Zurich: Breakfast Dialogue

24 Oct 2012

Success and Failures of HR Transformation Programs

Stefan Linde, Partner and Practice Leader of the Human Capital Practice of PWC

It was definitely worth getting up early to attend the IHRC Breakfast Dialogue with Stefan Linde. As highly qualified consultant of several years standing, Stefan has specialised in a number of HR-related fields, including; HR Shared Services and Outsourcing, Transformation, Process Policy and Design. Projects undertaken as part of his role as Partner – Leader People & Change for PWC mean that he is also very experienced in delivering HR projects otherwise considered by many to be dark and difficult journeys with little success or no return.

Stefan began the presentation by how transforming the HR function can be a form of evolution. Rather than something to be feared or avoided, HR transformation may be needed as the wider organisation itself matures. A clear vision of the end state from holistic perspectives applying Organisation Development and Change Management to introduce:

• Streamlining,
• Automation and Self-ServiceCommon processes and Process Improvement,
• Consolidation of ERP Platforms with IT systems providing data analytics
• and installing Shared Services and Business Partners

are all important steps along the journey to leaner ratios, higher productivity and best in class services provided. Therefore, even contributing to competitive advantage.

This all looked wonderful – conceptually. In practice, however, both Business and HR may underestimate the organisational complexity that introducing common processes, IT functionality and data analytics, as well as changing the existing roles and organisational structure may bring out. Assumptions and misconceptions may not have been addressed at the start, leading to resistance and opposition, which could ultimately de-rail the whole project. For instance, one solution may be imposed on all, rather than delivering a full-service for major corporate units only, whilst smaller country organisations contract for partial service delivery.

Human factors may also be a significant challenge. Long-standing working relationships with known and trusted HR managers replaced by self-service and/or in-/out-sourced service providers may prove traumatic in the short term, despite the promise of longer term benefits, such as moving away from admin and / or more interesting work. Culture also plays an important part. Change needs to apply from the very top of the organisation downwards. Initiatives like on-line reward statements can fail to take root if senior management don’t lead by example and adapt early enough. The prospect of losing headcount if HR services are centralised or off-shored may also be over-whelming if span of control is a sign of status within the organisation concerned. Significant resistance may also come from within HR itself, which also needs to be managed. This may be due to perceived threats to status and influence, career paths and even job loss.

Stefan cited Bayer, Proctor & Gamble, Philipp Morris and Unilever as examples of successful HR Transformation programmes. He emphasised the need to manage expectations towards long-term change and sustained delivery, with benefits realised after 2-3 years and continuing to grow over the next decade, rather than short-term fixes and instantaneous results. Recent PWC surveys like Shared Service Centres: Opportunities and Challenges in HR Transformation have emphasised standardisation, quality and efficiency as the most important drivers for embarking on such programmes, whereas cost would have been a more significant factor 5 to 6 years ago.

Stefan shared several insights from successful HR Transformation programmes. For instance, it’s essential to ensure close connection between Business & HR strategy, THEN review policies and streamline processes, rather than changing the organisation right from the start. Otherwise, there is the risk of “hard-wiring madness” with the project falling into disarray soon after implementation begins. Many of us have experienced the stress and frustration when it becomes unclear who to talk to when an issue arises, people have multiple roles and work-arounds the norm for both customers and advisors.

Other critical success factors include differentiating between strategic and operational HR, so that these terms are known within HR as well as shared by the Business. There should also be clear delineation of Who is Responsible for What. Strict role segmentation and clear communication channels are needed to support delivery of a 4-tier HR operating model. Ranging from Employee / Manager Self Service at Tier 0, Generalists at Tier 1, through to Centres of Expertise at Tier 3, this has proven to be the leading principle for operating HR effectively.

Typical pitfalls experienced in setting up the HR operating model have included Centres of Expertise becoming too remote and setting up HR programmes that don’t meet business requirements, reluctance of HR Business Partners to let go of administration, Shared Service Centres working at arms length without focus on service, efficiency, standardisation and governance. Plus the assumption that all will be well right from the very start, without allowing time or resources for continuous improvement as time goes on.

All in all, the Breakfast Dialogue was a fascinating, yet balanced insight into a compelling topic that will affect most HR professionals one way or another during their careers. To find out more, Stefan can be contacted via email stefan.linde@de.pwc.com and via telephone on +49 40 6378 2108 or +49 170 785 1844.