that role.

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Introduction

Topics covered
7.1 The necessity of great service

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7.2 Efficiency, service and cost

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7.3 Tensions and controversies

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7.4 Shared services, outsourcing and offshoring

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7.5 Lessons from experience

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7.6 Adopting a holistic services model

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7.7 Providing career paths

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7.8 In summary

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In this chapter, we examine a range of issues


about core HR services and offer advice for
CEOs, HR directors and others on how to run
and improve such services. Lessons from
experience and a summary of key points are
provided.

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What are HR services?

7.1
The necessity of great service

Typically, they include three types of activity.


Administrative support: for payroll, pensions,
recruitment, job moves, training, occupational
health and wellness services.
Information: record-keeping and data
handling.
Advisory services: for example, interpreting
terms and conditions, disciplinary and
grievance procedures and more general
advice to managers on how best to manage
their people. Essentially, this covers the
simpler parts of the HR manager role.
The first two categories often referred to as
transactional services are increasingly being
automated via intranets for employees and
managers to access them on a self-service basis.
Advisory services usually involve initial selfservice information pulled from intranets,
supported by call-centre advisors handling
more complex queries.

For most employees, the core requirement of a personnel/HR function is for basic people support
systems to work efficiently and, preferably, regard them as valued colleagues. The loftier
ambitions of HR as talent and change managers are not usually their first concern. It is more about
being paid on time, being treated fairly and not being encumbered by rules and procedures.
If such services are inefficient, HRs credibility will be questioned and its platform to provide
more value-added contributions undermined. While payroll systems and training administration
are not likely to attract people to an organisation, poor administrative practices can certainly put
them off. At stake is HRs reputation.
CEOs, senior executives and managers will naturally expect an HR director to ensure that
services administration is running smoothly, at head office and across the organisation.
After all, this is where most of the money on people is spent and where quality of service
must be as important as cost-saving and efficiency. Clearly, organisations face crucial
decisions on how best to provide such services in the future.

7.2
Efficiency, service and cost
The three main drivers of change in HR services are efficiency, service and cost.
Efficiency. Historically, HR has not always enjoyed a reputation for being the most efficient of
central functions. Even interviews with HR directors in progressive organisations revealed a
need for more robust systems to improve reliability and service quality.
Service. Although HR has an expected duty of care to employees, experience of its service can
appear more controlling than supportive and the notion of service does not fit well in
traditional personnel departments. Over time, a weak service orientation fosters employee
and manager cynicism.
In recent times, HR has had to run to stand still, as organisations undertake increasing
amounts of strategic and structural change including M&As and globalisation which have
led to higher volumes and complexity in administration workloads.
Cost. The most important issue driving efficiency initiatives in HR has been the pressure to
reduce costs. This is nothing new and also applies to other central functions.

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Mark Judd - HR SSO Director, HR Shared Services
Rolls-Royce

Service centres are not just about better administration. They can also
impact on business costs by having lean and governable processes.
Mark Judd, Rolls-Royce.

Intended benefits
Many organisations have, therefore, committed to HR transformation initiatives that typically
adopt technology to automate processes, shift administration work away from relatively
highly paid HR managers and, ultimately, reduce HR function size. Essentially this is about
attempting to work smarter.
Typically, service functions have been centralised into shared services units in effect, call
centres that take over administration tasks previously performed locally, either retained inhouse or outsourced.

Growth of shared services and outsourcing


The adoption of shared services and large-scale
outsourcing has spread fastest among large
organisations, where the economic case is more
obvious. A 2007 CIPD survey found that
28% of UK organisations had centralised HR
services provision

The intention is to release HR managers or business partners from administrative chores in


order to perform higher value work in helping the organisation grow, change and improve.

69% of these had created internal shared


services functions

Another way of lowering cost is by reducing complexity, which can result from

28% partly outsourced services and 4%


wholly outsourced them

local variations in terms and conditions that reflect custom and practice rather than business
logic or market differences

11% anticipated wholly outsourcing within


three years.

legacy systems and processes that need re-thinking to match new scenarios
support functions such as HR, finance and procurement having separate and mis-aligned processes.
As Mark Judd of Rolls-Royce puts it: Its not just about better value administration. These
centres can also impact the significantly higher corporate payroll, recruitment and learning
costs of the business by having lean and governable processes.
In a world of legislative compliance, the shared services centre is a safe way of dealing with risk
management, business assurance and quality control. Complying with the Data Protection Act,
which may have been complex and unmanageable, now becomes visible and auditable.
The adoption of a shared services model features in the Rolls-Royce case study. See also the case
study on Royal Bank of Scotland in the 2006 CRF report, Outsourcing the HR Function.

7.3

Source: The Changing HR Function, survey


report, 2007, CIPD.
See http://www.cipd.co.uk/surveys.
Conversely, because of the type of HR staff they
hire, smaller companies tend to do their own
administration and then source advice
externally on more strategic issues. Here, they
have options to consider.
As major outsourcing vendors may not be
interested in smaller companies, they could
contract out HR services to smaller suppliers.
They could take on experienced freelance HR
practitioners as part-time HR directors as an
alternative to consultancies.

Tensions and controversies


There are many logical reasons why centralisation makes sense, and the business case for
outsourcing has been marketed hard by vendors. In practice, it is not quite so straightforward.
Cost becomes the dominant driver: a desire to reduce costs has driven centralisation decisions
and implementation. Improved internal customer service appears a relatively low priority
frequently undermining the acceptability of change and, as a consequence, the economic case.

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Self-service culture manager is key


Getting the concept of self-service accepted by
managers is critical to reducing HRs
administrative workloads. There are two ways of
doing this.
The role of manager should clearly describe
their responsibility for managing people and
people-related information.
Management information and HR services
support should be so user-friendly and fast
that managers have no real reason to consult
HR business partners.
Leslie Berkes of Hewlett-Packard explains how
relatively easy it is to induct newer, younger
managers into a self-service habit.

Transformation is not always what it appears: this over-used word tends to refer to a new
technological platform and new structures, rather than the more fundamental issues
concerning HR practices and behaviours, which is where transformation should start.

Re-engineering is superficial: overhauling processes and outdated practices takes much


time and decision-makers often concentrate on the cost savings without thinking about
whether the changes are workable in the desired time-frame. This is particularly dangerous
when contemplating a major outsourcing deal. Transferring poor systems and people to an
outside contractor is a recipe for higher cost and considerable friction and the very
definition of a false economy.

People issues
Staff selection for a service function needs care.
Attitudes to the new function may vary widely for example, antagonism may be felt among
existing staff, given that job losses are likely with the transition to a centralised, leaner function.

Theyre the Internet generation, its second


nature. The older ones are the problem, who
still prefer the old methods. Nonetheless, we
insist on self-service up to senior manager levels
and, in spite of some resistance, we are making
headway.

Resistance from both HR and service users may have to be overcome.

If they insist on taking issues to business


partners which could be resolved using Ask HP,
this will become an issue in their reviews it
indicates their weakness as people managers.
We now make the point that the line are the
HR managers.

Creating a new service centre raises important career issues. Those transferring to an internally-run
centre can feel cut off from the organisation, with their options limited to the service centre itself.

Importing new recruits with positive attitudes may seem attractive, but retaining people with
organisational knowledge is vital.
Assessment can weed out the unsuitable, but this must be seen to be fair by others.

How organisations shape and communicate future career paths so that recruitment and
retention do not suffer is a significant issue.
People who move with an outsourced operation actually change their employer and, therefore,
their prospects will also change whatever they may have been promised. In theory,
outsourcers should provide career paths but, in reality, they may also consider offshoring.
Shifting administration to managers
A foundation of reduced workloads is encouraging self-service by both employees and
managers. However, potential pitfalls can be avoided by
ensuring that managers can identify tangible benefits from more self-service rather than it
being perceived as HR pushing administration onto already busy managers
ensuring that self-service tools are simple, user-friendly and supportive of business needs.

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Anonymous call centres in faraway places, with bored operators reading from a script, rarely help
employee engagement. Nick Starritt, PARC and Sirota.

If services are outsourced, the challenge is to overcome the impression that HR is


distancing itself even further from involvement with the business and people
management.

Over 10 years ago, Dave Ulrich suggested that the advantage of self-service would be the user is
the chooser that is, internal customers would define service levels, and take-up would be the
measure of success. Some organisations fail to abide by this fundamental principle.

7.4
Shared services, outsourcing and offshoring
When creating a shared services function, it is crucial to introduce a service culture based on
user-friendly access whether by phone, intranet or, in rare cases, face-to-face. The orientation
and skills of internal staff transferred into the operation must be considered. Any tendency
towards control or procedures first will damage how the centre is perceived.
Outsourcing is no magic bullet
Most of our interviewees felt that many major HR outsourcing deals have failed to live up to
expectations.
Vendors do not make much money.

The lure of outsourcing


The attractions of HR outsourcing have been
persistently marketed since 2000 as it became
harder for outsourcing providers to find new
business in IT. See CRFs 2006 report,
Outsourcing the HR Function, for more details.
Vendors were hoping to capitalise on HRs
variable reputation for administrative efficiency
and measurement abilities.
For years, HR functions have used many types of
external contractors, so outsourcing is not new.
It was the scale that was different in taking
over the role and staff of all administrative
functions and, possibly, some advisory roles as
well. The potential benefits include
reduced cost, increased efficiency, access to
updated technology, better management
information and a source of external expertise
enabling the HR function to slim down and
refocus on more added value activities in a
more complete way than if an internal shared
services function was created.

For clients, the potential benefits often do not materialise.


In a rapidly-changing world, locking into long-term deals is restricting as in any subsequent
restructuring, mergers or acquisitions, for example.
Some organisations have taken back some of the services they outsourced.
It is a sensitive area, as major contracts and reputations are at stake, so there are constraints on
revealing precise details.

However, anticipated financial benefits are


important in the judgements of key decisionmakers. Even assuming HR understands the
preparatory work required to improve success,
if it raises caveats about timescales, for
example - these may be interpreted as
resistance to change. As with so many change
initiatives, the potential for hubris to override
realism is omni-present.

This is not to say that outsourcing cannot be successful. We comment on how best to achieve
it below.
Rick Emslie, an experienced observer of the outsourcing market, told us: P&G and IBM claim to
have a successful outsourcing partnership, but I cant think of another. Its not a question of
whose fault it is because there have been unreasonable expectations from all sides.

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How not to do shared services


Generally-speaking, the public sector has
obvious possibilities for more automated and
efficient services because of quality issues,
common ways of doing things and duplication
in administration staffing.
We mention two successful public sector projects
in this chapter, but a UK Department of Transport
project in 2008 exemplifies how not to do it. It also
reveals the gap between current and ideal
standards of HR management in that organisation.
This self-managed project involved creating
a shared services centre for HR and finance
operations for the department and seven
agencies.
Intended to contribute to a government
efficiency drive the UK Cabinet Office hoped
for overall savings of 1.4 billion this project
aimed to save 112 million against an
investment of 55 million over 10 years.
It is now projected to make a net loss of 81
million.
At present, the service is only semioperational for the department and two
agencies, and is regarded as unreliable by
users a software glitch even resulted in the
system speaking in German!
In its analysis, the Parliamentary Public
Accounts Committee highlighted numerous
project management failings poor
preparation, a lack of testing, and taking costdriven short-cuts by using an existing contract
with IBM without devising a specific tender.
Continued in next column.

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Surveys on outsourcing conducted within the HRO Buyers Group some 77 large and mostly
US organisations revealed that time saved on administration by HR business partners was
minimal, and even that was often taken up with contract management. For more details, see
People Management magazine, March 2008.
The majority of HR directors we interviewed were not in favour of broad-scale outsourcing.
Why should we pay a margin to a contractor for something we should be doing ourselves, one
said. Others voiced similar concerns, some saying they would be prepared to consider it when
their investment in systems needed to be reviewed providing the supplier side was robust.
As yet, offshoring occurs relatively rarely, whether part of shared services or outsourced.
Intrinsically, it works best for handling processes and data rather than, for example, advisory call
centre services. Just as with consumers, the idea of being served by people in another country
who are dependent on manuals and scripts may not be particularly appealing. The more
advanced the advisory services, the less practical and acceptable this is.
Nonetheless, as more service centres are located globally, an increasing number of staff will
inevitably find they are dealing with an overseas facility.
Over-powerful purchasing function
Tales abound of purchasing functions that regularly accept the cheapest deals offered by
outsourcing vendors, and have little capability and often little orientation to understand
what quality looks like when hiring suppliers.
While it cannot be assumed that more delegated decision-making is better, it is important to
remember that trust and service suffer when cost is the main preoccupation especially where
supplier relationships become partnerships, as in HR services. Note the positive example of RWS
below, compared with the unfortunate failings of a Department of Transport project.
Shared services a stepping stone towards outsourcing?
While moving to an internal service centre may be a good way of transitioning to outsourcing, in
practice, its not that simple. Organisations are unlikely to dispense lightly with their extensive
investment in new systems and a service culture. They will tend to keep an open mind, preferring
to reconsider the issue as and when a systems reinvestment is due. They also need to be sure of
the quality of suppliers.
Outsourcing will have to be 20% more efficient before we can consider it, said Brian McLaren
of Royal Bank of Scotland in CRFs 2006 report, Outsourcing the HR Function. There has to be
a real service edge. I think were already efficient and we can always supplement with culture
change programmes. The issue turns on whether the edge is worth the effort.

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Co-creating HR services is the soundest way to ensure acceptability and fitness-for-purpose.

7.5

How not to do shared services (continued)

Lessons from experience


Here we set out pointers and guiding principles to consider how HR services may be configured
in the future.

The departments proposal to rescue the project


by adding Procurement was condemned as
liable to make things worse not least because a
clear cost-benefit case had not been presented.

Thorough preparation
An obvious, but key, point is the need to be robust about the rationale and advance
preparations, taking into account

This situation reveals deeper implications for HR


leadership, in allowing suspect attitudes and
behaviours to persist.

the simplification of internal processes

Mistakes were made that had occurred on


previous projects, indicating significant
weaknesses in learning and risk management
disciplines.

potential resistance to reduced autonomy, and suspicions when trade union agreements may
need to be renegotiated
the need for a thorough and persuasive relationship management process.
Co-create as far as possible
This starts with ensuring that services are designed to meet employee and manager needs, in
substance and how they are delivered. Too often the attitude has been we are redesigning HR services,
so we are the best people to judge. Time pressures and the bother of consultation may also be factors.
By contrast, co-creating services is the soundest way to ensure acceptability and fitness-for-purpose.
For example, BT refers to the voice of the internal customer being seen in everything they do.

Cost-cutting trumped quality considerations,


despite advice on how to design service centres.
The nature of the rescue proposal indicated that
neither management nor HR were learning.
A fundamental management overhaul is
necessary, which will require an HR function to
think and operate in a different way. Does the
capacity to achieve this exist?

If line managers are not yet attuned to be people managers, or to use technology tools, then the
necessary investment must be made well in advance to achieve that cultural shift.
Leaders as role
models

As in so many areas of people management, it helps if leaders actually lead when moving to new processes. Time
pressures and technophobia can present obstacles but setting an example is a core attribute of true leadership.
The fact that everyone is on the same system is powerful in terms of decision data and practical tools, such as for
performance management and development planning.

Service culture is
critical

From design to implementation, the message must be that centralisation is not about cost-cutting at the expense of
service. Indeed, targets and measurement should concentrate on improving the support levels for employees and
managers. Retaining existing staff in a new HR service centre can be advantageous in managing relationships with
colleagues. Any service culture deficits can be reduced through introducing external recruits with extensive service
experience, particularly in management positions.

The personal touch


From the start, users must always feel they are recognised and dealt with as individuals.
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What customer service feels like two


examples
We spoke to AdviserPlus, a specialist in providing
advisory services to managers to support
performance management and employee
relations. Managing Director, Karl Chapman,
explained their operating principles.
We are not visible as a company we appear as
part of the client companys own services.
We keep it simple theres just one number to call,
one intranet link, and one e-mail address.
A real person answers the phone, not an
automated voice system.
All new managers receive a welcome call and we
are proactive we phone them rather than
expecting them to call us.
Everything is designed around managers needs and
written in plain English. Our design work begins with
the managers perspective, not the centres.
We follow up all contact with time-lines for action,
indicating when they will receive progress calls.
Our management information system is key to
driving our ability to be proactive.
Our systems sit alongside any existing SAP or HR
system around the world.
Service, not cost, is our differentiator and winning
factor but, actually, there is always a cost-saving.
Were more high-touch than having an HR manager
on a clients site, and sometimes users are shocked
by how friendly and organised HR has become,
adds Chapman.
Similarly, an initiative in a UK insurance company
has HR advisers in their service centre who
systematically keep in touch with the line
managers and coach them if needed. They
provide feedback to HR decision-makers on issues
that impact manager performance. Improvement
opportunities and problems are rapidly identified
as a result, and fed to senior management.

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Imaginative communication about the service centre can offset any sense of distance between
it and the rest of the organisation. A service centre should encourage visitors, and its own staff
should be allowed to visit other company locations to gain a better appreciation of their
customers and the organisation they serve.
Smart management information
Smarter management information is a major advantage of re-engineering HR services and
adopting new technology tools. It is not just a question of software, but how people measures
are devised and the value they offer to management decisions.

Speed, relevance,
accuracy of systems

The quality of information available to service centre staff should


enable rapid and relevant answers to managers and
employees queries. Any barriers to a good service experience
should be removed. At no point should internal customers feel
they would do better to have locally-based administration or
advisory services.

Selective use of outsourcing


While attractive in principle, broad-scale outsourcing is best tackled only when a client has
created the right circumstances for a smooth transfer which is not easy and the supplier has
the strengths to add value. One approach is to adopt it in stages. As some services will already
be bought in, the question is what other parts of HR services can be supported externally?
While this will mean managing several suppliers, there are advantages, as the column shows.
Balancing centralisation with segmentation
An important principle is to avoid centralisation becoming an over-riding philosophy and
operating requirement. Any complex organisation will have to compete for labour in micromarkets and deal with many individual circumstances. Like other aspects of HR, there are
dangers in taking a one-size-fits-all approach. The tension between consistency and tailored
approaches needs to be managed.
Communicate like a relationship marketer
High quality and varied methods of communication should be used not just to sell in a
promotional way, but to follow the principles of relationship management. That means listening
as much as telling. Decision-makers, not just project managers and service providers, need to
have honest feedback.

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An HR shared services centre can actually champion the line manager by providing inputs to business
planning and decision support. Mark Judd, Rolls-Royce

Championing the line manager


Line managers are often concerned about the additional administration an HR shared services
centre might create for them, explains Mark Judd. However, if successful, it can actually
champion the line manager by providing inputs into corporate debates on business planning
and decision support. This, indeed, is one of the benefits identified in the insurance company
example we quoted in the previous column.

7.6
Adopting a holistic services model
A more ambitious concept is to think afresh about how HR support services are provided,
breaking with traditional bonds and existing functional structures.
Start with a people services function dedicated to a simple core message that all employees
should be well-supported.
Identify the main services required, irrespective of which function they traditionally belong to
this could embrace PC and software support, financial forms, premises, as well as the kind of
personnel services we have been referring to.
Imbue this new function with strong service values, dedication to continuous improvement
and joined-up thinking and link the way it is measured to employee productivity.
This idea is not new there used to be administrative directors but, unfortunately, without the
expertise and service values. However, technology now provides fresh perspectives. The selfservice concept can be applied to services from several functions raising the notion of the
multi-function service centre or just people services. There are obstacles to overcome,
however.

Segmenting outsourcing pros and cons


These are some of the advantages of using a
selection of suppliers.
Not having all your eggs in one basket or
expecting one company to be good at
everything.
Choosing from suppliers with established
reputations for excellence in specific areas
training management, payroll and employee
relations advice, for example.
Where suppliers in particular disciplines will
struggle to span national boundaries
effectively, being able to choose local suppliers
who can do better.
Flexibility to adjust services to meet
changing circumstances, without having to
revisit an entire contract relationship, for
example.
Challenges when using multiple suppliers can
be overcome, but must be catered for.
Having the internal competencies to select
and manage suppliers effectively.
Ensuring integration of suppliers and client
systems.

Functional heads may be reluctant to lose parts of their functions, particularly if they measure
their worth by the size of their kingdom.

Ensuring that suppliers in different


geographies work consistently.

Greater complexity will have to be handled if the scope of services to be transformed is wider.
If the desire is to outsource, risk levels may increase.

While it takes time and effort to stay in touch


with the supplier market, this usually pays
dividends in the long-term.

Having first floated this idea in CRF Publishings 2005 report, The Future of HR, some examples
are starting to emerge. See the column.

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Multi-function services examples

7.7
Providing career paths

Mark Judd, Director of Shared Services at RollsRoyce, had previously created a combined
administration service covering several functions
risk, finance, HR and IT when at PwC. The
message was that we all had to learn to work in a
different way. It was branded, Making It Easier,
reflecting our determination to achieve a
beneficial impact on line managers workloads.
PA Consulting have helped create two combined
function centres, one at the UKs Westminster
Council, and the other at Rijkswaterstaat (RWS)
the government body responsible for managing
road and waterway infrastructure in the
Netherlands. The RWS initiative
centralised 85 different support functions in
17 offices over 18 months
reduced headcount by 40% saving 750 fulltime equivalents and 45 million per year
dealt with 50,000 requests for support in its
first year of operation
resolved 85% of all queries and received an
average online customer satisfaction score
of 70%.

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Experts and leading practitioners have argued that HR should redesign its structures and ways
of working in order to think and act like a business. This includes service centres becoming
increasingly distinct from HR by focusing on administrative excellence. I think it is a rude
awakening for most shared services centre staff that the old career route of HR administration
from office to manager has now disappeared, commented Mark Judd.
Moving to a multi-function services unit might be seen to accentuate the break from HR,
although it may provide more options for those who wish to pursue administration roles. What
Rolls-Royce and other organisations illustrate are
opportunities to develop skills in service management, project management, continuous
improvement and Six Sigma techniques all of which are transferable
close links being created between the advisory service units and the remaining parts of HR.
For example, if a service centre runs field teams dealing with grievances, discipline or TUPE
issues and is also proactive in organisational analysis built around its data handling then it
already has skills that can allow transfer towards centres of excellence and business partner
roles after development.
The lesson is to build future career paths into organisational thinking and staff communication
at an early stage.

Regarding the purchasing philosophy at RWS,


note this observation of its Director of Corporate
Services, Hugo Kramer.

7.8

"We have great experience of fixed price


contracts, and the cost is always higher than
estimated because we cannot specify the total
work in advance. Where the nature of the job is
unpredictable as in the complex change
initiative mentioned above a more
sophisticated approach is required. It is much
easier to proceed on a trust basis, where you
manage the consultant's time and balance their
cost against benefits."

Many good practices we have indicated can add marginal costs to the way service centres
operate but such effort and investment can make the difference between success and failure.

In summary

Creating centralised service functions is time-consuming, requires significant investment and


entails risks if not managed carefully. Just adopting a lean approach is liable to create
dissatisfaction among users and service providers. Staff churn is unhealthy both in terms of
customer service where continuity is valued and in knowledge building.
The key is to create the essential conditions for growth and success. In future, we expect the
following changes will occur.

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HR SERVICES AND PEOPLE SUPPORT

Systems will become smarter, making self-service more appealing.


Managers and employees will become more self-reliant, providing they can see the benefits.
As HR service centres become a better platform for analysis and advisory services, those
aspects can optionally be merged with centres of excellence and policy functions. Relocation
is unnecessary, if working virtually.
Alternatively, the administrative and information handling aspects of an organisation will
increasingly be merged into a single multi-function service provider. Should that be so,
linkages with HR, finance, purchasing and IT functions will need to be redrawn with the
services function being repositioned as a centralised operational support function.
Outsourcing will continue to grow. However, while broad-scale deals may be eye-catching, they
are complex and risky. Much growth is likely to occur in specialised areas which can
supplement internal services and in enabling smaller and less sophisticated organisations to
achieve greater efficiency.

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MEASUREMENT

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Introduction

Topics covered
8.1 Whats the issue?

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8.2 What should be measured?

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8.3 Guiding principles

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8.4 An integrated approach to measurement

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8.5 Organising for better measurement

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8.6 External reporting

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In this chapter, we review an important


reputational issue for HR its contribution
now, and in the future, to organisation
metrics. What should be measured and core
principles are highlighted, followed by four
areas we feel HR should concentrate on in
future. The views of HRDs and experts are
provided.

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What is HRs contribution to outputs, as well as to inputs and throughputs? The functions Achilles heel
has been that it seems more comfortable with just inputs and throughputs. Professor Gordon Hewitt.

Measurement what HR must do

8.1
Whats the issue?

The report, Creating People Advantage, by


Boston Consulting Group for WFPMA, finds
that in most companies the links between HR
and strategy and those between HR and
metrics are broken.
It argues that, the HR function must be able to
measure, count and calculate the effectiveness
of both its internal operations and the
companys overall people strategies.
One of the reasons why HR ranks lower on the
corporate totem pole than the finance
department, it says, is that HR managers often
cannot quantify their successes.
A report conclusion is that until top executives
have a full and accurate view of HR activities,
the HR function will not achieve its proper role
within the corporation.
Note that this CRF report consulted 20 of the
more progressive organisations whereas the
BCG research covered a wider range of
organisations in geographic spread and size.
HR needs to be smarter about numbers
because of
intensifying pressures on overhead costs,
investments in people and what HR itself costs
the need to provide a business case with costs
and anticipated return for new proposals and
initiatives
globalisation and volatile operating conditions
creating new demands for workforce planning
skills, with proven expertise in technology,
research and modelling.
The general view is that HR still needs to improve
its understanding of costs and value add.

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The people aspect of organisations is important to measure as it represents a major investment,


and often the largest cost factor. Add to this the fact that intangible value is highly interconnected with human capital people make the difference and that people productivity is a
major variable to be managed, if an organisation is to be successful.
Yet, ironically, HR functions have not enjoyed a great reputation for their capabilities in
measurement.
In its first report on evaluation and measurement 10 years ago, CRF argued that HR activities
were often undertaken without clear evidence of any beneficial effects. Undoubtedly, this
helped fuel criticisms of HR as being fad-driven and lacking in business focus. Organisations
generally felt it was a difficult subject to measure but there was widespread agreement that it
was a skill area that HR directors and HR professional bodies should address as a priority.
Much attention has been devoted to HR measurement in the last 10 years.
In 1999, CRF described some useful books and frameworks on people metrics. Since then,
experts such as Jac Fitz-enz, Dave Ulrich and Mark Huselid have provided more detailed
guidance on how to create HR scorecards.
The balanced business scorecard, encouraging the correlation of people measures with
financial and operational data, has been adopted by many organisations.
The human capital concept has been widely discussed, but debates still continue on its
measurement aspects.
Regulatory requirements now exist to provide evidence on aspects of people management
for example, Sarbanes-Oxley concerning ethics policies. More recent governance issues
particularly in financial services are leading to more demanding oversight and reporting.
Metrics companies Saratoga, for example now provide organisations with business and HR
benchmarking services, as does the Hackett Group.
When purposefully used, employee surveys have become significant tools for measuring
organisational health and management quality, and to drive improvement.
Employee engagement has become established in many organisations, providing a sharper
focus for measurement and action planning.

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Doug Brown - Head of Commercial HR
Scottish & Newcastle

HR managers of the future need to harness data and make it work


for their businesses. If turnover rises or drops, data should be used
to drive conversations about people and performance.
Doug Brown, Scottish & Newcastle.

What interviewees told us


This is what CRFs interviewees felt about the state of play in HR measurement for 2009 and
looking forward.
HRDs and experts agreed that HR still needs to become more rigorous and skilled in metrics.
Experts were the most sceptical, based on their insights from senior practitioners and internal
customers derived from their work in consultancy, coaching and teaching.
They also agreed that young HR entrants are not particularly numerate. The educational
system is partly at fault, at least in the US and Europe. However, they felt a prevailing mentality
persists that HR is about people rather than business and that colleges and professional
associations should try to correct this line of thinking.
A few HR directors pointed to progress in adopting better metrics disciplines. For example, in
companies like Pepsico and GE, business focus and numeracy have long been hallmarks of the
way HR people operate.
However, rather more HRDs felt this was still something they wanted to strengthen, both in
capability and as a modus operandum.
Engagement measures are seen as particularly helpful, because they provide evidence of what
both line managers and HR contribute to people management. In some instances, significant
strategic decisions about organisation and management have been based on them.

8.2

HR and measurement experts and HRDs


There are still many HR people who seem
scared of numbers even just managing
budgets. But managers dont want to be
smothered with complex data. Using simple
techniques like RAG helps on both counts.
Quintin Heath, Twinings.
Weve definitely made a cultural shift. There
are now few areas of HR which are not
measured and reviewed because we start with
the concept of always trying to improve. HR is
definitely better at numbers than previously
and we take into account the numeracy skills of
new HR recruits. Vincent Thomas, Barclays.
As an FMCG company, we have both hard and
soft metrics. You would not survive as an HR
business partner in Vodafone without
understanding business numbers. Its the entry
level of your credibility. For us, the killer soft
measure is engagement. Paul Chesworth,
Vodafone.
At GE, we tortured data until it confessed.
Steve Kerr, Goldman Sachs.

What should be measured?


Experts agree that, to improve its performance in measurement, HR must first establish a
framework to pull together the different types of metrics it should use. We argue that there are
four areas three internal and one external on which to concentrate.
1 People management: providing dashboards to check organisational health, including staff
surveys, pulse surveys and regular data on absenteeism, performance management,
disciplinary actions, training and development, etc.

HR practitioners should, on average, spend


10%-15% of their time analysing and using
data. Peter Howes, InfoHRM.
Its not so much the numbers themselves, its
getting the team to talk about the numbers, and
the story behind them. Daniel Kasmir, BDO
Stoy Hayward.

2 Business change and improvement initiatives: for people systems and issues, such as a
new incentive scheme or a skills development programme. Or, they might concern changes in
broader organisation or work systems inevitably with people implications. Measurement is
involved before, during and after an initiative is launched.
3 HR function review: like any support function, HR should regularly monitor its service
performance and customer satisfaction including periodic reviews with stakeholders to
guide future plans and improvements.
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4 External reporting
In addition to internal information, it is essential to provide external stakeholders with details about the organisation and the way people are
managed. Reputation-related data includes activities loosely described as corporate social reporting often added to the HR portfolio of
responsibilities. This can reveal how the organisations culture and values translate into action. Stakeholders include investors, regulators,
business journalists, politicians, potential recruits and local communities. We expand on this topic in 8.6 below.

The CRF Evaluation Model


An effective HR measurement framework
distinguishes between relevance and excellence.
However efficient an HR process, it has to be
necessary does it fit the strategy, vision and
values, and is it a priority? The model also clarifies
three types of measurement.

These four dimensions are an adaptation of the CRF Evaluation Model, originally devised and
published in 1999 and updated in 2004. We found few organisations articulate clearly how
they manage people. However, more progressive companies interviewed for this study were
using some of the guiding principles below.
The Five Rights of HR Measurement
Workforce Success

Monitoring dashboards and milestones to


indicate progress.
Right HR Function
and Workforce Costs

Validation did we meet the agreed goal?


Evaluation what value was generated, was it
the right thing to do, and what can we learn for
the future?

Right Types of HR
Alignment

Evaluation is important just testing whether


pre-determined goals have been achieved can
lead to flawed judgements. Sound evaluation
typically requires

Right HR Practices

Right HR
Professionals

thorough analysis before any activity, to define


what should be measured and how, and the
theory and rationale as to why it should work

What HR Does
HR Do-able

further analysis during and after the activity to


create a learning loop
a holistic understanding of costs and benefits
direct and indirect

What HR Delivers
HR Deliverables

From The Workforce Scorecard, 2005 - Huselid, Becker, Beatty

8.3
Guiding principles

valid benchmark comparisons.


To be credible, avoid marking your own
homework consider the use of expert
independent evaluators.

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From our interviews, the following principles emerged to help HR improve measurement in the
future. More guidance can be found in the CRF reports, Effective HR Evaluation, 2004, and
Making the Most of Employee Surveys, 2006. The diagram above from Becker, Huselid and
Beatty is also useful.

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Some aspects of HR are numbers-friendly, others are not. Theres a great deal of subjectivity. Its an
area where you need experience. You need to understand the biases. Sometimes, its about
illuminating rather than proving things precisely and using the 80:20 principle. Steve Kerr, Goldman Sachs.

Start with business goals


The most common comment from interviewees was that HR should base what it does and
measures on business needs in consultation with internal customers about its work,
standards, business priorities and business plans. Naturally, alignment with business goals
should be a shared priority for everyone in the organisation, which is intrinsic to the
performance management system.
Numbers that aid decision-making
Given widespread information overload, HR should focus on data and measures that truly
inform decision-making. Numbers for numbers sake should be avoided statistics, after all,
can hide as much as they reveal.
Limit objectives and KPIs
Concentrating on a few essential priorities to achieve realistic results especially since
organisations often have an over-abundance of initiatives, targets and KPIs.
Accuracy and timeliness
These attributes of HR data have often been cited as a weakness. Some HR directors have tackled
numeracy defects by developing stronger disciplines and competence, while others have brought
in staff from finance. However, remember that qualitative data is often as important as quantitative.
Measure outcomes,
not just processes

Cause and effect

There is a tendency in corporate metrics and HR is no exception


to present data on work being done as achievements. While
process effectiveness is worth measuring, it is an input not an endresult. Evidence of activity is not the same as evidence of outcome.
Being able to demonstrate and improve how HR processes and
initiatives deliver business benefits is a crucial priority. Sometimes,
management teams may accept on trust that investment in
recommended activities leadership training proposals, for
example is a good idea, but evidence of value added should be
available to meet possible challenges from the CEO or CFO. In a
downturn, it is critical to do your homework in advance about
what should be prioritised.

More guiding principles


Triangulation

Learning to use a mix of data sources for


particular issues, including qualitative data.
Experience is needed to become a skilled
evaluator see Steve Kerrs advice above.
Return on investment

As a principle, any organisation or function


must know whether money is being well spent.
However, there are many variables affecting
people management. Direct cause-and-effect
relationships may not be feasible and precise
financial calculations may be impractical. Using
triangulation can establish a basis of probability
that an investment or activity was worthwhile.
Balancing tailoring with commonality

Creating a common set of metrics across


businesses and geographies is a critical lever for
pulling together an organisation, identifying
economies and for shared learning. However,
this can seem threatening to those used to
devolved authority
the business rationale must always be strong
how does this help the front end as well as the
centre?
Being able to segment and tailor is essential to
meet the needs of different businesses, local
units and employee groups. Organisations
must use both dimensions to manage and
measure effectively and know when best to
apply each principle.

Evaluation
As shown in CRFs 2004 Evaluation Model, just proving a target or budget has been reached is not
as important as demonstrating, through evaluation, that value was added. Evaluation should also
identify lessons learnt to guide improvements or, if necessary, a different course in future.

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Further areas of focus


The engagement concept has been especially
useful in measurement. For example, Standard
Chartered found that, once bank managers
could see how improved people management
impacted their bottom line, establishing a
shared approach to human capital
management across different cultures became
vastly easier.
The increasing trend towards systematic
organisational effectiveness reviews also
serves to ensure that each part of a business
is focusing on human capital issues in the
same way.
Articulating a set of shared measurement
principles, and then educating employees and
managers in using these, is important. While
this may be part of learning materials and
development programmes, few organisations
have taken visible steps to ensure such
aligned thinking.
All central functions should agree to be subject
to a service review with all that this implies in
terms of respecting internal customers. For
example, Prudential uses a survey across five
Group functions finance, HR, risk, legal and
communications. This measures, for each
function, how well they perform across four-tosix of their key responsibility areas.

For some HR functions, just ensuring these principles are understood and implemented will be an
advance. However we now discuss further areas for HR to work on in future.

8.4
An integrated approach to measurement
Metrics in organisations have generally developed through functional silos finance,
operations, marketing, HR, IT, etc. However, from an OD/OE perspective, an organisation should
be seen as a whole system. While the idea of an inter-related management decision system is
not new, many companies are still learning how to use models like the balanced business
scorecard and service-profit chain to understand the correlations between different silo-based
approaches to metrics.
Aggregated scorecards for senior executive and board use are common and are essential. We
found evidence that these had become simpler and clearer to aid comprehension and facilitate
decision-making.
On posing the question, what is your overall philosophy and approach to measurement?, CRF
has found relatively few organisations have taken meaningful steps to align understanding and
practice across all levels. Below and in the column are some areas on which to focus.
First, identify correlations between different data sets. Many organisations and HR functions
specifically can do more to establish cause-and-effect relationships between performance
and human factors. Productivity is an important measure, yet factors that influence it are
managed by different functions, from financial and IT systems to the work environment.
Taking this further, functions should be able to work together on aligning their measures,
including their timing. CRF commented on how the Royal Bank of Scotland did this in its 2006
report, Making the Most of Employee Surveys.
As mentioned in Chapter 5, Daniel Kasmir of BDO Stoy Hayward, told us how he had brought
different functions together to create a combined business intelligence scorecard, built
around common business success objectives.

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Numerical abilities in HR will be improved if the function has dedicated expertise in measurement
and metrics.

Metrics should be a key priority for an HR function that includes business-oriented, OD thinking
and skills in its core tool-kit thus shifting HRs reputation from laggard to expert in metrics
capabilities. Its not just about being smart at numbers but how those numbers are used.

8.5
Organising for better measurement
In the 2005 CRF Publishing report, The Future of HR, the emerging practice of analytics groups
enhancing and professionalising HRs measurement work was reported with Royal Bank of
Scotland appearing to be a pioneer. Ed Lawler and colleagues, John Boudreau and Pete
Ramstad, have helped establish this approach among larger US organisations.
However, there is less evidence of it being used elsewhere as indicated by the BCG/WFPMA
report already cited.
While there is no single model to follow, abilities within HR will be improved if the function has
dedicated expertise in measurement and metrics. Some HR director interviewees said they had
appointed individuals or teams to do this. Paul Chesworth of Vodafone was among several to
point out that metrics capabilities should be tailored to particular industries.
Note these caveats if creating a specialised unit.
Achieving more measurement sophistication should not lead to more complexity managers
need simple measures that are relevant to their work and circumstances.
Having specialist capability in HR should help achieve alignment with other functions, not
simply reinforce any silo thinking in the function.
Analytics is about qualitative as much as quantitative data.
Once better metrics systems and abilities are embedded, a specialist unit should not be needed.
The idea of a network of metrics specialists as an integrating mechanism is to be encouraged
for example, the way having balanced business scorecard champions in different functions, as
Merck Serono does.
However, the creation of a shared service function inherently operating across an organisation
provides a convenient platform to unify and increase the effectiveness of people reporting, when

Measurement and workforce planning


The BCG/WFPMA report found that developing
strategic people plans was weak. Few
companies systematically analyse the future
supply of, and demand for, employees, under
different growth scenarios and on a job-by-job
basis. Perspectives appear to be too short-term
and reactive, and thus inherently risky.
This reports findings confirm the above, often
with a predictive focus tending to be on top
talent and succession. However,
organisational review processes provide a
platform for better planning
some HR functions state right people, in the
right place, at the right time, as a core
deliverable
considerable interest and increased effort to
improve resourcing is evident, as Peter Howes
of InfoHRM, a leading specialist in workforce
planning, finds.
Our interviewees generally agreed that the
increased unpredictability of operating
environments creates a need for more not less
sensing capacity and scenario building. Hunches
and assumptions need to be tested more than
ever. It is better to get the future imprecisely
right than precisely wrong, said Howes, echoing
Steve Kerrs advice to use the 80:20 principle.
CRF is undertaking a specific research project
on the topic of strategic workforce planning in
2009.

it is used as a more enquiring, strategic measurement lever rather than simply analysing HR
service data as described in the Rolls-Royce case study, its role becomes predictive, and
supports both improvement and change
the service centre is designed to support multiple functions, rather than functional silos.

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Statements from companies that, people are our greatest asset, drive me wild because they are rarely
backed by evidence. Theres an enormous gap between the rhetoric and the reality and I think its
insincere and inappropriate. Ed Lawler.

HR data and future performance

8.6
External reporting

In some of its reports, CRF has described how


Standard Chartered and Royal Bank of
Scotland are providing analysts and
commentators with evidence of people
performance, such as benchstrength and
engagement.
It is argued that these are predictive of future
performance, unlike accounting data which is
intrinsically historic. Former CEO, Sir Fred
Goodwin, placed great emphasis on providing
benchmark data showing how RBS compared
with other organisations.
The Operating Financial Review while not
required in UK law is nonetheless strongly
recommended as good practice by accounting
standards bodies.
This is designed to provide improved
qualitative, non-financial and forward-looking
information on company performance and
risks as given routinely to the company board
and is expected to include people data.
Working with CRFs sister organisation, the
Performance and Reward Centre, Sir Andrew
Likierman London Business School Dean and
the UKs leading finance academic has been
developing the concept of organisational
resilience.
This seeks to identify, not just measures of
sustainability as discussed within accounting
circles, but those factors that indicate an
organisations capacity to cope with business
uncertainties and to re-invent itself as
necessary. Likierman sees human factors as
centrally important.

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There are two sets of reasons why organisations should report on people factors to external
stakeholders.
Pull factors
It wants to project positive messages to
investors about how well it is run, and how it is building capability for future performance
potential employees about why it is a great place to work
communities and interest groups about how it seeks to be a good corporate citizen.
Push factors
The organisation is required, or feels obliged, to explain itself either because of regulation, or to
recover from a reputational problem. This is still an under-developed area for the following reasons .
Many management teams prefer not to reveal more information than they have to, particularly
if as often with staff survey results that information may be critical of their performance.
HR functions have yet to acquire the skills and disciplines to support the proactive marketing
of their organisations.
Regarding the latter, IMDs Professor Vladimir Pucik, poses fundamental challenges. What
evidence can HR provide to show how the quality of people management enhances their
organisations value? How is HR differentiating the organisation?
The employer brand concept provides a means of answering Puciks challenge in terms of
employer reputation, along with a distinctive employee value proposition. Several interviewee
companies are regular contenders in externally benchmarked Best Employer competitions.
However, another important question from Pucik concerns future economic value. How does
the data HR provides indicate that the organisation is better able to perform in future? There
have been some recent developments on this, as described in the column.
It is clear that there are forces at work to provide meaningful data. But what about the demand
for this information?
From a regulatory standpoint, cultural issues such as ethics and health and safety are more
important than evidence of performance culture, quality, innovation and profitability.
Regulators in financial services are interested mainly in risk-related information, ultimately
because of its impact on the stability of markets and hence the reputation of governments.

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The idea that financial data is clear and robust was always a fallacy and Enron has certainly proved it.
If good people data helps managers to run a business better, analysts should be interested in it too.
Steve Kerr, Goldman Sachs.

The picture as regards investors is mixed.


Doubts have long been expressed about the acuity of investment analysts and fund managers.
They have frequently stood accused of shallow analysis and sheep-like behaviour, and the rise
of index-tracking indicates limited faith in active investment.
Bob Cowell and Amin Rajan, doyens among observers of investment activity, have both
attested to CRF that most analysts show little interest in human factors. Cowell, in particular,
feels that analysts have little interest in what HR directors have to say. See the column.
Like analysts, private equity investors are also seen to be overly focused on numbers and the
business leaders they meet, although in practice their due diligence is more thorough.
However, some investment groups have declared a positive interest in areas such as human
capital data. These include members of the Enhanced Analytics Initiative, launched in 2004 to
encourage better investment research.
They identify extra financial indicators (EFIs) as, for example, the alignment of management
and board with long-term company value, the quality of HRM, risks associated with
governance structure, the environment, branding, corporate ethics and stakeholder relations.
A number of our HRD interviewees feel the information they provide for the board is of direct
relevance to perceptions of organisational performance.
For example, Stephen Dando of Thomson Reuters, was impressed by his interrogation from
active investors who particularly asked to see the HR director. He firmly believes that, in 10
years time, We will have more enlightened and articulate investors and there will need to be
better and more transparent people metrics.
We conclude that, in future, there will be increased demands for accurate and illuminating
external reporting, and that requires internal HR reporting systems to be more robust, together
with the capabilities to support them.

Investment analysis and human factors


Bob Cowell is founder of Makinson Cowell, the
long-standing capital markets adviser to bluechip companies. He points out that most UK
investment analysts spend only a few hours a
year researching a company some US analysts
take longer.
Id like to think they are interested in the fine
talent development programmes that
companies such as Diageo invest in but they
arent. They make judgements on the leaders
whom they meet mainly at results
announcements. Theyre only interested in the
chairman, CEO, CFO and prominent business
heads. Ive seen them go off and have coffee on
the few occasions the HR director is asked to
say something.
Cowell has not yet seen anything that will
change this culture, and enable a more
fundamental research model to emerge.
However, it is possible that the widespread
dissatisfaction with the financial sectors
performance in 2008 will trigger a reaction
especially if it were more widely-known that the
accusations of shallow research appear justified.
The opportunity thus exists for those
advocating more comprehensive human
factors data to be provided to challenge the
investment industry to improve its own
performance by focusing more on leading
than lagging factors, given that most
accounting information is backward-looking.

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HR FUNCTION STRUCTURE AND CAPABILITIES

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Introduction

Topics covered
9.1 Guiding principles to shape HR

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9.2 Reporting lines and HR governance

110

9.3 HR specialisms and expertise

112

9.4 Business and corporate HR

113

9.5 Using three time-frames to set HRs objectives

116

9.6 Organisational transformation unit

119

9.7 HR capability requirements

121

9.8 HR capability development

124

This chapter draws conclusions from


preceding chapters about how HR should be
organised, staffed and developed. HR
structure, reporting lines, specialisms and
capabilities are examined, as are the issues
on which HR directors should focus to
ensure their functions are positioned well
for the future.

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There is no one HR design nor one optimal size of HR function. Nonetheless, HR functions of the
future should be slimmer, yet more efficient.

Use of the Ulrich model

9.1
Guiding principles to shape HR

Use of the three-legged model for HR structure


is growing, but is not universal. Virtually all the
companies we spoke to have adopted it to some
degree. The findings here are from the 2007
CIPD/IES study of over 700 UK employers for
The Changing HR Function.

Over 80% have significantly restructured


their HR function in recent years, and
particularly in the last three years, to become
more strategic.
HR service centres are more suited to larger
companies two-thirds of those with over
5,000 employees have created one, while the
figure for those with under 1,000 is only 17%.
Two-thirds again of the larger organisations
group HR specialisms in centres of expertise,
though the number, nature and
sophistication of these varies considerably. It
can be hard for smaller organisations to find
and afford people of the right calibre.
The term business partner is in wider use,
but is highly variable in job size,
responsibilities and reporting lines bearing
out a general suspicion that it has just
become an alternative term for an HR
manager or HR generalist.
Only 4% of organisations all large had
outsourced the bulk of HR services, although
they might outsource more if the supply side
becomes more attractive.
Continued in next column.

What are the main considerations for designing the HR function structure of the future? These
are our overall conclusions from interviews and the literature on HR structure.
Originally advanced by Ulrich, the general concept of concentrating expertise around
centres, encouraging self-service, and using technology more effectively is a sound basis for
future HR improvement.
Aside from some progressive HR functions, most have yet to implement these ideas fully and
many are still learning how to do so.
What most undermines progress and the implementation of new HR structures is a lack of HR
capability the knowledge, experience and personal qualities of HR people.
HR has no alternative but to adopt more streamlined ways of working and must therefore
tackle its capability issue as a main priority.
The threat of competition to HR exists from consultancies, for strategic advice and process
improvement; and from outsourcers for HR services. HR must think and act like a business if it
is to survive and prosper.
The three-legged model shared services, centres of expertise and business partnering has
been widely adopted, especially by larger organisations. See the column. However, evidence
reveals mixed ability and variable levels of understanding. Note these points.
HR should not simply end up creating a new set of silos the inter-relationship between the
elements is as important as the way they are segmented.
HR should be clear about its dual purpose when to act in service mode, and when to guide or
control. Managers and employees need to know where they stand.
Ulrich recommends the addition of a corporate leg, representing the HR governance required
to manage people in a disciplined manner.
Organisation structures vary considerably in size, complexity and geographic spread and HR
structures should reflect these organisational needs. Hence there is no one HR design that can
cover such varied entities as small companies, global operators and government departments.
Similarly, there is no one optimal size of HR function. While several HR directors told us they
were aiming at ratios better than 1:100, the right proportion depends on factors such as
business needs and the abilities of HR staff. Nonetheless, HR functions of the future should be
slimmer yet more efficient reducing in size by up to 50% or more if moving from labourintensive administration to self-service.

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Wendy Hirsh

In the diagram below are the building blocks that experts and HR directors agree should provide
the basis for any HR function. They can apply to a company of any size, scaled down to
individuals or up to teams. However, we stipulate some design features to address issues found
in implementing the three-legged model.
HR Organisational Blueprint
CEO

Use of the Ulrich model (continued)


Small companies with small HR functions are
likely to continue to have a single HR team
mixing generalists, affordable specialists and
administration.
We see the potential of small consultancies for
providing expertise and outsourced
administrative services.

HRD/CHRO

HR Specialists

Corporate HR

Centres of expertise
Consultancy

Policy, Strategy
Risk management

Local HRDs
(or BPs)
on mgt teams

HR Services
Administration
Advice
Data management
HR technology

Large companies have varied arrangements to


service their local operations. They too may
retain some composite HR teams, or dual-role
people being both a business partner and a
specialist, for example.
The CIPD/IES study concluded that
interpretation and understanding of the Ulrich
model was variable.
Note, as we pointed out in Chapter 3, that
Ulrich himself argues that there is a fourth leg
corporate HR, comprising the HR leadership
and policy-making team.

The arrows in the diagram between Corporate HR, HR Specialists and HR Services denote close
interaction and co-ordination.
We see organisational effectiveness (OE) skills as important for specialists, HR directors and HR
managers. Some interviewees feel that OD is not always interpreted in a sufficiently businessoriented way OE is increasingly the preferred term. Nobody in the line knows what OD means,
and neither do many in HR either, says the well-known independent researcher, Wendy Hirsh.
HR specialists may work as internal consultants for parts of the business, or as policy shapers
and project managers on organisation-wide issues for the top team and HR director.
Specialists should operate as a flexible pool of expertise.
In a large company, local HR directors or HR managers/business partners should be members of
management teams Ulrich refers to these as embedded HR who represent the HR
governance chain of command. They will be the conduits for commissioning work from
specialists. Their roles should require regular knowledge-sharing with all three elements above.

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HR tends to configure itself into silos. But business problems dont come in neat functional shapes.
Geoffrey Matthews, Merck Serono.

Who owns the project? Avoiding conflicts


When HR managers or directors in business
teams involve in-house experts in tackling a
business problem, issues concerning
relationships and skills may arise.
Specialists will develop their own internal
relationships with management colleagues,
and this helps them with business issues.
However, they should avoid undermining the
position of the local HR leader by competing
for the attention of the client.
HR managers need to be timely in bringing in
their specialist colleagues. As with external
consultants, the experts may observe that
trouble could have been avoided if they had
been involved earlier.
Professional disagreement is another issue to
be considered managers wont be impressed
if HR colleagues compete about their advice.
HR directors thus need to think about both
capabilities and personalities when designing
their HR structure.

Where the services centre becomes multi-functional, as described in Chapter 7, its reporting
line would switch to an operations director or COO. However, close linkages with specialists,
corporate HR and HR directors/managers must be preserved, and not undermined by a
change of reporting.
See the Standard Chartered case study for an example of how this simple design is interpreted in
a large global company. Note that they have formally separated Group policy specialists from
locally-based specialists, and HR Technology from HR Services.
Common criticisms of the Ulrich model
Creating centres of excellence can end up with remote experts delivering gold-plated
but impractical policies.
Business partners can end up becoming too wrapped up within their business unit to
appreciate the overall needs of the organisation.
Adoption of the service delivery model may also be regarded by employees as making
HR seem more remote.
The segmentation of HR into these three separate areas can make HR feel disjointed if
silo behaviour sets in.
However, these criticisms relate to implementation of the model rather than its faults.

9.2
Reporting lines and HR governance
Certain principles should be articulated to ensure clear lines of responsibility, and that HR is
embedded into the management of the organisation.
As indicated in Chapter 4, the senior executive in charge of HR should always report to the
CEO the importance of people management to the business demands it. If there is an issue
of calibre, that needs to be fixed.
Divisions and subsidiaries should also have a senior HR executive whether called director, VP,
manager or business partner as a full member of the management team. A common preoccupation for our HRD interviewees is the quality of these key individuals since the internal
reputation of HR depends on them.

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Generally, the direct reporting relationship will be to the business area head, just as the HRD
reports to the CEO. A dotted line relationship would exist with the Group HR director.
The nature of direct and dotted line relationships needs to be clearly understood.
Typically, a group functional head will take the lead in recruiting and overseeing the technical
aspects of what the divisional functional head does, but with the final decision on
appointment residing with the business head.
Performance reviews should be led by the business head, but with significant input from the
functional head, particularly in respect of development and career issues.
Generally speaking, direct functional reporting lines are not advisable if HR directors are
members of their respective management teams. However, there can be hybrid arrangements
where, for example, an HR executive sits on more than one management team.
An HR manager or director for head office or group functions should be considered especially
if these functions are large, but also to ensure that functional needs are understood in depth.
Function heads should naturally be involved in their performance review.

The end result should be that both performance reporting lines and HR governance
structures are clear. When an organisation is decentralised, tensions may occur if local
business heads are independently-minded. Thus, agreeing common frameworks and
shared ways of working become crucially important to retaining organisational cohesion.

People strategy development


A prime activity in HR governance is the
development of people strategy. As
recommended in Chapter 6, this should be seen
as part of the business strategy process as
people are intrinsic to the business. Thus
business teams should be the start and endpoint for the people part of business strategy
detailed preparatory and support work is
contributed by HR.
The more line managers are involved in the
design of people strategy, the more they will
understand and own it including the parts
that managers find difficult to implement
because it requires behavioural change.
For an example of how to embed managers in
strategy formulation, see the process designed
by Ralph Christensen the Senior HR VP at
Hallmark Cards Inc, whose practical work has
influenced Ulrich and others as described in
his 2006 book, The Roadmap to Strategic HR.

Disciplines for agreeing HR strategy should be clarified and how both HR and talent agendas
are addressed as part of a regular cycle that links to board meetings. Note how Prudential and
Standard Chartered do this, as described elsewhere in the report.
Should HR reporting lines follow organisational structures?
Generally yes, as there should always be a business-skilled and technically-capable HR
executive working on management teams. However, sometimes the job size will be too
small to justify someone of the right calibre dedicated full-time to every team.
We recommend a high quality HR executive covering several parts of the organisation
rather than a junior appointment. This should not be a relationship manager, but
someone regarded as an important member of the management team.

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Technical experts dont naturally talk to each other theyre protective of their patches. They need to
be re-oriented to come up with joined-up holistic solutions to meet business needs. Geoffrey Matthews,
Merck Serono.

Suggested HR expertise areas

9.3
HR specialisms and expertise

The following example groupings reflect ongoing strategic priorities for most organisations.
Engagement, including employer brand
management and employee surveying.
Talent management, resourcing, workforce
planning.

For HR to demonstrate greater added value, the quality and deployment of its specialist
resources is of central importance. How should HRs various specialisms best be organised?
Grouping specialists
There are two principles to take into account in designing centralised expertise groups.
Specialist disciplines

Learning and development.


Performance, recognition and reward.

The more traditional approach is to group specialists according to the areas of HR practice they
specialise in, such as compensation and benefits or recruitment.

Research and analytics.

Organisational priorities
Centralised expertise may also be required in
areas such as industrial relations, health and
safety and HR technology.
We recommend, in particular, the creation of an
organisational transformation group see 9.6
on page 119.

A better alternative is to group specialists in business solutions groups, designed to tackle


organisational needs such as talent management that require a mix of disciplines. A
performance, recognition and reward group, for example, would be less prone to narrow
thinking about pay.
Business solutions groups can evolve and change according to organisational needs they can be
seen as project teams if necessary, or exist to deal with perennial issues, as indicated in the column.
Communities of practice can be used as a way to focus on standards and career
development of underlying disciplines, such as L&D, which have application in many aspects
of business improvement.
A useful discussion of the design principles for centres of expertise is provided in an awardwinning article for Human Resource Planning by Amy Kates in June 2006, (Re)designing the
HR Organisation.

Locating specialists
Additionally, there is the issue of where HR specialisms are located.
The logic behind the creation of centrally-located centres of expertise is to group specialists
together to serve a large organisation, rather than distributing them among different business
divisions or subsidiaries and thus having a profusion of small HR departments. The
advantages include more economic use of resources, better sharing of knowledge, and more
organisational cohesion.

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Local businesses and divisions tend to go for the opposite, in order to have expertise locally.
This may be for practical reasons singular local needs or geographic distance, for instance
or because local business and HR heads just prefer it that way.
As with most aspects of business, there are cost and quality issues.
A high quality, and good value, central resource will look attractive to a cost-conscious local
business head, if it is clear how overheads have been reduced.
A centrally-located function has to be effective at managing relationships, service and
acquiring local perspectives to overcome perceptions of distance, and thus avoid local
management teams wanting to revert to local specialists.
An HR director will need to judge the depth of resource required and, depending on the work,
the laws of supply and demand will not necessarily apply efficiently. For example,
local management teams may not want help, or may need it more than they realise
consultancies or interim hires can fill resource gaps which can be an advantage if such hiring
is centralised rather than diffused. Managing the overall consultancy bill is another reason for
having a centre of expertise.
Where it is agreed that specialists should be deployed both locally and centrally, the linkage
between them needs to be considered carefully, to ensure alignment and knowledge sharing.
This always applies when specialists are dispersed. At the very least, they should be part of a
recognised community of practice. The other end of the spectrum is that they are secondees
from the centre.
In future, we predict that more organisations may choose to co-locate centres of expertise
with HR service centres, if they have them, for the reasons suggested in Chapter 7.
However, location is less of an issue if specialist roles involve them being out in the
business on a regular basis.

9.4
Business and corporate HR
The business partner
As already indicated, the term business partner is a currency of variable worth an issue
discussed in the next section. The points here refer to those who are members of management
teams alluded to in 9.1, whether called HR managers, divisional HR directors or vice-presidents.
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As an HR director, having a good Number 2 is a huge advantage. I could get up all sorts of drainpipes
and find out what was really happening. Don Young, former HR director.

HR in the business
The more HR is intrinsically involved in the
front end of the business, the more respect it
receives and the more value it contributes.
Vladimir Pucik, Ed Lawler and other business
academics have long stressed the importance
of HR becoming closer to the organisations
customers to understand better how to
support and design roles, development
programmes, performance frameworks, etc.
Here is an example of how HR at Serco actually
does this. See also the BAE case notes in the box.
The Serco Case

Serco is a global provider of outsourced services


for both the public and private sectors.
Examples in the UK are running prisons,
defence establishments and the Docklands
Light Railway. In 2008, it employed 50,000
people, but this is increasing rapidly as it wins
bids to run operations such as the Dubai Metro.
Serco has also acquired Infovision, one of Indias
largest call-centre businesses.
HR Director, Geoff Lloyd, explained that, while
he has a full corporate HR agenda, his function
is unusually strong in change management
because his HR managers are closely involved in
bid design and implementation.
No bid takes place without a strong HR
element, from the legal aspects to the transition
of staff onto our books. This is not just about
TUPE the involvement starts in business
development, which is unusual in HR.

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Ulrich, and others who described the business partner role, see it as akin to a GP who calls for
specialist help when needed. In addition, they encourage colleagues to use HR service centres
more proactively and effectively. The thinking is that business partners should potentially require
little or no staff as a consequence, thus contributing to a reduced overall cost base for HR.

In practice, organisations vary immensely in how they implement this role.


Line managers often still prefer the thought of their local service and, as discussed in Chapter
7, may take some weaning off it.
Some HR managers like having staff reporting to them it boosts their sense of importance.
Others are not yet ready or able to be as strategic as they should be.
In small companies or subsidiaries of larger organisations, there can be good reasons why it is
more practical to have some local specialist and/or administration resources.
So what is the future likely to bring?
The more HR services builds internal customer confidence and usage, the slimmer business
unit staffing will become.
The more HR business team members acquire OD and OE capabilities, the more authoritative
their advice will be and the more effective they will be perceived. They would still draw
support from elsewhere to provide training and development, coaching, facilitation, etc, to
support performance improvement and capability development.
Retaining a deputy is valuable, to provide greater capacity and cover in the event of absence.
This also provides a development position for less-experienced HR managers.
In summary, the only radical difference is increased personal knowledge and skills. The position
is no longer being a generalist, but being the local organisational effectiveness champion.

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HR in the business: BAE Systems


John Whelan, HR Director of BAE Systems Military Aircraft Division, has been at the heart of
re-shaping this 3 billion turnover business and its 16,000 people from a manufacturer into
a services provider a massive cultural and logistical shift. Rather than just making aircraft,
BAE is becoming a through-life services organisation. This includes taking ownership of
engineering and training services for customers like the Royal Air Force.
Partnering the customer is the new skill here. HR is on the front line, working jointly at
airbases with the RAF on staffing and culture transition issues. People are joining the
armed forces and ending up as BAE employees. HR is central to scenario planning and in
the bidding phase as a major part of the risk is people-based. In the on-base work that
follows, we have to be both commercial and adept at customer relations. Our HR managers
negotiate day-to-day and we cant just be nice. We have to make a profit.

Should the title be abandoned?


As discussed in section 3.4, the wide adoption of the business partner title has caused
considerable confusion among HR professionals, managers and employees. Ulrich stressed that
what he proposed was partnering all HR people should work closely to support business
agendas, not an inward-looking HR agenda.
When applied to senior executives on business teams, critics suggest that other functions such
as finance, marketing and IT have not felt it necessary to adopt such a term.
It still seems to convey a degree of separateness that HR needs to avoid.
When applied to different levels of HR executives with different responsibilities and
reporting relationships internal customers no longer know what it conveys.
For example, some L&D functions have a business partner cadre. While this may help focus
resources on different parts of the business, there is confusion with other interpretations of
business partner.
So, should the term be dropped? Arguably yes although with the momentum it has
acquired, this would take concerted effort. It is best used as Ulrich originally intended as
a description of an approach to HR not a job title.
Ulrich, and his occasional research partner, Professor Wayne Brockbank, have recently used an
alternative term. They refer to embedded HR HR professionals who act as a generalist or a
business partner in their organisational unit. We dont see such terminology being sexy enough
to catch on.
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HR re-structuring consult your customers


Many larger organisations have adopted the
three-legged model, and more intend to do so.
Once initial cost reductions and re-structuring
have been achieved, a new norm is established.
Our interviewees indicate that new challenges
then emerge. These include

CRF will stage a debate on this topic in September 2009 as an opportunity to reach a collective
conclusion with members.
Corporate HR
There are two dimensions to HR specialisms that, in larger organisations, are grouped into
centres of expertise.
Control setting policy requirements, monitoring adherence, and corporate change projects.

how to maintain positive views about what has


been achieved

Enabling providing an organisational service either centrally or with business teams,


increasingly referred to as HR consultancy.

how to avoid relapses and cost creep where


local administration and specialists start to be
re-created, for example.

There is tension between these roles. The policing aspect of HR has always been unpopular,
and has been lampooned in Dilbert cartoons. It is preferable to keep the control and enabling
roles separate.

A first priority is to ensure that quality standards


are met poor service is of more concern to
users than cost.
A second priority is to position the re-shaping
of HR, not just as the function addressing
internal issues, but as a shared project with line
management as the internal customer to
improve people management in which every
manager has a part to play.
Local management teams need to feel some
ownership, and be party to planning and
sharing information before, during and after HR
re-structuring. All methods of involving and
communicating with managers should be used
by the local HR head, but also by other HR
professionals such as service centre managers
and heads of centres of expertise.

First, both HR consultancy and HR service activities can help managers and employees to
comply where needed while also giving feedback to policy-makers about what is unpopular
or not fit-for-purpose locally.
Second, there can be good reasons to create a small number of central posts to support the HR
director in the control role.
Tackling policy work in discussion with HR specialists and services.
Supporting HR governance in monitoring and advising, for example.
Though not concerned with internal service, corporate social responsibility can also be included.
This should allow OE centres of expertise to focus primarily on providing a consulting and
facilitation service. This happens to some extent at present but should be defined more
sharply in future to reduce any confusion about how the three-legged model is interpreted.

9.5
Using three time-frames to set HRs objectives
Organisations are structured in many different ways and may need to evolve quickly as business
circumstances change expansion, contraction, M&As, new markets, etc. Merely adopting a
different HR structure does not in itself guarantee that HR effectiveness is improved.

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The three lenses should be HRs focus - doing a good job now, making improvement happen and bluesky thinking for transformation.

A simple way to re-orient HRs activities that fits any HR structure from an all-in-one department
to the Ulrich model is the use of three lenses, as shown in the diagram. These provide a way of
both thinking and channelling HR activities, and then organising work accordingly. It also aligns
with business needs. Every HR director we spoke to supported the concept.
3 Lenses
Now

Time-frame

Current needs

Improvement

HR services

HR specialists

Future

Transformation

.T
.U

NI

Lenses

Short/medium
term

HR BPs or
generalists

Lens One

whatever HR needs to do to help leaders, managers and employees manage the


current business.

Lens Two

helping to identify and facilitate improvement in the short-to-medium term of up


to a year.

Lens Three focusing on the long-term future, identifying radical change, supporting
innovation and stimulating breakthrough thinking.
These three lenses match three types of objective on which any organisation should focus.
Doing a good job now.
Learning and making improvement happen.
Blue-sky thinking and longer-range development of breakthrough strategies and genuine
transformation.

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The diagrams below describe how different parts of HR could use the three lenses.

HR Services
Lens

Responsibility

Current

Providing day-to-day services: planned


processes, response to customer calls

Improvement

Analysing data and customer feedback: ideas


for improvement feedback to BPs and
specialists, initiating or involved in improvement
groups

Future

Analysing data and customer feedback:


generate ideas for and with OE specialists

Business/strategic partners or generalists

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Lens

Responsibility

Current

Liaising with Services: mutual updating on


business needs, commissioning work
Working with line management to guide
implementation of current business strategy and
people policies

Improvement

Developing business plans with management


colleagues, and refining people component
Identifying areas for improvement, using and
interpreting people metrics, working with
Specialists and managers to develop, implement
and review improvements

Future

Contributing and facilitating strategy discussions


Facilitating discussion of radical change with
management colleagues
Liaising with OT unit and HR Director to develop
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There is a glaring gap in most organisations as regards the third lens who is in charge of taking the
organisation into the future?

HR Specialists
(eg L&D, Reward & Performance, Engagement & Brand, IR/ people
policies, Analytics)
Lens

Responsibility

Current

Interpreting current policies to support HR


Services and BPs
Analysing current practices to facilitate
improvement (eg via engagement surveys)

Improvement

Working with BPs and the line to improve


practices and behaviour
Researching and developing policy, practice and
process improvements
Providing educative programmes

Future

Contribution to strategy and planning ideas,


data

We recommend that all parts of HR be invited to participate, and be supported, in improvement


initiatives, and contribute to long-term, transformational ideas about the functions future.

9.6
Organisational transformation unit
There is a glaring gap in most organisations as regards Lens Three who is in charge of taking
the organisation into the future? Often, minimal resources are devoted to this, compared to
dealing with today. The future tends to fall to CEOs and strategy units, but much more is
required to focus the entire organisation on future competitive advantage.
Most HR directors we spoke to have not filled this gap. However, here are relevant examples.
At Hewlett-Packard, OE and OD specialists have been working on this for years.
Steve Kerrs work at GE fell into this category.
A multi-disciplinary innovation team at Scottish & Newcastle is challenging and facilitating
parts of the organisation to devise and implement new ideas see CRFs 2007 report,
Embedding Creativity and Innovation.

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The new space to be in for HR is creating value through better internal and external collaboration.
Thats not what HR people tend to talk about but they should. Stu Winby.

We hesitate to use the word transformation because it is employed in the HR context as


shorthand for outsourcing or creating service centres. However, as we see it, the role of an
organisational transformation unit (OTU) is about holistic organisational change, rather
than just HR a corporate re-invention centre. The way it uses the three lenses is
described below.
HR Specialists Organisational Transformation
Lens

Responsibility

Current

Scanning dashboards and feedback re current


issues

Improvement

Working with teams in HR and the line to


improve policies, practices, behaviour
Steering/providing project management of
change initiatives
Contributing to corporate business plans, inc
workforce and resourcing plans

Future

Working on future strategy, analysing internal


and external intelligence, developing scenarios
and business models with Strategy Unit,
undertaking organisational reviews , design of
change processes, planning and facilitation of
M&As and other re-structurings

We envisage an OTU as a small group of highly-experienced organisation experts working


closely with the CEO and top team, and with a strategy unit. In a small company or division, this
could be a single individual, a trusted consultant, or embodied in the HR directors portfolio. In
terms of resourcing and skills, this unit
should be multi-disciplinary IT, operations management, finance, marketing and OD in its
staffing, all with a high level of business expertise
can exist as a virtual team, drawing on resources from elsewhere, including external advice
will have an HR component with skills in organisation design, development and change
management
should possess project management capability, enabling the unit to move from blue-sky
thinking to design and implementation, with a continuous learning and feedback loop
may incorporate a research function for long-term scanning, although this could also draw on
other resources that have relevance product or service R&D, for example.
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Conceptually, the work of an OTU should be seen as a corporate asset, a key enabler of added
value and differentiation, as well as long-term organisational resilience. Its value lies chiefly in
enabling smoother change, and avoiding collateral damage, because of a far higher quality of
design and strategy implementation
using consultancy support selectively and appropriately

Not just about IT systems change


Note that some organisations have created
business transformation posts. These are
nearly all IT-related, and hence potentially
narrow in focus.

as a result, far better ratings by stakeholders for leaders regarding how they manage change.

They tend to be more akin to super-project


manager jobs related to systems change.

A transformation unit does not necessarily belong in HR. As a multi-disciplinary team working
with strategy, it could report to the CEO.

This misses out the OD dimension, and the


holistic perspective we are proposing.

If, however, the HR director and function have embraced the organisational effectiveness
challenge and hence the responsibility for organisation design and driving change then
their contribution to this unit is exactly how they would make a major contribution to the
third, future-oriented lens.

9.7

As yet, few companies have seen the


importance of the third lens, and why it needs
a dedicated resource.
BT is a good example to follow its
transformation director, who was at the heart
of future strategy and a confidante of the CEO,
helped lead a CRF masterclass on change
management.

HR capability requirements
Preceding chapters have indicated the kinds of knowledge, skills and orientation required for
HR to tackle its current and future challenges. We have described these for HR directors at
Group, divisional or subsidiary level in Chapter 4.
Books and articles by Lawler, Ulrich, Brockbank and other experts, as well as HR reports and
surveys, all send the same message about the future competencies required for the HR function.
Professional associations are starting to use the same language.
More knowledge about business, markets, operations, processes, finance and technology.
Better understanding of the organisation itself and its sector whether private or public
service or not-for-profit.
Sound grounding in the classic HR functional knowledge areas underpinned by an
understanding of related theory.
We add also an understanding of individual and organisational psychology, without which an HR
professional will have few behavioural insights.

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Kai Peters - CEO
Ashridge

A painful transition

Equally important are these behavioural characteristics.


Influencing ability good listener, effective persuader and negotiator.

Re-engineering in HR as in any function


typically involves assessing new capabilities,
and shedding those that dont fit. This is a
typical example from an HR director.

Courage to stand up for what is right, and prove it.


Resilience patience, calmness and persistence.
Service orientation not the controlling, bureaucratic behaviour of old HR.

Weve been raising business partners from the


basics up to OD level, encouraging them to
become strong business influencers. The move
is from that of helper to a cutting edge,
transformational role.
We started four years ago, and took out half
of 50 generalists. We worked on a dozen but
only three made it to the end of the
assessment and development. It was a painful
process. Eventually, we recruited 30 really
effective people.

Proactivity taking the initiative to identify opportunities and solutions, float ideas and draw
up business cases to support them.
Additionally, practical skills and knowledge areas, such as being numerate and able to express
ideas clearly and write well, are important.
CEOs want proactivity solutions not problems
I have yet to meet an HR person whos come to me with an idea or suggestion which spots
and resolves a business problem this is surprising, because thats what makes one
valuable to an organisation. Instead, I hear reasons why things cant be done. Kai Peters,
CEO, Ashridge. Other CEOs have voiced similar views in previous CRF research.
The answer, as at BAE Systems, starts with rethinking HRs purpose and building this into
work and objectives.
HRs role is to understand the business and its external environment, ask challenging
questions and bring innovative solutions to business problems. Alistair Imrie, Group HRD,
BAE Systems.
We would argue that these requirements apply to all kinds and levels of roles in HR whether in
service centres, being the HR member of a management team or working in a specialist area,
including young entrants.
The diagram opposite shows a general capability framework for HR. Note the base of business
and functional knowledge, applicable to all. At a more advanced level, higher order skills are
required, including
business and organisational analysis
project management
understanding technology
client management disciplines
facilitation skills

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We have well-intentioned, motivated people, with a strong service orientation, trying hard to deliver.
Theyre light on challenge. Many have the necessary intellectual raw material, but theyre not applying
it to the right issues and business challenges. Thats what our development programme must address.
HR Director.

in addition to the knowledge areas listed. A yardstick for success is to be seen to provide a better
service than can be bought from consultancies.
HR Capability Framework

Effective
tomorrow

CEO &
Board
Adviser

Leadership

Consulting skills

Org

anis

atio

nal

Effe

ctiv

ene

ss

Culture
Business &
HR strategy
Organisation
design
Organisation growth
and development
Leadership skills &
coaching
Talent management
Engagement
Innovation and improvement

HR Functional
HR Business
Knowledge
Knowledge
Learning &
Strategy &
development
planning
Performance
Markets &
management
competition
Recognition & reward
Metrics & finance
Effective Organisational
Resourcing
today
Employee relations and law
psychology
Communications
Operations &
HR systems & technology
processes

Administration
skills

This kind of capability blueprint should be augmented by a detailed competency framework


showing requirements for
skill areas operations, communications, customer relations, project management
specialisms L&D, employee relations, OD and OE
and indicating for more general capabilities the levels to be achieved as responsibilities and
role grow.

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We spend a great deal of time training HR people. We send them to business schools and universities
such as INSEAD and Michigan, rather than use CIPD college courses. I find the best development tool is
two years in a role and then rotate. Vincent Thomas, Barclays.

Rolls-Royce: HR professional development


Tom Brown was recruited as HR director to help
transform the company from a UK-oriented
engine manufacturer to a global power systems
provider. To do this, HR needed to be reshaped
and overhauled.
HR has already become more influential and
effective, because were injecting a performance
culture into ourselves as well as the company.
Ive laid out a strategy for us to become a
function that is valued internally, so much so
that people will be desperate to join us. Our
young HR high potentials are particularly
enthused by the new direction.
Everyone in Centres of Excellence and business
partner roles went through an assessment for
development centre, which looked at both
behavioural and technical competencies, using
external assessors giving feedback within 48 hours.
The results shocked quite a few, and some opted
out as they could see a higher bar being set.
This allowed us to bring in new talent, and
create a different understanding of what was
expected. We also moved people around within
HR in terms of roles. In future, we will become
better at doing this.
Weve just launched a professional development
framework, which articulates the new expectations
and criteria for progression to more senior roles.
Weve upgraded our learning management system
and provided self-assessment tools. We are staging
masterclasses specifically to sharpen business
acumen and change skills.
These activities are in keeping with Rolls-Royces
commitment to professional development in all
disciplines, over many years, including close links
with universities and professional associations.

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While a generic framework is a useful guide such as that recently developed by the CIPD
each organisation should make explicit what it wants, especially its business-related needs. Its
just as critical for people in service and specialist roles to be as business-aware as managers and
directors. If not, their advice may become disconnected from reality. See, for example, the BT
case study for its HR capability framework.
At present, internal customers of HR tend to respect the ability of individual HR people they
meet. Yet their overall impression of the function is less positive see our notes from the 2008
IES study, What Customers Want from HR, in Section 3.3. Therefore the aiming point in
regular customer reviews of HR should be that everyone in HR they deal with is professional,
knowledgeable, responsive, gets things done, etc.
Finally, we reproduce in Appendix 1 Ulrichs most recent thinking on HR roles. This complements
what we have proposed but offers new descriptions that update his original roles of business
partner, change agent, employee champion and administrative expert. As before, he seeks to
provide a catch-all description for HR as a whole.

9.8
HR capability development
As we have indicated, the core issue for HR is not its shape and structure but its attitudes and
abilities. In this section, we review how the HR community can address these.
Knowledge and skills programmes
We have stressed the difficulty of attracting high quality graduates into HR, and that many HRDs
are unimpressed with how well young graduates are prepared at colleges and business schools.
What then are organisations doing themselves?
Many of our interviewees noted that HR and its L&D specialists tend to be busy devising
development programmes for the rest of the organisation but not tackling their own needs.
A striking number referred to a cobblers children mentality.

When money is tight, there are inhibitions about proposing investment in HR training.
There is also a reluctance to be seen as admitting a weakness. But, actually, there would be
much support for a higher skilled HR function, said Ed Lawler.

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Note these points.


We find that continuing professional development is not rigorous, as discussed in the 2005
CRF Publishing report, The Future of HR. Too many HR people dont read and cant count,
one HR director commented caustically.
While commercial and professional association courses/conferences are readily available, in
our HR directors view, the quality is variable and is not particularly leading-edge.
There are few options for more senior level development hence the growth in joining
dedicated networks and forums like CRF, where peers can learn from each other, as well as
from thought leaders.
For the relative few in HR who take the academic route to self-improvement, good businessoriented HR courses are hard to find. In the UK, some practitioners have taken Masters in
organisational psychology. In Germany, there are the occasional PhDs in companies.
While cultural attitudes differ around the world, the pressures of the HR day job make parttime study difficult and employers do not demand advanced HR qualifications.

Relationship continuity a neglected HR


feature?
While movement may be desirable for
development and career purposes, HR directors
also need to consider how to ensure continuity
of thinking and service.
Noel Hadden of Deutsche Bank made the point,
in CRFs recent research into coaching and
mentoring, that internal customers like
external ones can find it annoying if the HR
adviser in whom they have invested time has
moved on, and they have to build up a new
relationship with someone else. The cycle may
then repeat itself and matters become more
confused if a newcomer has different ideas from
the predecessor.

Inside companies, HR is usually eligible for general management talent development


programmes. However, this tends to be for a select few, who may then be tempted to move
out of the function. This neither improves HR-related capabilities, nor those in the HR
function generally.

This may prompt managers to work with


external consultants and coaches because they,
ironically, may provide both more experience
and be available over a longer period than
internal appointees.

However, some progressive companies are offering bespoke HR development programmes.

Staffing policies and corporate memory need to


be worked on to resolve this but it helps to be
sensitive to the issue in the first place.

Royal Bank of Scotland was among the first in the UK to do this, using Cranfield.
BAE Systems programme was designed with Professor Wayne Brockbank at Michigan.
We also describe briefly activities in Rolls-Royce and BT see the BT case study in Chapter 10.
Such programmes go hand-in-hand with devising a professional development framework, as
noted in the previous section. The success of these can be measured through HR function
service surveys.
Career development
As with any talent programme, on-the-job development, experiential learning and career moves
are essential elements. Note these points.
While there is nothing new about moving HR people around different disciplines or around
the business not all companies do this rigorously.

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The repositioning of HR as a driver of organisational effectiveness is central to the functions


reputation.

BAE Systems: HR professional development


Like Rolls-Royce, BAE Systems is undergoing a
radical transformation in its business model,
and recognises the importance of up-skilling in
HR for the success of this transition. In 2004, it
began to re-define HRs contribution to the
business. These are some essential points.
Developing a new profile of competencies,
testing this with line managers and then
using performance management and
development plans to drive progress.
Commissioning Wayne Brockbank of Michigan
to provide a high-level, functional skills
programme. He has now produced this as a
case study of good practice published online
in 2006 by Wiley Interscience. Michigans
research into HR competencies guided the
development of BAEs HR competency profile,
and provided benchmark data.

Supervision of HR talent needs to be considered carefully if middle-rankers still fall short of


expectations. When undergoing what can be a painful transition, it is important to keep
encouraging those on whom the functions future reputation depends.
For some, moving into specialist areas will be a career anchor. For others, it is just part of the
path to HR director.
Generalists have historically been seen as masters of nothing. The bar now needs to be set
higher and in a lean, future-focused function, there should be fewer or no roles for those
who are not on a path towards HR director or specialist roles.
Segmenting HR into service centres and areas of expertise can create silos. Some will choose
to specialise in service management. Others may want to focus on OD, L&D or reward.
However, the structure should not be an inhibitor to lateral movement of transferable talent.
Moving in and out of HR
As identified in CRFs 2002 report, The Career Issues of Corporate Functions, those in HR
who have worked in other disciplines, and line roles in particular, often have these distinct
advantages.

The learning methods reinforced through


project work, learning-driven opportunities
and consultancy support have been
specifically used to deepen OD skills and
experience.

Life experience.

As at Rolls-Royce, initial audits and assessment


were used to establish who was willing and
able to make the necessary personal transition
coaching was used in support, as needed.

There is nothing new about people entering HR from other functions and disciplines. In future, this
should be managed as a positive talent-building move.

The programme has been followed up with


development electives to cover important
areas of professional competency, such as
organisation design and development,
employee relations, business and financial
awareness, service provision and personal
credibility.
Continued in next column.

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Projects and secondments provide an excellent opportunity for HR talent to work on businessimprovement ideas, and to show their capabilities as ambassadors for the function.

Understanding the internal customers perspective.


Credibility with managers.

Note that this challenges the narrow view of HR as a profession, with all the connotations
of exclusivity that this implies. Rather, it supports the reality that effective people
management requires involvement in, and with, the business
The repositioning of HR as a driver of organisational effectiveness is central to the functions
reputation. The overview of the business and the opportunity to make a significant difference
should be core attractions in HRs employee value proposition. This should work both ways.
Talent should be more attracted to HR as a place to get ahead.

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It should be easier to place HR people in other parts of the business for broadening purposes,
because they become known for their insights, and practical skills such as project management.

BAE Systems: HR professional development


(continued)

Indeed, HR functions, and HRDs in particular, should determine a desired mix of people with
HR or other career anchors, as a way of ensuring that teams have an inclusive picture of
business realities.

The HR graduate entry programme has been


adjusted to enable more rapid movement
along the learning curve.

In a number of organisations we spoke to Hewlett-Packard and Scottish & Newcastle, for


example there were examples of high-achieving individuals who had moved into HR from
elsewhere. They were cited as role models to encourage more movement in and out of HR.

There is a programme of HR conferences that


feature experts, senior BAE managers and
customers in addition to a best practice
sharing and recognition event.

In addition, using secondments in and out of HR on improvement projects, for example


should improve the quality of HR work, build co-operative relationships across functions and
business areas, and provide good development opportunities for all concerned.

An online learning resource centre has been


developed, including input from external
sources.
In order to build HR into business operations,
everyone has been trained in life cycle
management (LCM) processes, including
serving as assessors. Some senior HR executives
act as LCM chairmen, looking at stages in
process/innovation development.
BAE Systems encourages experienced people to
join HR from project management and
commercial areas. They are given projects in HR
knowledge, are coached and mentored, and
take on some self-learning, to onboard them.
John Whelan, who played a key role in managing
the development programme, reports that there
was a 120% rise in the approval rating of the
function in its annual satisfaction survey,
following the Brockbank programme.
Inevitably, you reach a new plateau but
further improvements will take us higher.

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CASE STUDIES

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Introduction

Topics covered
10.1 Hewlett-Packard

130

10.2 Standard Chartered Bank

132

This chapter provides five case studies


illustrating approaches and practices we
recommend for the future.

10.3 Musgrave

137

Hewlett-Packard

10.4 BT

141

Developing business acumen and OD


capabilities among line managers and HR.

10.5 Rolls-Royce

146

The adoption of organisational


effectiveness as a core competence for HR.
Skills development regime for HR.
Standard Chartered Bank
Governance system for people
management.
Talent and performance system.
HR professional development adoption
of organisational effectiveness.
Musgrave
Employer brand management.
Leadership and talent development.
Development of the HR function.
BT
Culture change in HR.
HR capability framework and development.
Measurement.
Rolls-Royce
Purpose and creation of shared services.
Their development and evolution.

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"It is essential that people work in unison toward common objectives and avoid cross purposes at all
levels if the ultimate in efficiency and achievement is to be obtained." Dave Packard, HP founder.

Facts about HP

10.1
Hewlett-Packard enriching HR quality

HP employs over 140,000 people in 178


countries, doing business in more than 40
currencies and using more than 10 languages.
It has three broad regional groupings
Americas, Asia Pacific and Japan, and EMEA.
It claims the widest portfolio of technology
products and services in the world and operates
in many business segments each of which
requires a different operating model.

We spoke to Leslie Berkes, who has had a long and varied career at HP in various organisation
effectiveness roles, and is now responsible for leadership and management capability across the
organisation. It has been his responsibility to introduce OD thinking, not just into HR, but into
general management.
HPs HR function
Prior to the EDS merger, there were around 1,800 HR people in HP, with EDS employing a similar
number. Following integration, and after increasing self-service HR for managers, the current
target is around 2,500 people. The function is structured into three broad groups.

Declared people focus

HP sees itself as an ideas and people company.


Technology and people are its two greatest
assets.
Working collaboratively across the world and
across business segments is a challenge in such a
large and complex company but HP is guided by
the principles created by its founders, illustrated
by the following statement from Dave Packard.
"It is essential that people work in unison
toward common objectives and avoid cross
purposes at all levels if the ultimate in efficiency
and achievement is to be obtained."

Global Operations this includes all HR managers working with teams in the different
business segments and regions. They have a dotted line responsibility to their business teams.
Centres of expertise these cover the usual areas of expertise such as talent, L&D, reward,
and also an Employee Experience team that focuses on the employer brand and employee
value proposition.
Shared services function using SABA technology, this function is also a way to develop HPs
ability to include HR outsourcing in its commercial service offerings.
Note that we no longer have a separate organisation effectiveness (OE) team. It is now seen as
an essential core competence that we build into HR.
Three priorities for functional development
HP uses its HR Academy for developing HR talent, providing services directly and by using
contractors. The three main areas of focus are
business acumen enabling people to be business, as well as HR, focused
professional development aligning with SHRM and ASTD, but also developing HP learning
content and OE proficiency
career development integrating development with career decision-making.
There is a strong focus on experiential learning using projects, job roles and action learning.
Developing business acumen
This is part of the core curriculum for general leadership development, but there have also been
specific initiatives for the HR function. The same training partner has been used for both BTS,
who specialise in developing commercial competencies and mindset.

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HR is constantly examining organic growth and acquisitions, from planning to execution, to estimate
revenue and cost streams. Leslie Berkes, HP.

The top 80 HR executives underwent a series of four quarterly three-day workshops. This had a
strong OE flavour, covering organisational analysis, business analytics and influencing skills.
Group projects were undertaken between the modules on live issues.
All other HR staff went through a workshop programme also focusing on commercial
competencies.

HPs strategic framework


Mark Hurd, HPs CEO, uses a simple triangle
motif to maintain company-wide focus on three
priorities.
Capital
(including human)

In addition, there are targeted recruitment efforts including concentrating on the best business
schools in the HR subject area, such as Michigan.
This means that HR people must be proficient in two areas where, historically, they have been
weak technology and measurement. They need to know the critical factors driving our
performance in any of the business models they are working in.
Efficiency

HR makes a significant contribution to the way strategy is developed, as workforce


planning is a key ingredient. This includes modelling all the people ramifications of our
different options, so we provide a great deal of decision data and thinking, as well as
facilitating strategy discussions, across the company.
HP also makes a strong point of using leaders to teach leaders. Berkes commented that, This
starts with CEO Mark Hurd, who is himself terrific as a teacher. Leaders here have to be able to
walk the talk, and demonstrate coaching skills. This helps HR specifically.
Rotation principle
HP has a policy of rotating people through regions, businesses and functions for them to build a
broad understanding of the business.

Targeted growth

We use this for the people aspects of the


business, explained Berkes. So in the growth
context, HR is constantly examining both
organic growth and acquisitions from
planning to execution with the constant aim
of estimating revenue and cost streams.
Talent acquisition is part of that analysis and
discussion, ranging across regions, businesses
and functions.

Young entrants into HR follow a two-year programme in which they are moved around the
business, including non-HR roles. We are specifically looking for MBA-level people. They may
choose to stay in their business area, but we are building our reputation for interesting and
important work.
What about attracting talent already employed? We intend to increase that in future. We have
some high profile role models including our last chief learning officer and also the current
head of the HR Academy, who is finance trained and last worked in a big sales job.
Some will wish to remain in specialist career tracks in the centres of expertise, but the onus on
them is still to be business-focused.

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The banks management committee spends 40% of its time discussing people, organisation and
culture issues. Tim Miller, Standard Chartered.

About Standard Chartered


Standard Chartered is a dual-listed banking
group in London and Hong Kong. It has some
1,700 branches in 70 countries and employs
over 100 nationalities.
It has operated as a trading bank since 1857,
mainly in Asia, the Middle East and Africa.
It has grown steadily in recent years and
currently employs around 64,000 staff.

In summary
HPs approach ticks most of the principal boxes as regards developing a future-fit HR function.
Hiring and developing people with business acumen.
Embedding OD and OE skills throughout HR.
Rotating people in and out of the function for career development.
Developing an HR service proposition that aims to be second to none.
Running HR like a business, with a constant focus on a good return on investment.
Its still work in progress, said Berkes,but we feel were well down the road compared to
others.

10.2
Standard Chartered people governance, HR development
This case provides a brief overview of how Standard Chartered builds people management into its
governance process; the banks talent management framework; and the evolutionary journey its
HR function is undertaking. We spoke to Tim Miller, Director of People, Property and Assurance.
Governance and people
Clarity of governance is important as a starting point for good people management
transparency about who does what, how decisions are taken and how risks are managed.
Standard Chartereds top team reflects three dimensions of governance geographic, global
lines of business, and its functions. While possessing a proud heritage as a multi-local bank
well-embedded in its local communities, its governance processes also ensure that a one bank
principle operates with clearly-defined shared processes and policies. Talent management
and sharing good practice are prominent requirements.
It articulates governance principles for performance, people and sustainability. Regarding
people, it commits to ensuring proactive steps to attract, retain and develop talented and
skilled people who live the values in their everyday working life.
This is echoed in its declaration of strategic intent towards key stakeholders, such as customers,
communities, investors and regulators. As regards our people, four inter-related commitments
are made.

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The Strategic People Agenda is a management, not HR, process. We review each country, business
unit and function. There are robust exchanges, covering topics such as performance, talent and
diversity. Tim Miller, Standard Chartered.

Be recognised for attracting, employing and retaining the best people.


Creating a diverse talent pipeline.

Board and top team oversight of people


strategy
The group board has four sub-committees
audit and risk, remuneration, nomination, and
sustainability and responsibility. People risk is
formally recognised.

Enhance recognition of great people managers.


Build a foundation for multiplying leadership capacity.
The banks management committee spends 40% of its time discussing people, organisation
and culture issues, commented Miller.
Strategic People Agenda governance
There is a regular calendar of meetings to discuss people management and talent, as indicated
in the diagram below. The agenda covers the topics in the column.

Three times a year the plc board discusses the


Strategic People Agenda, with particular
emphasis on the assessment of talent
management.

Strategic People Agenda

Talent management architecture

The standing agenda covers these topics.

Endorsement and external


critical assessment of
Standard Chartereds
Talent Management Agenda

Three meetings a year

PLC
Board

Principal sponsor
and architect

Group
CEO

Overall sponsorship and


accountability for the Banks
Global Talent Agenda

Group Mgmt.
Committee

Strategic assessment
of critical talent priorities
for the bank

Monthly people
reviews and quarterly
strategic people reviews
Quarterly
people forums

Country CEOs
chair quarterly
talent reviews

Global Business
Leadership Teams
Countries

Cascade into strategic


priorities for businesses
Operationalise talent
agenda with specied
success agendas

People priorities to support the business


strategy.
Organisation design.
Succession risks.
Critical talent pools, and diversity.
Building technical abilities.
Building leadership capability.
Staff engagement.
HRs contribution includes data/intelligence to
support planning and robust discussion, plus
ideas and technical knowledge. However,
discussion always starts with business priorities.

Standard Chartered

Note that overall responsibility lies with the Group CEO, and with business and country
management teams. This is supported by more detailed planning discussions involving HR,
although again the Group CEO has overall accountability.

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We believe in a powerful metrics capability that helps managers understand their performance issues.
Tim Miller, Standard Chartered.

Talent segmentation
There is more detailed segmentation of talent
for the purposes of planning and providing
learning and development for all staff.
Categories include the following.
New hire.
Raw talent.

Talent and performance management


For some years, Standard Chartered has embraced Appreciative Inquiry principles, and uses
employee engagement disciplines and measurement to guide managerial behaviour. See the
case study in CRFs 2006 report, Employee Surveys.
Consequently, the bank takes an inclusive approach to managing talent, and categorises staff
for performance management purposes. Everyones valued, but in different ways, observed
Miller.
HIPOs comprise some 7% of total staffing.

Talent pool.
Lateral talent pool international moves, for
example.

The two largest groupings are Critical Resources people who perform valuable roles and
Core Contributors, those who are steady performers.

Pivotal roles.

There are three smaller groupings underachievers, underperformers and staff who are new
or in transition roles, for whom it is premature to assign performance ratings.

Critical roles senior positions, transitioning,


managing initiatives or M&A integration, top
professional roles, key people managers, etc.

Data on performance achievement in these bandings is part of the regular assessment of people
management at all levels in the management structure.

The Bank has developed a comprehensive set


of on-line learning tools to complement its
suite of development programmes. Its HR
Service Centre is the first port of call for
employees and managers for advice on
learning and development planning.

In general, the organisation has always emphasised its use of HR data to illuminate issues,
ensure objective judgements and drive decision-making. Miller commented that, We believe in
a powerful metrics capability that helps managers understand their performance issues. This
also allows us oversight of important issues such as how they differentiate between average and
best performers.
Another dimension is the importance of performance discussions, which is intrinsic to its
Great Manager Programme. Training and guidance on conversations that count stress the
role of discussion to foster engagement, learning and development, building strengths and
building careers.
Talent management and development
The diagram below indicates the dimensions of talent pools and associated development
processes. Note the way that talent is managed both in-country and on a global basis and is
segmented, as described in the column here.

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Global Talent Pools


Regular business reviews on talent from
board through to country management team
Outcome, not process, measures tracked

Midcareer
MBAs

Senior
Management
HIPOs
Middle
Management
HIPOs

Junior
HIPOs

ols

International
Graduates
Country
Management
Trainees

al

ob

Gl

t
len

Po

Ta

2 year
development
Strategic
Locally
Reviewed by Reviewed by
Locally
through
hiring which
managed
and
10 global
Group
tailored
rotations and
supplements
reviewed in
leadership Management
programmes
global
leadership
56 countries
teams
Committee
programmes
pipeline

Standard Chartered

HR functional development
A Target Operating Model describes how HR will be configured by 2011. In practice the goal is to
extend what the bank is already doing. However, the way the function is being re-shaped and
described reflects the principles set out in this report for the HR function of the future.
As shown in the diagram on page 136, the function is organised around two simple concepts
service and organisation effectiveness.
The 2011 service aim is for 80% of all people processes to be self-service, using the Banks
developing shared services structure. The main differences between now and 2011 are
providing a common technology platform across the Banks global operations, capable of
serving twice the current staffing level
facilitating the uptake of self-service in areas where this is less well-established at present
establishing more completely a suite of core people products and processes tailored to particular
business area needs and, as a result, reinforcing Standard Chartereds values and ways of working.
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As regards organisation effectiveness,


this begins with HR executives who work with business teams, supported by specialists located
in their part of the organisation
Group level specialists and project teams work on whole organisation issues and initiatives.
Finally, there is the supporting IT team, which works on current and future HR technology issues.
What will HR look like in 2011?
CUSTOMERS

HR strategy
Supporting the business
HR specialists
Senior point of contact for
businesses/ functions
whose role is to optimise
business performance
through people
Local OE will deliver
business and function
people agendas at local level

ORGANISATION
EFFECTIVENESS
Business and function aligned
Organisation Effectiveness

HR management
Day-to-day operations
Core HR transactions

SERVICE
DELIVERY
People@SCB Portal

LOCAL TIERED MODEL


Local OE

Hubbed specialists
providing expertise in
country
Global specialists
conducting research,
owning policies, processes
and continuous
improvement
HR governance, risk and
finance
Flexible project team to
address business critical
issues

Query Management

Functionality enabling
managers and employees
to perform HR
transactions themselves
Query management
comprising contact
centre and case unit to
resolve issues that
cannot be resolved
through self-service

Hubbed Specialists
Employees

GROUP
Global Specialists
(Strategy, Policy,
Product
Management and
Research)

Managers

Project
team
Continuous
Improvement

Focus on improvement
through operational
efficiency
Provide transactional
processing support,
analytics and reporting
capability to support
evidence-based decision
making

Governance & HR support


HR Technology & Operations

Standard Chartered

A slim management structure oversees both the service and organisation effectiveness parts of
the function. A small top HR management team sets the agenda, and is charged more formally
than its predecessor with both looking ahead and looking externally. A larger HR Management
Team drives the transformation in an integrated way, including as it does the HR heads from
around the business and geographical structure.
The implementation of the model is measured both in terms of benefits and cash savings from
the smarter use of resources and technology. HR staffing levels are planned to be 1:80.
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Noel Keeley - Group HR Director
Musgrave

We manage development as an ongoing activity as part of the


DNA of the business. Noel Keeley, Musgrave.

10.3

Facts about Musgrave

Musgrave developing talent and capability


We describe Musgraves adoption of a comprehensive leadership and talent management
framework, underpinned by shaping the employer brand. We spoke to Group HR Director,
Noel Keeley.
Musgraves people strategy
Until 2005, the companys five operating divisions had developed semi-autonomously.
Reflecting this, there was a Group HR director but no central HR function, and no shared
policies. While the Group had a common set of values, the divisions were inevitably developing
their own people practices and there was little movement of ideas and people.
A decision was made to operate the Group differently. Maximising collective people strengths
and developing an employer brand were adopted as core planks in the business strategy.
A new Group HR strategy was created and then re-named people strategy with a central
focus on right people, right place, right time, and right across the business.
Talent management and engagement were to be particular priorities, to build the strength of
both the companys management and its customer-related performance.
As the new Group HR director, Keeley and the five divisional HR directors agreed to adopt
common frameworks where advantageous. These included initiatives to enhance
performance management

Musgrave is a private company founded in


Cork in 1876, where its headquarters are still
located.
In 2006, its largest division became the first
retail organisation to receive Irelands
Excellence Through People Gold Award, and
has just reached platinum status the highest
level possible.
As an outcome of the people strategy
described here, Musgrave is also now
prominent in the Irish Independents Best
Companies to Work For list.
Musgrave describes itself as partner to
entrepreneurial food retailers and food
service professionals. It owns a number of
food retail brands, and partners with owners
of food retail chains.
It employs a core group of some 5,500 staff
managing its retail business model, through
which a further 50,000 people are employed
in over 3,400 stores. Together with its retail
partners, it is the second largest employer in
Ireland.

leadership development
talent management
HR technology.

It has significant presence in the UK through


ownership of the Londis and Budgens brands,
and also owns a number of supermarket
brands in Spain.

For the first time, common measures and KPIs were developed across the business. They are now
a core part of the organisations business metrics, which include an annual engagement survey
with follow-up action planning.
Leadership and talent development
Musgraves people strategy includes development processes for all employees, driven by the
adoption of personal development planning disciplines across the company.

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My role as Group HR director is to guide and challenge where necessary, both the CEO and my peers.
I expect divisional HR directors to do the same. Noel Keeley, Musgrave.

What Musgrave stands for


Values

Long-term stable relationships internally


and externally.
Honesty open communication with
stakeholders and taking responsibility for
your actions.
Working hard and providing a supportive
environment for good performance.
Achievement seek to be the best, and work
as a team to do so.

Specific processes are tailored for different groups, particularly senior management and talent.
While for convenience they may be seen as programmes, observed Keeley, in practice, we
manage development as an ongoing activity as part of the DNA of the business. It is also
values-driven, with a strong behavioural element.
New leadership development focus
We started at the top, explained Keeley. First, the chief executive and board team
underwent assessment by YSC, and then each team member had an in-depth review and
development planning session with Keeley and the CEO.
Second, the board spent 14 days in the first year discussing individual and collective
behaviour. The outcome was a set of executive committee operating procedures. Now,
some three years later, a progress review has identified further improvements, mainly
about the strategy process.

Not being greedy sharing knowledge and


success, recognising contributions.
Guiding principles

The top 50: driven by their PDPs and following assessment by YSC, every member of the top 50
has tailored development, including all executive team members.

Musgraves strategy concentrates on the


following five areas.

This includes work on their coaching skills.

Developing brands.

Involving them in community development projects community involvement and


sustainability are taken seriously at Musgrave.

Driving innovation.
Achieving lowest cost without compromising
quality.
Creating the best team.

Additionally, there are team development actions to enable senior teams to be high
performing.
Externally-provided coaching is selectively available to support people new in role or making
a challenging transition.

Growing the business.

The next 150: the Musgrave Leadership Pathway includes mandatory development processes
for all senior managers in respect of performance development, employee recognition and
living the values. Optional elements include development of areas such as presentation or
project management skills.
Future leaders: 24 individuals are nominated by divisional top teams every two years from
within the group of 150 to take part in the Musgrave Strategic Leadership programme. This
includes four residential sessions, assessment and coaching, and ongoing mentoring by
members of the top 50.

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High potentials: below the top 200, there is the Musgrave Leadership Development
programme. Twenty individuals, who have the potential to be future directors, are selected at
divisional level each year. They experience an 18-month schedule including 360 degree
assessment and feedback, coaching and two residential learning sessions.

Musgraves graduate programme

Graduates: graduate entrants undergo a programme of development over a minimum of two


years, streamed according to chosen career anchors see the column. The programme includes
rotation through various parts of the relevant function and undertaking projects.

Finance

Entrants choose one of the following


development tracks.

HR
Marketing

Succession planning
The top 200 managers are discussed in annual people reviews carried out by the CEO and Group
HR director, with the MD and HRD of each business division. They examine performance,
development plans and succession ladders. The results are collated and reviewed collectively by
the Group executive team in a whole-day session, with particular attention given to the top 50.

Product development
Supply chain
Trading
Store design

An important point we put over to managers when they consider performance is how to
distinguish between outcomes, effort and potential, Keeley pointed out.

IT

Given the extensive process of assessment and review, some managers will not meet the
required standard. Keeley comments that careful monitoring means that when this happens,
wherever possible people leave of their own accord and in a positive manner.
The HR directors role
Keeley explains that he and his divisional colleagues, as members of their respective
management teams, play a full part in all decision-making. Resourcing and customer service are
particularly important issues, and help to place people issues at the heart of the management
team agenda.
In addition, my role is to guide, and challenge where necessary, both the CEO and my peers. I
expect divisional HR directors to do the same.
That involves being trusted by both CEO and board members to listen and advise in confidence,
and help manage relationships at the top.

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HR is provoking positive change, as well as ensuring it is managed effectively. Noel Keeley, Musgrave.

Musgrave has placed people at the heart of its brand communication, and is now articulating
the employee value proposition to support this.
Musgrave people cycle wheel

val
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This is a new experience for many, coming after


10 years of an expanding economy. Our values
mean that we are always looking at costs
anyway. We prioritise the measured
management of any reductions having to make
dramatic announcements is a sure sign of failing
to think ahead.

ON
IT I
N
OG
EC
4

In working through an economic downturn,


hard decisions have to be made. A recent
management conference involving the top 100,
Winning in a Recession, sought to build energy
around identifying opportunities as well as
being honest about where and when economies
would be necessary.

The good news was that our people were already positive about working at Musgrave. Sharing
the creation of our people strategy has reinforced, as well as improved this. Now all our HR
activities are tuned to support the lifecycle.

elo

What is being measured is, of course, a


combination of line manager and HR
performance, but HRs influence on manager
performance is certainly in the spotlight. The
business awards won by Musgrave are an
encouraging indicator of progress.

Co-creation was central to the refinement of the people strategy. An extensive series of
working groups led to defining the Musgrave People Experience as a lifecycle. The four stages
and their elements are shown in the diagram.

dev

In a retail business, HR is highly conscious of


business numbers, and this shapes our actions.

The retail brand strategy has been developed with extensive staff involvement, not only
profiting from their knowledge but building their ownership of what follows. The brand work
identified behaviour as one of four key aspects to be managed.

HRs core mission is to ensure the business has


the human capital to deliver business strategy.
Metrics on resourcing and talent are therefore
especially important, along with engagement
surveys. All metrics used regularly were agreed
with line managers.

Developing the employer brand


Extensive work has been undertaken to sharpen brand management across the Group, which
has been reinforced by work on employer brand values.

AN
D

Measuring people management and HR

G
IN
D
N
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Developing the HR function


While there is no specific development initiative for the HR function,

Facts about BT

graduates have their own tailored programme

BT is now a company with global reach,


serving people in over 170 countries.

HR executives are included in the various leadership and talent development processes
Masterclasses on coaching, to help senior practitioners extend their role to senior team
development, are to begin shortly
other professional workshops are being planned.
A plan to adopt a shared service model is being developed, but this will also support finance and
IT, and may include outsourced elements.
We will naturally be examining the development needs of business partners, Keeley says. He
regards facilitating change to be embedded in HRs job description. We are provoking positive
change, as well as ensuring its managed effectively. Three of the business divisions also have
an OD manager working with the HR director.
In summary
This case indicates the main steps a relatively little-known but sizeable company has taken to
sharpen both its performance and reputation. It shows how performance management and
development planning together with development interventions are intrinsically part of the
strategy for business success.
Also of central importance are the business values which can be seen to shape both priorities
and behaviour.
The HR function is key to all this, and has been the primary change agent. There is still more to
be done but, in four years, Musgrave appears to have made rapid progress.

10.4
BTs professional development framework for HR
This is an overview of BTs recent work in transforming its HR function.

At the same time, some 80% of 100,000 plus


employees are still based in the UK.
It has four business and two operations
divisions.
Ian Livingston succeeded Ben Verwaayen as
chief executive of BT Group on 1 June 2008,
having previously been finance director.
Customer service reputation is at the heart of
BTs strategy, to drive both satisfaction and
revenue in a market place of converging
technologies and globalising competitors.
There has been a major focus on values and
talent in recent times.
BT has an HR function of some 750 people.
These are being steadily focused on more
added value activities, since BT outsourced
many HR services to Accenture in 2005.

Growing HR talent
Alex Wilson has put the emphasis more on
growing talent rather than external
recruitment. Apart from working on HR skills,
an effort is underway to recruit talent from
other areas into HR. He commented that BT
generally encourages movement between
functions 10% of HR now come from the line,
or areas like strategy, business improvement
and marketing.

Purpose
Given the realities of the telecoms industry, the recent history of BT is one of constant
transformation. Group HR Director, Alex Wilson, took on the challenge of up-skilling HR so
that it could better support business performance improvement and change.

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Ten per cent of HR now come from the line or areas like strategy, business improvement and marketing.
Alex Wilson, BT.

This is encapsulated in the vision statement adopted for HR people experts at the heart of
change.
Primary levers to realise this vision have been a set of new HR capabilities, development tools to
support the achievement of these, and a process of building ownership of higher standards
through culture change within HR.
Among secondary goals has been a desire to encourage more collaboration and sharing and to
minimise silos and re-invention of the wheel. While these are natural occurrences in a large
international group, more joined-up behaviours in HR will contribute to its reputation for
service and professionalism.
Alex Wilson - Group HR Director
BT

The capability framework


There are three groups of critical competencies that BT is concentrating on for the future creating
value through delivery, creating impact through relationships and creating people solutions.
The competency areas are shown in the diagram below.
BTs HR Capability Framework

Creating
Value
through
Delivery

Creating
Impact
through
Relationships

Creating
People
Solutions

Strategy
Development &
Implementation
Flawless
Execution
Programme/
Project
Management
Managing Change

Relationship
Management
Communications
&
Influencing

Knowledge
Management

Diagnostics &
Problem Solving
Process & Policy
Management
Commercial
Understanding
Data Analysis &
Interpretation
Research &
Benchmarking

BT Leadership
Capabilities

BT

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BT has defined four different practitioner levels to be attained developing, intermediate,


full and expert.
Capability Levels
Level

Description

Developing
Practitioner

Not displaying the qualities and attributes f or the HR


capability being assessed

Intermediate
Practitioner

Range of practical experience but requires development of


in-depth competence and skill
Uses basic techniques or tools
Refers to others for guidance in critical or sensitive
situations
Developing wider business experience and knowledge

Full
Practitioner

Operates independently and supports others in this


capability
Demonstrates competence in unusual or complex
situations
Demonstrates the full range of skills required by the
business in this capability
Keeps knowledge and expertise up-to-date
Demonstrates in depth understanding of one or more
business areas and developing broader commercial view
Demonstrates strength across some of the capability items
at all 3 levels but has some development areas

Expert
Practitioner

Viewed as a role model for this capability


Recognised expert who develops this capability in others
and acts as a specialist advisor to others
Demonstrates expertise in business critical or highly
complex situations
Demonstrates in depth and broad business understanding
Consistent high standard of delivery of the capability items
across all 3 levels

BT

The various competency areas are each articulated in detail. We just show one below as an
example, relating to change management and describing the three higher levels of
attainment.

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Managing Change

Using change tools & methodologies


Coaching others through change
Identifying the impacts of change

Intermediate
Practitioner

Full
Practitioner

Responds positively to
change & highlights
the benefits to others

Coaches others on
the identification of the
people impacts of
change & how these
can be addressed

Demonstrates an
understanding of a
change tool & how it
can be used to plan &
communicate change
Identifies the people
impacts of change on
individuals &
anticipates employee
requirements
Manages ambiguity
Identifies potential
barriers to change
Coaches managers
on the change
management process
Implements a range of
change tools &
methodologies

Creates energy
behind the change
process
Diagnoses change
requirements &
proactively challenges
the current practices
Anticipates &
manages the politics
around change to
establish the
alignment of
stakeholders
Develops &
implements strategies
to overcome
resistance & barriers
to change

Creating
Value Through
Delivery

Expert
Practitioner
Coaches leaders on
the leadership of
change
Visibly champions
change within the
business & role
models appropriate
responses to change
Builds organisational
change capability
through a culture of
learning, flexibility &
innovation
Motivates an energetic
response to change in
other business
leaders
Communicates
change with passion
and commitment,
creating a compelling
vision for others

BT

Capability development
All HR staff were put through a development centre, and tested against these competencies.
This provided a view across the BT Group of the levels of competence in HR.
Individual results were fed into performance and development planning.
An extensive on-line toolkit has been developed to support each of the competencies, as part of
BTs Route to Learn system. BT was an early adopter of the intranet in the 1990s, and distance
working and home working are strong features of its modus operandum.

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BT uses rotation as a development tool, moving people through other functions and different countries
HR people do this too.

Naturally there are also internal development programmes, workshops and masterclasses
aligned to the competencies. Where there were gaps, new programmes have been developed.
For example,
two were recently launched, on commercial awareness, and on communications and
engagement
a third, on organisational effectiveness, is being piloted with the intention of rolling it out
across HR and then to line management.
Rising stars may be put through external programmes such as those provided by RBL, the firm
led by Michigan academics Dave Ulrich, Norm Smallwood and Wayne Brockbank.
BT uses rotation as a development tool, moving people through other functions and different
countries. HR people do this too, and it all helps to foster more internal cohesion and
knowledge transfer.
As regards oversight of the programme, the HR leadership team holds a Careers Council to
address talent and succession planning. The number of development interventions is also
tracked monthly and reported to Alex Wilson.
HR cultural transformation
Apart from working on the skills, it was an intrinsic part of the plan to work on behaviours too.
BT undertook a process of engaging HR people in the transformation journey, in two stages.

Measurement for HR
BT is using a range of methods to test progress
and learn for the future.
For the last three years, HR has asked line
managers to undertake on-line assessments of
HRs added value and commercialism,
supported by interviews with top managers.
BT is undertaking further assessments in HR to
determine the level of improvement in HR
capabilities, and provide pointers to add yet
more value to the business.
Part of the transformation task and hence
measurement relates to managers
embracing more their people responsibilities.
BT has other survey tools which provide data
on this.
Accentures operation of HR services is also
measured in great detail against SLAs and user
satisfaction targets.
BT also participates in some external
benchmarking and comparisons, both on costs
and its degree of transformation.

Creating the big picture

Discussions were held throughout HR to look back over the past five years, have honest
discussions about what needed to improve and envision what was needed in the future to
become people experts in change management. Some 150 people contributed through
interviews
facilitated group discussions
using regular HR regional conferences.
BT used a group called Delta 7 that specialises in visualising vision and strategy development.
They already had experience of the company, and they helped to assemble a picture of BTs HR
journey into the future.

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Embedding

As stage two, this visual representation was then discussed in late-2007 by every HR team in BT,
with detailed guidelines given to facilitators. The purpose of the team meetings was to
aid understanding of the journey and vision
provide an opportunity to express ideas and feelings in a safe environment
give participants the confidence to engage with their own stakeholders about HRs future
direction
collectively agree the principal steps to take to support transformation
encourage every participant to commit to a behavioural change towards realising the vision.
The guidelines provide examples of sharp-edged and tough questions, designed to stimulate
honest and open debate.
Involving the line
Using specially designed discussion guides your role as people managers this approach has
also been deployed among line managers in some parts of the business, to raise understanding
of the role of both HR and the line in managing people.

10.5
Rolls-Royce creating a shared services centre
We spoke to Mark Judd, Director of Shared Services, who had previously pioneered shared
services in PricewaterhouseCoopers.
Context
Rolls-Royce is making a transition to a global power systems company, rather than being a
predominantly UK-oriented aerospace company, as in the past. CEO, Sir John Rose, made it clear
that HR would need to play a central role in achieving this transition. The HR function itself has
required a thorough transformation to equip it for this challenge.
The initiative to create a shared services centre began in 2006, and it now employs 180 people
located in Derby. The first step has been to serve the UK workforce of 22,500 employees. The
extension to the rest of Rolls-Royces workforce outside the UK currently over 50% and
growing is now underway.

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Weve been a catalyst for positive change by providing line of sight that only the unions enjoyed
previously! Mark Judd, Rolls-Royce.

The transition
Rolls-Royce has moved from a situation where some 40 sites across the UK had been run with
considerable independence. There were all manner of historical relationships and practices,
and separate agreements for non-managerial workers, observed Judd.

Scope of HR change
The areas of HR activity include both
administration and advisory services covering

Reducing complexity

reward

The service centre provides a platform for continual simplification, and insight across the
business enables the more efficient use of resources. Having only one phone number is an
example. Duplications were revealed and were then negotiated out. Initiatives to redefine
grades and adopt a flatter leadership structure were introduced.

pensions

Weve been a catalyst for positive change by providing a line of sight that only the unions
enjoyed previously!, said Judd. Its painful at times, as in exposing and challenging
different local practices we are dredging up unsightly sediment in terms of costs and
illogicalities. But, eventually, the company will be more robust as a result.

recruitment

The internal customer perspective


Creating the kind of customer service that wins over sceptics is at the heart of the HR services project.
Transition requires careful and persistent communication with, not at, managers. The younger
ones expect to go on-line, but the more traditional ones want to be able to knock on an HR
managers door. Some were negative, but after trying out the new service their attitude changed.

employee data handling


grievances and disciplinaries

global mobility and deployment


issues connected with organisational change,
including redundancy payments.
Theres nothing in terms of administration
that we dont deal with, and we are starting to
examine how we can support business
partners in undertaking their role as this
evolves, said Judd.

In preparing the ground, service centre managers undertook workshops with each business to
consult, test and build confidence. Each had to sign off content at the outset about local
terms, for example.
As regards ongoing service, Judd explained, it was important to communicate that its certainly
not less personal. Instead of walking half-way across a site, you just pick up a phone anytime and
speak to someone you know can deal with the issue right away.
Building confidence
As might be expected, not everything worked smoothly to begin with. However, extensive
measures have been taken to build confidence amongst line managers. Colleagues are regularly
invited to visit the centre.
Around 75% of the staff have worked in Rolls-Royce before. They actively maintain their
relationships, and this spreads confidence. Visitors dont just meet senior managers they
encounter the people who manage or do the front-line work.

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We resist silo-based working in HR, and will work actively with the other HR communities.
Mark Judd, Rolls-Royce.

Coping with recessionary pressures


Mark Judd explains that, by the day, twists and
turns in the operating environment require
increased flexibility of thinking. Here are just a
few examples.
Major customers can suddenly go out of
business.
Shifting currency values means that business
cases for overseas re-locations can alter
significantly.
Confidence in outsourcing has been
undermined by the Satyam scandal in India.
Naturally, the question posed to HR, as to finance
and IT, is what further savings in running costs can
you achieve?
Centralisation of services offers continuing
potential to generate savings. However, there are
tensions to be managed.
The willingness of management and unions to
re-negotiate local practices, so that there is
greater standardisation and thus savings in
administration time and more flexibility.
Technology improvements may provide longterm savings, but cash is in short supply and the
demand is for cost-reduction now.
More outsourcing might seem to save costs
short-term, but are the risks too high?
The HR services function is incredibly interconnected with these debates and involved in the
decision process, comments Judd. Because we
can now see across the business, we are able to
reveal potential for both improvement and cost
savings that just wouldnt have been apparent
otherwise. There may still be tough choices to make
but at least we can provide some new options.

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Bringing in visitors from Rolls-Royce operations outside the UK has worked well in selling the
transition to a global service centre model. Indeed, the fact that the service centre is now
receiving regular visitors from other companies also helps to build its reputation.
While we had a full promotional strategy from leaflets to workshops the critical confidencebuilder has been going live. First time service is what you are judged on, and the word spreads
fast. People there seem to know what they are doing, was the perception we built.
Initially, operations managers also worked as relationship managers with parts of the business,
and helped sort out teething problems. This is now no longer necessary as self-service has
become the norm.
Service standards moving ever upwards
Service levels are benchmarked externally through Saratoga. Internally, they are measured on a
monthly cycle, including phoning people randomly for their views and ideas. The service centre
has achieved the bronze standard in the companys quality programme and is now progressing
to the silver level.
Were moving from the foothills up to the mountains. Theres a long way to go, but we are
already getting internal recognition HR is now being seen to lead the way in internal
services. Were getting external recognition too, even though we dont seek it.
The service centres management are now shifting from a reactive to predictive mode,
developing the agility to handle a variety of changes in the business from shrinkage to
acquisitions. Working more proactively with business partners and centres of excellence, the
service centre will both propose incremental improvement and engage in discussion about
more fundamental changes.
We resist silo-based working, and will work actively with the other HR communities.
What about outsourcing?
This option was ruled out, since the variety of practices in Rolls-Royce would make the cost of
transfer too high. Having now made an investment in a robust technology platform and
achieved high service levels, there is no visible advantage in considering major outsourcing.
We use contractors for specific services, just as we have always done.
However, Judd remains open to the concept in the long term, when a new technology platform
might be required.

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Further development
The priority for the HR function in Rolls-Royce is to achieve the successful implementation of a
global HR shared service organisation over the next two years. A possible goal for the future is
becoming an enterprise service provider, supporting other functions in addition to HR as Judd
achieved at PwC.
"We start with business cases about areas where shared practices make both economic and
internal customer sense." At that point, the service centre would naturally gravitate to
becoming more than just part of HR.
Meanwhile, to cope with recessionary pressures, the service centre is working on a ready for
anything approach. We cant know what the business will ask us to do, because the operating
environment is so unpredictable. So we need to gear our thinking and methods to be both
flexible and fast.

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Introduction

Topics covered
11.1 Conclusions

152

11.2 Recommendations for HR

155

11.3 Conclusions and recommendations - high level summary

160

In this chapter, we summarise our


conclusions from the research, and then
proceed to make more detailed
recommendations.

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HR capabilities tomorrows essentials

11.1
Conclusions

Knowledge

Business
Organisation design and OD
Psychology
Work and process design
Business and people metrics
Skills

Communication
Numeracy

Overall conclusions
Over the past decade, HR functions have had to cope with significant changes resulting from
legislation, new markets, technology, globalisation, etc. They have worked hard, covered the
basics well and some have done better than that. Yet, surveys indicate that HR in general
continues to have a reputational problem.
Long-standing concerns persist about competence, lack of business focus, service quality,
courage and added value.
The widespread shift to a three-legged structure has not clarified managers and employees
understanding about what HR does. Also, there are question marks about how effective HR
has been in implementing new functional structures.
Parts of the HR portfolio have been off-loaded to consultants, lawyers, benefits specialists and
outsourced service suppliers with mixed results.

Analysis
Project management

Demands for higher HR expertise intensify as technology drives new business models and
ways of working and globalisation adds complexity. Managers need more help than ever to
see beyond task requirements and operational pressures.

Attributes

Courage
Influencing ability

Behind any reputational problem is a reality problem. Our interviews with leading HR directors
and experts
confirm and illustrate where the problem areas are

Resilience

help us to identify seven priorities for configuring HR in the future see below

Tact

provide examples where forward HR thinking is being adopted or practised.


The fundamental challenge is to re-orient and up-skill HR to seize opportunities offered by
a greater understanding that people make the difference. As yet, only a few progressive
companies and HR directors appear to be moving in that direction.
Seven priorities to shape HRs future
1 Re-frame HRs purpose
HR should redefine its purpose as organisational effectiveness.
Identifying strategic priorities that will ensure organisation success.
Focusing on outcomes that demonstrably help achieve performance goals and ceasing to do
things not serving this purpose.
Creating a high-performance work environment, not just high-performing people.

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Vincent Thomas - Director - HR
Barclays Global

Managers have great self-delusional power when it comes to


behaviour. Vincent Thomas, Barclays.

2 Re-focus HRs portfolio


HRs portfolio of activities should reflect more business critical roles. Its work should
concentrate more specifically on driving future as well as current performance. See the
priority roles in the column.

HRs priority roles in future


Business problem-solver
Organisational architect

3 Re-skill HR people
While usually designated as the guardian of talent management, HR urgently needs to tackle its
own talent and professional development issues. It is in the interest of the whole organisation to
have a function that specifically improves organisational and people performance. This requires
a new employer brand for HR itself, to reposition it as a place for high achievers.
4 Re-define people management responsibilities
Clarity about who does what is crucial to avoid responsibilities falling between two stools. A
people governance structure is required, incorporating
managers being primarily responsible for doing and engaging, with leaders having
responsibilities as role models
HR being the guide, goad and guardian of quality and its success should be connected to
how well managers do

Workforce planner and resource


Talent manager and capability raiser
Performance management expert
Change agent
Collaboration and innovation facilitator
Engagement champion
Employer brand manager
Culture steward, with a particular focus on
performance and learning

agreeing a calendar and process for developing a compelling people strategy as part of
formulating business strategy.
In most organisations, managers still need to
recognise the full extent of their people responsibilities
learn more about the fundamentals of good people management, from psychology to behaviours.
There should, therefore, be a continuous drive to strengthen managers people skills in
performance management, feedback, capability development, and understanding
organisational effectiveness.
Finally, good people governance requires regular measurement and reviews to give a more
incisive picture of how managers and HR are doing and highlight further improvements.
5 Re-shape HR relationships
There are three critical relationship areas for HR to work on.
HR and customers HR needs to use co-creation rather than just consultation in convincing
managers and employees that their needs will be met by HR services and processes. This has
mutual education benefits. HR should also clearly distinguish between its service mode and
control mode the latter when it acts on behalf of the management team.

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All managers think they are experts in human behaviour. Actually, the knowledge of most on this
subject is minimal. Ed Lawler.

Other conclusions
From our research, we reached two further
conclusions relevant to HRs future.

- being a key influencer of strategy and organisation design

CEOs

- challenging when needed

CEOs have a defining influence on future-facing


HR, through choosing the HR director and their
own agenda for organisation improvement. We
argue that, generally, CEOs end up with the HR
directors they deserve. The more they know
about how the HR function and its director can
support strategic goals, the more likely they will
obtain the quality they want.

- being the guardian of culture and values

Investors

We find a mismatch between the extent to


which progressive HR can drive value, and the
interest shown by those professionally engaged
in rating organisations. Much analyst research is
superficial.
At the same time, HR could do better in providing
convincing evidence and metrics on the impact
of investment in capabilities and culture and
some management teams are reluctant to be
transparent about people management.
However, there are indications that investors are
starting to ask more pertinent questions. We
conclude that what boards find important to
discuss about talent and engagement will in time
become an area that organisation analysts and
investors focus on.
We all need to encourage our investors to
think long-term. We need to demonstrate we
have a culture that can sustain high levels of
performance, said Stephen Dando of
Thomson Reuters.

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HR directors and CEOs/top teams the ideal HR director will not only drive functional
renewal, but will also improve top team effectiveness by

- guiding top team processes and behaviour

- acting formally as adviser to the board on reward, performance and development at the top.
Within HR ensuring collaboration between different parts of HR in using services and
specialist resources. Also, acting as an integrating function to avoid silo behaviour and
enabling head office functions to serve the organisation as a joined-up team.
6 Refresh HR processes
Our research indicates that people processes should be designed with more rigour
underpinned by operational evidence and tied more directly both to organisational goals and
the needs of managers/employees to perform effectively. Therefore, we conclude that
processes should be prioritised performance, talent and change will always be high on the list
processes should be mapped with clear owners, customers and success measures and
supported by evidence that anticipated benefits will be delivered
in HR services, customer satisfaction and value added must be at least as important as cost
a strong focus on measurement and evaluation should underpin all HR activities, requiring the
development of analytics capabilities.
7 Re-align professional bodies
As yet, professional bodies in HR are not felt by experts and HRDs to be doing enough to raise
the sights of the HR community. They have issues to face concerns about over-reaching their
members, and the limitations of college lecturers as levers for progressive HR thinking and
practice. These bodies could have more impact by
ensuring that educational standards and course content more truly reflect HR of the future,
and include high quality experiential learning
working with HR directors and progressive organisations to create a new tipping point for
HRs reputation.

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Too many HR people step aside and defer to specialists in leadership development and OD. These
should be seen as core HR skills. John Whelan, BAE Systems.

11.2

Organisational effectiveness priority areas

Recommendations for HR
1 Repositioning the function as organisational effectiveness
The functions purpose is to help managers get the best out of people, and create an effective
performance environment. This is how the different parts of HR support this.
A services function for day-to-day issues and continuous improvement.

The primary areas on which OE should


concentrate are the management of
talent and capability
performance organisation, team and
individual

Specialist areas for advice and facilitation, and to support corporate HR policies.
HR managers in business teams are catalysts in framing specialist input and liaising
with services.
OD should be a core skillset for HR managers and specialists.
Organisational effectiveness works on the organisation context, not just people.
This should not involve HR acting in isolation to change itself. The re-framing must be of direct
benefit to the whole organisation with manager/employee needs built in. They should both
understand and feel it is in their interests, which is more likely if they are consulted.
Eventually, it is conceivable to drop the HR and re-name the function OE. However, part of
HRs reputation problem is that it has changed the name on the tin more than once from
personnel to human resources, from training to learning and development, from HR
manager to business partner without changing the contents.

change including organisation design and


work processes
engagement incorporating work on the
employer brand and employee value
proposition
workforce planning which is intrinsic to longterm people strategy.
These points should influence how specialists
are grouped in expertise areas.
A reward and benefits group should focus on
recognition, and link its work to performance
and talent.

Thus we recommend no name change at all until it is clear that HR has genuinely transformed
itself into an organisational effectiveness function.
Irrespective of the precise structure adopted, HR directors should ensure that objectives and
work are defined with the help of the three lenses, as described in Chapter 9.5. It should be clear
to all function professionals how they contribute to organisational effectiveness for current
needs, improvement, and more radical change.
2 Focus on HR talent
HR directors and CEOs must see that HR is staffed with capable problem-solvers who also have good HR
knowledge. The job cannot be done by second-raters without relevant experience. Key ingredients are
re-framing capability requirements by level and performance standards
an internal development programme, with external expert inputs
experiential development projects, secondments, etc
career paths moving staff around the function and the organisation to obtain practical
experience, preferably at the front end of the business
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HR should be held accountable for those activities on which the function claims to have some
significant insight and expertise. Nick Starrit, PARC and Sirota.

People governance requirements

recruitment leavening the mix with external recruits, and with talent recruitment from
inside the organisation, either permanently or for a period

Clarifying the respective responsibilities of


OE/HR, general management, and the chain of
command in OE/HR.

CPD the question, what significant personal development initiatives have you completed
this year?, needs to be asked of everyone in the function.

Devising and publicising a timetable and


process for people planning.
People strategy should be fully embedded in
business strategy.
This should be reflected in local people plans
within functions and operating units guided
by organisation reviews led by the CEO and
OE/HR.
The co-creation principle should be applied to
design work on people processes through a
combination of expert and customer inputs.
Responsibilities must be defined for
managing/improving organisational climate,
requiring a deep understanding of OD as well
as people development.
Managers and HR should be measured on
outcomes.

3 HR cultural shift
A programme should be devised to modify understanding and behaviour within the function so
as to build ownership of HRs new paradigm and create a service culture. Similarly, there should
be communication with managers and employees, so they
are clear about why the shift has taken place
can see that their own needs and views have been covered
identify the shifts in behaviour they themselves may need to make.
4 Role clarity HR and management
Clarity about who does what and working to shared objectives is essential. Fewer but more
critical initiatives should create better embedded practices. People governance should stipulate
the points in the column.
The end result should be a clearly defined mode of partnership in people management, to be
evidenced in functional reviews and internal customer surveys.
5 People management skills
The re-alignment of HR should be reflected in people skills development programmes for
leaders and managers. The focus should be on
performance management and development planning capabilities, including objectivesetting, fair rating, how to give careers advice, etc
giving and receiving feedback, and coaching skills
a solid understanding of OD and psychology, to equip managers to be good customers of the
OE function.
A commitment to people skills starts with selecting, growing and promoting great people managers.
6 Organisation transformation
In any fast-evolving organisation, a top executive or team could be appointed to stimulate
thinking about future organisational re-invention, and integrate efforts to plan and implement
radical change. This will address the third, future-focused, lens.
OE/HR should contribute expertise to this multi-disciplinary function which may act in part as a
virtual team.

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Peter Howes - CEO
InfoHRM

HR directors can end up being the HRO for top level people dont
let yourself get sucked into the minutia. This should be nearer 5% of
your time, not 70%. Peter Howes, InfoHRM.

7 Measurement and evaluation


This historic HR weakness should be addressed to improve its ability to make convincing
business cases, and provide sound pre- and post-decision management information.
Boosting OE function numeracy and business orientation.
Using desired business outcomes to identify decision-aiding people metrics, while
minimising purely nice-to-have measures.
Using a mix of qualitative and quantitative methods to identify cause-and-effect
relationships, and provide business cases for improvement and change.

The priority of collaboration


While HR priorities will be specific to
organisations and their circumstances, a
universal issue rarely focused on effectively is
collaboration.
Combating silos and encouraging knowledgesharing and collaborative working across
organisation structures, to maximise synergies
communities of practice, for example.

Developing in-depth analytics capability as an area of expertise.


Improving data analysis and management information through service centres guided by
cross-organisation perspectives and regular contact with internal customers.

Ensuring joined-up thinking and policies


within head office functions.

Integrating metrics across functions to improve the visibility, quality and assimilability of
management decision information.

Building network capabilities to collaborate


externally, support innovation and foster
successful business partnerships.

Better metrics ability will also support the provision of data to investors, demonstrating the
organisations efficiency and resilience over the longer term.

Using talent development projects to improve


integrative work and network building.

8 HR directors their personal role


Chief organisational effectiveness officer

Whether or not such a title is adopted, the concept should guide the CHRO/HRDs contribution
to top team and strategy formulation.
Working with function and business heads on the design and operation of their areas from
people and organisation perspectives.
Day-to-day effectiveness is supported by efficient and customer-focused HR services but where
service centres become multi-disciplinary, direct responsibility will move away from the HRD.
Top team effectiveness

HRDs should be appointed who have skills in


designing and facilitating top team processes
coaching CEOs and other colleagues informally, and/or arranging external coaches and
mentors if appropriate
acting as an interlocutor between the CEO and other team members
challenging CEOs and senior executives
acting as the organisations conscience.
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I spend a lot of time away from head office meeting business teams and our business partners, to help
embed the changes we are making. Tom Brown, Rolls-Royce.

Leading the function

HR directors must balance their work among top team members with leading the function. It is
they who must drive the new OE/talent focus and function culture change, and act as role
models. Building a strong team which can work at top executive level will help spread the load.
9 HR and corporate governance
We recommend the following role parameters for HR directors, providing they are suitably skilled
and experienced.
Responsibility, in support of the CEO, for board oversight of the people component in business
strategy, particularly talent and succession which usually requires one or two discussions a year.
Tom Brown - HR Director
Rolls Royce

Selection of board members.


Accountability to boards for the design of effective senior executive performance and reward systems.
Expertise in top team and board team functioning.
Involvement in the design and functioning of top team and board development.
Board members should have access to HR directors to discuss any people and performance issues.

HR is expected to take a stand, and not be compliant or simply do the bidding of senior
executives. We have to dig in our heels occasionally, on issues such as senior
appointments. David Russell, William Hill.
Often, an HR person is not present at board meetings, yet HR insights and knowledge are
needed. The board should insist on this. However, beware if the CHRO is not an HR expert.
You wouldnt make a non-lawyer head of the legal department. Steve Kerr, Goldman Sachs.

10 Professional bodies and HR directors


Over time, experts such as Ulrich, Lawler, et al, have set out a new vision for HR. However, as we
have identified, the weak link has been inadequate talent development and cultural shift.
Professional bodies need to embrace a more challenging set of capability requirements to
support organisational effectiveness and then propagate this convincingly to their members
and new HR entrants.
They also need to work with more progressive organisations to reflect leading rather than
lagging practices.
An onus rests also on progressive HR directors to create the new HR reality.
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Supply of talent will only improve if it is widely understood what it means to be part of
tomorrows HR function.

As HR experts see it

Differences in global HR standards are best addressed by world-class companies setting the
pace, communicating good practices and thus overcoming cultural biases.

HR needs to adopt the art of the possible, not


why things are against the law or wont work.
Ed Lawler.

A mix of channels can be used recruitment messaging, pressure on professional bodies,


using public forums, etc to reach a tipping point.
11 CEOs

Just being an executioner of strategy, plays to


HRs historic comfort zone. Its a very different
dialogue if you are a co-architect. Professor
Gordon Hewitt.

Knowing what good looks like

As the appointer and line manager of the HR director, CEOs must know what an effective HR
function and HRD looks like. That includes understanding the future-facing concepts about
structure and roles, as described in this report.

The capability and beliefs of the HR director are


the biggest determinants of the HR functions
direction. Pat Wright, Cornell.

Using HRDs to facilitate top team effectiveness

Given the pressures on CEO jobs and senior executive relationships, they will benefit from
recognising the wider role that experienced HRDs can offer. They should actively seek help,
profiting from the insights of a well-connected HRD and welcoming challenge. Without this, a
CEO will miss potentially vital feedback. Selecting such an HRD is an important contribution to
managing top team risk and productivity.
Role model for people management and capability development

HR should ask hard, but simple, questions


about engagement and performance, for
example. Steve Kerr, Goldman Sachs.
Relatively few CEOs have yet had experience of
a great HR director they dont realise what
they could have. Andrew Mayo.

Effective people management is dependent on line managers having the right attitude and
skills. The CEO is primarily responsible for this, with the support of the HRD. The more that this
can be done by example, not just exhortation, the more credible it will be that this is a priority
even the CEO does it is a powerful line to use!
12 Investors, analysts and fund managers
Wise investment decisions will be based on an understanding of future potential, not just past
performance. This requires knowledge of what
creates long-term resilience and the ability of the organisation to re-invent itself
productive top team processes and behaviours look like
represents sound and well-targeted investment in capability
drives engagement
the people metrics are that indicate long-term organisational health.
Investors should be aware that the flimsiness of much broker research means it is not fit-for-purpose.

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11.3
Conclusions and recommendations high level summary
Overall conclusion interviews/surveys reveal HR has a continuing reputational problem. Longstanding concerns persist about competence, lack of business focus, service quality, courage,
added value. Move towards three-legged structure has not yet clarified managers/employees
confusion about what HR does. The fundamental challenge is to up-skill and re-orient HR, enabling
it to seize the opportunity offered by greater understanding that people make the difference. But
only a few progressive companies and HR directors are moving in that direction as yet.

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Seven themes

Actions

Re-frame HRs purpose

Re-define purpose as organisational effectiveness


what makes this organisation stand out as a winner?
focus on outcomes that provide demonstrable organisational benefits
create a high-performance work environment, not just high performing people

Re-focus HRs portfolio


more business critical roles
more future focus

Roles to fulfil are business problem-solver, organisational architect, workforce planner and
resourcer, talent manager and capability raiser, performance management expert, change
agent, collaboration and innovation facilitator, engagement champion, employer brand
manager and culture steward
Currently too much about the here and now. Use three lenses to re-focus objectives and delivery:
- sustaining current performance
- stimulating and guiding improvement
- driving and designing transformation
Create a transformation role to develop and embed organisational capability for change and
reinvention

Re-skill HR people
a new employer brand for HR
talent focus: a place for high achievers

Institute a culture change within HR, raise the sights and ambitions of current and potential
HR managers
Primary focus on business and OD skills a theoretically-underpinned and experiential
learning programme
Rotation within the function, and secondments in and out of the function
- Recruit from non-HR disciplines to boost business competencies, metrics skills, etc
- Selective external recruiting and interim appointments experienced consultants who
can teach/coach the new skill set, for example
Insist on continuous learning broadening and deepening throughout your career

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Seven themes

Actions

Re-define responsibilities for people


management

Create a people governance structure


Managers responsible for doing and engaging; HR to be guide, goad and guardian of quality
Agreed calendar and process for developing of a compelling people strategy, within
business strategy
Drive to strengthen managers skills
in performance management, feedback, capability development, understanding OE, for
example
leaders to be role models

Re-shape HR relationships

Co-creation of processes to ensure manager/employee buy-in and fitness for purpose


The ideal HR director both driving functional renewal and enhancing top team effectiveness
- key influencer of strategy and organisation design
- guiding top team processes and behaviour
- able to challenge and hold up a mirror when needed, guardian of culture and values
- formal adviser to board on reward, performance and development at the top
Avoiding silos within HR and head office HR is the integrating function

Refresh HR processes

All important processes to be mapped rationale, owners, customers and success


measures identified
Services to be designed with customer satisfaction and value added seen at least as
important as cost
Strong focus on measurement and evaluation to underpin all HR activities

Re-align professional bodies

Raise their sights in order to be seen as leading, not lagging, in raising HR calibre
Work with leading HRDs and progressive organisations to create a new tipping point to
improve HRs reputation

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APPENDICES

APPENDIX 1
HRs roles Ulrich updated
In recent lectures, Dave Ulrich has updated his original 1997 definitions of business partner,
change agent, employee champion and administrative expert.
HR Actions, Roles and Competencies

Business Ally

le

Bu
sin

op

Pe

Operational
Executor

Strategy
Architect

es

Systems &
Processes

Culture and
Change
Steward

Talent
Manager and
Organisation
Designer

Organisation
Capabilities

Credible
Activist

Relationships

HR Professionalism
The RBL Group

These are his explanations of the new headings.


Credible Activist
Delivering results with integrity
Sharing information
Building relationships of trust
Doing HR with attitude

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Culture and Change Steward


Facilitating change
Valuing culture
Crafting culture
Embodying and representing culture
Strategy Architect
Sustaining strategic ability
Engaging customers in strategy formulation
Talent Manager and Organisation Designer
Ensuring todays and tomorrows talent
Developing talent
Shaping organisation and communication
Fostering communication
Designing rewards systems
Operational Executor
Implementing workplace policies
Advancing HR technology
Business Ally
Interpreting social context
Serving the value chain
Articulating the value proposition
Leveraging business technology
Ulrich adds that he sees the last two roles as tickets of admission basics that HR must be good
at in order to be seen as credible in the remaining roles.

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APPENDICES

APPENDIX 2
New CIPD HR capability framework
The UKs Chartered Institute of Personnel and Development has undertaken an in-depth
project to define a more forward-looking capability framework for HR. Among other uses, this
provides a platform for devising a new syllabus for colleges providing CIPD qualification.
Project Frames involved
market research desk research, interviews with senior HR professionals, consultation with
industry
a literature review
obtaining feedback on findings from the project senior advisory board, employers, and CIPDs
research and policy department.
The aim is to produce an HR profession map for the UK which is market-led and evidencebased. The architecture of this profession map comprises
a definition of the purpose of HR
10 professional areas
4 bands of competence from arrival in the profession (Band 4) to senior practitioner (Band 1)
12 behavioural competencies.
The 10 professional areas comprise the nine listed below, all supporting the realisation of the
tenth Business solutions.
Leading and managing the HR function
Resourcing and talent management
Performance and reward
Strategy and planning
Organisation development
Employee relations
Organisation design
Learning and development
Information and service delivery

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Within the HR profession map, each professional area, for each band, will explain the activities
to be assessed at that band, the technical knowledge required at that level, and the behavioural
competencies to be displayed. There is also a useful articulation of what is required to transition
between levels.
The 12 behavioural competencies are as follows.
Setting the agenda

Curious to learn and understand


Powerful thinker
Confident to challenge
Wise decision-maker
Doing it the right way

Personally credible
Trusted partner
Relationship manager
Skilled influencer
Making it happen

Driven to deliver
Collaborative team player
Clear communicator
Change agent
Each of the 12 behavioural competencies then has a set of indicators and contra-indicators for
each band.
Note that CIPD recognises that the current provision of development programmes and services
to HR professionals in the UK at least are considerably skewed towards the less senior bands
(3 and 4).

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Nearly all the reading list items are referred to in the report.

HR in general

Wright, P. M.,
Restoring Trust: The Role of HR in Corporate Governance,

Re-defining Strategic HR, 2006.

Working Paper 3-11, 2003, Center for Advanced HR Studies, Cornell


University. http://digitalcommons.ilr.cornell.edu/cahrswp/34/

Christensen, R.,

Talent

Roadmap to Strategic HR: Turning a Great Idea into a


Business Reality, Saranac Lake, NY, AMACOM Books, 2005.

Capelli, P.,

Business Intelligence,

Talent on Demand: Managing Talent in an Age of Uncertainty,

Boudreau, J. W. and Ramstad, P. M.,

Cambridge, MA, Harvard Business School Press, 2008.

Beyond HR: The New Science of Human Capital, Cambridge,

MA, Harvard Business School Press, 2007.


Hirsh, W., et al,

Cohn, J. M., Khurana, R. and Reeves, L.,


Growing Talent as if Your Business Depended on It, Harvard Business
Review, Vol 83, Issue 10, pp 62-70, 2005.

What Customers Want from HR, Institute for Employment Studies,

2008.
Kates, A.,

Guthridge, M., Komm, A. B. and Lawson, E.,


Making Talent a Strategic Priority, McKinsey Quarterly, Issue 1, pp 4859, 2008.

(Re)designing the HR Organization, Human Resource Planning,

2006.

Lawler III, E. E.,

Kelly, J. and Gennard, J.,

NJ, Jossey-Bass, 2008.

Talent: Making People Your Competitive Advantage, Hoboken,


Power and Influence in the Boardroom: The Role of the
Personnel/HR Director, London, Routledge, 2001.

Kenton, B. and Yarnall, J.,

Somaya, D. and Williamson, I. O.,


Re-thinking the War for Talent, Sloan Management Review, Vol 49,
Issue 4, pp 29-34, 2008.

HR The Business Partner: Shaping a New Direction, Oxford,

Butterworth-Heinemann, 2005.

Performance

Losey, M., Meisenger, S. and Ulrich, D.,


(eds), The Future of HR: 64 Thought Leaders Explore the
Critical HR Issues of Today, Hoboken, NJ, Wiley, 2005.

Houldsworth, E. and Jirasinghe, D.,

Merritt, L.,

Paauwe, J. and Boselie, P.,

Human Capital Management: More than HR with a New


Name, Human Resource Planning, June 2007.

HRM and Performance: What's Next?, Center for Advanced HR


Studies, Cornell University, 2008.
http://digitalcommons.ilr.cornell.edu/cahrswp/476

Ulrich, D. and Brocklebank, M.,


The HR Value Proposition, Cambridge, MA, Harvard Business School
Press, 2005.
168

Managing and Measuring Employee Performance, London,

Kogan Page, 2006.

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READING LIST AND REFERENCES

Hirsh, W., Carter, A., Gifford, J., Strebler, M. and Baldwin, S.,
What Customers Want From HR: The Views of Line Managers,
Senior Managers and Employees on HR Services and the HR
Function, Report No 453, Institute for Employment Studies, 2008.

Hirsh, W., Abbot, K. and King, A.,


Managing Executive Performance for Organisation Results,

Lank E., et al,


Herding Cats: Choosing a Governance Structure for Your Communities
of Practice, Journal of Change Management, Vol 8, No 2, June 2008.
Lawler III, E. E.,
From Human Resource Management to Organizational Effectiveness,
Human Resource Management, Vol 44, Issue 2, pp 165-9, 2005.

London, Performance and Reward Centre, 2008.

Change
Hamel, G.,
The Future of Management, Cambridge, MA, Harvard Business

School Press, 2007.

Neumann, J. E., Kellner, K. and Dawson-Shepherd, A.,


Developing Organisational Consultancy, London, Routledge, 1997.
Vosburgh, R. M.,
The Evolution of HR: Developing HR as an Internal Consulting
Organization, Human Resource Planning, Vol 30, Issue 3, pp
11-23, 2007.

Kotter, J. P.,
Leading Change, Cambridge, MA, Harvard Business School Press,

HR services

1996.
Business Intelligence,
Society for Human Resource Management,
Change Management: The HR Strategic Imperative as a Business
Partner, HR Magazine (US), Vol 52, Issue 12, pp 1-10, 2007.

Next Generation HR Shared Services, 2008.

Reddington, M., Willamson, M. and Withers, M.,


Transforming HR: Creating Value through People, Oxford,

Organisation development and design capabilities

Butterworth Heinemann, 2005.

Anderson, M. C.,

Reilly, P., Tamkin, P. and Broughton, A.,

Fast Cycle Organization Development: A Fieldbook for


Organization Transformation, Cincinnati, OH, South-Western

The Changing HR Function: Transforming HR?, London, CIPD,


2007. Summary available at: http://www.employmentstudies.co.uk/pubs/summary.php?id=cipd1107

College Publishing, 2000.


Armstrong, M.,
How to be an Internal Consultant, Human Resources, Winter Issue,
pp 26-9, 1992.

Reilly, P. and Williams, T.,

Block, P.,

Orion Partners,

How to Get Best Value from HR the Shared Services Option,

Farnham, UK, Gower, 2002.

Flawless Consulting, 2nd Ed, San Francisco, Jossey-Bass/Pfeiffer,

Shared Services Centres that Work, 2007.

1999.

www.orionpartners.co.uk

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Measurement

Wright, P. and Collins, J.,

Becker, B. E., Huselid, M. A. and Ulrich, D.,

The Chief Human Resources Officer Key Challenges and


Strategies for Success, Working Group Research Brief, Center for

The HR Scorecard Linking People Strategy and


Performance, Cambridge, MA, Harvard Business School Press, 2001.

Advanced Human Resource Studies, Cornell University, 2008.

References CRF reports


Fitz-Enz, J.,
The ROI of Human Capital, Saranac Lake, NY, AMACOM Books, 2000.

Ashton, C. and Lambert, A.,


The Future of HR, CRF Publishing, 2005.

Fitz-Enz, J. and Davison, B.,


How to Measure Human Resources Management, Maidenhead,

Cunningham, I.,

McGraw-Hill, 2002.

Business-Focused Learning and Development, 2008.

Huselid, M., Becker, B. and Beatty, R.,

Haffenden, M. and Lambert A.,


Effective HR Evaluation, 2004.

The Workforce Scorecard: Managing Human Capital to


Execute Strategy, Cambridge, MA, Harvard Business School Press,

2005.

Hesketh, A.,
Outsourcing of HR Possibilities and Pitfalls, 2006.

HR function development
Lambert, A.,
Jamrog, J. J. and Overholt, M. H.,
Building a Strategic HR Function: Continuing the Evolution, Human
Resource Planning, Vol 27, Issue 1, pp 51-62, 2004.

The Career Issues of Corporate Functions, 2002.

Lambert, A. and Yip, G.,


The Challenge of Operating Globally, 2007.

Quinn, R. W. and Brockbank, W.,


The Development of Strategic Human Resource Professionals at BAE
Systems, Human Resource Management, Vol 45, Issue 3, pp 47794, 2006.

Lambert, A.,
Embedding Creativity and Innovation, 2007.

Sparrow, P., Hesketh, A., Hird, M., Marsh, C. and Balain, S.,

Lambert, A. and Buckingham, M.,


HRs Role in M&As, 2006.

Reversing the Arrow: Using Business Model Change to Tie HR


into Strategy, Lancaster University Management School, Centre for

Lambert, A.,

Performance-Led HR, 2008.


http://www.lums.lancs.ac.uk/files/14655.pdf

The Employer Brand and Employee Engagement, Research

Vickers, M.,

Morton, L.,

HR Growing Pains: Getting from Awkward to Accomplished,

Differentiating Talent Management, CRF Publishing, 2005.

Briefing, 2005.

Human Resource Planning, December 2007.


Note all CRF publications are available only to members of the
Corporate Research Forum.
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Other references books

World Federation of Personnel Management


Associations/Boston Consulting Group,

Tappin, S. and Cave, A.,


The Secrets of CEOs, Nicholas Brealey, London, 2008.

Creating People Advantage How to Address HR Challenges


Worldwide through 2015, April 2008.

Ulrich, D.,

World Federation of Personnel Management Associations


and Centre for European Human Resource Management,
Cranfield University, UK,
HR Competencies and Professional Standards, June 2000.

Human Resource Champions, Cambridge, MA, Harvard Business

School Press, 1997.

Other references reports and articles


CIPD
The Changing HR Function Key Questions, 2006.

CIPD
A Barometer of HR Trends and Prospects, 2008.

The Conference Board,


Evidence-Based HR in Action, 2008.

Hewitt Associates
European Ways to HR Transformation, 2006.

The Hackett Group


2004 HR Book of Numbers, www.thehackettgroup.com.

PricewaterhouseCoopers
Global Trends in HR, 2006.
Scholz, C. and Bhm, H., and European Association for
Personnel Management,
Human Resource Management in Europe, Routledge, 2008.
SHRM and The Hay Group,
Strategic Research on Human Capital Challenges, October

2007.

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