Leading Transformation: Why Most HR Operating Models Fail

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Leading Transformation: Why Most HR Operating Models Fail

Since the 1980s, more than 1.5 million scientific articles have been written on the topic of HR operating models. Yet, in 2022, our clients often mention that their HR operating model still falls short of business expectations. The shift from “operational administrator” to “strategic business partner” is only a change in title, not practice. 

In this article, we share our observations on common oversights. If you navigate these insights correctly, will set your HR operating model up for success.

The quest to become a strategic business partner 

The Ulrich HR business partner model gained popularity in the late 1990s and early 2000s. Many organizations opted for an approach in which the traditional HR advisor was expected to become a strategic business partner. This resulted in the same person interacting with the same stakeholders in the same way, with many a CHRO expecting a radically different outcome. And why not? The HR operating model was, after all, transformed. 

As we all know, the reality was that it often took organizations years – if not decades – for their HR business partners to become truly strategic. The intention was noble, yet we did not manage to create the capacity for these changes to occur in execution.

Another, more recent, example is a large financial organization we’ve worked with. They decided to transform HR into a digital self-service environment. This led to a sprawling IT landscape with over 70 disjointed HR apps. The result was the lowest employee experience ever recorded and a total lack of data integration. It took an external team of consultants more than a year to define a digital strategy, clear up the IT landscape, and create one centralized employee portal that integrated the remaining tech solutions.

A third example is a large pharmaceutical organization implementing a data-driven way of working as part of its business strategy. After implementing several self-service HR dashboards, adoption remained in the single digits. Only after extensive training of the HR organization in data-driven ways of working, the organization saw an uptick in adoption. That was two years after they initially introduced the dashboards.

Why HR operating models fail

All these organizations had a clear people strategy that translated business objectives into people priorities. In addition, these organizations were working with an HR operating model that fit their organizational context. They had clearly defined roles and structures. So, why did these models not deliver value? 

If we dive below the surface, we can see that in these scenarios, the HR design lacked a clear understanding of the required capabilities that were needed to underpin the operating model design. Even though they redesigned roles, they never took the time to answer the following questions as part of the overall design process:

  • What do we need to be good at in order to execute the strategy through our current operating model?
  • How do we build the right capabilities to deliver business value?
  • What is our current baseline, and what needs to change in terms of our skills, experiences, technologies, and processes to deliver on our strategy?
  • How do we create the required capacity and boundaries for these shifts to occur?

Many organizations made this mistake when aiming to move towards the Ulrich HRBP model. Even though the model allowed for the opportunity to position HR in a strategic way, the required underpinning capabilities were not in place to enable strategic execution. Ulrich himself warned us as the HR community that real transformation needed to stretch beyond just a new organogram. In fact, it required a designated shift in accessing the right underpinning capabilities. 

Similarly, the other two organizations had a clear mission to implement self-service and a more data-driven way of working. However, without the technological capabilities nor the data literacy needed to achieve this, the HR organization missed its mark.

We expect this problem to only increase. According to McKinsey Research, 87% of organizations are facing a skills gap within the next five years. In addition, 54% of all employees will require significant upskilling, according to the World Economic Forum.

Leading Transformation: Why Most HR Operating Models Fail
In order to execute the people strategy, the HR function needs a best-fit operating model, a supporting HR work architecture, and a contemporary capability framework. Many organizations fail to assess the skills required to execute their strategy and make their operating model work, resulting in poor strategy execution and low business impact.

An HR capability model

In our experience, organizations can overcome these challenges by creating an HR capability model that describes the required technology, processes, skills, and resources required to execute. The use of this model is threefold.

  • It helps identify the future capabilities needed to deliver on the HR or people strategy
  • It gives a realistic view of the current state of the HR organization as well as the biggest areas of risk
  • It provides a tangible roadmap towards accessing the desired capabilities

The challenge is that many existing HR capability models are old. We had a recent engagement in Moscow, where one of the participants working for an international company shared that their organization’s skills structure was based on the old USSR model that was commonly used in the 1980s.

Not all our capability models may be that outdated. However, there are very few HR frameworks in use that address contemporary skills such as digital dexterity and data literacy within an HR context or describe the requirements for HR to operate in the human experience era. This is one of the reasons why we created the T-Shaped HR professional framework.

However, we noticed that simply having an overview of needed future skills is insufficient for organizations to execute on their HR operating model. That is why we set out to create a process that helps organizations create a capability framework that fits their organizational context. 

We call this process the HR navigator. The outcome is a clear overview of the capabilities required to realize the people strategy and make the HR operating model work. It also provides a roadmap on how to build these capabilities, and identifies the biggest areas of risk to address. HR navigator also shows you a way to implement this using your internal learning resources as well as a relevant selection from the AIHR course library.

We’ve worked with multiple organizations to implement the HR navigator and have seen great results. HR professionals are more fit for purpose, more strategic, and make the business succeed by being able to execute the HR strategy.

As we prepare for a post-Covid workplace and have to deal with distributed organizational models in a digital-first world, we see the importance of having a clearly defined HR capability model become non-negotiable for HR functions of all sizes. In a constant sea of change, can you afford to navigate without a clear roadmap?

If you’re interested and want to learn if you have the required capabilities to execute your HR strategy, visit the HR navigator here.

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