CIPD HR Operating Models ~ Strategic Human Capital Management (HCM) Blog

I read through the CIPD's recent report, Changing Operating Models, whilst at IQPC/SSON's HR Transformation Summit last week.

The report summarises a number of different peoples' contributions and shows that HR is still having problems transforming to a more strategic future - see the graphs summarising research from Alan Boroughs (rather confusingly labeled the wrong way around in the report.)

Why is it such a problem? Well, the central point about HR transformation is that it is part of broader organisational transformation, but confined to HR. So if the whole organisation model is wrong somehow then an aligned HR model won't work well either. I think Barry Fry and Anton Fishman makes this point well, explaining that there is little benefit aligning with anachronistic enterprise models. I try to get round this by always ensuring that HR transformations align with the broader context of the organisation, not just the business and HR strategy.

I also like the way that Jill Miller and Paul Sparrow discuss this best fit approach looking at SMEs (Jill) and cross-organisational collaboration (Paul). See this post on the need for organisation principles to support HR transformation too.

Once you've got this best fit position you can then build an integrated talent management architecture around it, a point Alan Boroughs explains well.

I also like how Dave Ulrich describes it:

"In recent years, some have tried to figure out ‘what’s next’ in how HR departments will be organised. The challenge again starts with the business and the most basic question is, ‘how will the business be organised?’ The basic business structure challenge remains grounded in the centralisation–decentralisation grid and debate, and so does the HR department challenge. Some have misinterpreted our work as advocating that HR should be organised through shared services in all business settings. One well-intended study interviewed HR leaders in government agencies and SMEs and they critiqued the shared services logic. Duh! These organisations were functionally driven and should not create an HR organisation that is different from the business organisation."

(Actually I think Dave has misunderstood what's been happening across UK government agencies but the basic point still stands.)

This best fit approach means that Josh Bersin’s suggestion that there is a standard roadmap all HR functions need to go trough to transform is complete nonsense (as most roadmaps are.)

For one thing, business focus may be one future strategy for HR, but there are others - see my recent posts on people centricity (1,2,3), and also on the need to consider and select from multiple futures, not just the one that someone tells you to follow.

Secondly, whatever future you want to create, you should never copy the slow crawl progression that other organisations have been through but leapfrog over all this and work out how you go straight to the thing that you want.

One of the key aspects of OD is the use of an operating model (like an organisation model, but with more detail) and most of the CIPD’s report deals with the typical Ulrich model design of HR, and considers the relative weightings of the different parts of the model:

Centres / Networks of Excellence

Some of the writers suggest the centres of excellence (or as Josh Bersin suggests, networks of excellence) form the most important part of the HR model.

John Boudreau and Ed Lawler (who makes one of the best arguments for people centricity in his book Talent) use their HR survey data to argue this point. But their data also shows that lower amounts of tailoring HR approaches for business units is correlated with an increased role in strategy. I think they understand this to mean that HR shouldn’t fiddle and therefore doesn’t need HRBPs. I read it the other way around - if HR doesn’t have a strategic role it won’t be successful in tailoring its approaches. So we need more, not less, focus on business partners.

Anyway, so much of HR effectiveness depends on how things are done, not just whether they are done or not. For example rotation in and out of HR can be positive or negative - it depends on why, in what way, and how it is done eg if it’s well planned and managed and for the right reasons.

But actually I don't think rotation is a key area. Josh Bersin notes that companies are bringing in business people because HR needs to focus on outcomes and effectiveness. Well actually that's why I think we need more deep people related specialism and specialists retained within HR (since I recommend a future which is people centric, rather than solely focused on the business.)

It’s a shame that Lawler doesn’t talk about the Organisational Effectiveness role (I suspect the article was written mainly by Boudreau.) This is a newish and critical part of the HR model, but perhaps this is what the professors were getting at when they were suggesting more focus on the COEs.

However, I’d disagree on this - for me OE is something all HRBPs should take on - one of the things we discuss in the HRBP training I run for Symposium.

Business Partners

Several of the contributors suggest the HRBP is the key role. Gareth Williams suggests that HRBPs are becoming thought leaders in their own right so we won’t need so much focus on COEs. I’m not sure about that as it sounds a bit too much like a return to HR generalists.

Nick Holley notes that organisations are becoming leaner and more matrixed so the partner role becoming more central - like a knot in a bowtie. This shift means that HRBPs often lack intellectual capability and prove unable to step up. I don’t agree with Nick on this. For me business partner failure is more often about lack of development support and organisational guidance for new HRBPs to move upwards. Plus Elliott Jaques (also called Elliott Franks in the report) had some interesting ideas and I do sometimes use his insights around requisite organisation for organisational layers and grading, but I wouldn’t use career path appreciation as it doesn’t fit with what we now know about the plasticity of the brain.

I also don’t agree with Nick about the most important capability needs for business partners. For example Nick reviews some SHRM research which asked HR professionals about the “worth of various academic courses toward a successful career in HR. 83% said that classes in interpersonal communications skills had extremely high value. Where was change management? At 35%. Strategic management? 32%. Finance? Um, that was just 2%.'

Nick finds this disturbing. I don’t. For one thing, SHRM were asking about what HR finds useful not just what they do. And I don’t think he has any justification for ignoring our views. We find interpersonal skills useful, OK?

Secondly, I think it's completely appropriate that we find interpersonal skills important, and for exactly the same reason that Nick suggests the HRBP is the key knot in the bowtie. Increasing ambiguity, complexity and matrixed organisations means that it’s people to people relationships which make the biggest differences to our effectiveness. This is why the Symposium HRBP training focuses on relationship management skills.

HR does need to understand Finance. But once we’ve understood the basics and established our credibility as business people, further financial savvy doesn’t help that much. The difference that makes the difference is understanding and influencing people. Interpersonal skills.

Service Centre and Outsourcing

Andy Spence writes about the positive impact of cloud and outsourcing on service centre operations. I’d agree with this, though I’d suggest the impact of new technology is a little less about cloud and a lot more about generally better functionality and especially usability.

Andy also suggests that cloud is enabling outsourcing because cloud requires standardisation which makes HR easier to outsource. Yes, but it also makes it easier for organisations to do HR themselves.

Standardisation can be a problem too. I think an important piece of the HR jigsaw which is missing in many organisations is greater clarity over what parts of an individual organisation’s HR architecture is strategic, and which is transactional. The transactional piece just needs to be delivered well by an efficient system, and potentially outsourcing. The strategic piece is more difficult and more critical and may need a different, specialist best of breed system / module on top of the integrated platform. If you just standardise everything you’re not going to be able to differentiate your HR architecture and you’re not going to be able to compete based upon your people.

Summary - the need for HR Capability and One HR!

So what's my view on the relative importance of the legs of the Ulrich 3 legged stool? That it's a dumb question. Their relative importance depends on your own business strategy, organisational context, HR organisational principles, etc, etc. Plus they're all likely to be important.

Jill makes the point that structure doesn't count as much as skills. It's a good point and I think all the commentators have focused far too much on structure and nowhere near enough on the other elements of the organisation model, particularly skills.

So I do like Josh Bersin's suggestion that more than the current 8% of organisations need to have a professional development programme for HR.

The other thing which is really important and is completely missing from the report is the need for a 'one HR' focus and culture. Because actually the relativities between the three groups in the model is a lot less important than that the three groups get on and work together to produce great people and organisational outcomes for the business.

Focus on skills and culture, and build a model based on a sound OD approach, and my bet is that you'll get a much better impact on talent management as well as operations.

And let me know if you'd like any support in doing this - eg in developing your own HR development programme, or you just need some more general guidance on effective, people centred HR transformation.