Future Trends in HR Operating Models (Part 2)

This is the second of a two-part discussion on Future Trends in HR Operating Models, click here for Part 1 Future Trends in HR Operating Models (Part 1 with Slides)

(3) HR Outsourcing market will restructure to deliver standardised services

The HR Vendor landscape is evolving all the time (slide 8), we have HR Technology vendors, HR Outsourcing (HRO) providers, single process vendors and HR consultants. HR vendors are also impacted by current economic changes, with cost pressures and streamlining. The market will look very different in two years time with more mergers & acquisitions, see for example Towers Perrin and Watson Wyatt merger.

There have been less huge, multi-year HRO contracts such as Unilever/Accenture or Convergys and Johnson & Johnson. 10-year HRO contracts are more difficult in the current environment. It is difficult enough to predict the needs of your own organisation, yet alone where a supplier will be in 5-10 years time, so HR buyers are more cautious. However, single process outsourcing is booming – RPO, Learning & Development outsourcing or see recent examples of large “Payroll Plus” contracts. The ERP providers are now developing and providing SaaS models – see Wipro and Oracle example and if successful this will indeed ‘blow-up’ the HRO/BPO service model.

The HRO model will change to provide lower cost services to a broader range of organisations. For buyers to benefit from cost savings to achieve their strategic agenda, they will need to accept more standardisation of services. Industry consolidation, technology innovation, economic pressures and a drive to deliver HR strategy will all help to make this happen. Those vendors who provide tools and services that help address organisations key Talent Management issues will thrive.

(4) HR as a corporate function will be leaner, with Employees and Managers doing more

Organisations need to improve productivity in a competitive globalised environment and HR needs to demonstrate ‘value for money’ like every other function. This will encourage ‘leaner’ central HR functions, pushing out more “people management” to managers enabled with much better skills and tools.

Current HR operating models need to change (slide 10). The ‘Ulrich Model’ promoted ‘economies of scale’ and ‘economies of skill’ with the adoption of Business Partners . However, the implementation of the model has had mixed results, including adoption of Business Partner model, questions about whether HR Technology has been a barrier rather than an enabler, and gaps in HR skills required to implement the changes needed.

Business Partners – working within HR or the business with participation in strategic decision-making. This is currently a weak spot in many HR Operating Models, for different reasons including HR Generalists struggling to operate at an Executive level. A key challenge for HR will be to enable Managers to manage their staff more effectively, with less reliance on central HR support. There will be ‘Business Partners’ in future HR Operating Models, but fewer and operating in a different way.

Centres of Expertise – providing policy design and case support, responding to changes in external market or legislation. A big question is can COEs provide best practice at a competitive price?

(5) HR Skills will develop in Change Management, Project Management, Vendor Management and Technology

In allocating more time to delivering HR solutions, HR must review the skills it really requires. Delivering change requires different skills to managing day-to-day operations. Key skills gaps include Vendor Management, Change Management, Project Management and business transformation skills.

Vendor management is an increasingly important specialist skill in HR. (see this useful guide from CIO magazine Vendor Management Guide) With less end-to-end HR Outsourcing deals, and more single process contracts – managing vendors effectively is a fundamental. Building mutually beneficial relationships with effective Account Management, Service Level Agreement management, continuous improvement, negotiating and contracting adds real value.

Project Management – with so much change in mergers, acquisitions, restructuring and technology, HR needs to be in a position to lead large-scale change programmes. HR professionals bring great experience and understanding of the people aspects of change which is so crucial to delivering successful change. Simply put, organisations should be coming to HR when they require project and change management expertise.

And finally, after reflecting on what might be on the horizon, here are some steps to get started (in addition to slide 13) 10 steps before starting your HR Transformation project

This is the second of a two-part blog on Future Trends in HR Operating Models, click here for Part 1 Future Trends in HR Operating Models (Part 1 with Slides)

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