In the UK Civil Service, there is 1 Human Resource professional for every 50 employees. In other sectors with some degree of standardisation, larger organisations should be achieving a ratio way beyond 1 HR professional to 100 employees. The report indicates that HR in the UK Public Sector is about half as efficient as it should be.

The UK Government has presented its strategy for delivering efficiency savings in the Public Sector, Putting the Frontline First – Smarter Government and states that “This plan delivers better public services for lower cost”. The report refers to a range of tactics including strengthening the role of citizens and civic society, accelerating the move to digitalised public services, allowing local authorities to create further commercial opportunities and streamline central government for sharper delivery. The report also highlights the objective of improving back office processes to the standard of the best.

To make the proposed Public Sector changes, and make them stick, requires effective people management and HR has a key role to play in this. As “Next Generation HR” – the Civil Service wide employee framework recognises, it is key that performance improvement, engagement and wellbeing, competencies and skills and smarter workforce deployment are delivered more effectively. The key to “Putting the Frontline First” is “Putting employees first” – they ultimately will deliver these changes.

In the report Benchmarking the Back Office IT, Finance and HR metrics have been published for Government departments. The tactic of “Naming and Shaming” with benchmarks can be a useful and powerful technique when used appropriately. However benchmarking alone should never be used to size any function, it is a crude yard-stick. Sizing HR functions should be linked to the wider organisational goals. The question should not be “how do we achieve 1:77 or 1:150?”, rather “what are the goals of the organisation and what HR capability and resources do we need to deliver them?”

Armed with this benchmark data, Click here for spreadsheet with HR Benchmark Data (with Glass Bead Consulting Ranking), the HR Transformation Analyst team at Glass Bead Consulting were let loose for some initial number crunching. The data, at this stage, has too many questions and gaps to be analysed in a meaningful way, but here are some comments and observations.

Comments on HR Benchmarking Data

1. 1. The data shows ‘% Cost of HR Function’ (against total running cost) and ‘Ratio of Employees (FTE) to HR Staff’, plus Average Working Days Lost to Sickness (AWDL).
   
   
2. 2. Using Benchmarks is a minefield with many reasons for anomalies. It is often a more productive use of time to work out why there are differences within an organisation. The metrics chosen have their flaws, for example the Ratio of Employee (FTE) to HR Staff might show variations due to degree of outsourcing and definitions. ‘% of Cost of HR function’ will vary considerably depending on the type of expenditure i.e. running Embassies around World or calculating benefits payments.
   
   
3. 3. In terms of HR metrics, we prefer the ‘Total Cost to Serve per employee’ metric as it reflects 3rd party spending and relative salary costs. E.g. the HR : Employee ratio might be very high because 50% of HR is outsourced, however the ‘Total Cost to Serve per employee’ allows a better comparison.
   
   
4. 4. It would be useful if the report published “number of employees” and “number of HR Staff” – then the departments could be grouped into similar size. An organisation with 500 employees clearly has less options for economies of scale and skill, not to mention investments, than one with more than 20,000.
   
   
5. 5. Why are there gaps in the data? These are the most basic data elements you would look to in a HR Assessment. How many employees do you have and how many HR staff? Why is this so difficult?
   
   
6. 6. The document mentions, 1:77 (see graph below), as an private sector industry median performance. However, in a recent discussion in the CIPD LinkedIn community, there was general agreement that 1:100 is a sensible starting point. Larger Private Sector top performers are way beyond 1:100, with the use of shared service centres, Employee & Manager Self Service tools, effective use of 3rd parties, and re-allocation of people management responsibilities.
   
   

   

   
   
   

7. 7. Why include Sickness (AWDL) as a metric here? Although there are correlations between effective HR and this is an important metric, it is one of many goals. Managing sickness is not solely HR’s job – it is also the mangers responsibility. However important Sickness is, it is a distraction in this context.
   
   
8. 8. Where is the NHS data? The NHS should be much further ahead than other Government departments following the large investment in ESR (HR Oracle based system) which has now been implemented. Having a common HR System is a key building block for more efficient Shared Services. It is important that NHS data is included to get a baseline from which regional shared services can now start to be planned.
   
   
9. 9. Our HR analysts had some issues with the data, but highlight some of the ‘HR : Employee ratios’ that stood out were as follows :-
   
   

21 – Northern Ireland Office

25 – Ministry of Defence

28 – Department for Transport

33 – HM Treasury

37 – Cabinet Office

38 – Department of Business, Innovation and Skills

Even with a target of 1:77, the figures above show there is a long way to go.

(For readers from the Private Sector, how does your organisation compare?)

As Rick, from Flip Chart Fairy Tales asks, in Government support functions: over-spending and over-staffed, what does this tell us about the efficiency of the Civil Service as a whole?
If an organisation is delivering at 1:20 or even 1:40, it is not delivering HR effectively. I would go as far as saying 1:100 has been the litmus test for organisations if we are going to use crude benchmarks. The scope of the report doesn’t tackle how well HR does in terms of helping organisations achieve their objectives (which is why HR exists). Better links need to be made between progress on ‘Next Generation HR’ and ongoing Benchmarking reporting.

Any plans to transform UK Public Sector needs strong leadership, robust performance management, employee engagement and the right competencies and skills deployed at the right time. In other words a well functioning, modern HR department. Reporting the key HR Metrics is a fine idea and good starting point. However it is important that the right metrics are assessed and any decision-making framework includes a much broader set of a data so that meaningful targets are set and delivered.

This is a summary of an original article published by Strategic HR Review.

In an economic downturn and subsequent recovery, change is inevitable for every organization. Effective Change Management is often a mix of the strategic and the practical. It can encompass everything from ensuring strategies are aligned, to making sure your weekly bulletin goes out on time, on message and to the right people. From a HR perspective, it is important to provide leadership and guidance by example and the following actions can help HR executives to lead the way during the change process.

1. Define and deliver your HR strategy

Make sure that HR strategy is consistent with the overall business strategy, and where necessary provide input and ideas into the overall business strategy. Make sure you achieve buy-in from key stakeholders. This can be achieved by clearly outlining your proposed improvements and delivering on project ideas early on. Part of aligning HR strategy with the overall business strategy will be achieved by sharpening your HR operating model and asking how each HR role will support your organization in the next 12 months. You will be better able to respond quickly to organizational changes with better HR systems, more effective processes and better aligned capabilities in place. This allows HR to deal with the next new change more effectively.

2. Understand HR cost drivers

It is vital to know what drives HR costs. If you know your key performance metrics and what has an effect on them, you can quickly demonstrate that you understand the cost, service and risk implications of any proposed organizational changes on your own department. A good grasp of the cost implications of strategic decisions and the analysis to back it up – really helps when it comes to making changes. By conducting an assessment of the HR department, you get a better understanding of your internal benchmarks. A key metric for HR to understand is the HR “Cost to Serve”of each employee, including staff, systems and third parties. This can vary widely between businesses and geographies and it is important to know why.

3. Take a lead on sourcing options

Take the outsourcing decision to your board – do not let the board take it to you. Be proactive and do the research into how outsourcing could benefit your department (see article Top 5 Benefits of HR Outsourcing)and bring about positive change, as well as cost-savings. Show that you have been actively looking at alternative ways to provide better and more cost-effective HR services in payroll, IT, recruitment, training, HR administration and benefits. Develop your own “build or buy” criteria to help gradually improve HR services. Demonstrate that your business case takes into account the benefits of moving from fixed cost to a more variable cost (that will help in the downturn and the subsequent upturn).

4. Lead by example

There is a balancing act that good HR directors need to master. Often, HR directors are so outwardly focused on supporting the organization that they can neglect the day-to-day workings of their own department. When aligning HR strategy to the wider business strategy, HR directors need to focus on the internal working of the HR department, and most importantly, the people within the HR department. Show leadership through developing your talented team members, and use this as your core team to lead change. Retention strategies start at home, so show the board what you are doing to keep and develop your most talented team members. Be innovative. The organization will look to the HR department to lead on this – secondments, project roles and recognizing excellent service are all initiatives that can inspire people within the organization.

5. Implement change decisively and calmly

All executives in the organization must demonstrate leadership by managing change in a calm and decisive way. HR can stop the organization making “knee-jerk” reactions – more than ever, this is the time to make the right decisions for your organization. Implement changes calmly, effectively and consistently.

HR Project failure usually means increased cost to implement, reduced quality of final outcome, time delays and often leaves a huge dent in morale.

The list below are reasons why HR projects fail based on the number of sleepless nights they have caused HR Execs, and the more scientific approach of research and surveys. The good news is that they are all preventable – by following tried and tested methodologies such as Prince 2, brushing up on your Change Management skills and mixing all of this with a huge dose of common sense.

Typical HR projects can include change programmes, implementation of shared services, HR transformation projects, outsourcing and IT projects.

Top five reasons why HR projects fail include:

1. Lack of clear executive leadership. Any HR project needs a sponsor to help ensure that it is set up to succeed with the right resources. Having executive leadership comes into its own when the project has to traverse choppy waters. HR projects that have business (non-HR) sponsorship tend do well. Lack of leadership can lead to a lack of vision and people quickly forget why they are working so hard in the first place.

2. Skills of staff. It sounds obvious, but the key skill that is usually lacking is project management. There are simply not enough skilled project managers in HR with experience in successfully delivering complex projects. Many project management problems stem from inexperience, a common example is not breaking up the project into manageable pieces. Another key skill that is required for HR Project Managers is Change Management and unfortunately Project Management methodologies and courses do not emphasise this enough.

3. Governance not set-up properly. If the governance hasn’t been agreed formally at the beginning, it is amazing how initial enthusiasm can disappear when the going gets tough. This comes from not agreeing up-front how decisions will be made during the project. It is well worth investing time early on to establishing project governance. This helps ensure that issues are resolved quickly when they arise.

4. Not managing stakeholders effectively. For most projects, you will need to persuade human beings to change how they do things. This is very difficult and will require diplomatic and sometimes innovative methods to succeed. Not managing stakeholders can lead directly to other classic PM problems like not gaining employee buy-in, dealing with resource cuts, other projects getting priority and not dealing with genuine cultural differences. The key is to identify your stakeholders up front, work out how the project impacts them and what they will need to make the project work. Then ensure that you prioritise your time so you can work through any issues they may have.

5. Project complexity across multiple businesses and geographies. Complexity can be caused by working across different business units and geographies, each with potentially different drivers and cultures. To overcome potential problems, set up the project to gather all requirements, take time to understand your stakeholders and design your Governance to help resolve those tricky issues. Finally, use your sponsor to provide you with guidance where appropriate and watch out for barriers that are perceived rather than real.

The HR Outsourcing market has its problems like every other market right now. On the supply side, there are too many providers, with some running ‘loss-making’ HRO contracts over 7-10 years. On the demand side, a larger range of organisations urgently require HR solutions that allow them to provide better and more cost effective HR solutions. The HRO market is still maturing, 2009 will be interesting with large contracts signed and further HR provider consolidation. Why is there increasing demand from organisations to outsource their non-strategic, transactional HR processes? The benefits of HR Outsourcing include:-

1. To reduce the cost of HR, and to better manage the cost of HR. Many organisations have achieved savings greater than 20% by standardising HR processes, utilising self-service tools and outsourcing. The extent of savings depends on willingness to standardise and transformation of the “retained” HR function. When the HR cost base is more tightly controlled and better managed then decisions can be made about the relative allocation of resources. In sectors with mergers, acquisitions and rapid changes in employee numbers a goal is to provide more variable costs linked to employee numbers which can push clients towards using more specialist 3rd parties.
2. To avoid major investments required in HR technology. That multi-million dollar SAP/Oracle upgrade is much harder to justify in this economic environment. Some HRO providers can provide their own HR platform and offer the latest upgrades and services that your organisation probably can’t.
3. To realign HR to focus on delivering HR Strategy and support its core business. A typical goal of HR Transformation is to increase the proportion of HR cost allocated to strategic HR and reduce the proportion allocated to HR Administration. With non-strategic HR processes outsourced, HR is better able to respond more quickly and more effectively to organisational changes.
4. To improve the quality of HR Services delivered to employees and managers – using service management techniques, self-service tools or best-of-breed suppliers. To achieve this requires excellent change management skills with policy harmonisation, standardisation and changing HR customer interactions. This is difficult work, however the advantage of a legally binding contract and go-live date really can focus the mind.
5. Controlling the legal risks and improving compliance will be more rigorous when there are external contracts with providers – this will become increasingly important in an era of increased regulation.

See also HR Outsourcing – The Challenge of Picking Winners

If you are thinking about HR Transformation, then consider taking the following steps :-

1. Conduct a skills audit

Which HR Transformation Skills currently exist in your organisation, and are they available?

2. Complete a HR Current State Assessment

What is your current HR performance like? Do you have the key HR performance metrics such as HR FTE to Employee ratio and HR Cost to Serve, broken down by division and geography ? If not, then you will need to develop a current baseline as a starting point – facts are key in making your case for change and deciding whether to buy services from outside.

3. Check your appetite for change

Any transformation programme is long, challenging and can take between 1 and 3 years. The impact and effort for your staff to move an organisation through a series of step-changes involving process and technology is often underestimated.

4. Understand your organisation strategy

To gain “buy-in” to your HR Vision you will need to be aligned with your organisations strategy.

5. Start thinking about who your sponsors will be

For any large Transformation programme to succeed, it is essential to have visible leadership to push changes through and lead by example. It is worth considering a “non-HR” Transformation champion.

6. Set this up as a formal project

The general rules of project management apply here to, so brush up on your project management experience and consider seconding a qualified project manager. Establishing appropriate governance is essential to deliver on time and to budget.

7. What is the appetite for outsourcing ?

Do you currently outsource services in other areas such as IT and Finance? Do you currently use 3rd parties to deliver HR services in payroll or Learning and Development ? Would a move to outsource HR Administration be too large a shift for your organisation in experience and strategy ?

8. Speak to your customers

Ask your key HR customers for their view of current service performance and future requirements. Surveys and focus groups can be developed, or simply ask your key customers the direct question over a coffee?

9. Start developing your vision

The key to gaining buy-in and providing clarity to your team is a clearly articulated vision. Who needs to input and deliver your vision will depend on your organisation, but it needs to inspire your staff, the Board, and deliver your organisations strategy.

10. Consider working with a HR Transformation partner

If you find you have skills and experience gaps in HR Transformation, then consider partnering with a specialist HR Transformation consultant.