Next Generation HR

Faced with an accelerating rate of disruptive forces, many businesses have no choice but to transform. (A recent study suggests that some 58 percent of the surveyed companies agree they need to reinvent their business every three years or less to survive.)¹ The HR function plays a key role in supporting business transformation. Successful firms both reposition their core business (through partnering, acquisition, or consolidating their portfolios) and create new growth businesses. The success of both dimensions of transformation depends on companies leveraging hard to replicate assets like brand, talent, and culture and ground their efforts in motivating purpose and mission. When HR helps to create and leverage these intangible assets, it directly supports business transformation and, ultimately, the ability of the business to reposition itself for renewal and growth.

The ongoing COVID-19 pandemic has thrown into stark relief how a high-performing HR function can help the business respond to severe disruption. In this context, it has never been more important for HR to deliver business value.

High-performing HR functions can also deliver tangible benefits in cost savings and operational efficiencies—a vital advantage as companies struggle to recover from the drastic economic impact of the pandemic.

This research into the next phase of HR transformation distills insights of over 100 HR executives, the results of a survey of over 700 HR professionals, and interviews and case examples looking at the transformation efforts of leading companies such as Tetra Pak, Bayer, JTL, and NatWest Group.

Looking toward a future made more uncertain by the COVID-19 pandemic, these companies are aware that every dimension of work is changing. This requires the function to be skillful at constantly aligning and realigning the people strategy to shifting business needs and priorities. This  is a “tight/loose” dynamic—a “tight” strategic alignment between the business and people strategy and  a “loose” or flexible HR structure to assemble the right combination of skills and resources to deliver people-based business outcomes.

Insights for what’s ahead

We identified the following insights about how companies can move to the next phase of HR transformation in which HR is “fluid” and adaptive and able to anticipate and respond rapidly to new business requirements and create and capture a range of people-based value to benefit business performance.

To ensure that HR can align with business needs and also anticipate future challenges or opportunities, the strategic people plan should be frequently reappraised against emerging business needs or revised strategies. This is particularly important when the company is experiencing disruptive change. This degree of strategic alignment requires tightly integrated strategic planning processes but also frequent dialogue between senior leaders at the global center, HR organization, and leadership teams from key markets or business divisions. Establishing this kind of open and rich discussion enables the HR strategy to be proactive and customer centric and aligned to business priorities. This promotes buy-in and ownership among business leaders.

To ensure HR delivers business value and impact, leaders should agree on a clear vision and value proposition for HR. This should be revisited regularly along the transformation journey in response to shifts in the competitive landscape or business strategy. HR needs to become adept at sensing and seizing the opportunity to create new people-based value for the business. As HR works more flexibly across the business, it is likely to have several value propositions, and some of these may be conflicting, requiring clear strategic prioritization or active management of this tension. HR needs to ensure buy-in to any revised VP, not just from the business but within HR. A clear vision and value proposition will help shape decisions about further transformation. HR leaders can construct their own value chain analysis, defining where HR creates or loses value and identifying opportunities to create new value for the business.

Currently, HR is not organized flexibly enough to keep pace with changing business need or a shift in business context. To ensure HR can work more flexibly via projects, teams, communities and networks, HR at the center must work differently. The central HR leadership team must mandate less, listen more, and work more collaboratively while providing strategic direction and oversight. Becoming more customer-centric requires the center to work in a brokering role, matching limited HR resource with diverse and sometimes conflicting needs across different business divisions, markets, and regions. This kind of “deal making” and prioritization also ensures HR activity remains coordinated and focused on where it can have maximum impact to business performance.

To ensure it can work in more fluid, customer-centric ways, HR should develop new capabilities across the whole HR organization. This is to ensure HR staff have the skills to work flexibly across different types of teams and projects. HR needs to shift to a more customer-centric and business-oriented mindset to keep looking for ways to generate competitive advantage for the business. HR needs to invest in its own upskilling program and focus on strategic thinking and execution, commercial acumen, stakeholder management, change management/consulting, and a range of project management skills including Agile methodologies and designing around employee experience.  Any transformation effort should identify the new skills needed by HR and the wider business to work more closely and collaboratively. Talent strategies should be formulated before the start of the transformation to help the HR organization adapt and commit to the new strategy. Strategies should be put in place to increase talent mobility, both across the HR organizations (for example between expert-based groups, global and regional HR, service delivery, and digital HR) and between HR and the rest of the business to enable cross-seeding of HR expertise, commercial acumen and new thinking.

Companies should approach transformation as a continuous journey, with scope for experimentation and adaptation built into any transformation effort. Instead of looking for one ideal operating model, companies should design a basic blueprint with room for experimenting with different types of teams and projects to build experience and buy-in across both HR and the wider business before scaling up these efforts. Transformation can be done in phased approaches by clipping on new operating approaches but when this tactic no longer provides enough flexibility or business impact, a full-scale redesign should be considered.

Visit our HR Transformation hub [hyperlink] to access a suite of resources, including a short research report, a HR Transformation Playbook for HR leadership teams, and case studies of HR transformation. 

¹Nadya Zhexembayeva, “Three Things You’re Getting Wrong about Organizational Change,” Harvard Business Review, June 09 2020.