CIPD highlights rapidly changing face of HR

CHANGING HR FUNCTION

CIPD highlights rapidly changing face of HR

A recent survey from the Chartered Institute of Personnel and Development illustrates the extent to which HR functions are constantly adapting to the changing UK business environment.

Over the last five years, for example, more than eight in ten of the 787 respondents surveyed said that their HR functions had changed structure. Even more striking perhaps was the finding that more than half have made changes in the last year. Most HR functions had restructured to become more strategic contributors to the business.

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The survey is the third phase of a two-year research project conducted by the CIPD to look more broadly at questions surrounding the “Changing HR Function”.

The first two stages looked at existing knowledge in the area followed by a series of qualitative case studies, while the survey aimed to examine how HR functions are meeting the challenges of structure, role, skills and relationships.

An additional final report is planned to be completed by the end of 2007.

The Ulrich model

Particular attention is given to the extent to which HR functions have adopted the so-called “three-legged” model first developed by US academic David Ulrich.

The model proposes segmenting the HR function into three areas:

• shared services
• business partners
• centres of expertise.

The segmentation of HR activity, it is argued, offers a number of advantages with shared-service centres, which take care of transactional work, offering economies of scale that should result in cost savings; business partners, who handle the transformational aspects of HR, making the strategic contribution; and centres of expertise, the third leg of the model, providing specialist knowledge of resourcing, development and other increasingly complex matters.

Main findings

Shared services

• Just fewer than 30% of organisations had centralised provision of HR administrative services, with more than two-thirds of these having shared services delivered in-house, while a further quarter partially outsourced them.
• A range of benefits were identified in having shared services, the most common of which being the repositioning of the HR function to make it a more strategic contributor, helping focus HR work on more services and improving service quality.

Business partners

• HR business partners were present in 38% of the organisations surveyed and, again, a number of benefits were identified with the approach.
• As with shared services, making HR a more strategic contributor was highlighted but helping HR become more business-focused, giving people management issues greater importance and increased credibility for HR were also mentioned.

Centres of expertise

• With regard to the third part of the Ulrich model, centres of expertise, 29% of organisations said they had such arrangements in place.
• The most common areas mentioned were training and development (79%), recruitment (67%), reward (60%) and employee relations (55%).
• Of the benefits of centralisation expertise, the most common were deeper professional knowledge, consistency in HR advice, quality of advice and making the function a strategic contributor.

Ulrich model still only used by a minority

• With a significant number of companies restructuring their HR functions the survey also sought to determine whether changes had lead to the adoption of the Ulrich model.
• In total, three out of ten of those making changes to the HR function said that it now reflected the model, while a further 28% said that this was partially true.
• Nevertheless, only 18% of HR functions had all three elements of the model in place, with a single HR team still by far the most common structure.

Difficulties with restructuring the HR function

Perhaps why so few have adopted the model is the number of difficulties outlined by respondents with regard to restructuring their HR functions. In particular, five areas stood out including:

• around two-fifths of those surveyed mentioned problems with defining new roles
• a similar proportion said they had insufficient resources
• slightly fewer saying they were hampered by skills gaps
• around 35% did not have effective enough technology in place to enable change to progress smoothly
• just under a quarter mentioned resistance to change from within the HR function.

Other key findings from the survey

Restructuring the HR function

• While the main reason for changing the HR function was to become more of a strategic contributor, other common aims were to improve services (34%), increase business focus (30%) and to reduce costs (29%).
• When asked about how the size of the HR function had changed over the last three years most respondents said they had either stayed the same or grown. Where there were reductions it was likely to be administrative or junior staff.

Benefits and challenges of HR structures

Among the main problems experienced with the Ulrich model were as follows:

• boundary disputes associated with shared services
• getting drawn into the wrong activities as a result of business partnering
• difficulty in separating transactional work when using centres of expertise.

Roles and responsibilities of HR

• Behind recruitment and retention, the other main HR objectives highlighted included developing employee competencies (62%), improving the management of people performance (61%) and maximising employee involvement and engagement (59%).
• Of the factors driving change in the future, business strategy and goals were mentioned by 88% of respondents with HR’s own strategy and cost pressures both mentioned by around half of those surveyed.
• Overall, compared with three years ago the HR function now focuses a lot more on strategic issues and less on administrative activities with the trend forecast to continue over the next three years.

HR skills and careers

• When asked about the three most important competencies and capabilities for establishing the credibility and effectiveness of the HR function respondents most commonly identified strategic thinking (54%), influencing skills (51%), business knowledge (45%) and ability to deliver against targets (40%).
• The most common methods of addressing the skills shortages of HR staff were external training courses (72%), CIPD study (57%), conferences and internal courses (both 52%).

A final word

“Today’s HR departments are often judged on their success in meeting business targets, improving efficiency, performance and reducing costs. Changes in the HR function have created a huge shift in the way it delivers services and in its relationship with the rest of the organisation in order to increase business focus.” - Vanessa Robinson, CIPD Organisation and Resourcing Adviser.

Survey methodology

The survey was based on a similar study conducted in 2003 so that direct comparisons were possible. In total, 787 HR professionals responded and the median size of department was 10. There was a range of staff numbers in the departments covered, with a third having between one and five staff and a half with between six and 50 employees. The largest department had around 3,000 HR staff.

By job level, 57% of those surveyed described themselves as heads of HR functions and a further 26% said they were board members. The majority of the remainder described themselves as HR managers (8%), HR experts (3%) or business partners (2%).

The sample was split between 43% from the public sector and 57% private with 36% from multinationals.

Want to know more?

Title: The Changing HR Function, Chartered Institute of Personnel and Development, September 2007.

Availability: To download the 30-page report, free of charge, in PDF format visit the Chartered Institute’s site at www.cipd.co.uk or go directly via this link www.cipd.co.uk/subjects/hrpract/hrtrends/_chnghrfncn.htm?IsSrchRes=1

The Chartered Institute of Personnel and Development (CIPD) is the professional body for those involved in the management and development of people and has over 127,000 individual members. For more details visit www.cipd.co.uk.