Transforming the Human Resource Function Through Shared Services

　　Highlights

　　“The creation of Shared Services strategies in the Human Resources function, emphasizing Employee Self Service and the judicious use of Outsourcing, is the critical first step in transforming service delivery”. George LeVan-Skyworks Solutions “HR should not be defined by what it does, but by what it delivers – results that enrich the organization’s value to customers, investors and employees.” - Dave Ulrich “Quite simply, the “new” model improves the ratio of human assets deployed to work on core, strategic activities tied to advancing the business in lieu of activities that can effectively be accomplished via technology and well-managed employee call centers.”

　　“A transformation of HR operations shifts the focus from a traditionally reactive and administrative function to one that is tightly connected to the business.

　　The effect of this strategy is significant in making it possible for businesses to respond to market and human capital changes more rapidly.”

　　“With advances in HR technology, HR staffs are no longer required to serve as information provider, gatekeeper or data entry clerk as has traditionally been the case.”

　　Implementing a Shared Services model, common and flexible policies and programs, and consolidated technology across the corporation enhances the efficiency and credibility of the HR function-Mellon research.

　　Executive Summary

　　Human Resource executives face a growing challenge from business leaders: enable the organization to achieve excellence by developing strategies to attract, develop and retain human capital.

　　While this challenge has been discussed and debated for many years, major organizations are demonstrating that it is possible to successfully rise to the challenge.

　　The delivery of Human Resource (HR) services is at the core of achieving organizational excellence through human capital. This paper reviews practical and proven approaches to transforming the function to one where HR professionals, particularly those tied closely to divisions and business units, gain the capacity and competency required to proactively drive strategic business objectives.

　　Though reducing cost is clearly one motivator to transform HR, far more compelling is the interest in generating value for the organization. The demand for HR to create value is also not new; however few companies have reached their full potential in this regard. Our emphasis of a new model for HR delivery and more importantly, the roadmap to implementing such a model – provides a path to meeting the demand for value creation.

　　The model enables transactional and nonstrategic activities, which are widely recognized as the predominant focus of most HR professionals today, to move to a shared services organization that provides personalized care for employees leveraging key technology tools.

　　Business-based HR leaders are thereby empowered to grow business partnering, change management, workforce development and organizational effectiveness capabilities and truly support organizational excellence.

　　Why Change?

　　Management of human capital is a critical lever to achieve strategic business objectives such as managing costs and enabling top-line revenue growth. The current rate of economic, competitive, and political change demands cost flexibility in all Selling, General and Administrative (SG&A) functions. The mandate for the Human Resources function is to work better, faster and cheaper.

　　HR professionals are expected to deliver more advanced and differentiated human capital skill-sets, create and maintain high performing workgroups, offer technology platforms with increased functionality and direct access to information and partner with business leaders to align people strategies with business goals to achieve corporate initiatives. Dave Ulrich, a leading scholar in human resources, recently wrote:

　　The competitive forces that managers face today and will continue to confront in the future demand organizational excellence. The efforts to achieve such excellence – through a focus on learning, quality, teamwork and organizations get things done and how they treat their people. Those are fundamental HR issues. To state it plainly: achieving organizational excellence must be the work of HR.

　　The question for senior managers, then, is not ‘should we do away with HR?’ but ‘what should we do with HR?’ The answer is: create an entirely new role and agenda for the field that focuses not on traditional HR activities such as staffing and compensation, but on outcomes. HR should not be defined by what it does but by what it delivers – results that enrich the organization’s value to customers, investors and employees.

　　What is HR Shared Services and Why is it Important?

　　Only through a focused approach to HR Shared Services can companies accomplish the imperatives demanded of the Human Resource leader. HR Shared Services enable companies to meet the expectations of their stockholders while preserving, or more likely increasing, service quality to their employee population. Today’s organizations can no longer maintain the status quo in HR service delivery.

　　A transformation of HR’s operations shifts the focus from a traditionally reactive and administrative function to one that is tightly connected to the business. The effect of this transformation is significant in making it possible for businesses to respond to market and human capital changes more rapidly.

　　A New Model is Imperative

　　As Dave Ulrich and our experience with many complex companies suggest, the traditional model of delivering HR service does not align with the evolving demand to achieve organizational excellence. As HR organizations work to shift focus and activities, a number of concepts have been presented by various consulting organizations and academics alike. A common theme, however, has emerged towards decreasing the size of the HR function while moving transactional activities “out” and deploying fewer human assets to perform these activities by outsourcing, leveraging technology and creating common approaches, processes and practices. The combination of technology tools such as employee and manager Direct Access (sometimes referred to as self-service) and outsourcing provider capabilities enables HR’s shift of attention and skills to more strategic roles. We see this transformation visually through a simple graphic as shown in Illustration 1. Text Box: Text Box: Illustration 1

　　Over the years, a variety of models have

　　been designed, considered and even implemented in an effort to achieve the transformation represented above.

　　Perhaps most recognizable to HR executives is the seemingly constant swing between centralized and decentralized models. In the past, organizations found that the benefits of common systems, consistent standards and control, and economies of scale associated with fully centralized HR service delivery were less responsive, not flexible and often failed to meet the needs of business units. At the other end of the spectrum, however, the gain in flexibility to meet unique business unit requirements related to decentralized service delivery carries higher cost, duplication of effort, and variable standards.

　　Many organizations that have experienced the swing between centralized and decentralized operations are familiar with the results. Of particular note is the sense of employees that the company lacks a common culture or brand. Instead, the heavily decentralized organizations find that business units create duplicate and contradictory HR practices, policies, processes and procedures. These differences across the company are not business requisites, but rather the result of history, individual preferences and experiences. Shifting HR’s focus enables focus directly on the customer needs that include creating a company brand identity through leveraging economies of scale.

　　To realize the benefits of both models, companies are shifting to a shared service approach that enables streamlining of processes across multiple units or locations while maintaining customer focus. As demonstrated through Illustration 2, the pairing of the best of purely centralized and decentralized models through a shared services approach – that significantly leverages technology – is proving to be quite a successful approach to achieving the new requirements for HR. This approach to HR shared services that combines enabling technology (to be discussed later) becomes the critical lever empowering human resource leaders to support their businesses as required to advance the enterprise’s strategic objectives. Quite simply, the “new” model improves the ratio of human assets deployed to work on core, strategic activities tied to advancing the business in lieu of activities that can effectively be accomplished via technology and well- managed employee care call centers.

　　It is imperative to understand that, unlike past centralized models, the shared approach described here does not move control to corporate or a central entity but rather creates a centrally managed organization that serves employees and business-based HR professionals as customers. As a result, new roles for the traditional “corporate” HR are created just as the roles of business-based HR change.

　　Text Box: Illustration 2

　　Source: Shared Services: Adding Value to the Business Units, by PwC – Don Schulman et al

　　The HR shared services model has been employed by many of the nation’s leading companies to increase quality, improve service, and reduce processing cycle times as well as expense. Various HR shared services models are found at IBM, Royal Bank of Scotland, Lockheed Martin, Warner Lambert, Hewlett- Packard, Sears and Boeing.

　　Clearly the concept of Shared Services is not new to HR and other functions such as finance, procurement and marketing.

　　So what’s different today? The answer is a combination of advanced technology and increased understanding of the total change required of HR’s role to make a Shared Services model effective. By managing the supply chain of employee interactions and transactions effectively, complex companies are able to eliminate waste and process variability. Using approaches such as “Lean Thinking” and “Six Sigma”, processes are better aligned to enable the HR shared services model that has – up until only a few years ago – not been possible.

　　HR is Becoming More Efficient, But What About Effectiveness?Changing the delivery model alone may improve the efficiency of HR, but for an effective transformation, HR roles must also shift – in most cases quite drastically. In a shared service environment, nonstrategic HR activities and specialized HR expertise are removed from the business unit.

　　The proper division of responsibility across the spectrum of Transactional to HR Expertise to Business Partner is Text Box: Illustration 2

　　Source: Shared Services: Adding Value to the Business Units, by PwC – Don Schulman et al

　　critical. The range of activities from

　　Transactional, to HR Expertise to Business Partners is vast. In our experiences to date, the majority of field- based HR staff have focused on the Transactional activities, leaving little to no time available for partnering with the business or bringing depth of expertise around strategic human capital issues like employee development. Shifting Transactional and Expertise activities that can take advantage of economies of scale to technology and shared service organizations enables the field-based HR staff to truly focus on those activities at the Business Partner end of the spectrum. The division of activity is best represented through Illustration 3 below.

　　At a more detailed level, HR roles can be defined as follows: Corporate HR

　　. Guides the development and implementation of HR Strategy

　　. Ensures customer satisfaction of entire HR function

　　. Manages executive facilitation and coaching

　　Shared Service:

　　Centers of Excellence

　　. Exhibits World Class functional expertise and gathers better practices to provide advice and counsel to business units

　　. Leverages knowledge resources across the organization

　　. Develops programs to business unit specifications

　　. Provides business units quick responses to escalated issues

　　Shared Service:

　　HR Service Center

　　. Administers corporate-wide programs

　　. Creates HR efficiencies across the organization

　　. Resolves customer administrative issues and processes transactions, as needed

　　HR Business

　　Partners

　　. Defines and meets the unique needs of the customer

　　. Implements HR programs using business unit-specific knowledge

　　. Defines HR strategy at business unit level

　　Local HR

　　Specialists

　　. Administers location specific programs with input from Corporate

　　HR and Centers of Excellence

　　. Resolves customer-sensitive issues

　　Text Box: Illustration 3

　　HR managers in the business units are increasingly called upon as strategic

　　business partners. But, what do we mean by strategic partner? The future HR

　　business unit manager’s role encompasses six key areas of partnership shown in

　　Illustration 4.

　　To accomplish these roles, most HR departments require fundamental change

　　and growth of competencies. The Society for Human Resource Management (SHRM) Foundation completed an effort comprising many years of data collection with major, global companies that included General Electric, Westinghouse, Citigroup,

　　AT&T, PepsiCo, Mobil, Oracle, ICI America, LL Bean and a number of others.

　　The research culminated in a detailed HR competency framework reported in 2000.

　　The framework, which divides across three domains: Core, Role Specific and Level-

　　Specific competencies, provides a powerful foundation towards achieving the necessary capabilities to achieve HR and organizational excellence.

　　Leveraging Technology to Enable

　　World-Class HR

　　In the past, Shared Services meant operations and policies needed to be common for all. With advances in HR technology, HR staffs are no longer required to serve as information provider, gatekeeper or data entry clerk as has traditionally been the case. The new service delivery combines the reorganization of HR activities in a shared service environment with web-based direct access to personalized information and transactions for employees, managers and HR professionals.

　　Today’s HR technology offers knowledge-based solutions providing employees

　　access to frequently asked HR questions, customized benefits information and

　　employee-specific data. These applications are delivering dramatic results for

　　organizations supporting employees with information and services to make effective work and life decisions helping to achieve strategically focused higher performance.

　　As a result of these recently available technology capabilities, a Shared Services

　　function can be equipped to have immediate and accurate knowledge of local

　　policies, procedures, employee history and special arrangements, thus enabling a

　　centralized function to provide customized service rather than "one-size-fits-all"

　　service. Also, employees and managers are able to readily access and manage

　　information without HR intervention. The use of direct access (sometimes referred to as self-service) is a key factor in the redistribution of activities performed by

　　HR. Transactional activities are performed Text Box: Illustration 4Text Box: under a tiered service delivery model in which technology provides the first level of support to HR’s customers. A customer focused service center provides the next level of support and relatively few issues escalate to HR specialists as represented below in Illustration 5.

　　Model?

　　The roadmap to HR Transformation is made up of many critical activities that serve to help organizations understand the current state, envision the future, build the

　　model, validate the vision, and implement the new HR service delivery approach.

　　Benchmark and Set Targets Most compelling for business and HR executives in gaining momentum to enhance and transform HR is the combination of savings and service quality improvement that can be realized. Though realizing them at times is complex, real savings and service quality improvement is gained through the shift to the new model of enterprise-wide shared services that leverages changed HR roles and direct access technology. Our experience demonstrates that leading HR

　　organizations are restructuring operations and leveraging benchmark data to set

　　aggressive and achievable targets to reduce cost – but more importantly create

　　long-term value. Successful transformations rely upon a combination of benchmark targets and better practices rather than any single measure.

　　Consulting firms such as ours, AnswerThink’s Hackett Group and others have core capabilities in assisting organizations to identify the current HR operating cost baseline by analyzing budgeted and hidden costs to deliver HR services. Executives must recognize the value of benchmark data in enabling solid decision-making that is tightly connected to the baseline data and benchmark comparisons. Targets for service improvement, cost reduction and efficiency in advancing HR’s role must be closely tied to the baseline data.

　　Most of our clients today are heavily focused on targeting cost reduction while actually improving the quality of HR service. Some of the key benchmarks around HR operations appear below. Companies should strive towards top performance, which is quite realistic, when shifting HR to the new model described earlier.

　　Text Box: Illustration 5Text Box:

　　Text Box: HR Management Measure Median Mean Top Quartile Performance

　　HR Expense per Employee $1,338 $1,657 $530

　　HR Full Time Equivalent Ratio 98 149 173

　　Source: Saratoga Institute

　　Payroll Management Measure Mellon Better Practice High Performing Range

　　Payroll Cost/Year per Employee $165 $90

　　Employees per Payroll Employee 1,000 500

　　Annual Paychecks per Payroll Employee 31,000 28,000

　　Source: Mellon Analysis

　　Regardless of the source of benchmarks, it is clear that by shifting to the new

　　delivery model for HR, major companies are achieving annual savings in excess of

　　30-40% of total HR costs. These major savings are derived through staff eductions, technology consolidation, vendor consolidation, process efficiency – particularly gained through direct access implementation - and in a growing number of cases through HR administrative outsourcing.

　　The savings associated with implementation of Direct Access are tremendous. The Cedar Group’s HR Self Service Survey provides benchmark comparisons of manual versus direct access enabled process costs. The savings to be realized are significant as represented by the chart below.

　　Text Box: Source: Cedar 2003 Workforce Technologies Survey, 6th Annual Edition

　　Establish HR Baseline In order to determine the efficiency of the Human Resource organization, a detailed cost analysis is performed to rapidly establish the current HR operating expense. The baseline is a true imperative as it provides the foundation for the business case supporting the overall HR transformation and the

　　“yardstick” against which future success will be measured. To complete this, an

　　organization will:

　　. Assess and understand the current HR delivery model and organization structure (e.g. Where and how are services delivered?

　　How many levels of management?

　　What is the current technology functionality and capability); and . Collect and analyze current headcount and operating budgets to understand current people

　　resource allocation and work distribution (activity based costing method to determine which activities people spend the majority of their time performing).

　　While this effort sounds massive and challenging, there are proven approaches

　　and tools, such as web-enabled surveys, data collection templates and methods of

　　sampling that enable rapid completion, even in large, decentralized and complex

　　organizations.

　　Build Business Case The HR Baseline data is compared to known HR benchmarks to identify opportunities for cost reduction and service improvement. This step enables the organization to make more informed, though difficult decisions without

　　sacrificing HR’s ability to add real value to the company’s mission and operation.

　　Developing a solid business case benefit from a confirmation of the HR strategy

　　and how it will support the company’s changing requirements. The key steps in

　　this phase of an HR Transformation include:

　　. Build a comparison to known benchmarks and identify performance gaps;

　　. Identify, prioritize and quantify cost reduction opportunities;

　　. Develop timeframe for realization of cost reduction opportunities; and

　　. Articulate the case for change,

　　quantitatively and qualitatively. The strongest business cases are those that deeply analyze the financial implications of the transformation.

　　Companies that conduct this rigorous analysis are equipped to evaluate various

　　scenarios and options regarding HR functionality, technology capability and anticipated return on investment. As well, the development of a strong business

　　case yields powerful information that serves as an effective tool to gain support

　　of even the harshest of critics because “the numbers don’t lie”.

　　Design the New Model

　　The main objective of this phase is to determine and confirm the main responsibilities of each new or existing HR entity that will assist in the realization

　　of HR’s business imperatives. Each organization is different and must consider unique business requirements when designing HR’s future state. It is imperative that HR professionals and representative customers of HR are involved in the design effort. Design must be a joint effort across the organization rather than a corporate-driven activity and consider the current state of HR to ensure that the future design can be effectively implemented.

　　Understanding the gaps between the current and future states is extremely

　　important. For example, companies that require major technology upgrades to

　　achieve a particular future state design may find that such a future state is

　　unachievable within the organization’s timeframe, budget or resource constraints. We have, however, cautioned our clients against focusing in too much depth on documenting the current state.

　　The goal is actually to gain as much information as required to understand

　　operating roles, technology functionality and infrastructure and major processes

　　and procedures. In this way, the design teams will be equipped to understand the

　　overall operations of HR today to guide their design of a realistic future state that

　　meets business needs.

　　Guiding principles should be established providing direction for the design of the

　　new model that will focus on four key areas: People, Process, Organization and

　　Technology. The guiding principles will help teams understand parameters for

　　design that will include the future role of HR, expectations for use of technology

　　and savings/investment targets. Perhaps most important within the guiding

　　principles are those focused on governance. Our most successful clients establish a simple model to manage the transformation of HR and guide decision-making. All team members must understand how to resolve issues as they rise through the design and implementation stages a major project such as transforming HR.

　　People: Design/Redesign Roles and Responsibilities The roles and responsibilities of HR professionals must shift to enable the new model. In order to meet the strategic needs of the organization and deliver value-added service to customers, HR roles must be reshaped and redefined.

　　The skills and capabilities required to perform the new roles of the HR professional must be established and transition steps to move individuals to these new roles determined.

　　To ensure HR meets the new goals set, the model must identify measures of success. Performance metrics are selected and monitored on a routine basis. But more important than collecting data for the purpose of ensuring operating metrics are in line with expectations, a “Partnership Agreement” between HR and the business should be crafted to document the HR organization’s commitments to supporting business goals.

　　Organization:

　　Develop Service Delivery Matrix A service delivery matrix is developed to delineate where activities will be performed for HR processes function by function. The delivery matrix provides a clear responsibility for “who does what” in the new environment. This shapes the detailed design of the organization and directly drives the process design/redesign.

　　Outsourcing options that range from partial to end-to-end arrangements must

　　be considered in determining how best to deliver the new model. Organizations are discovering that HR administrative activities are not part of their core competencies, making outsourcing an attractive option. The option becomes additionally attractive when investment dollars are not available. Outsourcing often enables streamlining of processes with little or no up-front investment, providing financial flexibility relative to implementation costs which can be significant when creating internal shared services call centers and technology. This opportunity is particularly attractive when investment dollars are low or immediate payback is required. Of course, processes must be redesigned in the same fashion regardless of the degree of outsourcing to achieve the maximum benefit.

　　Process:

　　Design/Redesign Processes Streamlining and standardizing processes is the goal of the process design/redesign. By prioritizing based on high-impact, process flows are documented according to the guiding principles. Processes should fit the new

　　model and leverage the automation provided by the new technology. This activity serves not only to direct the flow of information and activity in HR, but also to illustrate the change from the current environment. During redesign, a gap analysis is performed to capture the support requirements needed to implement the new processes.

　　Leveraging the top internal better practices to identify the future “norm” and

　　advancing those processes by incorporating an understanding of benchmarks and external better practice design the most effective processes.

　　Through a team-based approach involving participants from across the company, future processes can be designed rapidly and to a deep level of detail to prepare for implementation.

　　Technology:

　　Select Enabling Technology The selected HR delivery model and process designs must drive technology decisions where possible. Further, better practice organizations have moved towards a “best of breed” approach where the technology selections are driven by capability in a functional area rather than

　　more traditional sole-source provider solutions.

　　Significant focus must be placed on selecting HR technology tools that:

　　. Support the designed processes

　　. Integrate with existing technologies that will remain in the new model

　　. Offer full direct access functionality for both employees and managers

　　that are intuitive and user-friendly

　　. Provide cost effective solutions

　　. Enable upgrade without considerable and costly

　　customization

　　Manage Change Proactively The implications of changing the HR delivery model are significant and reach throughout the organization. Employees and managers may have concerns about the decrease in face-to-face contact with HR as direct access and shared service call centers take a more prominent role in providing day-to-day support. HR staff will likely have fears about performance expectations tied to being more strategically connected to the business.

　　Finally, business leaders may have doubts about whether they actually need or want HR to gain a more strategic role.

　　Resistance to HR’s transformation will take the form of the examples presented

　　along with a variety of others. As such, a focused approach to managing the

　　change is an imperative for success. Often, change management is viewed as

　　an “extra”. Our experience, however, indicates that successful change

　　management activities in the context of HR transformation are embedded

　　throughout the effort with a constant eye towards practical action in support of

　　implementation.

　　Ken Hultman, in his book Making Change Irresistible, identifies strategies for

　　overcoming resistance:

　　. Establish a positive climate

　　. Encourage an interest in improvement

　　. Show people how overcoming resistance to change can help them

　　. Help people increase their competence

　　. Involve people in decisions

　　. Cultivate a value for teamwork

　　. Don’t react emotionally

　　. Avoid inadvertent mistakes

　　. Concentrate on factors within your control

　　We must have a strong understanding of stakeholder concerns and interests to

　　enable proactive change management.

　　An Impact Analysis provides a basis from which enablers and barriers to the change can be identified. During the Impact Analysis a sample population of

　　stakeholder groups that includes executives, managers, employees and

　　HR staff, is surveyed through focus groups and interviews.

　　The findings of the Impact Analysis combined with a detailed understanding

　　of other organizational issues, activities and events should directly drive

　　development and execution of practical approaches – aligned with guidance such

　　as Ken Hultman’s – to effect change.

　　These approaches are documented within a robust Change Strategy document for the HR transformation that incorporates focus on stakeholder management, communications and training. A detailed plan to execute the strategy with timelines and responsibilities attached to each activity in the plan will be a critical element of

　　implementation.

　　When crafting the change strategy, companies must recognize that while the

　　implementation will progress, the company must still operate – and it will.

　　Mergers and acquisitions, plant closings, major hiring activity and shifts to business strategy will happen while HR is moving to a new model. Combining this early

　　recognition with an understanding of stakeholder business’ day-to-day tactical

　　concerns tends to lead towards stronger change interventions and strategies to

　　enable the continued path of HR’s change even while the business focus will

　　be elsewhere.

　　Illustration 6 helps illustrate the major questions that must be answered through the Change Strategy.

　　Text Box: Illustration 6

　　Text Box: We expect to play an integral role in the transformation and therefore expect to be regularly updated on progress against goals.Text Box: We will use a “one-size-fits-all” approach that may not fit “unique” business unit needs.Text Box: We will communicate to all stakeholders so that they can understand how changing HR will benefit the business and our employees.Text Box: HR systems will be consolidated to put the data employees, managers and HR needs at their fingertips.Text Box: Managers and employees will do HR’s work, and HR will focus on staff “strategic” activities instead of their customers’ day-to-day needs.Text Box: Processes will be streamlined; HR transactional activities will move to Direct Access technology; and strategic HR responsibilities will increase at the business units. Text Box: Headcount reductions in HR will lead to decreased quality of supportText Box: HR staff will be “strategic business partners’ who proactively support business objectives. Text Box: HR will need to develop these new competencies.Text Box: HR will be lean, cost effective, and provide better service through technology and shared service centersText Box: Technology

　　How do we use it optimally?

　　Text Box: Communication

　　What are our needs?

　　Text Box: Processes

　　What will they work?

　　Text Box: People

　　What competencies are needed?

　　Text Box: Organization

　　What will HR look like?

　　Text Box: UManagement’s Strategic GoalsText Box: UChange ManagementText Box: UManagement’s Strategic Goals

　　Implement the New Model

　　The time and cost of implementation has many variables that include decisions

　　about business requirements, speed of implementation, degree of outsourcing,

　　selected enabling technology solutions, degree of preexisting infrastructure,

　　resource capacity and use of external implementation partners. Critical to success is development of a thorough implementation activities plan based upon realistic timelines and goals.

　　Executing the implementation plan requires strong project management and

　　continuous focus on the change management interventions as documented

　　in the Change Strategy and Plan. Executive level buy-in is central to success

　　and typically best gained via thorough and repetitive socialization of the business.

　　Finally, with respect to implementation, our most successful clients have found waiting to achieve perfection prior to implementation is a tremendous mistake.

　　As HR professionals, we must recognize that an 80% solution is far better than no

　　solution. In fact, the reality of this model is that it will continuously evolve and improve.

　　As HR gains greater competency and credibility, policies and processes become

　　more streamlined and technology advances, the organization’s level of comfort will increase. The result is a continued increase in the organization’s expectations and demands for the “New HR”.

　　Company Experiences and Lessons Learned A variety of companies, as referenced

　　throughout this paper, have moved or are in the process of transforming the Human Resource function. While the primary goals of these transformations tend to hold common themes such as improving quality of HR, driving HR to more strategically support the business and reducing cost, experiences and approaches to getting to the future state can be as varied as the businesses themselves.

　　A joint report by Saratoga Institute and the American Management Association

　　entitled “Restructuring the Human Resource Department” documented the

　　Six Leading Indicators for Successful HR Restructuring as identified by 26 top

　　companies that had recently undergone significant restructuring:

　　Our experience supporting dozens of companies in this regard supports the

　　importance of these factors. The approach described in the previous section clearly

　　incorporates the above as well. From connecting the case for change directly to

　　the business needs, to engaging leadership commitment, to harnessing the

　　power of benchmark data, every step of transforming HR requires the combination

　　of these six imperatives.

　　Text Box: Planning Teamwork

　　Business Focus Commitment

　　Communication Benchmarking

　　Success Stories

　　One of our recent clients, a Fortune 100 global corporation with more than 130,000 employees, is currently implementing a major transformation of HR. The model

　　includes consolidation of HR systems, policies and programs, implementation of a

　　Shared Services function and redesign of the business-based HR professional roles. Leveraging an in-depth benchmarking study, our client was able to develop a

　　clear vision of the future HR model and the associated capability enhancements and significant savings to gain executive buy-in early in their effort. The resulting model followed a “best of breed” approach that includes outsourcing core functions such as HR customer care center, affirmative action plan development and integrating a suite of HR technology from various vendors as well as internally developed solutions.

　　The company, derived from almost 20 legacy organizations through mergers and

　　acquisitions, presented a complex, decentralized environment in which

　　creating common systems, policies, programs and processes was not a simple

　　task. Internal politics aside, the barriers inherent to transforming HR technology,

　　processes and roles in this environment required strong leadership, detailed

　　planning and robust program and change management capabilities.

　　By implementing strategic HR capabilities, common and flexible policies and

　　programs, and consolidated technology across the corporation, the company is on

　　track to realize its $69 million targeted annual savings. Further, with the

　　introduction of direct access technology, HR’s customers are able to gain

　　information and conduct transactions with greater ease and speed than ever before.

　　Senior executives have increasing access to enterprise-wide human capital data to

　　support decision making whereas in the past this information was only available

　　through manual collection and, therefore, rarely viewed.

　　Perhaps most interesting about this organization’s experience is the growing

　　acceptance by HR and HR’s customers of the new model. Early in the

　　implementation planning, resistance to direct access tools and a shared services

　　model was high. Throughout the transformation effort a consistent focus on

　　stakeholder information gathering and management enabled the team to garner

　　increasing support across constituencies.

　　Further demonstrating business unit interest in the new model is the growing

　　demand from units scheduled for implementation later in 2001 and in early

　　2002 to gain access to the new tools, services and HR capabilities faster than

　　planned.

　　In another case, a manufacturing company of approximately 15,000 employees

　　recently implemented an outsourced model including a HR customer care center and supporting HRIS and direct access technology. The model has enabled the

　　HR organization to scale down in size, saving 30% of HR costs annually. Like the

　　first example described above, this company also undertook a detailed benchmarking effort as a means to determine all possible opportunities to

　　improve HR and reduce cost simultaneously.

　　The business case demonstrated significant advantage through leveraging

　　an outsourcing provider to deliver technology and administration. In this way,

　　the remaining HR function has been able to focus more heavily on partnering with its customers relative to the growth of the business.

　　Feedback across the employee population (both manufacturing and white-collar alike) has been quite positive. Here too, the initial concerns of both HR and HR’s

　　customers were significant in advance of the implementation. However, HR leaders

　　indicate that by involving cross-sections of HR and line employees in the design,

　　testing and implementation of processes, programs and technology, the

　　transformation garnered the required support and commitment to be successful.

　　What to Avoid

　　For as many HR transformation success stories that exist, there are also challenges and pitfalls. Organizations that seek total buy-in or 100% perfection of processes or technology before moving towards HR transformation have tended not to succeed as readily. Also, as referenced earlier, organizations that attempt to drive

　　transformation of HR without involving a cross-section of the company tend to

　　struggle to gain the needed support and focus.

　　Small or incremental change will tend to save short-term dollars or improve small

　　areas without yielding the kind of results necessary to actually achieve

　　organizational excellence. However, this should not preclude organizations from

　　selecting “quick-win” opportunities to improve HR, which ultimately link to a

　　larger plan. The challenge, however, is to first create a longer-term vision of HR

　　based upon goals and targets that will directly support the business’ objectives.

　　The pitfall is proceeding with collections of non-integrated initiatives across the

　　company that ultimately do not bring the Human Resource function to a next level of strategic performance or effectiveness.

　　Getting Started

　　For many, figuring out where to begin can be the most difficult step. It’s important to recognize that shifting the role and model for HR in large and small organizations will likely be a complex and long-term effort.

　　The benefits can be realized within less than one year while often the ROI will

　　increase to a steady state over multiple years.

　　Based upon our experience supporting clients in advancing the effectiveness of

　　HR, here are some quick pointers for getting started:

　　. Go for the 80% solution – waiting for 100% likely means you’ll never get

　　started.

　　. Benchmark and set targets tied to performance – don’t benchmark for the sake of benchmarking.

　　. Develop a solid quantitative business case to demonstrate the expected financial returns and use it to sell the effort to stakeholders.

　　. Identify the “governing body” for the project efforts. Many organizations

　　successfully leverage the senior HR executive leadership team to serve as the steering committee.

　　Mobilize a core team with balanced representation from across the company to

　　lead the effort with at least some fully dedicated staff as the initiative grows in

　　size and complexity.

　　Seek experienced external partners to support the data collection, business case,

　　design, and implementation effort.

　　Text Box: UStrategic HRM-BPO Geographic Contact List

　　Practice Leader:

　　Judy Coffey-Hedquist (312) 846-3600 coffey-hedquist.j@mellon.com

　　Western Region:

　　Dr. Bruce Barge (714) 712-8430 barge.b@mellon.com

　　Central Region:

　　John Furcon (312) 846-3650 furcon.j@mellon.com

　　Eastern Region and Canada

　　Thomas F. Casey (617) 722-7533 HTUcasey.t@mellon.comUTH

　　HR Transformation Communication Liaison

　　Ruth Hunt (612) 215-6933 HTUhunt.r@mellon.comUTH

　　HR Outsourcing Liaison

　　Arthur Mazor (770) 916-4190 mazor.ah@mellon.com