Evolution of the HR Function

A few years ago, during a client interaction, I was surprised by a question on security practices in our company. Apparently, the client measured the maturity of their vendors based on the security practices prevalent in the vendor’s premises. After all, they wanted to entrust their data with us! This scenario vividly illustrates the importance of HR evolution in ensuring not just operational efficiency, but also trust and security in today’s business landscape.

Nearly five years later, we were asked a similar question where another client evaluated our HR practices at a significant level of detail to gauge our competence.

In subsequent discussions, I have found that the question on HR maturity is being asked frequently by potential customers, investors and even prospective employees. The answers indicate maturity, stability, long term sustainability, and delivery capabilities of the organization and hence are very important.

So, what is the HR function’s growth?

This post explores my discovery on this topic and should be helpful to both HR professionals and senior management in understanding the stage in which their HR function is and the steps they need to take to move to the next level.

You may also like to view a small questionnaire that will help you identify the Maturity and Effectiveness of the evolution of the HR function in your organization.

HR Function Growth Path

As the organizations mature, HR practices also mature . The HR function is at three different states in its hr evolution cycle where it starts as a Business Function, becomes a Business Partner and then a Strategic Partner. Please refer to the following figure that shows the migration.

In each of these cases the role and impact of the HR department becomes progressively more strategic in nature. At higher levels of maturity, the HR evolution can add tremendous value to the leadership potential, top-line, bottom line and long-term sustainability of the organization.

At each stage the attributes & value add by the Human Resources function change and the tools required vary significantly.

HR as a business function

At the very least, HR in an organization must be responsible for managing employee data, payroll, time and attendance, and setting company policies.

The role is largely that of personnel administration focused on both internal & external compliance, and on management of employee records.

The tools that HR requires are related to managing employee data and include a rudimentary HRIS, payroll processing software, time and attendance systems (could include time-card readers, swipe systems and associated devices). I have found that in many cases, organizations even use spreadsheets and shared directories to manage their employee data, policy documents, leave applications, contracts, etc. In most cases, paper-based employee files are the only source of employee data which are managed by the Personnel Administration department.

HR as a business partner

As a business partner, HR’s role is to meet the “existing business needs” so that the organization can grow at a measurable rate.

At this stage, HR focus shifts to competency-based recruitment, total compensation, employee development, communication and organization design.

HR helps in formalizing the organization structure (who does what and reports to whom). That done, it identifies the skills necessary for each job role. Further, it helps in defining appropriate training programs that are necessary for developing these skills, recruitment techniques to evaluate the skill levels and benchmarking the skills against industry standards and competitors.

Total compensation (payroll and benefits) also becomes a focus area where the HR helps the organization attract and retain skilled employees by becoming a leader in compensation management.

Using the skill database and the organization structure, the HR function iteratively evolves compensation practices, improves the training function and makes the recruitment function more attuned to the skills needed by the organization.

To facilitate all these, HR uses tools such as applicant tracking software for recruitment, employee portals for communication, self-services for empowerment, learning management systems for training and development and employee database for capturing employee skill profiles. Organizations even have well defined job descriptions with details of qualifications, experience, special skills required for the job and job roles and deliverables for each job position.

We have found that at this stage, most organizations prefer some degree of automation and are using tools either built internally or procured from vendors. Another characteristic of organizations at this level of maturity is the break-up of the HR function into sub-functions such as training, personnel administration, recruitment and compensation & benefits, each partly dependent on the other.

HR as a strategic partner

Organizations that view their HR as a strategic business partner believe in providing the full maturity of their HR function. Such organizations are focused on attaining leadership positions rather than a year-on-year growth. Bottom-line and top-line growths are expected to be achieved automatically.

At this level, HR becomes responsible for identifying core competencies necessary among other functions such as:

• » Aligning employees to a common sets of objectives derived from the mission and value statements
• » Mitigating risks by devising appropriate Succession Planning Strategies
• » Identifying top-performers and non-performers
• » Continuously measuring of the effectiveness of leadership and employee satisfaction
• » Increasing employee engagement through appropriate measures
• » Aligning compensation to performance
• » Adjusing recruitment and training to competency gaps
• » Specifying well-defined job descriptions which are mapped to the organization structure. These become the basis for recruitment, goal setting, training, performance evaluation and career development

As a strategic partner, HR uses a variety of automation tools for Learning Management, Performance Management, Compensation management, Recruitment and On-boarding, Succession Planning, Alignment and 360 feedback. An integrated view of employee’s lifecycle in the organization is visible through appropriate dashboards available to decision makers at all levels in the organization.

Summary

Size and age of an organization has no bearing on the maturity of their HR function. Maturity depends on their focus on “managing people” which constitute their biggest asset.

Appropriate HR tools can help the organization quickly mature their HR function and institutionalize best-practices for long-term growth.

Empxtrack offers a set of tools which can assist organizations in speedy maturity of their HR processes irrespective of their current status. It contains 18 modules clubbed in four distinct categories of Performance Management, Recruitment, HR Strategy and Human Capital Management. These SaaS based modules can quickly migrate your HR processes online.