: Delivering HRM – systems and roles
On completing this chapter you should be able to define these key concepts. You should also understand:
· The framework for delivering HRM
· What the concept of HR architecture means
· What an HR system looks like
· The HR role of line managers
· The role and organization of the HR function
· The nature of an HR delivery model
· The role of HR professionals
The framework for delivering HRM is provided by the HR architecture of an organization, which consists of the HR system, HR practices and the HR delivery model adopted by the HR function. Within that framework the provision of advice and services relating to human resource management is the responsibility of the HR function and the HR professionals who are members of the function. Ultimately, however, the delivery of HRM is up to line managers who put HR policies into practice.
HR techniques such as organization development, selection testing, talent management, performance management and total reward play an important part in the delivery of HRM. But there is the danger that new and seemingly different techniques become ‘flavours of the month’ only to be quickly forgotten when they fail to deliver. Some time ago McLean (1981: 4) observed that:
The history of the management of human resources is littered with examples of widely acclaimed techniques enthusiastically introduced by managers who are keen to find solutions to their ‘people’ problems, only to be discarded and discredited by the same disillusioned and increasingly cynical managers some time later.
Times have not changed. The effective delivery of HRM depends on using techniques which are tried, tested and appropriate, not ones which have been promoted vigorously as ‘best practice’ without supporting evidence.
HR architecture consists of the HR systems, processes and structure, and employee behaviours. It is a comprehensive representation of all that is involved in HRM, not simply the structure of the HR function. As explained by Becker et al (2001: 12): ‘We use the term HR architecture to broadly describe the continuum from the HR professionals within the HR function, to the system of HR related policies and practices, through the competencies, motivation and associated behaviours of the firm’s employees.’ It was noted by Hird et al (2010: 25) that: ‘this architecture is seen as a unique combination of the HR function’s structure and delivery model, the HR practices and system, and the strategic employee behaviours that these create’.
Purcell (1999: 38) suggested that the focus should be on ‘appropriate HR architecture and the processes that contribute to organizational performance’. Becker and Huselid (2006: 899) stated that: ‘It is the fit between the HR architecture and the strategic capabilities and business processes that implement strategy that is the basis of HR’s contribution to competitive advantage.’
The HR system
The HR system contains the interrelated and jointly supportive HR activities and practices which together enable HRM goals to be achieved. Becker and Huselid (1998: 95) observed that: ‘The HRM system is first and foremost a vehicle to implement the firm’s strategy.’ Later (2006) they argued that it is the HR system that is the key HR asset. Boselie et al (2005: 73) pointed out that in its traditional form HRM can be viewed as ‘a collection of multiple discrete practices with no explicit or discernible link between them. The more strategically minded system approach views HRM as an integrated and coherent bundle of mutually reinforcing practices.’
As illustrated in Figure 3.1, an HRM system brings together HR philosophies that describe the overarching values and guiding principles adopted in managing people. Taking account of the internal and external environments in which the organization operates, the system incorporates:
The HR function delivery model
In a sense the HR function is in the delivery business – providing the advice and services that enable organizations and their line managers to get things done through people. The HR delivery model describes how those services are provided. These methods of delivery take place irrespective of the degree to which what is done corresponds with the conceptual HRM model described in Chapter 1.
The most celebrated delivery model was produced by Dave Ulrich. In his influential Harvard Business Review article (1998: 124) he wrote that: ‘HR should not be defined by what it does but by what it delivers – results that enrich the organization’s value to customers, investors, and employees.’ More specifically he suggested that HR can deliver in four ways: as a strategic partner, an administrative expert, an employee champion and a change agent. This first model was later modified by Ulrich and Brockbank (2005), who defined the four roles as employee advocate, human capital developer, functional expert and strategic partner. The role and organization of the HR function in delivering HRM is explored below.
The role and organization of the HR function
Members of the HR function provide insight, leadership, advice and services on matters affecting the management, employment, learning and development, reward and well-being of people, and the relationships between management and employees. Importantly, they contribute to the achievement of organizational effectiveness and success (the impact of HRM on performance is considered in Chapter 4).
The basic role of HR is to deliver HRM services. But it does much more than that. It plays a key part in the creation of an environment that enhances engagement by enabling people to make the best use of their capacities, to realize their potential to the benefit of both the organization and themselves, and to achieve satisfaction through their work.
Increasingly, the role of HR is seen to be business-oriented – contributing to the achievement of sustained competitive advantage. Becker and Huselid (1998: 97) argued that HR should be ‘a resource that solves real business problems’. But one of the issues explored by Francis and Keegan (2006) through their research is the tendency for a focus on business performance outcomes to obscure the importance of employee well-being in its own right. They quoted the view of Ulrich and Brockbank (2005: 201) that ‘caring, listening to, and responding to employees remains a centrepiece of HR work’. The HR function and its members have to be aware of the ethical dimensions of their work (the ethical dimension of HRM is explored in Chapter 8).
HR activities can be divided into two broad categories: 1) transformational (strategic) activities that are concerned with developing organizational effectiveness and the alignment and implementation of HR and business strategies; 2) transactional activities, which cover the main areas of HR service delivery – resourcing, learning and development, reward and employee relations. A CEO’s view on the HR agenda as quoted by Hesketh and Hird (2010: 105) was that it operates on three levels: ‘There’s the foundation level, which we used to call personnel, it’s just pay and rations, recruitment, all that sort of stuff that makes the world go round, transactional work. Level two to me is tools, it could be engagement, reward, development, those sort of things. Level three is the strategic engagement.’
The organization of the HR function
The ways in which HR operates vary immensely. As Sisson (1990) commented, HR management is not a single homogeneous occupation – it involves a variety of roles and activities that differ from one organization to another and from one level to another in the same organization. Tyson (1987) claimed that the HR function is often ‘balkanized’ – not only is there a variety of roles and activities but these tend to be relatively self-centred, with little passage between them. Hope-Hailey et al (1997: 17) believed that HR could be regarded as a ‘chameleon function’ in the sense that the diversity of practice established by their research suggests that ‘contextual variables dictate different roles for the function and different practices of people management’.
The organization and staffing of the HR function clearly depend on the size of the business, the extent to which operations are decentralized, the type of work carried out, the kind of people employed and the role assigned to the HR function. A survey by Incomes Data Services (IDS, 2010) found that the overall median number of HR staff in the responding organizations was 14: in small and medium-sized companies (with 1–499 staff) the median number was 3.5, and in companies with 500 or more employees it was 20. While, as would be expected, large organizations employed more staff than small and medium-sized enterprises (SMEs), they had on average fewer HR staff per employee. For SMEs the median ratio of employees to HR staff was 62:1; in large employers it was 95:1. The overall ratio was 80:1. The IRS 2012 survey of HR roles and responsibilities found that the median ratio of employees to HR practitioners was 80:1.
A traditional organization might consist of an HR director responsible directly to the chief executive, with functional heads dealing, respectively, with recruitment and employment matters, learning and development, and reward management. Crail (2006: 15) used the responses from 179 organizations to an IRS survey of the HR function to produce a model of an HR department. He suggested that this ‘might consist of a team of 12 people serving a workforce of around 1,200. The team would have a director, three managers, one supervisor, three HR officers and four assistants. It would include a number of professionally qualified practitioners, particularly at senior level’. However, there is no such thing as a typical HR function, although the ‘three-legged stool’ model as described below has attracted a lot of attention.
The three-legged stool model
The notion of delivering HRM through three major areas – centres of expertise, business partners and HR shared service centres – emerged from the HR delivery model produced by Ulrich (1997, 1998), although, as reported by Hird et al (2010: 26): ‘Ulrich himself has gone on record recently to state that the structures being implemented by HR based on his work are not actually his idea at all but an interpretation of his writing.’ They noted that the first reference to the three-legged stool was in an article by Johnson (1999: 44), two years after Ulrich published his delivery model. In this article Johnson quoted David Hilborn, an associate of William Mercer, management consultants, as follows:
The traditional design [of an HR department] typically includes a vice president of HR, then a manager of compensation and benefits, a manager of HRIS and payroll, a manager of employment and so on. However, the emerging model is more like a three-legged stool. One leg of the stool includes an administrative service centre which processes payroll, benefits and the like and focuses on efficiency in transaction functions. The second leg is a centre of excellence (or expertise) in which managers and specialists work. These employees concentrate on design rather than transactions and will have line managers as their customers. HR business partners make up the third leg. They are generalists who usually report to line managers and indirectly to HR. These employees don’t get involved in transactions, but instead act as consultants and planners, linking the business with appropriate HR programmes.
This exposition provided the blueprint for all subsequent versions of the model, which has evolved as follows:
· Centres of expertise – these specialize in the provision of high-level advice and services on key HR activities. The CIPD survey on the changing HR function (CIPD, 2007) found that they existed in 28 per cent of respondents’ organizations. The most common expertise areas were training and development (79 per cent), recruitment (67 per cent), reward (60 per cent) and employee relations (55 per cent).
· Strategic business partners – these work with line managers to help them reach their goals through effective strategy formulation and execution. They are often ‘embedded’ in business units or departments.
· HR shared service centres – these handle all the routine ‘transactional’ services across the business, which include such activities as recruitment, absence monitoring and advice on dealing with employee issues such as discipline and absenteeism.
Critical evaluation of the three-legged stool model
Although this model has attracted a great deal of attention, the 2007 CIPD survey found that only 18 per cent of respondents had implemented all three ‘legs’, although 47 per cent had implemented one or two elements, with business partners being the most common (29 per cent).
Moreover, there are difficulties with the notion. Gratton (2003: 18) pointed out that: ‘this fragmentation of the HR function is causing all sorts of unintended problems. Senior managers look at the fragments and are not clear how the function as a whole adds value’. And as Reilly (2007) commented, respondents to the CIPD survey mentioned other problems in introducing the new model. These included difficulties in defining roles and accountabilities, especially those of business partners, who risk being ‘hung, drawn and quartered by all sides’, according to one HR director. At the same time, the segmented nature of the structure gives rise to ‘boundary management’ difficulties, for example when it comes to separating out transactional tasks from the work of centres of expertise. The model can also hamper communication between those engaged in different HR activities. Other impediments were technological failure, inadequate resources in HR and skills gaps.
Hird et al (2010: 31) drew attention to the following issues:
· An ‘off the shelf’ introduction of a new HR structure without careful thought as to how the model fits the organization’s requirements.
· A lack of care in dealing with the boundary issues between elements of the HR structure which can easily be fragmented.
· A lack of attention to the new skill sets needed by business partners to ensure they can play at the strategic level.
· A lack of understanding on the part of managers as to the value of a new HR structure.
· A lack of skill on the part of line managers to make the required shift to greater responsibility for people issues implied by the new model.
· What is referred to as the ‘polo’ problem: a lack of provision of the execution of HR services as the business partner shifts to strategic work, and the centre of expertise to an advisory role.
However, some benefits were reported by respondents to the CIPD (2007) survey. Centres of expertise provide higher quality advice. Business partners exercise better business focus, line managers are more engaged, and the profile of HR is raised. Also, the introduction of shared services results in improved customer service and allows other parts of HR to spend more time on value-adding activities. It can also cut costs by reducing the number of HR staff required.
Dealing with the issues
The following approach incorporating recommendations by Holley (2009: 8–9) can be used to deal with HR structuring issues:
· ensure that top management are behind the changes;
· involve line managers and the whole of HR in planning and implementation;
· work out exactly who will do what in each area – HR and the line – avoid overlaps and ambiguities, taking particular care in defining the respective responsibilities of business partners and members of shared services centres and centres of expertise;
· ensure that the right balance is achieved between HR strategic (transformational) activities and HR service delivery (transactional) activities;
· ensure that the right people are in the right roles (don’t simply switch job titles);
· let everyone know about the changes – why they are taking place, how they will work and any differences in responsibilities;
· define the skills required by both HR staff and line managers and help in their development;
· plan the implementation, phasing it as required to avoid any disruption;
· monitor implementation to ensure that it is going according to plan.
Evaluating the HR function
It is necessary to evaluate the contribution of the HR function to establish how effective it is at both the strategic level and in terms of service delivery and support. The prime criteria for evaluating the work of the function are its ability to operate strategically and its capacity to deliver the levels of services required.
Research conducted by the Institute for Employment Studies (Hirsh, 2008) discovered that the factors that correlated most strongly with line managers’ and employees’ satisfaction with HR were:
· being well supported in times of change;
· HR giving good advice to employees;
· being well supported when dealing with difficult people or situations;
· HR getting the basics right.
But the results showed that HR could do better in each of these areas. The conclusions reached were that HR must find out what its customers need and what their experiences of HR services are. HR has to be responsive – clear about what it is there for and what services it offers, and easy to contact.
The IRS 2012 survey of HR roles and responsibilities established that the main measures used by respondents to assess HR effectiveness were:
· absence management data – 79 per cent;
· staff turnover data – 75 per cent;
· exit interview feedback – 66 per cent;
· discipline and grievance data – 60 per cent;
· results of employee surveys – 60 per cent;
· anecdotal/informal feedback – 59 per cent;
· number of tribunal cases – 50 per cent;
· benchmarking – 47 per cent;
· spending against budget – 46 per cent;
· time-to-fill vacancies data – 34 per cent;
· cost per hire – 30 per cent.
CASE STUDIES ON THE ORGANIZATION OF THE HR FUNCTION
HR organization at the National Australia Bank Group
HR at the National Australia Bank Group has a number of centres of expertise, business partners, solutions consultants, project managers, a shared services centre, and telephone advisory service for employees (the people advisory helpline).
Centres of expertise
Centres of expertise cover areas such as reward, employment policy, talent management, culture management, diversity and performance. The staff in the centres are specialists in their respective fields, while the other parts of HR can be found in the HR service centre, with the exception of recruitment, which is conducted by line managers.
Business partners attend business unit leadership team meetings and set the company’s people strategies and deliver the HR requirements emerging from various projects. They tend to work in the areas of talent, performance, leadership, diversity and culture and their job is to facilitate the implementation of corporate people initiatives with the relevant specialist HR partners. Unlike shared services staff, they only get involved in HR’s daily operational matters if projects escalate and extra help is required.
Solutions consultants deal with operational queries referred to them from the people advisory helpline – mainly issues of case management and other more complex enquiries. They are a key point of contact for people leaders on matters of policy and procedure, although they do participate in some transaction work as well.
Project staff work on projects that emerge from strategic discussions.
The HR shared services model at PricewaterhouseCoopers (PwC)
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