HR Transformer Blog

HR Benchmarks - A Government Health Warning

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. 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. 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. 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. 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. 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. 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. 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. 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. Our HR analysts had some issues with the data, but highlight some of the 'HR : Employee ratios' that stood out were as follows :-

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.

HR Social Networks - UK Trends

Are UK HR professionals the 'social butterflies' of the online World? Researchers monitored 2000 online conversations in the UK over September and October as part of their research. The conversations included employers, consultancies, and employees discussing HR related topics. The interesting report from CHA, the workplace communications consultancy, was based on research by online specialist Pass It On Media. It found that the tone of conversations was mainly neutral to positive which surprised the researchers who expected more 'angst' in the current economic environment. The report is worth a read with innovative research, case-studies from Virgin, E.ON UK and Dell, and some very useful and practical tips for employees and employers alike. Download the PDF "Conversations at your fingertips - How HR professionals score as social networkers"

The findings that stand out for me :-

1. The key venues for conversation are message boards or forums, which account for 54%, followed by social networks such as LinkedIn (23%) and blogs (23%).
2. Broadly, the themes covered are: the working environment & friendship at work, salaries & related issues, how people are feeling, and work/life balance & holidays.
3. The top five are LinkedIn, Facebook, iVillage, Netmums and UK Business Labs.
4. Busiest day for social networking about employment issues are Thursdays and Fridays.
5. Social Networks are now more popular than personal emails.
6. The term 'human resources' has been used only 13,000 times on Twitter "HR" has been used a staggering 323,000 times in the life of Twitter.

For trends in UK Social Media usage, the map below comes from Are you LinkedIn in London or Bebo in Belfast? and show the regionalisation of various social networks, as of September 2009. With Facebook and Twitter's growth leveling off, and Bebo and MySpace continuing to lose audience it will be very interesting to run these again in 2010.

Possible questions for further research is how do other functions compare to HR and what are the trends in other countries?

How to Lead Change by Example - 5 Tips for HR Professionals

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.

Do you need a HR background to be a successful HR Director?

General Motors have appointed Mary Barra as new Head of Human Resources (see article in 'Workforce' - General Motors Shakes Up HR Leadership)

Mary does not have a HR background, however has been a top executive with an engineering background. This has raised the question,

"Do you think someone with a 'non-HR' background can make a successful HR Director?"

I posed this question to an Institute of Directors discussion on LinkedIn (UK-based members-only group) and within 24 hours had over 20 comments, which brought out a range of strongly-held views on people management and Human Resources.

Some themes, and my commentary from the discussion :-

Can someone with a 'non-HR' background be HR Director? Absolutely, they could bring in real experience of the workplace, fresh innovative strategic thinking, strong stakeholder relationships (particularly for internal candidates) and bring in the real thinkers from outside HR.

What about specific HR knowledge on policies, benefits/reward, industrial/employee relations, employment law?
"It's a positive sign they want to make deep changes in HR and don't want to draw from the HR community" from the Workforce article.
Naturally this specialist HR knowledge is needed, but it doesn't all need to be with the HR Director, or in some cases it doesn't need to be within the organisation. Larger organisations can afford to employ specialist direct reports, and all organisations can go outside the organisation for specialist HR services. The HR Director is still 'accountable' for decisions made on employment law, but that doesn't mean they need to know the latest directives in minute detail.

The context is key. The range of competencies and experience required for a particular HR Director role is varied and will depend on the circumstances. From major transformation to taking over a 'steady ship', the skills needed to 'transform' an organisation are very different to those needed to 'manage' an organisation. (see article HR Transformation Highlights Skills Gaps in HR.)

Who is responsible for 'People Management' anyway? Well everyone actually - from the CEOs to managers and employees. HR does have a key role, but it is not their sole responsibility. People solutions come not just from the HR Director, but from a collective team of specialists.

Do organisations need a HR function, if most services can be outsourced? There is a market for HR outsourcing (see article on Top 5 Benefits of HR Outsourcing) which vary in maturity from Payroll and Benefits Administration to end-to-end HR services (for large global players like BP, Unilever etc). If someone else can deliver a particular function 'better and cheaper' then why not outsource? My recommendation is not to outsource strategic functions which should be delivered by those 'close to the heart' of the organisation. Or better than outsource, why not eliminate unnecessary HR administration or utilise 'self-service' software applications where appropriate.

Why are we not having this discussion about Finance and IT, what makes HR different? A great question from @bncarvin on Twitter, and also from the LinkedIn debate. My view is that we are having this debate about HR, simply because in many areas HR is not delivering on 'talent and people issues' attracting, retaining and developing employees. In some cases, HR is not responding to the strategic agenda because it is bogged down in important operational work, mergers, restructures etc. In other cases, it is because the transformation skill-set is missing. Many of the Chief Executives current issues are 'People issues', for example improving performance of employees, developing the talent pool, fostering innovation. If these are not delivered by HR, then the CEO will look for radical solutions such as bringing in talent from outside HR.

My hope is that HR will develop the transformational skills required to allocate more resources to strategic issues, utilise appropriate HR service providers and benefit from the renaissance in HR software solutions (see article 5 Future Trends in HR operating models). With mounting pressure to deliver, HR has to transform or bringing in HR Directors from 'outside of HR' will be more common. However if HR does respond, the current question will change from,
"can people with 'non-HR' backgrounds become HR Directors?"
to
"can HR Directors become Chief Executive Officers?" (see for example the article Making the step up from HR to the CEO )

For those in HR who can rise to the challenge, the prizes are high indeed.

Does the shoe have to fit? I would be very interested in your views.

Finally I wish Mary Barra good luck in her new role!