What makes top-performing HR departments stand out from the rest? The Hackett Group’s HR practice leader for Europe, Dorothée El-Khoury, reveals the results of its research.
Evidence shows that organisations with world-class HR functions outperform their competitors.
The latest research from The Hackett Group reveals that these organisations outperform the rest significantly, spend 23% less per employee than typical companies and employ 32% fewer staff overall.
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The research classes “world-class HR organisations” as those that achieve top-quartile performance in both efficiency and effectiveness across an array of weighted HR metrics.
For a business earning $10 billion (around £8 billion) in revenue a year, achieving world-class status represents as much as $14 million (around £11 million) in potential savings annually.
Efficiency and effectiveness are the key measurements, and world-class HR functions achieve top-quartile performances in both.
So how do these organisations do it? The research identifies five critical factors that give these top-performing HR organisations a clear competitive advantage.
1. They embrace digital transformation
Technological advancements have transformed the workplace into a collaborative, more open, mobile and less hierarchical environment.
The digital age calls for new business models and new skills – and world-class HR organisations are leading the charge.
These organisations are using cloud-based software to build greater collaboration among their employees and analytics platforms to gain deeper business insights.
The rise of mobile devices allows for easy access to company information on the go and laborious administrative tasks have been dramatically reduced through the use of automated tools.
The best organisations realise that in order to foster innovation and boost company productivity, they have to fully embrace digital transformation. As such, they invest 18% more in technology than the average HR organisation and their automated processes are at least twice as good.
2. They make better decisions
Knowledge is power, and the best HR departments are good at gathering information and using it to plan their recruitment strategies.
Their investment in technology has not only enhanced their processes, but also improved their ability to make faster, better decisions.
They have access to advanced information systems that can track important market trends and conditions, providing valuable business intelligence. The best organisations use this data to regularly measure their performance, analyse their talent and develop their growth plans.
It is simpler than it sounds. Ultimately, world-class organisations know how to harness data and put it to good use. Decisions that once required close scrutiny can now be made quickly and securely, with all the necessary information close at hand.
Employee management is far more transparent and overall leadership is vastly improved. This translates into higher levels of performance and productivity.
3. They allocate resources better
Budgets are flat so it is up to HR organisations to fund their own digital transformations. This is an important financial allocation that can be boosted by reducing inefficiencies.
Typical companies tend to focus on transactional tasks rather than strategy. World-class organisations know that real value lies in paying attention to their own performance and so they dedicate specific resources to ensure continuous improvement.
Implementing a formal service delivery model is a key step to becoming world class. This standard three-tier model includes global business services, centres of excellence, and HR business partners.
Successful deployment results in greater efficiency and reduced costs, yet less than 20% of organisations have implemented it. There is clearly room for improvement.
4. They deliver a better service
Satisfied customers are essential to success. HR may not be a customer-facing department in the traditional sense, but the happiness of internal end-users is just as important. In fact, their wellbeing must be central to every activity and function that HR provides.
World-class organisations are skilled at designing and delivering HR services that focus on the employee. They show higher adoption rates of both managerial and employee-level self-service functions, leading to improvements in productivity and engagement.
5. They create business partnerships
The Hackett Group’s research shows that world-class organisations have a different mix of staff.
A typical organisation tends to be top-heavy with more managers and fewer people to deliver the business-critical work. Comparatively, a world-class HR organisation will have 20% more employees focused on enabling business change, and thus these employees make a greater effort to work together across all company levels.
In 80% of these organisations, staff are seen by their stakeholders as business partners, driving organisational performance.
A crucial factor for typical organisations to realise is that the best understand that HR is not a standalone function, but rather it interconnects with the greater business. It plays a critical role in achieving a successful digital transformation.
World-class HR is able to deliver the standard day-to-day functions of employee management and recruitment with excellence – but that’s not enough. It also needs to show itself as a department that can measurably contribute to the company’s wider goals, proving its strategic mettle to such a degree that it earns a seat at the boardroom table.