Given the increasing executive focus on people and talent, HR has an unprecedented opportunity to position itself as a true strategicpartner to the business. Yet very little tangible, pragmatic adviceexists as to how specifically HR can make a real difference toorganisational performance. Here Hay Group unveils the six keyrequirements for building a strategic HR function that is fit foryour organisation’s needs both today and in the future.

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fit for today and fit for the future

strategicBuilding

HR

1 Align to the business strategy To really add value at board level, HR professionals must understand and leverage the linkages between strategy, people and work. And that begins by asking the right questions like ‘what are the organisation’s people requirements over the next five years in line with our strategy?’

Determining the answer requires a solid understanding of the business, as well as the impact of a number of external factors on the organisation’s human capital needs. These include economic conditions, competitor activity, industry and market trends, regulation and advances in technology. This understanding must then be translated into robust workforce plans to deliver the ‘five rights’ – the right number of people, with the right skills, in the right place, at the right level and at the right cost.

2 Focus on the right things Understanding where there is a requirement for basic – versus best practice – HR practice and service is critical to becoming a strategic partner. Exploring what ‘lean’ HR could look like, and then identifying where additional resource should be focused to deliver the strategy, enables the function to have a commercial conversation around the value it adds and its return on investment. It also maintains focus on those key services which are essential to the organisation’s future.

3 Balance standardisation and differentiation The dominant focus on functional standardisation over recent years has failed to meet business needs, leading to shadow resources and creeping costs. The reality in today’s increasingly complex business environment is that some level of differentiation in HR practice and service is required. It is essential to understand how much flexibility is really needed, whether by business segment, market, region or employee group.

How can you build strategic HR fit for today and for the future?

By balancing this flexibility with the advantages of standardised global practices – and by understanding the value of difference – HR can play a critical role in developing organisational agility at the right price.

4 Create an integrated HR operating model Thinking about how the function works and creating an HR model which is fit for purpose now, yet scalable for the future, is critical to delivering short and long term functional value. This means translating HR activity into detailed processes and policy, delivered by the right number and level of capable people, in the right structure and location, supported by the right data and technology. It also means putting the right governance and performance management in place to ensure focused delivery, and designing for scalability in line with changing business requirements.

5 Ensure pragmatic, sustainable implementation Delivering pragmatically and sustainably means acceptance of constant change, and recognition that adapting quickly is key to organisational agility and competitive advantage. This necessitates incorporating ‘future proofing’ into the design of discrete, stand alone solutions, and understanding the interdependencies across key HR activities and processes for larger scale programmes to maximise value.

6 Build HR capability The final requirement for building a strategic HR function that is fit for today and for the future, is creating a confident, capable and agile HR team. By developing HR professionals who have the necessary skills to understand the business environment, translate the organisation’s strategy into human capital requirements and engage with the business effectively, the HR function can have real strategic impact.

Building strategic HR2

©2014 Hay Group. All rights reserved

www.haygroup.com

People management is becoming increasingly important to organisations, casting HR firmly in the spotlight as an increasing number of executives are citing human capital – how best to develop, engage, manage, and retain talent1 – as their biggest challenge to driving organisational performance.

This is a significant opportunity for HR. As organisations face the many and varied challenges of operating in an increasingly complex, fast paced and volatile business environment, the function is uniquely positioned to support the organisation in achieving strategic goals. In particular, HR has the potential to provide vital insights and direction to leaders on organisational and employee effectiveness, and what it takes to really drive performance.

However, a general consensus persists among business leaders that the HR profession has so far fallen short of making a real impact. And recent Hay Group research indicates that almost two thirds of HR professionals agree.2 So how can HR really make a difference?

Working in partnership with our clients, we identify how HR can align to business strategy and then develop robust workforce plans to drive performance through people. We also help to identify the right things to focus on, analysing where HR can afford to be ‘lean’ and where practices need to be cutting edge to deliver the strategy. We recognise too, that one size does not necessarily fit all – particularly for our global, multinational clients – so we work with them to balance standardisation and differentiation.

We then help to evaluate how the function currently works and what may need to change to develop an integrated HR operating model. Next, we develop pragmatic, sustainable implementation plans for both discrete, stand alone solutions and large scale transformation programmes. Finally, using our expert knowledge of HR, we help our clients build the HR capability required to confidently engage with the business and operate as a true strategic partner.

Six key requirements for building strategic HR

1 Align tothe businessstrategy

2 Focuson the right things

3 Balance standardisationand di�erentiation

4 Create an integratedHR operating model

5 Ensure

sustainableimplementation

6 Build HRcapability

pragmatic,

How to build strategic HR

1 The Conference Board CEO Challenge, 20132 Next Generation HR, Hay Group, 2012

How fit for purpose are your HR services?

Understanding where there is a requirement for basic – versus best practice – HR service can be a true source of competitive advantage in delivering an organisation’s people requirements. Very few organisations need to be cutting edge across the board, and making an investment decision informed by factors such as the business environment, level of organisational maturity and industry issues enables the function to maximise the return on investment of functional spend.

The goal for HR must be to deliver fit for purpose HR services to generate the best possible return on people. This means discarding the notion of holistic best practice in favour of focused differentiation as a source of competitive advantage in line with the organisation’s strategy and culture.

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©2014 Hay Group. All rights reserved

Building strategic HR4 www.haygroup.com

Attraction, recruitment and retention Resourcing and workforce planning

Basic

n No clear employer brand

n Ad hoc hiring to meet short-term needs

n Basic vetting and selection with a focus on interviews

n Basic induction in place

n Limited retention

n Focus on reacting to short term supply pressures for today’s skills and capabilities

n No tracking of employee education, skills and capabilities

n Ad hoc use of contingent workers

n Ad hoc international assignments

Progressing

n Some employer brand differentiation

n Established recruitment processes

n Varied assessment / selection methods

n Local onboarding

n Ad hoc, reactive retention

n Basic workforce analytics to meet local needs

n Basic data on employee skills and capabilities captured as part of hiring process

n Some local graduates and apprentices employed on an ad hoc basis

n Some level of procurement to manage contingent workers

Advanced

n Strong brand with clear employee value proposition, incorporating corporate and social responsibility, sustainability and ethics

n Targeted campaigns

n Articulated employee value proposition

n Mature employee referral programme

n Selection on both capability and ‘fit’

n Onboarding tailored by level and function, with global and local content

n Workforce planning integrated into business planning and performance management

n Resourcing models cater for flexible working patterns, locations and contracts

n Developing alumni and contingent workforce management

n Employee skills and capabilities data collected via annual performance management process

n Formal global graduate and apprenticeship programmes, with defined competencies and structured development

n International assignments managed centrally according to business need and succession plans

Best practice

n Global recruitment strategy linked to workforce plans

n Sophisticated digital employer brand

n Employee advocacy measured and rewarded

n Flexible recruitment model incorporating physical, virtual, digital and mobile channels to engage with potential, current ex-employees

n Sophisticated use of technology to facilitate direct sourcing of candidates

n Corporate and social responsibility, sustainability and ethics incorporated into candidate assessments

n Onboarding tailored to individual needs and requirements for critical roles

n Individual preventative retention plans in place for stars and critical roles

n Global analysis of exit data, translated into actionable plans

n Deep understanding of future capability requirements in line with business scenario planning

n Integrated, global plans for transforming workforce capabilities

n Sophisticated, proactive contingent workforce management (including alumni, freelancers, independent professionals, consultants) using a range of sources (direct, indirect, crowdsourcing)

n Flexible delivery models to cater for both planned and unplanned global fluctuations in business activity

n Integrated global graduate and apprenticeship programmes

n Global mobility at the right price, incorporating permanent moves and assignments

Performance management and reward Learning and development

Basic

n Focus is on base pay

n No clear line of sight between performance and reward

n Minimal differentiation

n Basic benefits provision with limited choice

n Ad hoc skills and class room based training for basic qualifications and induction

n Limited leadership development

Progressing

n Established performance management cycle

n Underperformance is managed effectively

n Some variable pay differentiation

n Some level of periodic base pay benchmarking for critical roles

n Online benefits administration via multiple systems, sites and suppliers

n Blend of learning and development approaches

n Learning and development offer spans technical and behavioural competencies

n Ad hoc leadership development

n Learning evaluation measures immediate participant feedback

Advanced

n Explicit link between overall remuneration, performance measures and strategy execution

n Differentiated remuneration at all levels with visible impact of individual performance

n Wide range of flexible benefits, benchmarked periodically against sector peers

n Increased focus on employee health and wellbeing

n Global recognition programmes

n Learning Academy provides a ‘one stop shop’ for employees to access leadership, technical and behavioural development

n Clear linkages exist between competencies, career paths, and learning and development

n Leadership development programmes exist at different levels, equipping leaders to manage and inspire an increasingly diverse workforce

n Learning evaluation measures change in performance and behaviour

n Sophisticated knowledge transfer between employee groups

Best practice

n Holistic performance culture, incorporating behaviours, CSR, sustainability and ethics

n Focus on intrinsic and self-determined extrinsic motivators at an individual level

n Wide range of benefits appealing to multi-cultural and multi-generational workforce

n Total reward benchmarked annually for all disciplines against sector and non-sector peers

n Global recognition programmes incorporating peer and customer nominations

n Sophisticated learning organisation with segmented, blended learning, spanning languages, cultures, styles, geographies and generations

n Application of advanced cognitive techniques and neuroscience research to achieve behavioural change

n Use of innovative technologies and delivery mechanisms

n Global platforms to share knowledge and learning and encourage collaboration

n Integrated leadership assessment and development, aligned with business strategy

n Balance between organisation and employee led learning

n Learning evaluation measures impact on business results and return on investment

Current state: where you are now

Desired state: where you need to be

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Use our diagnostic below to assess where you are currently, and where you need to be, for each key HR service.

©2014 Hay Group. All rights reserved

Building strategic HR6 www.haygroup.com

Talent management Employee relations, communications and engagement

Basic

n No formal succession planning other than at board level

n No high potential programmes

n Promotions managed locally on an ad hoc basis

n Limited diversity management

n Largely reactive industrial relations practices with a focus on grievance and disciplinary proceedings, and trade union activity if required

n Basic understanding of local legal and regulatory requirements, with basic, local policies

n Ad hoc communications and basic employee engagement

Progressing

n Diversity managed at a local level

n Some level of local succession planning, high potential identification and development

n Formal, calibrated promotion process, supported by competencies

n Specialist capability in employee relationsn Employee relations issues are managed by

HR, with some knowledge transfer to the linen Coordinated communications and

engagement plansn Employee engagement measured by

periodic survey

Advanced

n Diversity managed at a global level

n Clearly articulated career paths, supported by defined competencies and development

n Formal succession planning for key leadership, technical and professional roles

n Global high potential programme to identify a diverse pool of candidates for defined roles and capabilities

n Formal learning and development for high potentials with ongoing assessment

n Promotions built into the performance management and salary planning cycle with clear exception management and sign offs

n Focus is on individual employee and organisational needs

n Employee relations understood in a global context, with clarity on comparative practices across geographies

n Flexible guidelines cater for a wide variety of contracts in response to increasingly fluid working practices and careers

n Centrally defined guidelines are adopted locally

n Business led grievance and disciplinary proceedings with HR support

n Clearly defined and communicated employee engagement strategy

n Engagement success measured by periodic survey. Results are analysed and translated into action

n ‘Employee’ engagement extends beyond the organisation’s boundary to include alumni and contingent workers

n Coordinated, multimedia communications, segmented by employee group

Best practice

n Proactive, global diversity management with regular reviews of business policy, practice and processes

n Integrated global succession plan for all key leadership, technical and professional roles

n Integrated high potential programme incorporating managed moves, linked to employee development plans

n Accurate forecasting of promotions

n Proactive industrial relations approach with a focus on ‘win win’ and corporate and social responsibility

n People-related operational, legal and regulatory risks are fully integrated into corporate risk management

n Managers own ‘people issues’. HR intervention limited to coaching or specialist support in complex or high risk cases

n Employee engagement fully owned by the Executive Team and the engagement needs of different employee groups are understood, articulated and actioned

n ‘Adult’ culture with policies limited to the essential

n Global platforms and multiple channels are utilised for two way engagement and communications

n Ongoing measurement of communications impact, engagement and enablement

Managing change Managing employee data

Basic

n Ad hoc, reactive approach to change

n Limited change management toolkit

n Limited organisational development capability

n Local management of employee data

n Combination of paper and electronic media

n Local, manual reporting

Progressing

n Developing change management and organisational development capability, supported by basic toolkits and practices

n HR own or contribute to ‘people’ related workstreams in transformation projects

n Accurate employee data managed via local system or application

n Local, automated reporting

Advanced

n Strong organisational development capability with a range human capital implications incorporated into business scenario planning

n Systematic approach to anchoring change, including deployment of sophisticated change management and culture change practices

n HR mobilise transformation teams in line with business need and activity

n Basic employee data integrated globally, supported by standard data ‘dictionary’

n Some global, systematic reporting

n Developing capability in data analytics

Best practice

n Business strategy aligned with business model, operating model, organisational structure, culture and processes to optimise organisational effectiveness

n Application of advanced systems thinking, cognitive techniques and neuroscience research to achieve business outcomes

n Extensive use of advanced facilitation techniques and change environments to foster collaboration, innovation and engagement

n Human capital measures are linked to business and transformation outcomes, with articulated benefits and a clear return on investment

n Global, cloud based system providing one source of employee data with full use of workflow capabilities, incorporating performance management, reward, talent, learning and development

n Easy access to data for managers via apps, tablets and hand held devices to facilitate decision making and development

n Employee and manager self-service is accessible via multiple channels

n Global, systematic reporting

n Integrated HR data used by other functions e.g. finance

n ‘Big data’ capability to enable complex analysis e.g. sophisticated algorithms to predict workforce trends

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Case study: transforming HR to deliver

The arrival of a new CEO at this blue chip manufacturing company heralded sweeping change. Previously highly centralised, the company was to move to a more agile, service-minded approach with a focus on emerging markets, and HR had to transform accordingly.

Drawing on interviews and workshops with HR employees, leaders and stakeholders, we worked closely with the chief HR officer to redefine the HR vision and create a new operating model and structure. New roles, accountabilities and a streamlined service model have created the flexible, decentralised approach the client needed. Now more efficient, HR is also more closely linked to strategy. To date, the exercise has identified $7m savings in one HR functional area alone.

Current state: where you are now

Desired state: where you need to be

CD

©2014 Hay Group. All rights reserved

Building strategic HR8

Contact us

If you would like to discuss how your organisation can transform to deliver its future business strategy, please contact:

John Douglasd +44 (0)20 7856 7165t +44 (0)20 7856 7000e john.douglas@haygroup.com

About Hay Group

Hay Group is a global management consulting firm that works with leaders to transform strategy into reality. We develop talent, organise people to be more effective and motivate them to perform at their best. Our focus is on making change happen and helping people and organisations realise their potential.

We have over 3000 employees working in 87 offices in 49 countries. Our insight is supported by robust data from over 125 countries. Our clients are from the private, public and not-for-profit sectors, across every major industry. For more information please contact your local office through www.haygroup.co.uk

We know HR We are experts in HR practice because it is our daily business. Every day, HR professionals in 70 per cent of the FORTUNE 200 rely on Hay Group’s proven tools to get the job done.

We fully understand the merits of different operating models and we conduct ongoing research into the priorities and challenges facing HR professionals in today’s business world.

We are global yet local We understand how important it is to balance the advantages of global scale with the benefits of local market sensitivity and our global presence reflects this.

We have proven international project management credentials through numerous large scale, global projects that cross boundaries and business units.

Unparalleled data and analytics Our advice is underpinned by the richest and most comprehensive global databases and we have world-class workforce analytics based on decades of job and workforce research. We have analysed and assessed workforces in every major industry and sector.

Business impactBecause we develop solutions from a business results perspective, we are able to make tangible links that demonstrate value through meaningful measures such as cost, time, efficiency and customer satisfaction.

Why Hay Group?

Natasha Dillond +44 (0)20 7856 7157 t +44 (0)20 7856 7000e natasha.dillon@haygroup.com

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