HR, Transformation, Survey

SBPOA HR Transformation Survey - Preliminary Results

Earlier this year, the SBPOA supported by EDS commissioned a survey into continuing trends in the HR transformation arena as more and more companies shape up to the challenges of making HR strategic. Over 200 organisations took part in this years survey with many different sectors of industry contributing to the findings. This summary is the preliminary report from the survey highlighting key issues and trends from the report and offers the reader an opportunity to reflect on the key messages for your own organisation.

About the participants

Overall the respondents can be grouped into 3 segments across many of the different themes such as revenues, type of company and functional responsibility. Whilst a simplification, there are 3 typical profiles of the survey participants giving a diverse and thus very relevant spread of opinions;

• Large commercial enterprise with revenues over $1billion (32%), over 5000 employees (33%) and falling within the big industrial sectors such as healthcare, financial services, IT, telecoms, utilities and manufacturing.
• Medium-sized enterprise with revenues between $50 and $999 million (32%), 500 to 5000 employees (33%) across a wide spectrum of both public and private entities.

• Smaller enterprise with revenues below $50m (36%), less than 500 employees (33%) and likely to be a provider to the HR transformation agenda through consultancy, software/HRIS solutions development and HR services providers.

This diversity of response is also reflected in the profile of the roles performed by the participants;

• 15% of respondents are at board level (owner/CEO/President/MD)
• 30% of respondents are at senior management level (VP/Director)
• 30% of respondents are at managerial level
• 25% perform other roles such as consultants, research, project management and other supporting roles.

Finally, the survey is also geographically diverse split between the Americas (50%), Europe (30%), and the Middle East, Africa and Asia-Pacific (20%).

Overall the survey is robust and valid in every aspect with data provided across a wide range of industry, a wide geographical viewpoint, from every level of the organisation, and across the full range of perspectives of the HR transformational journey.

The key findings – 7 things I want to know from the survey

In reflecting on the vast array of data within the survey, I have asked myself can I answer 7 critical questions that I think are crucial to the debate on HR transformation and in which to provide a logical structure in looking at the survey findings:

A. Why are we doing HR transformation?
B. What is HR transformation focusing on?
C. How has HR changed to date?
D. How are we doing?
E. What are the key enablers to change?
F. What are the key barriers?
G. What are the key learnings for others to draw upon?

Against each of these challenges, I have looked at the data and brought out the key aspects that I think are critical to the debate on HR transformation.

A. Why are we doing HR transformation?

Unsurprisingly, the principle reason for the need for transformation is the desire to ‘make HR more strategic’ with over 60% of respondents stating this as one of the main drivers for change. Perhaps as supporting evidence, 50% of respondents also chose cost reduction and 47% chose ‘responding to overall organisational change’. Service enhancements also featured at 46% (Table 1).

What also emerges from the data is that the drivers for change could have inherent conflicts within them yet many respondents checked 3 or more categories. The survey does not inform us by what is meant by being more strategic and judging by the other data, I do question whether in some organisations, the need to change HR is a purely transactional affair of reducing expenses in a ‘cost centre’ rather than something more strategic. Indeed the data also suggests that HR is just part of a broader agenda for change (cost savings). This concern will be reviewed again in the overall summary.

Rank
1. Making HR strategic
2. Responding to changes in business-wide organization
3. Part of overall organization's transformation process
4. HR currently not adding sufficient value
5. Cost reduction
6. Benefit from new technology
7. Service improvement
8. Maximize resource availability

What are the main reasons to transform your HR systems and processes?

B. What is HR transformation focusing on?
Continuing the theme from the previous area of discussion, questions seeking better clarity on how HR was seeking to transform and what it is aiming to address have proved illuminating.

For those that saw outsourcing as a lever for change, HR transformation is best categorised by addressing basic transactional processes such as payroll (36%), healthcare benefits (35%) and pensions/benefits administration (31%). Perhaps this is exaggerated because of the large US response rate to the survey and the greater complexity and administration that is often found in areas such as benefits, healthcare and payroll. However, these look like easy cost saving targets rather than anything more strategic and in all 3 cases are targets for outsourcing as the preferred mechanism for change.

For those looking at what they need to change in their HR functions generally, other areas of the HR function are being addressed such as employee communications (31%), performance management (26%), recruitment/selection (29%) and training/development (31%).

The survey also sought out key themes from how shared services, self-service and technology more broadly. Whilst shared services scored highly across all 16 areas of HR activities, this was seen more of a lever of change for the whole HR function (28%) rather than anything more specific. Self-service and technology whilst important do not play the same role in HR transformation as outsourcing and/or shared services.

Of most concern though given the findings of the previous question is that 33% of respondents are not transforming the hr function overall. This continues the developing argument that whilst HR practitioners have great ambitions to change the overall strategic positioning of HR, they are doing the easier transactional stuff not really focusing on overall change (Figure 1).




C. How has HR changed to date?
Across many of the HR activities included in the survey, HR functions are just about equally spread across the four stages of transformation. Taking payroll as an example; 27% have no plans to transform, 25% have completed transformation, 23% are still in the process and 25% are still planning to transform. This pattern is reflected in other areas of transactional HR such as benefits & healthcare administration, as well as the large areas of HR activity such as recruitment/selection, performance management and training/development.

More niche activities such as relocation, expatriation, stock option management are least likely to be part of the HR transformation plan with over 60% of respondents not planning to transform in each case.

Overall though the message is that HR transformation is very much work in progress with only 9% of respondents confirming that they have completed the HR transformation process. That said, elsewhere in the survey there is evidence to suggest that the transformation process is taking longer than most organisations expected. More time is being spent on the planning stage (10% of organisations have spent longer planning than expected) (Figure 2) and the delivery of the changes are on average taking longer than expected. The optimum period for change is somewhere between around the 1-year mark although when tied to the scope of the transformations, this statistic is very questionable. This theme will also be reinforced when we consider how organisations are measuring the total impact of the changes they are making.





D. How are we doing?
Measurement of HR performance in the changes it is making featured strongly in the questions if somewhat less so in the responses. Generally speaking about 50% of respondents could answer the question of measures of success although interestingly these were almost entirely financial measures. Less than 10% of those surveyed could describe non-financial measures mostly in terms of reduced cycle times for key processes having implemented technology solutions. This is especially concerning given that 45.8% of organisations included service improvement as one of the main reasons for HR transformation.

Within the financial measures, 80% of respondents have spent somewhere between $1m and $10m achieving on average about 15% cost savings. Within the data, there is some question about the scale of our ambitions as HR professionals when 47% of organisations have achieved less than 10% cost savings with only 21% achieving greater than 20% (Figure 3).

Less than half of those who responded on total costs/benefits (Figure 4) also answered the questions on how much is being spent on HRIS solutions. That said, of those that did more was being spent than planned with 23% spending over $11m on HRIS solutions alone. As with the overall HR change, the timescale for HRIS changes is commonly between 12 and 24 months albeit those who planned to spend less than 12 months are being disappointed with a full 10% expecting to implement within 12 months but slipping into the 24 months bracket.

Given that 60% of respondents wanted to use HR transformation to ‘make HR more strategic’, there are few measures of performance other than cost/ROI that support this objective, compounded by a dearth of service metrics for the 46% of companies who also want to address service improvements. Even worse, for the 26% or companies who have achieved less than 5% cost savings, this doesn’t feel very transformational.






E. What are the key enablers to change?
Not surprisingly the overwhelming factor for success to a question which in itself received a high response rate was executive management and sponsorship (Table 2). The surprise is that it was only 75%! Perhaps aligned to it a further 66% stated that the quality of leadership is almost just as important. Having a clear vision, strategy, detailed plan and scope of services were equally as important to each other with about 50% of respondents seeing these as very important. The internal processes supporting transformation such as communications, training, getting employee commitment and capability were slightly less important averaging around 40% of respondents seeing this as very important.

Despite the arguments of some to the contrary, only 31% of participants in the survey thought that a solid technology platform was very important. However, other technology tools such as employee and manager self-service, data analysis and electronic policies and procedures are all deemed of greater importance than the core platform itself in effecting transformation.

Rank
1. Employee self service
2. Electronic policies and procedures
3. Data analysis and reporting tools
4. ERP (SAP PeopleSoft Oracle JDEdwards Other)
5. Workflow
6. Manager self service
7. Customer Relationship Management (CRM)
8. Business intelligence
9. Data warehouse
10. Document imaging

Factors to ensure HR transformation success

F. What are the key barriers?
The most useful finding from the survey that there is no one thing that can be identified from the qualitative responses as being the major barrier to HR transformation. Clearly from the previous question, not having senior sponsorship and strong leadership is a non-starter as far as being successful in the transformation of HR but beyond that many reasons are evident. Perhaps of concern is that over 20% of respondents spend over 6 months on getting senior approval once the business case has been presented backed up by many comments on having to secure organisation-wide buy-in either at an individual executive level or across all divisions. It does appear that consensus across a senior executive team in the way forward is critical and individual mavericks can slow the process down.

Another inference from the survey is that securing the totality of the funding for the transformation is very hard, even with robust business cases and very strong sponsorship. This suggests that de-scoping of desired plans, or chunking or the overall transformation into smaller more digestible pieces is very common. Clearly for most companies, HR transformation is seen as a periphery activity, especially where technology prioritisation is concerned and the case for large investment is very difficult. That said, 51% of organisations have approval granted within 3 months.

G. What are the key learnings for others to draw upon?
The most significant finding is that having gained sponsorship from the top, ongoing commitment and sponsorship throughout the programme of change is even more essential. Clearly whilst support for transformation maybe given at board level initially, as the programme is implemented a number of issues can arise. Having complete faith in the original design, especially standardised processes and clear service targets, and not adjusting from the planned design to pander to political aspects is also evident in the survey.

Overall very few respondents provided learnings which confirms two ongoing themes within this review; firstly, many transformations have not been completed and secondly, HR does not like reviewing its performance against specific measures.

Summary thoughts from the author
Overall, the survey has provided very useful data and findings in respect of a number of facets of HR transformation. The report card of performance for HR would probably read ‘B – has made some progress in becoming a more valued member of the business community but needs to deliver real change across the HR function, not just the transactional stuff, and demonstrate more clearly how it will add value in future’.

There is still much to do. Whilst the trends are to sort out transactional HR activity through outsourcing non-core processes, re-engineering other processes through self-service and leveraging off shared services as part of the overall change to the HR function, very few organisations are at this point. The survey suggests that most organisations are looking at transformation on a piecemeal basis by targeting 2/3 areas of activity rather than the whole. 56% of respondents are either planning to, or in the process of, changing the whole HR function, whereas 9% have completed it. Remembering too that 36% of organisations had no intention to look at the HR function holistically. The strategic imperatives for change could be viewed as largely cost-driven and support the theory that for many, HR transformation is about changing back-office processes only.

What the survey infers but does not answer is how are functions transforming HR more generally in areas such as business partnering, reviewing the role of the centres of excellence, looking at measures of performance for areas other than process cycle times and costs and in short, defining what added value really means.

Finally, and as a practitioner rather than a solutions salesman I can say this objectively, I do wonder whether HR professional have got the skills themselves to effect transformation or whether the investment in external support in respect of broader business case preparation, change management and delivery is a worthwhile investment.

What next for the survey findings?

This is the initial summary of the findings although the survey contains much more data and areas of further thought and reflection. A fuller report on the findings will be provided early in 2005 when opportunities to follow-up with willing participants to get richer data will be undertaken.

About the author

Tony Williams is Head of HR Shared Services for the Royal Bank of Scotland Group. RBS is the 6th largest bank in the world on market capitalisation and employs over 135,000 employees worldwide. RBS HR shared services has been recognised by a number of industry specialists as one of the leading proponents of the shared services model in HR. Tony is a leading authority on shared services through his membership of a number of different organisations who promote HR change, his regular contributions at industry conferences, and through his book ‘How to get the best out of HR – the shared services option’ co-written with Peter Reilly and published in early 2003. Tony and Peter are now working on their follow-up publication which questions how transforming HR through shared services and/or outsourcing is contributing to the overall remit of HR and what the future holds for the function.

About the SBPOA

The SBPOA is the leading, independent, global body for the shared services and business process outsourcing (BPO) sectors. The Association interacts each year with more than 250,000 professionals worldwide, including practitioners, service providers and industry analysts. As a not-for-profit membership organisation, the SBPOA provides online and offline networking, access to best practices and independent commentary on the evolution of shared services and BPO.

About EDS

With more than $20 billion in annual revenue, EDS is ranked 87th on the Fortune 500. EDS Business Process Outsourcing (BPO) integrates the people, processes and technologies you need to provide a complete solution, resulting in maximum efficiencies and improving the competitive agility of your company. EDS has been delivering many of these critical services for over 40 years. Our BPO portfolio encompasses HR, finance and accounting, supply management, customer relationship management, and transaction and administrative services. We provide industry and process experts to design and manage processes that are critical but not core to your business. By leveraging EDS' technology investments and global delivery capabilities, you can save money while driving increased business value. EDS' Human Resources (HR) Outsourcing Services can streamline your benefits administration, compensation management, recruitment and staffing, workforce development, HR management, and payroll systems. Visit www.eds.com/hr to learn what we can do for your company.