Why the HR structure is industry agnostic but not time agnostic

Every company’s HR Function needs to look different, needs to be composed of different building blocks – and this is even more true when you have different industries: An HR Function for a major Retailer should be based on different building blocks than the one for a Financial Services company. This is what Consulting firms tell us and this is what we see out there – therefore, it is right.

Is that so? I see that different. The general concept of the HR Organization can always be the same. Every company needs the same foundational building blocks:

  • Talent Management
  • HR related Business Consulting
  • HR Specialists
  • HR Admin

And any company that does not see the need for any of these is definitely missing something. Now, don’t get me wrong – I don’t say that every HR Function should look the same. I am just saying that actually the differences needed are not based on industry or country or workforce – but based on firm and HR maturity.

To get the basics out-of-the-way: The way how you fulfill these 4 foundational building blocks can be very different – you can outsource, you can consolidate them into unified roles if size does not allow for separate roles, you can have contractors supporting you, etc. – but you will always have all four foundational building blocks. If not, than you miss out or… and this is where my point is coming…or you are at a different state of maturity. What does that mean? The HR function is evolving since its beginning and there is still no end to see to it – where HR will be in 10 years from now or even in 5 years from now is a very interesting question. Only thing sure is that it will look very different from today. HR is still no stable function, no commodity, but still finding its purpose and its direction, defining where it should play and where it shouldn’t. This is all influenced by many different topics like workforce expectations, regulations, management needs, etc.

HR does not stand still and won’t – and any differences that there are between HR Functions of different firms are not based on industry or size, but on maturity of both the HR Function and the firm itself. HR is 100% a support function and needs to support whatever the firm needs to be successful, and only the firm itself knows what it needs – there is no personalized model per industry or country or workforce, but there is a basic model which needs to be adjusted to the needs and maturity of a company. What is right and fitting perfect today, is wrong and too tight or too loose tomorrow. Don’t go into the trap of “if my competitor is doing it way A, I need to do it way A” – look inside your company only and listen what is needed, what is wanted – and use this to shape your HR organization, every day.

HRIT: Are we still converging or already exploding?

I have recently spoken about HRIT and SaaS already but now I feel that there is still much more to that topic than I have written before. When you think about HRIT and SaaS I believe that at least 90% of you are thinking Workday or SuccessFactors. That is my experience. Also, when you speak to consultants, this is what you get as an answer – take Workday or SuccessFactors, maybe Oracle Fusion. But that’s it. But if I look into the history of not only HRIT, but also consumer technology I must wonder if this still is the right answer. In addition, the clearness of consulting advice you get towards these two/ three solutions makes me cautious.

Think about consumer tech. Since the Apple iPhone introduction which is celebrating its 10 year anniversary next year (yes, time flies, and also yes – 10 years ago there were no real smartphones!), we are on a path of convergence. Most of our technology, most of our daily tech interaction is with the iPhone or any other smartphone for that matter:

  • Consumer grade cameras and also video cameras are or have been replaced by the phone
  • The Walkman, Discman, MP3 player as a separate device has disappeared and was replaced by the phone
  • Your landline phone has disappeared
  • You are utilizing your computer much less for internet browsing or similar
  • Your TV or home Hi Fi system remote controls have merged into the Phone
  • There is an App for everything
  • and more and more and more

In essence, the phone was becoming (and still is) the monolithic device that steers our lives and that we would probably miss most if we lost it. However, this trend is rapidly changing. The App industry is going down, phones now are turning modular (see here or here) or are enriched with additional, separate tech tools. The consumer tech industry is bringing back gadgets, Apps are no longer a lasting business model (except for the global big players). After 10 years of convergence, the phone is exploding and bringing back gadgets that are not multi-purpose, but specialized, that are not ok to use, but the best for a specific use-case.

And now think about the history of HR tech. The real HR tech started truly with systems like SAP HCM or (Oracle) PeopleSoft. These systems started out as “better” payrolls and converged into monolithic HCM suites for any use-case of data admin, payroll, recruiting, performance management, self-service, etc. But at some point in the years of 2000 (more towards the middle and end), these monoliths were “exploding” and the newest trend in HR tech was “best-of-breed”. You did still use your HCM monolith, but only for some core applications and only because it was the knot that hold everything together. But you mainly worked in specialized Apps for Learning, Performance Management, Recruiting, etc.

Today, it seems like we are again for a long time – at least for the last 5-6 years – back with monolithic systems. It is just that they are called different now (SuccessFactors, Workday, Fusion). But why should we be at any different point than consumer tech today or HR tech 10 years ago? – I actually believe that we are even closer to the explosion in HR tech than in consumer tech. Why so? – we are at the perfect storm of two catalysts joining up:

  • HR significantly evolving and repurposing important topics like engagement, performance, compensation, succession, learning
  • Tech significantly evolving with a multitude of start-ups that are now no longer consumer focussed, but B2B focused like tinypulse.com or everwise.com

This perfect storm will bring up the question of how the new monoliths can integrate with best-of-breed, and that at a faster pace and probably not with standardized interfaces to connect and exchange data. It will bring up the question of how we should think and prepare for that future – today.

Trade-off – Efficiency and Effectiveness: Do we have the right focus?

In my last post I pleaded that HR for once should stay ahead of the curve and not blindly follow any trends. I am still 100% behind that and would like to support it today with some additional thoughts: The trade-off or conflict between being efficient and effective.

As an HR Consultant there is one slide that is one of the most important when it comes to making the case for change/ making the case for an HR Transformation. It might look different from consultancy to consultancy, but each and every HR consultant has that in the back pocket with the same message. The pyramid or small square in a big square – the message that the true value of an HR Transformation is not really in HR, but in the workforce, realized by easier HR interactions, faster HR transactions. Don’t get me wrong, I still believe in that slide – have used it myself multiple times. But have also seen multiple times that the consequences of this slide were not taken when actually transforming HR. And this is the target conflict, the trade-off between efficiency and effectiveness – not in HR, but in transforming HR.

Why is that so? – when designing a new HR Organization, companies and consultancies tend to design it as lean as possible, as specialized as possible and as rigid as possible – with global standardization, global technology, global processes, etc. – and all of this is necessary for a lean and efficient HR organisation. But what about effectiveness? Yes – the CoEs will be designed with a bit of slack so that they can drive HR effectiveness and all is well. But is that so?

Coming back to the original “slide” that I was referring to: The real deal, the real business case is outside of HR which in turn means that we need to make sure with every HR Transformation that this part of the company, the overall workforce, the business stays effective! This is the effectiveness that we should watch out for, this is the actual conflict and trade-off we need to discuss and align. Because lean HR in 9 out of 10 cases means:

  • Standardized processes with one size fits all – no special treatment of any business unit or employee group, regardless if it is needed or not
  • Self-service for initiating any people related transaction
  • but also self-service for employee or manager education on HR policies and procedures

And of course, this is necessary and completely normal for transformed HR organizations with Shared Services. Some are even more rigid and only allow self-services – no personal case resolution or handling or intake anymore. The people manager or employee has to fit into the pattern of self-service possibilities and policies published. If not, too bad.

The question is: Is that the right approach? – sure, this is the right approach if you want lean HR. But it is not the right approach if you want to achieve the complete business case of an HR transformation. Don’t get me wrong – I am not against self-services or publishing of policies. But what happens in many cases is that this is focused on HR and not on the consumer of the service. Companies are slowly understanding this. In fact, I had a conversation last week about self-services vs. telephony support for employees and managers. A company has changed its approach on how to take requests in – from a focus on self-services, short call turnaround times and mass-handling to an open menu for the employee or people manager: Take the contact method that you feel best fit for you for your specific case today. – result was that significantly more calls were coming in to HR now than before and that call handling times have almost doubled. But employees/ people managers came less often for the same request – could receive a satisfying answer and action earlier. In total, employees and people managers had to spend less time searching for the right answer to a complex case/ question online before starting a self-service request which triggered multiple back and forth between HR and the requestor due to incomplete information, misunderstanding, etc. They now had the chance to call in immediately for complex cases and got help through a conversation (another change) rather than scripted call handling, which was much more effective for the requestor. Now it seems that this would be less efficient for HR – but preliminary results show that the total handling time of a single request was reduced due to less back and forth and having all necessary information. Let’s see how that plays out in the long-run.

At the end it seems that there maybe isn’t even a target conflict, but we will only find out if we not only during the business case, but also when designing and implementing the transformed organization, processes and systems focus on the holistic picture and the company as a whole, not only HR. And in coming back to my plead of the previous post: Don’t go all digital, allow for analog conversations to happen in real-time (sure, it does not need to be phone, can be chat as well – but let’s face it we as humans are much more efficient in telling our case/ issue/ request than writing it) and make these human interactions with a conversation – not scripted – to achieve best outcome.

Technology: Being ahead of the curve

My recent posts have been about best-practice vs. best-fit and especially their application within HR. Technology was one of the areas where I was clear that a best-practice approach suffices. I am not going to change my view on that. However, would like to argue that specifically in technology, one should look outside of what is happening in HR to what is happening in real-world technology. And that for the first time, HR could be ahead of the curve? – what do I mean by that?

When you think about HR technology, there are a few visible trends that all HR technology firms are going:

  • automation
  • going digital
  • analytics

I believe there is no doubt that this seems to be the future. And I have to say that I am not against that future. I just believe that we should be more differentiated around it. The current view (and I am happy to have a conversation around that) is that in these three topics, you see the future of HR technology. Probably right – question though is, if this is also the future of HR?

Ahead of the curve?

Before going further into that topic, let’s have a look outside of HR. Let’s have a look into consumer technology – in the end, all of above HR technology trends are based on consumer technology trends.

Automation: In HR technology, the trend is really towards more automation and integration. Get things done in the background and without human intervention as much as possible. We have seen similar trends in consumer technology a few years back. We went to all integrated systems and software – there was an App for everything on your iPhone or Galaxy. However, if you look into consumer tech now, you see that the trend is fading – actually reversing. People are going back to non-integrated technology in certain areas. If you think about photography for example, the hype in the recent years was to have it all on your phone and within apps. All integrated end-to-end. However, this is clearly changing with the current trend to separate cameras. Back to specialized products in hardware rather than all in software, back to distinct products and hardware specialization. Sometimes even to analog photography.

Going digital: Going digital seems to be the only idea, the only way to go down for all of HR – probably for all of a company if you see the trends and measures in technology. And again, consumer technology led the way to this path. Probably, there is no real way out of this – and probably there should not be a way out. However, a bit more differentiation should be applied. And again, consumer technology leads the way. What was the most significant product on this years globally biggest Consumer Electronics Show (CES)? – it was an analog audio device – actually a record player. A vinyl record player – and it was most favored around the younger generations.

Analytics: HR analytics, workforce analytics will bring us the insights to lead and manage the organization of the future. Predictive analytics are the solution of all of our issues – if you have a look into the HR technology trends and marketing, this is what you read. And again, this is based on consumer electronics. Many of the analytics products in the HR space are based on consumer editions like amazon or Netflix have developed and are using. The same algorithms used in these consumer based technology is driving HR technology. Now, interestingly, there are some consumer companies that believe to be ahead of the curve and are using something new: human curated playlists or recommendations. Apple is one of these – and the claim and believe is (which was so far not proven to be wrong) that there are specific topics, where the human analytics and understanding is superior to technology. And the success of this seems to prove them right.

Now, these are just a few examples that I currently see in play. You can argue any of these, but you cannot deny the fundamental shift in consumer behavior and technology. It is of course, not a shift back to the ancient time – but it is a balancing act from “all digital” to “digital where it is good, but analog where it is still superior”. I believe that this is the right move to do in consumer tech – and also I believe this is the right thing to do in HR tech. We are currently not on the road to the balance, but to all digital in HR tech. Let’s be for one time in HR ahead of the change curve and go now to the balance rather than needing to invest and roll back in a few years from now. Our workforce seems not only to be ready for the balance, but demands it (younger people buy vinyl, prefer curated playlists and buy themselves discrete products rather than all integrated tech). In my next blog I will play out what this exactly means for HR. But until then – any thoughts from the audience?

HR Innovation: best practice vs. best fit for HR

As laid out in my earlier post, there is an academic conversation going on about what is the right thing to do best-practice or best-fit. I have argued that both have their places and their positives and negatives. But how to think about it in the HR function specifically?

There are functions that are prone for best-practices – and these are functions that are highly regulated or live in a very stable and not changing context across organisations and geographies. These functions can most of the time just adopt a best-practice and will be successful with it. However, it won’t provide them any strategic advantage as other companies are using it as well – and it seems to be imitable.

When you think about the HR function though, there are two key differences to what I have stated above:

  • The HR function does not have a stable environment. On one hand regulations, labor laws and unions require different practices in different geographies. But in addition, not one workforce is like the other. You have big differences in the workforce mix like demographics, geographies, blue vs. white collar, research vs. production orientation, etc.
  • If you take HR seriously and if you take the resource-based view of the firm seriously (and there is no believe that we should not), HR and its practices are the key drivers and influencers of the workforce and all its attributes – and this is the key differentiator, the key competitive advantage. So why would you even think about adopting best practices and make your workforce more similar to the one of a different company? You would loose your competitive advantage. – of course you can argue that a poorly performing workforce does not have a competitive advantage and copying a competition’s practices will bring you into the same spot like them – but what do you really win by that? You are still always a step behind and won’t perform in close range.

This statement clearly makes the case for best-fit. However, best-fit is expensive and also makes mistakes as you are constantly trying something new – and you can’t always win. So does HR need to be that expensive? And does that really add value? – it does not. You have to go one level deeper and have to differentiate. The fact is that your workforce is the competitive advantage – not your HR organization as a whole. But your HR organization is the key driver of that competitive advantage – so how does that work together?

When we dissect HR in its parts, then it is a combination of people, organization, technology, process, and policy. Let’s leave the people out at this point and focus on the other four. Where does the core competitive driver sit and how does it drive the competitive advantage?

Policy is at the heart and centre of the HR practice – the policy says what is done and how its done. It truly defines the HR work and the core of it – and therefore is the core driver of the competitive advantage. You should stay away from best-practices in all people influencing areas (administration vs. talent). Use proven policies in the areas of payroll or workforce administration. You do not drive workforce effectiveness through these but just efficiency. However, if efficiency is your key advantage, don’t copy here.

Process is to be seen very similar like policy. However, the influence on the competitive advantage is much lower. Still, how you operate key talent processes like talent acquisition, performance management, succession planning or learning drives your competitive advantage. And if you focus on efficiency mainly, don’t underestimate the administrative processes of payroll and workforce administration. But usually these don’t bring much return.

Organisation brings policies, processes and people together. Organisation is basically the key example where a 50:50 cooperation between best-practices and best-fit are the best. There are proven organisational concepts out there that work in general for most companies as they are sufficiently holistic. However, the detailed application to your firm, the detailed design and implementation needs to follow your very own company context.

Technology – last but not least. Technology is the oiling machinery that brings it all into execution. If you are not a high-tech company that needs to be differentiated in that field to show your abilities, there is no reason for being different, for not going with best practices. Differentiation through technology is very expensive, can easily go into a dead-end and does rarely pay off. The influence of technology (as long as we talk about current technology) to the workforce is minimal. It is a pure enabler and needs to enable the policies and processes.

This is now my guide to best-practice vs. best-fit. As you can see, it should be differentiated and both best-practice and best-fit have its place and reason for being in HR. Let me know your thoughts on twitter, Linkedin or Facebook.

HR innovation: Best-practice vs. best-fit

I have written a few posts about HR Innovation – and what is not innovation. One topic that automatically comes up when talking about innovation is best-practices. Do we need to reinvent the wheel? Can’t we just take what works in a different company? – It has proven success, we can ask the same consultants that did it for company A to do it for us? Like this we won’t fail and we won’t need to experiment. And it is also much cheaper to get it like this.

Who hasn’t heard this? And what did you say then? – how can you disprove that a working, functioning practice (in a different company) does not work for you? – it is hard.

However, in academia for a long time, there is a controversy around best-practices. You have supporters of it as well as empirical evidence that this works. But you also have opponents to best-practices. And they also have statistical, empirical evidence. It is the old game of “you can never validate a theory, just not falsify it”. The opponents prefer a different model which is called best-fit. Before discussing further – what is the difference?

Best-practice means that a common, proven practice from a different company or a different organization can be copied and implemented in your own organization or company and it will work and produce similar positive results like in the other company or organization you are copying it from.

The best-fit model on the other hand says that not any model that works in a different company or organization will work in your own. But that it is more effective to implement practices that are linked to the contextual environment (and that can be various variables) of your company or organization.

In academia these models are on opposing sides and both claim to be the right ones. However, academia and business are not the same. So what does that mean now for HR innovation and for utilising one or the other? Well, the truth is like every so often in the middle – or at least somewhere there. There are common best-practices that can really be utilised across a wide range of companies or organisations and there are best practices that won’t work. The reasons for this sit within the specific best-practice: High-level best-practices like recognising that employee performance is directly influenced by the degree of involvement and ability are true almost anywhere. However, a working Performance Management System (consisting of process, technology, policy, application) will for sure work in one company as a best-practice, but copying it will fail for the majority of companies/ organisations. The level of the best-practice is important. Best-fit on the other hand will always work – as it is best-fit.

So why not then always use best-fit? – also an easy answer: It is expensive as you are constantly re-inventing the wheel and it is not always bringing the same fruits (meaning success) than the best-practice in the other company.

The question then is when to and when not to use best-practice and when to and when not to use best-fit. And the answer might be very different from function to function, but I will provide my professional and research based view for the HR function in my next post.