Theoretical framework: Model for HR transformation

The biggest challenge faced by HR today is helping organizations to succeed. Sumit-Kumar (2014) states that the aim of HR transformation is to turn HR management into a force that can help organizations reach their business objectives and instil them in employees. Deloitte (2010), however, notes that too often HR organizations transform themselves in a strategic vacuum, responding to the day-to-day operations requirements of the business without a clear view of the big picture. HR professionals tend to focus internally on their own functions and roles rather than externally on what their outcomes should be (Ulrich, 2010; Deloitte, 2010).

Ulrich (2010) warns that transformation efforts that focus exclusively on improving HR are bound to fail. For HR to be effective and successful, it must reconfigure to drive value through a system of performance that is specific to the organization. Weiss (2000) states that transforming HR entails changing the priorities of the department, including its accountabilities, roles and design. He adds that the process emphasizes strategic value, competitive mind-set and process outcomes.

Ulrich et al. (2009) propose a four-phase model of HR Transformation to ensure that HR drives business success. The model addresses four critical questions about HR transformation: • _{Why transform HR?}

25 • What are the outcomes of transformation? • _{How do we transform HR?}

• Who should be part of the HR transformation?

Figure 2-3 Model of HR transformation. Adapted from Ulrich, Allen, Brockbank,

Younger & Nyman, M. (2009).

Phase 1: Building a Business case: Business context

Without an explicit mandate to transform, HR professionals are likely competing for the attention of leadership to gain necessary resources and funding to support transformation in HR rather than in other areas. (IMPA- HR) BUSINESS CONTEXT (WHY) HR ACCOUNT- ABILITY (WHO) OUTCOMES (WHAT) HR REDESIGN (HOW)

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Phase one of HR transformation entails building a business case for transformation. For HR leaders to build a solid case they must first know or understand the business context. Building a business case addresses the “why” of the transformation. Ulrich and Brockbank (2005) argue that the setting in which business is carried out offers the rationale for HR transformation, hence it has to be based on a strong understanding of the context within which the business operates. Similarly, Ulrich et al. (2009) adds that a well-planned HR transformation must first respond to general business conditions and specifically service the main stakeholders. The authors state that the business environment keeps changing in response to changing business conditions. These business conditions are either cyclical, such as growth and retraction cycles, or structural, such as changes in technology, globalization and demographics. Therefore, it is important that HR specialist who plan to contribute to strategy design and sustain transformation understand and become aware of these variations as they affect HR investments and management strategy.

Building a business case for HR transformation not only involves an understanding of general business conditions but also requires HR professionals to understand stakeholder expectations. Stakeholders, according to Ulrich et al. (2009), may include customers, regulators, investors, employees and suppliers. HR professionals must identify what their expectations are and ensure that these form the business case for the transformation. The general business conditions and the requirements of specific stakeholders shape an organization’s strategy and define the reasons for transforming HR. Knowing and understanding who stakeholders are and advocating how best to deal with them ensures that HR transformation is aligned with issues that matter to the success of the organization. Creating a clear line of sight between HR transformation and stakeholders enables HR transformation to build a viable business case for transformation (Ulrich et al., 2009).

Phase 2: Define outcomes

The second phase of a transformation program involves defining the expected outcomes of the transformation. To reiterate, HR transformation is not a single event and it’s not about what is done within HR, but rather it’s about the value that actions will create for key stakeholders. HR transformation must focus on changing the thinking about the role of HR in delivering value to stakeholders. It must change both behaviour and outputs, and such changes must improve the life of stakeholders (Ulrich & Brockbank, 2005).

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When organizational leaders understand and acknowledge the significance of HR transformation in responding to changing business challenges, they inevitably become eager to understand how to measure the impact of the transformation. HR transformation has two types of outcomes: Stakeholder expectations and capabilities created by the organization. In addressing stakeholder outcomes, HR professionals ought to identify key/critical stakeholders thereafter deliberate and define what outcomes will appeal to them the most (Ulrich & Allen, 2009). Outcomes should be operationally defined, tracked and measured over time to quantify the progress of HR transformation. HR professionals must design systematic processes for collecting, distributing and monitoring data of stakeholder results. Stakeholder mapping provides the basis for measuring results.

In addressing capabilities as outcomes, HR transformation efforts should focus on improving the fundamental identity, culture or image of the organization. This form of transformation outcome defines and builds capabilities which frame people’s views of the organization. Capabilities signify what organizations are known for, what they do best, the manner in which they organize activities to deliver value, how they define intangibles which stakeholders focus on, the brand that customers relate to and the culture that shapes employee behaviour. Ulrich & Allen (2009) argue that capabilities are significant in creating identity for organizations. These according to them become the identity of the organization and are key to implementing business strategy and enhancing the deliverables of HR practices. The authors propose that HR professionals need to undertake a capability audit and identify those capabilities which are critical to the future success of the organization given the business conditions and business strategy (Ulrich et al., 2009). Smallwood and Ulrich (2004) state that a capability audit enables an organization to monitor its intangible assets, highlights which ones are important given the history and strategy of the organization, measures how well the organization is delivering on these capabilities, and leads to a plan for improvement.

Phase 3: Redesign HR

The third phase of transformation addresses the “how” of the HR transformation. Any business has both strategy and structure, and HR transformation can therefore focus on redesigning both aspects of business to ensure that the HR department responds to the requirements of the business context and delivers value for the firm. The redesign phase has 3 components:

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According to Ulrich et al. (2009), transformation of the HR department requires redesigning the HR organization to resemble the business organization and strategy. The authors identify three overriding principles which guide redesigning of the HR department: (a) The HR organization adds value when its logic and structure reflects the logic and structure of the organization it serves. This implies that the HR strategy and structure should be a subset of the overall business strategy, and structure should not be something off to one side driven by a different HR agenda. Businesses are often organized along two dimensions/structures: centralised (to drive efficiency and control) and decentralised (to drive effectiveness and flexibility). The choice of structure is dependent on various factors such as size of the firm and geographic locations. The rule of thumb however is that the HR strategy and structure should mirror that of the company. As Amy Kates (2006) states, the design of HR department must parallel the many dimensions of business.

(b) Continuous knowledge production. Knowledge production represents the collective information and insight of the field or profession. HR specialises in a body of knowledge about how people and organizations operate. Knowledge insights become productive when HR customers use that knowledge to improve their efficiency and effectiveness. The HR department operations, processes and organization should ensure valuable HR service delivery and enable stakeholders to reach their goals smoothly. Because high-tech organizations operate in dynamic environments, which require constant innovation, knowledge production is essential for organizational survival and growth (Collins, Smith, & Stevens, 2001).

(c) The last principle involves differentiating and managing both strategic and transactional work. Clarifying what work is strategic and transactional is important in HR transformation. The business context and key capabilities provide the context for HR to understand HR work that should be strategic by identifying which work has the most business impact. Defining both strategic and transactional work ensures that both are done well and increases HR credibility and confidence in undertaking strategic functions (Ulrich et al., 2009).

• _{Transforming HR Practices}

Transforming the work of HR involves revamping HR practices and systems to be more effective, aligned, integrated and creative. HR practices can be transformed based on two dimensions: content and processes.

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Content involves the actual work of HR and can be synthesized into four domains:

(a) Flow of people: This domain is concerned with what happens to the company’s most valuable assets – its employees. This involves how people enter and move through the organization and how they exit the organization. Flow of people within organizations also involves having talent pipelines, which requires an evaluation of internal and external talent pools to determine gaps between the talent the organization has and the needed talent, determining appropriate strategies for developing and acquiring the talent needed, and executing, monitoring and refining pipeline strategies (Oracle, 2012). It is critical that organizations pay attention to the flow of people to ensure availability and development of talent that the organization needs to accomplish its strategic intent.

(b) Flow of performance management: The goal of performance management is to promote and improve the effectiveness of employees. It is a process in which supervisors/managers and employees collaborate in planning, monitoring and reviewing employees work, based on work expectations and goals of the organization. Performance management also provides the opportunity for identifying learning and development gaps to ensure employee effectiveness and accomplishment of business goals. Work standards, measures and rewards link people to work and promote accountability for performance.

(c) Flow of information: Businesses today operate in a knowledge world driven by information and characterized by frequent coordination and collaboration between different stakeholders. Information flow has become an essential part of workflow. The type and amount of information employees need to get their work done and how they get it done are very important in ensuring that HR delivers and creates value for the organization. Mindfulness of information flow also ensures that employees know and understand what is happening within the organization.

(d) Flow of work: Addressing workflow entails defining and clarifying who does what work, where and how it gets done. Coordination and support of workflow throughout the organization and operating processes combine individual efforts into organizational outputs. Proper workflow management therefore ensures governance, accountability and exceptional results.

Processes on the other hand focus on how HR work can be reengineered. Ulrich et al.,

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(a) Alignment: For HR to deliver value, their practices have to be aligned to the organization’s strategy to have high impact. As noted in previous sections, the HR organization adds value when its logic and structure reflect those of the organization it serves.

(b) Integration: HR systems achieve high impact when they work together in a synergised strategic focus to achieve business goals. Integration implies that performance management, talent management remuneration and other HR practices present a consistent point of view and emphasize how the organization manages its human capital.

(c) Innovate: To be innovative, HR has to stay ahead of changes in the environment. Keeping abreast of trends enables HR to understand what risk competitors are doing. • Upgrade HR professional’s competencies

The changing demands of the business environment have undoubtedly raised the bar on HR. For transformation to be a success, HR professionals need to develop a new set of competencies which will support the capabilities organizations need to accomplish its strategic intent. This also requires them to develop a mind-set of a strategic partner to enable them to counter the demands of the changing business environment. Anh Van (2011) states that in the face of volatile business environments and an increasing need to consider human capital as a source of competitive advantage, organizations are reconsidering their human capital strategies and the contribution and capacities of their human resource functions. Ulrich et al. (2011) also maintain that HR professionals can respond better to business challenges and create sustainable value by upgrading their competencies. The authors list the following steps to upgrade HR competencies:

(i) Articulate a theory or set a standard: Setting standards addresses the question of “what is required for HR professionals to be successful?” The effectiveness of HR has been frequently defined by the roles and activities of HR. Having standards for future evaluation is critical for comparing actual performance of employees. The appropriate criteria enables assessing employees’ performance as successful or unsuccessful in their respective roles, as well as their contribution to the accomplishment of objectives of the organization. Standards should be clear, understandable and measurable (Huselid 1995, Pulakos 2004, in Frixou & Charalambous, (2016).

Human Resource Competency Studies have however combined the work on HR roles and activities into a framework of HR competencies. Ulrich, Brockbank, Johnson, Sandholtz

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and Younger (2008) presented a framework, Figure 2. 4 of HR competencies which suggests that to be successful, HR professionals should manage both People (be attuned to the human dimension of the company) and Business (mastering the requirements of the business). Managing these dimensions entails mastering six competencies that lead to HR effectiveness. These are: 1.Being a credible activist, 2. Managing Culture and Change, 3.Being a talent manager and organizational Designer, 4.Being a strategy architect, 5. providing operational excellence & 6. Being a business ally. The first tier, being credible activist relates to managing relationships, entails information sharing and delivering expected results. The second tier, entails being a business Ally and operational executor. In this regard, HR is expected to implement work policies and technology and also interpret the social context, articulate the value proposition and leverage technology. The last tier relates to organizational capabilities and entails being a talent manager/organization designer, culture and change steward and strategy architect. Here, HR is expected to manage talent flow, develop talent and design reward systems. HR should also facilitate change, craft and enact culture, and sustain strategic agility.

Figure 2-4 Framework of HR competencies. Adapted from Ulrich, Brockbank,

Johnson, Sandholtz and Younger. (2008).

(ii) Assessment: The purpose of assessment is to determine whether HR professionals meet the set standards. During the planning stages of the transformation, a system for determining how well HR professionals do or do not meet the required standards need to be established. Unless performance is measured, HR professionals will not know whether

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or not they are getting better. Assessing performance against standards can be done formally and informally. Informally, HR professionals continuously request feedback and ask for suggestions on how they can improve in particular areas. Formal ways involve organizational performance management reviews. A popular and effective way is the 360 degree review. HR professionals receive feedback from a range of stakeholders: managers, customers, subordinates and peers. These data enable them to learn how they are seen and perceived by others and what their strengths and weaknesses are. It is very important for HR professionals to identify patterns in feedback data and act on suggested improvements. This in turn encourages feedback givers to divulge information openly (Ulrich et al. 2009). (iii) Investment: Investing in HR personnel entails allocating resources and time to developing their skills. The quality of HR professionals determines how well or poorly employees work towards accomplishing organizational goals. Human resource investment equals production, growth and retention of staff. Investing in human capital, according to Pasban and Nojedeh (2016), is critical for nurturing the skills and knowledge of employees, stimulating innovation, adding value and increasing customer satisfaction.

(iv) Measurement and follow-up: The final step involves measuring and following up on the quality of HR professionals. The old management adage of “you can’t manage what you don’t measure” still holds true. Measurement, however, should not only be about developing HR professionals; it also requires that HR developments be part of HR performance management. This is achieved by clearly defining and communicating the goals and processes of HR transformation and ensuring that HR works optimally to deliver value.

Phase 4: Engage line managers & others

The last phase in the HR transformation model focuses on accountabilities. Several groups of stakeholders play a significant role in this stage and must be involved: HR, line management, customers, investors and consultants. Involving stakeholders ensures that their perspectives are considered in the transformation plan, confirms their commitment and support towards the controversial and difficult elements of the plan, and lessens resistance to the required changes and innovative problem-solving during the course of implementation.

• Human resources: The responsibility for the design and implementation of the transformation process lies with the HR department. HR executives should ensure that adequate funds, talent and time are allocated for the transformation. They are tasked with

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initiating, taking lead in the design and monitoring of the transformation plan, and also ensuring that the plan is executed accordingly. The HR team is responsible for championing the transformation. With knowledge gained from experience in working with organizational business units and service centres, HR staff possess excellent understanding of how the business operates and makes money. They facilitate discussion on how to organize the HR department so that their service delivery units collaborate to deliver value and HR practices align with strategy, integrate with each other and address matters the organization genuinely needs to deal with. Success of HR transformation depends on the calibre of HR personnel and on their relationship with line management.

• Line Management: Line management has to ensure that the organization has the right people and the right organization in place to deliver to all stakeholders on the expected outcome of the transformation. It is essential for line management to work in collaboration with HR in implementing transformation and ensuring that it is aligned to business objectives. Line managers also have the responsibility to remain transparent and provide a clear business focus for the reengineering plan to ensure that the change agent’s gains access to internal and external information. In addition, they must to see to it that the right people are involved in the process and must demand clear and measurable results. HR