By Ann Leckie w/ the assistance of Tanya McCarthy, Nancy Silcock & Tyler Hodges

One of the greatest challenges facing HR is finding a way to apply the proverbial ‘best practices’ within the context of their various businesses and organizations.  One of the greatest opportunities would appear to be the ability to develop an HR function from a relatively blank slate – building or rebuilding a business from the ground up, with HR taking a leading role.

As it turns out, these are exactly the challenges and opportunities that answer the question, “What Keeps Heads of HR Up at Night?”  When confronted with just such an opportunity, Ann Leckie of Teldon Media, turned to the expertise of the wider pool of peer professionals and the resources of BC HRMA’s knowledge and research function.

Undertaking a survey of 14 companies with Canadian head offices, the goal was to better understand the current best practices in HR organizational structures, specifically within British Columbia, and gauge the merits and malleabilities of best practices.  Connecting with companies ranging in size from 100 to 10,000 employees, they also sought to determine if the HR structures within organizations were promoting the emerging areas of HR expertise: social networking for branding and recruitment, knowledge management, project management of HR programs and data analysis.

The findings, compiled from industries including service, manufacturing, public and non-profit sectors, were compiled into a white paper “What Keeps Heads of HR Up At Night” that can be found here.
.
What the research team, led by Leckie, discovered makes for interesting reading. They found that most HR groups are not satisfied with their form and are in the process of changing and potentially changing again in a quest to get the right things done, in the right way, by the right people.

HR’s Challenge Not a Small One

So what does keep heads of HR up at night?  When probing this question, a sense of the enormity of what is being asked of HR emerges:

• We are worried about turnover (recruitment).
• We are concerned with defining, keeping, and attracting our next leadership team (recruitment, retention).
• We have too many people who are the only people in their areas who know how a specific process works. They are holders of our institution knowledge and we can’t afford to lose them (succession planning).
• We need to recruit to bring in new talent but we are not entirely certain of exactly what roles and work we have for them (organizational design).
• Our workplace is changing and not everyone is keeping up (training and workforce planning).

Organizational Structure: The Crux and the Key

The survey focused heavily on organizational structure because it is a significant leading indicator of the health of the HR department. Organizational structures reflect businesses’ desire to facilitate the “way things get done around here”. Thus, although there are commonalities in organizational structures across companies, the differences highlight the unique nature of each company.

HR is strategically involved in business and is demonstrating leadership in a growing number of functional areas. HR must have the right structures in place to support business activities and to enable emerging areas of expertise. Effective structures allow innovation and increase of both business activities and professional growth.

Two major challenges were reported. The first is that the design of the HR department was aligned with programs and projects, which encourages the HR business clients to frame their operational problems with a solution in mind. This limits critical thinking and strategic interventions by HR.

What the survey revealed is that the organizational functional chart of HR reinforces the client’s understanding of their problem and potential solutions. When clients come to HR with both a defined problem and a clear sense of what type of program or solution they are looking for, they limit themselves and the organization from finding truly strategic answers.

What is clear in talking to HR departments who are dissatisfied with their organizational structure is that although they have changed the structure in the past and are considering changing the structure in the future, their changes are not working. Their clients are still predetermining their problems and solutions, and HR knowledge and skills are not being utilized strategically. The typical HR organizational structures are not breaking this pattern, or worse are reinforcing clients’ limited definitions of their problems.

A 2008 Corporate Leadership Council Report states that “approximately 71 per cent of organizations have restructured HR within the last three years and 60 per cent of the survey respondents indicate that their organization plans to restructure within the next year.”

When organizations make multiple changes to their organizational structure they are indicating that they feel a need to change the “way things get done around here”. The number of previous and projected organizational changes in the companies surveyed signify that many HR departments are not satisfied with the way things are getting done.

Knowledge Transfer: Keeping the Company DNA

The second problem is that the structures are proving inefficient at managing issues around the loss of knowledge. Many companies are experiencing their knowledge DNA being eroded by turnover and retirements. Only one company that participated in our survey was not deeply worried about turnover, succession planning and knowledge transfer. This company has historically had low turnover and clear internal development steps for employees. However, their concerns rested around building the leadership capacity of their next generation of leaders.

In IBM’s CSeries 7 – CHRO paper, in which hundreds of CHROs (chief human resources officers) were interviewed, the authors found that one of the greatest concerns for the CHROs was: “Effective collaboration and knowledge sharing and application of collective organizational knowledge and experience are essential to building an agile and responsive workforce. Yet many organizations lack the structure and resources to facilitate institutional knowledge sharing and collaboration.”

The concerns indicate a paradigm shift in HR. They represent the operation asking itself: Where does our institutional knowledge of who we are, how we approach problems, and how we resolve issues lie? The very DNA of companies is increasingly being called into question with new pressures created by the movement of employees within and outside of the company.

Several companies talked about how their best salespeople have personal relationships with their clients that cannot be replaced by new customer relationship management (CRM) solutions. These employees have worked for the company for many years, have built long-term trusted relationship with their clients, and have solutions to problems that have not yet been foreseen. When these salespeople leave the organization, the risk to the company is great, immediate and quantifiable.

Other companies discussed the same issues but focused on key employees who worked on a piece of equipment, a process, or a system and who hold key knowledge. The cost of this employee leaving might not be felt immediately but eventually the impact would be clear.

All of these scenarios demonstrate concerns that there are not enough safeguards in place so that when a key employee leaves, the company’s productivity and effectiveness will not be harmed. In effect, the question is: How do we capture the company’s core knowledge – its DNA – that is currently being held by individual employees or silo’d work processes? This concern is not unique to BC and the companies we surveyed.

Working Towards Better Solutions

The organizational structure improvements that HR have implemented to date represent best practices. These developments include Transactional Back Office, Centers of Excellence, and Front Office.

The solutions have worked to a point. However, the Transactional Back Office improvements have been challenged by the cost of implementation, and employees’ willingness to circumvent the new systems. Similarly, Centers of Excellence have been challenged by a lack of sufficient resources to enable the managers to attain their strategic goals and Front Office has been challenged by an inability to completely facilitate their clients’ needs.

The survey results indicate that HR professionals do not believe that their current HR organizational structures are meeting operational needs. 79 per cent of companies interviewed in this survey have reorganized their department in the last 36 months, and approximately half of the organizations interviewed have plans to, or are considering reorganizing their departments in the next 12 months.

Despite being structured, or working towards being structured according to best practices, HR leaders do not feel that their structures are meeting operational requirements.

HR professionals also indicated that they are being required to take on more programs and projects while their budgets are remaining relatively stable. Although some HR budgets are increasing, the increases are minimal and mostly reflective of wage increases. Some HR departments are being cut back but generally few are seeing significant cuts.

Based on these findings, one should question if best practice literature and current organizational design of HR departments are meeting the needs of the fast changing operational worlds in which we work. The level of dissatisfaction with HR organizational structures indicates a discrepancy between the form of HR, the functions they are being asked to own, and what HR departments wish to do.

That is not to say that the organizational design is not doing what it is supposed to do. We note in almost every interview conducted that the heads of HR are satisfied that they are directionally moving towards a more effective and efficient system for managing the cornerstone transactional work of HR. They are satisfied that they have implemented significant process improvements and believe process improvements will continue to occur at a rapid pace.

Proposed solutions include changing the structures of HR to be more representative of the collaboration required to fix today’s complex business challenges, and HR practitioners increasing their project management skills.

Together, the changes made to date and considered for the future are hopefully signs of an active HR visionary population trying to best serve their client groups.

(PeopleTalk Fall 2011)