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The end of HR as middleman

ISSUE 165 JUNE 2012


The future of HR lies outside the HR department, say David Page and Anita Lettink. They discuss the consumerisation of HR, saying the profession must re-skill to support business leaders and ensure the future of HR does not lie outside the company.



The digital revolution is changing the way we do business and, as a consequence, our organisations are changing too. Our way of working is affected by fast-paced innovations, many of which leverage technology.

The changing workforce
The future workforce is shrinking. The exit of baby boomers and the rise of the service economy were expected to keep people employed, but the opposite is true: the recovery will be more jobless than expected. Today’s employers are implementing alternate ways to execute tasks and activities.

In general, digital businesses employ far fewer people than traditional manufacturing businesses. Apple, for example, employs 60,000 people around the world, Google 31,000 and Amazon 33,000, compared to 163,000 at Unilever, 317,000 at Toyota and 83,000 at ExxonMobil.

In our search for efficiencies, we’re also erasing every role that doesn’t add perceived value—from travel agents to supermarket cashiers.

The future workforce is also becoming increasingly diverse and dispersed. The internet enables global access to technology and creates a global and connected workforce: as long as you can access the web, you can perform your tasks, regardless of location. The result is a global marketplace for skills and experience.

The notion of lifetime employment is gone. To remain agile, companies will use short-term and more flexible forms of labour, such as consultants, as opposed to permanent contracts.

And, as the line between personal and work life blurs, the notion of an eight-hour workday disappears because more people work in virtual, global teams and communicate with colleagues and customers outside of normal business hours, across time zones.

Companies realise that, to retain employees, they must accommodate their personal lives and create solutions to their individual needs.

Even though some companies are starting to respond to employees being always available, people are constantly connected to their jobs. As work-life spills over into personal lives, and vice versa, so does technology. As a result, the workforce of the future will increasingly prefer their personal devices over work devices simply because the former allows them to be more productive.

Jobs of the future will rely less on a fixed set of skills and a stable career path, and more on combining several advanced skills using the internet to collaborate. Brynjolfsson and McAfee, in Race Against The Machine, suggest our ability to creatively combine knowledge and intelligence into new, innovative skillsets will become a dominant skill in itself; one which challenges the consequences of the ‘digital divide’.

Human resources—a look back
Human resources dates to the 1960s. The function received an overhaul at the end of the 20th century via Dave Ulrich, whose book Human Resource Champions: The Next Agenda for Adding Value and Delivering Results proposed fundamental changes to the function.

Despite this, HR still does not or cannot measure what it delivers, meaning that added value is perceived as low. As a result, HR does not get the much-coveted ‘seat at the table’ and is usually not considered part of the C-Suite. And as they say: “If you’re not at the table, you’re on the menu”.

After more than 15 years of trying to make the business partner role stick, it’s time to take a step back and reassess.

The consumerisation of HR
Many publications have questioned the HR function and its strategic role, as well as its added value. When a function remains virtually unchanged over many years, even though the business world has changed profoundly, it’s time to ask: “What if we can start all over again?” Will we set up HR the way it is set up today? Before answering these questions, we’ll look at the external conditions shaping the requirements of the new HR function.

HR in the 21st century must be technology-savvy. Technology will be embedded in all aspects of HR. Digital HR access will give HR the capability to follow and measure interaction with managers and employees accurately at each stage of the process, and to influence and track transactions to further optimise service delivery.

Social media will become an integral part of communication. The consumerisation of HR means that online HR transactions must be available on every device, work seamlessly and fast, and deliver quick and easy results.

As business cycles grow shorter, processing people data quickly and intelligently becomes a matter of business survival.

The challenge will be to run analytics on a collection of HCM systems implemented over several years, in various geographies. Once a company has a sound infrastructure to manage workforce data and processes, the resulting insights will become more valuable outside of HR.

Your company probably deals with many people in different regions globally. Translating policies into their language is not enough—you must redesign HR to work on a global scale. At NorthgateArinso our focus is standardising HR processes globally while making local exceptions where necessary. This allows for regional consolidation which drives down costs and enforces standards.

Shared service centres (whether insourced or outsourced) will evolve into a hub and spoke model, with the hubs becoming global or regional and the spokes supplying local knowledge in the local language. Local spokes turn into expert centres, providing in-depth local expertise to complement regional services.

Besides IT, there is no department which outsources processes and technology as HR does. Nevertheless, the traditional way of outsourcing has created disappointing returns.

With the success of cloud vendors, the acceptance of standardised processes is easier. Offerings have matured and organisations place less emphasis on distinguishing themselves in transactional HR processes or sticking to their traditional ways of working. Also, shared service centres have matured—they now handle classic HR functions such as workforce administration, payroll etc.

When HR systems and services are outsourced, keeping up with the latest developments becomes the responsibility of the outsourcing provider. If that is not the case, HR must maintain in-depth technical knowledge and keep up with developments to ensure that systems and tools are up to date.

By using cloud-based systems, companies benefit from continuous development, shared innovation, user-based pricing models and the economies of scale that the cloud provides.

The tipping point
We’ve reached a ‘tipping point’ in HR: new technologies are changing the profession. The new HR must be small and agile, deal with different people needs and have a robust transactional base that can support the global workforce in a virtual manner.

When HR stops being the middleman, it does not mean HR will retreat to its ivory tower. HR must be in touch with the business to ensure the right topics are addressed and people programmes bring the desired results. This does imply that HR will eliminate all activities where it does not add value and focus on delivering outcomes.

HR essentials—what matters most
The next generation of high-performing HR professionals must exhibit three competencies critical to being regarded as providing credible business support:

  • Create an agile organisation;
  • Improve delivery quality;
  • Drive down cost.

NorthgateArinso believes the future HR organisation will consist of two departments: an HR service centre (which can be insourced or outsourced) and a more specialist HR consultancy team that is flexible in size.

The HR service centre handles all administrative and transactional activities and streamlines and improves operational services. Self-service provides users with access to HR services and information on the device of their choice: ‘consumerised’ HR is fully integrated in service delivery.

Business partners and ‘centres of expertise’ will be replaced by a centralised (global) HR consultancy team focused on delivering just-in-time HR programmes, supported by local consultants dealing with local issues and adapt global programmes and policies.

Within the HR consultancy team, certain people will still need expert skills to handle ongoing topics, such as labour negotiations, unions, pensions etc. HR must start managing outcomes instead of processes.

Get ready for the new HR

The changes proposed won’t happen overnight. HR professionals must re-skill to support business leaders. This means having broad knowledge of HR, and training in project management, analytics, business planning, new (mobile) technologies and social media.

The future of HR is not radically different. These changes are fundamental in delivering HR results that matter: enabling an organisation to deal with its future workforce.

One thing is clear: The future of HR lies outside the HR department. And if HR professionals don’t grasp that concept very soon, the future of HR will lie outside the company.

For a full copy of the white paper titled The Consumerization of HR: the end of HR as middleman, email Jason.Black@northgate-is.co.nz.

—David Page is the managing director of NorthgateArinso Australia and New Zealand and Anita Lettink is managing director of NorthgateArinso in the Netherlands.

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