Will HR transformation be the thread that ties value to experiences?

Reframing the HR function

Most HR functions today are often isolated and vertical. While founded on solid principles, dating back to the Ulrich Model of the 1990s, these ideas have become rigid and sacrosanct, rather than remaining flexible and open.

"The speed of change in the world shows we need to empower people to be a lot more flexible, adaptive and project-oriented,” says Andy Lomas, Partner, EY People Advisory Services EMEIA. “But job architectures and hierarchies, typically codified by HR, are getting in the way and employees struggle to combine into new teams from old ones or collaborate temporarily.

“You might need to take someone from finance, procurement or supply chain, add a couple from HR and estates and legal and have a team running for a few weeks. Sounds easy, but enterprise structures often make it very difficult. HR needs to find new ways to help businesses adapt and simplify their structure to cope with change, and to do that HR must work horizontally.”

Adjusting KPIs

Consider “time to fill”, a key metric in talent acquisition, it refers to how quickly HR can get a person into a particular role. The reimagined HR function may follow a more powerful indicator: time to full proficiency of that hire in the role they were hired for. It is a short step from here to anticipate the value to the business if a new salesperson exceeds their sales targets in month six, rather than month 13.

The primary aim of the new people function is to contribute value in terms the business recognizes and respects. As it pursues this new value, the HR function has to find new ways to be accountable and measure its own success.There are four strands to value that are recognized in the typical organization today:

• Financial value (revenue growth, market share, margins)
• Consumer value (which includes idea generation, R&D, patents)
• Societal value (sustainable development goals, resource efficiency)
• Human value (human capital deployment, culture, employee health)

The new HR function anchors its remit to the fourth value that affects all the others, mirroring the function’s own horizontal reach and creating a quadruple bottom line: human value. Everything in the business is wired to that human value, which serves as a pre-requisite to boosting performance in the other three.

Human value is the cornerstone of creating long-term value overall. A focus on human value will build a better working world with an operating model that can evolve with the needs of the business and continually enable its people. It’s not only about what individuals bring to the business, but what the business delivers the other way.

“The traditional way of measuring the HR function was to look at how much the function cost, and to measure single data points around a specific process,” says Billy Soto Garayzar, People Advisory Services Principal, EY Americas. “Instead we have to start with what the business and workforce believes is important and work backwards. That's where the human value starts coming into play: HR surrenders its control at the center and instead aligns with other parts of the business. That’s when you start seeing the power of the human value, when you start gathering holistic insights through that lens.”

New metrics

Human value represents a new focus in terms of metrics. This can be intimidating as it involves re-evaluating the whole measuring system that HR teams have built and relied on during the past 20 years. 

Historically, HR functions may have measured workforce engagement every year or two. In the new model businesses will conduct regular employee listening monthly, at scale. As well as annual surveys, they will conduct lifecycle listening, in which questionnaires are triggered by employees’ actions at every stage of their journey – from onboarding to upskilling, promotion, termination and leaving the company.

The results can often be surprising.

“We like to ask our clients what year it feels like if you’re a customer of their organization,” says Fox. “Most clients will say: ‘Well, you can book online and answer queries by chatbot, so it feels like 2020.’ Then ask them: if you're an employee there, what year is it?’ They say, ‘don't even ask. 1998?’

Such experience data delivers deep insight into how the workforce is faring and what they’re feeling. This generates extra work in analyzing the data to draw practical recommendations, which means creating extra analytics to process the information. This is one example of a high-value task people will be free to do when more operational roles are automated.

By creating these indices, the HR function will be able to look for and identify trends that suggest strengths and weaknesses in its processes.

One client wanted to know why people found onboarding such a bad experience. Was it just because the laptops were late? When they dug into the data they realized it wasn’t: it was because the recruitment teams were exceptional and gave such a hands-on, leading-edge recruitment experience, that when it stopped the new starters felt forgotten. The company can now act on that information, so when people come on board now it's not a shock. And why's that important? It can take up to three months for someone to get up full productivity and if they start from a bad experience, it can have quite a big financial impact.

Marrying ‘X’ with ‘O’

Experience data (X data) doesn’t reach its full value alone. Its true power becomes clear when it’s married up with operational data (O data). O data can include just about any data point that is valuable to the organization internally (customer data, financial data, marketing data, supply chain data, HR data, etc.) and externally (market share, share price, brand awareness, net promoter scores, etc.). The value comes in the correlations found when analyzing the relationships between X data and O data.

Take a metric such as return on investment in talent (ROIT). This measures all the money a company puts into paying and motivating its employees, together with spend on running employee programs, against the actual dollar return those investments bring. Companies that publish their human capital deployment (HCD) metrics generate 2.5 greater ROIT on average.

“The good news is there's plenty of areas that reveal a correlation between operational performance and experience,” says Robert Zampetti, EY People Experience Leader, EMEIA. “Especially when you drill down into each business function. By taking, say, a metric of sales account performance and correlating it back to the experience and people side, you quickly reach an ‘aha!' moment. There's all kinds of things you can do with this data – but nothing at all will be done until you recognize it.”

This combination of X and O data is quantifiable and impactful. By managing and measuring experience and how it's correlating to KPIs of interest to the business, the HR function will be able to clearly demonstrate the value it’s adding – as well as setting benchmarks and targets against which HR leadership can constantly review and refine performance.

“Suddenly the same P&L owner who's wondering why they’re paying for HR starts realizing it actually has value,” says Zampetti. “HR has given that P&L owner an idea they can address, and how HR can help them do so. And they can measure it to see if it all made a difference."

This is a bold and challenging new model which seeks to fundamentally challenge the traditional ways HR has organized itself. In the past, HR often sub-contracted its thinking and requirements to IT. Today the function must now play a bigger part in the design of the digital platforms that provide services to, and gather this data from, employees. And it needs to follow the design thinking aspects of “Me, We, Here’’ in order to facilitate that.

With the rise of machine learning algorithms can do much of the work in demonstrating success at delivering this value. But these new tools won’t run themselves. They will need to be set up and guided by experienced data scientists, which points to one invaluable area of investment that the new HR function has to make.

Change can be daunting at the best of times. But when the wider operating environment feels defined by uncertainty, that challenge can quickly become overwhelming. Organizations are often keen to skip choosing between operating models, and instead go straight to investing in technology to solve their problems. This may offer immediate pain-relief, but won’t be effective, especially if the problem isn’t properly considered before implementing the software.

What’s needed instead is time to understand what inspires and drives the workforce, and what matters to the business in terms of value creation. In as few as six weeks an organization can identify what service delivery model it needs for the future. It can provide an enablement roadmap of how the function is going to achieve that, how tech investment will fit into the plan and what value it’s going to create for the wider organization.

By including stakeholders from across the business in the design process, the HR function will achieve far broader adoption of the new ideas, because people were involved and engaged from the beginning.

After the initial sprint comes the next phase of the project: identifying and prioritizing further opportunities for sprints to design, build and roll out innovative, engaging services and products across the business. This is about fast-build cycles of a few weeks each, getting things to an 80% solution before testing, gauging reactions, tweaking and finally scaling it for full deployment.

This will enable the organization transform for weeks at a time, not months, delivering value all the way through the implementation, rather than waiting for two years and measuring success retrospectively.