Chapter 10
Contrasting Models for the Future of HR
Many people have written about the future of HR. How do these models compare?
Contrasting Models for the Future of HR
Many groups have proposed models for HR’s future. How do they stack up?
The CMO of People model is not the only vision for how HR should operate—many people have proposed useful models. It’s a good idea for leadership teams to have a sense of the different models being proposed for how to deploy the HR part of their organization. The CMO of People model is an exciting and proven approach to getting more business impact out of the HR organization. That doesn’t mean it’s right for all companies. Leaders should have a sense of the different models so that they understand the options and draw on the elements that are most important to their organization.
In this chapter, we’ll look at these models:
–Blow Up HR (Harvard Business Review)
–HR from the Outside In (Dave Ulrich et al.)
–Beyond HR (John Boudreau and Pete Ramstad)
–CHREATE (a model proposed by a group of 100+ CHROs)
–Lead the Work (John Boudreau, Ravin Jesuthasan and David Creelman)
A Quick Review of the CMO of People Model
As a reminder, here are some salient points of the CMO of People approach to HR:
–HR takes Marketing as a useful role model (rather than aspiring to be more like Finance)
–HR focuses on business impact (not on the delivery of HR services)
–The head of HR is a member of the inner circle of the top team (not a second-tier C-suite role)
–There is an intense focus on a predictive, immersive, end-to-end employee experience that drives productivity (not a “be nice to employees” approach to engagement)
–Analytics is a core tool (technology is essential to removing administrative tasks)
–The scope of HR is broad (it includes CSR, Real Estate and Communications)
We’ll contrast each model for HR with the CMO of People model.
What Can You Do Today?
Try to articulate the model that your HR function is following today.
Blow Up HR
Does HR need to be improved or completely re-thought?
In July/August 2015, the cover of the Harvard Business Review flaunted the title, “It’s time to blow up HR and build something new. Here’s how.” The most important part of the story was simply the mood captured in that title: many leaders feel, fairly or unfairly, that their HR department doesn’t add value.
The frustration with HR is rooted in its lack of connection to the business. Some feel that HR mandates programs and policies that are at best a waste of time. In fact, it feels at times as though HR is actively getting in the way of the business that is trying to get things done.
Before we get too down on HR, remember that the Dilbert™ comics had a character called “Mordac, the preventer of information service,” showing that IT could also have the reputation for actively getting in the way of the business getting things done. Furthermore, to some extent, HR’s role must be a policing function that prevents managers from doing things that would hurt the firm (e.g., breaking labor laws, undermining the fairness of the compensation system). Still, the mood is behind “blowing up HR” has valid roots.
Peter Cappelli’s View on Blowing Up HR
Inside the magazine, Wharton professor Peter Cappelli did not endorse blowing up HR—instead, he listed five things that HR should do differently.
- Set the agenda. Rather than reacting to requests or complaints from leadership, HR managers should tell the CEO and operating executives what workplace issues need to be addressed and how fixing those issues will improve the organization.
- Focus on issues that matter in the here and now. HR should focus on company—and industry—specific challenges that the organization faces in the short term.
- Acquire business knowledge. HR must learn to use analytics.
- Highlight financial benefits. HR should use analytics to quantify the costs and benefits of its initiatives.
- Walk away from the time-wasters. HR should stop investing in programs that lack clear impact.
Ram Charan’s View
Management consultant Ram Charan has previously written in HBR that the solution to HR was to break it in two: one part that focuses on administrative duties, and the other that focuses on leadership and talent development. In the “Blow up HR” issue, he suggested that the CEO, CFO, and CHRO should form a triumvirate to guide the organization.
The reaction to Charan has been, “Yes, we get where you’re coming from” followed by, “We’re not convinced that you’ve laid out a practical path forward.”
Comparison to the CMO of People Model
Cappelli’s ideas are remarkably consistent with the CMO of People model and we’d endorse all of them. His five points are a good checklist for organizations to follow as they re-think what HR should do. In terms of Charan, I don’t share his belief that HR must be split in two; while I agree that the CHRO must be tightly linked to the top team, the team should include other members of the C-suite (such as CMO or CRO) beyond the CEO and CFO.
What Can You Do Today?
Assess how your leadership would respond to the suggestion, “Let’s blow up HR.” How happy are they with the status quo? What’s their appetite for trying something new?
HR from the Outside In
The best-known HR thought leader sets out a new model.
Dave Ulrich has been a leading influencer of HR organizations for more than a decade. His current model is described in the book HR from the Outside In: Six Competencies for the Future of Human Resources, which he co-authored with Jon Younger, Wayne Brockbank, and Mike Ulrich.
The most important idea in this model is the catchphrase “HR is not about HR” —great HR is about making the business better, not HR better. This is what the title HR from the Outside In means: you start from outside HR by understanding what the business must accomplish and then direct HR to those ends. It sounds obvious, but in practice, HR organizations are often obsessed with their own processes, concepts and lingo with little awareness of the ultimate “outside” reasons for HR’s existence.
The following excerpt describes the six competencies needed to execute this “outside in” model.
–Strategic Positioner. This is much more than just “knowing” the business. HR Professionals must be able to position their organization to anticipate and match external implications and bolster their organization’s competitive advantage.
–Credible Activist. HR Professionals must be internal activists, but they must focus their time and attention on issues that actually matter to the organization. They must be true professionals and be able to influence others and generate results in everything they do.
–Capability Builder. HR Professionals must be able to align strategy, culture, practices and behavior; must create a meaningful work environment; and must find and capitalize on all the organization’s capabilities.
–Change Champion. Most corporate change efforts start with enthusiasm and end with cynicism. HR Professionals must help the organization counter that trend by helping it diagnose issues and learn from past failures.
–HR Innovator and Integrator. HR professionals must ensure the organization has the right talent and leadership for the current and future success of the organization. It must develop innovative HR practices that drive the talent agenda of the organization.
–Technology Proponent. All organizations seem to have difficulty in handling and transferring the massive amounts of information they accumulate. This is especially true in HR, and HR professionals must find ways to effectively use technology to understand and strengthen the talent within the organization.
In our view, strategic positioner is the most important of the competencies listed above; the central idea of HR is about making the business better. The second most important is credible activist because that’s a significant change for HR. HR has typically been a service function responding to requests from the business.
The other competencies are more familiar to existing HR departments and will help them to focus their attention on the big things they need to get right regardless of their HR roles (e.g., training, recruiting).
There is nothing in this list that a CMO of People would say is misguided. The ideas of strategic positioner and credible activist are inherent in the CMO of People concept. Furthermore, it’s encouraging to see that Ulrich’s model emphasizes the importance of technology. What seems to be missing is the primacy of analytics and the value of the predictive, immersive, end-to-end experience as an overarching concept that continually pushes HR in the right direction.
You can learn more about the “HR from the Outside In” model by reading the book.
What Can You Do Today?
Get the Ulrich book—he’s too important to overlook.
Beyond HR
A well-known professor and ex-finance professional, now in HR, re-envisions the profession.
Beyond HR: The New Science of Human Capital by John Boudreau and Peter Ramstad sees the past and future of HR as being analogous to the relationship between Accounting and Finance. In a simplified view, Accounting focuses on doing the transactions; Finance makes decisions on investments. Similarly, HR is currently at the transactions stage, and it will evolve toward a state where it makes decisions on investments in talent.
Beyond HR also argues that there are tools and analogies from other functions (including Marketing) that are useful for HR. For example, the book describes how the core marketing idea of customer segmentation should also be a core tool for HR.
An idea from Beyond HR that has gained widespread acceptance is the notion of a pivotal role. A pivotal role is one where an investment in the quality or quantity of talent will make a big difference in results. For example, if you are building an airplane from composite materials for the first time, an investment in the number and quality of composite material engineers will probably yield a high return. The composite material engineers might be no more skilled or important than the engineers building the engines; however, if the quality and quantity of the people building the engines are already high, then an additional investment in that talent pool is unlikely to lead to large returns.
Embedded in the idea of pivotal roles is a focus on performance variation. If there is a large difference in performance between the best talent and the worst talent, then an investment in shifting people toward the top of the distribution through better hiring or training will have a big impact. For example, if you find that your best cashiers are three times as productive as your worst cashiers, then an investment in that talent pool (e.g., more rigorous selection techniques) could have a big impact. On the other hand, if the best cashiers are only 15 percent more effective than the worst ones, then an investment in talent is less likely to pay off.
In the Beyond-HR model, HR helps the organization decide where to make investments in talent. It still has to do the traditional work of transactions, compliance, and so on, so the decision-making role sits atop the function much as Finance sits atop Accounting.
The Beyond-HR model is complementary to the CMO of People model. Combining these two models would direct thinking toward, “Where will an investment have the biggest impact on the employee experience?” and “What aspects of the employee experience have the biggest impact on productivity?”
You can read more about the model in Beyond HR by John Boudreau and Pete Ramstad.
What Can You Do Today?
Put together a small team of your smartest people (not just HR people) to identify the two or three most pivotal roles in your organization. Where would an investment in the quality or quantity of talent have the biggest impact on the business?
CHREATE
CHROs weigh in on the future they see for HR.
CHREATE (the Global Consortium to Reimagine HR, Employment Alternatives, Talent and the Enterprise) was a project run by a group of more than one hundred CHROs and HR thought leaders who came together in a three-phrase project to scope out the future of HR.
CHREATE started from the premise that there are five forces of change buffeting the business world; their executive summary describes them as:
- Exponential pattern of technological change. Technological breakthroughs will force organizations to adapt and reinvent themselves more quickly. Meanwhile, the workforce faces the risk of job loss and skill obsolescence, requiring that they adapt and reinvent themselves.
- Social and organizational reconfiguration. The workforce’s increased autonomy and decision-making authority will make the workplace more power-balanced and less authoritative. The workplace will be structured more through social networks and less through hierarchy. Work relationships will be more freelance, gig and project-based and less exclusively employment-based. Organizations will tap more diverse avenues for sourcing and engaging talent that extend beyond traditional employment.
- A truly connected world. Information will be more abundant, richer and more available to everyone. Work will be accomplished from anywhere, creating a truly global talent ecosystem. Seamless global and real-time communication will lead to faster product development. Go-to-market strategies will be more diverse, and have shorter product and strategy durations. Organizational reputation will become a pivotal currency in customer and work markets.
- All-inclusive, more diverse talent market. Multiple generations will increasingly participate as workers, today’s minority segments will become majorities, older individuals will work longer, and work will be seamlessly distributed around the globe through 24/7 operations. Organizations that win will develop new employment contracts and hone new leadership styles and worker engagement approaches to address the varied cultural preferences in policies, practices, work design, rewards, and benefits.
- Human and machine collaboration. Technological breakthroughs will produce exponential disruptions in markets and business. The rapid adoption of robots, autonomous vehicles, commoditized sensors, artificial intelligence, and global collaboration will renew the thinking about work.
To deal with this world, HR will have to reframe its focus and add capability. The change was encapsulated in four major roles for HR:
- Organizational Performance Engineer. Diverse forms of “employment” and new ways of organizing and collaborating will challenge the traditional ways of working and require expertise in how organizations align, enable, inspire, and reward people to accomplish shared goals and deliver results.
- Culture Architect & Community Activist. There will be a shift away from legacy, company-centric worldviews and toward increasingly considering the ecosystem of all stakeholders—customers, suppliers, shareholders, “employees,” and the community at large. This will require companies to more actively engage this broad community while prioritizing the importance of culture and brand.
- Global Talent Scout, Convener & Coach. Given the changing workforce dynamics of an increasingly global, connected world, HR will find new ways to source, engage and connect talent in more agile, diverse, and effective ways.
- Trend Forecaster & Technology Integrator. Strategic thought leadership—and the ability to anticipate and respond to trends—will be increasingly important. This will include a deep understanding of data and talent analytics to drive decisions, as well as the ability to effectively leverage technology to deliver value.
The commonality with the CMO of People model that leaps out is the importance of data and technology; it is one of CHREATE’s four roles and matches the CMO of People’s insistence that “analytics comes first” and technology is an essential enabler. Other than that, the two models of HR diverge in emphasis. It’s not that advocates of the two models would come to blows over their differences; however, from the CMO of People’s perspective, the CHREATE model seems to focus more on how we need to re-invent the specific functions within HR to face the changes buffeting the world, rather than on the broader principles that guide the HR function as a whole.
Where a CMO of People would find the CHREATE model helpful is in pointing the different parts of HR toward the future—for example, thinking in terms of a virtual culture architect reflects the fact that the organization culture has to work for people who are not in the office.
You can learn more about the CHREATE project at http://chreate.net/.
What Can You Do Today?
The CHREATE team was united in the notion that the world was changing rapidly and HR would need to change as well. Can you identify mechanisms that would allow your HR organization to learn and adapt? Do you need to give HR more room to experiment?
Lead the Work: Navigating a World Beyond Employment
If the gig economy is real, it will disrupt HR.
The Lead-the-Work model by John Boudreau, Ravin Jesuthasan and David Creelman is the most challenging of the visions for the future of HR. The most important idea in the book is that employees’ jobs can be deconstructed into projects and tasks done by various types of free agents (e.g., freelancers, contractors, temps, consultants). This is often referred to as the gig economy, the on-demand workforce, or the Uber-ization of work.
The Lead-the-Work model argues that an important role of leaders and HR is to look at the work that needs to be done and turn up or down the dials on these three dimensions:
–Deconstruction: To what extent should work be divided into smaller pieces?
–Dispersion: To what extent does the work need to be done on-site?
–Detachment: To what extent does the relationship with the worker need to resemble an employment relationship? Can it be detached from that relationship so that the worker is an independent party?
For some work, the dials need to be turned down and it should be constructed as a full-time job, done in the office, by a permanent employee. In other cases, the dials can be turned up, and work can be deconstructed into small tasks, done anywhere in the world, by completely independent free agents. Each of the dials can be turned independently; doing that tuning, and managing the resulting arrangements becomes critical for leaders and HR.
The ability to have a “world beyond employment” is greatly dependent on talent platforms (such as Upwork) that allow organizations to easily find the free agents they need for projects and tasks. The new world is also enabled by changes in business models/ mindsets and by a social shift such that being a free agent is seen as a desirable option. The success of this new model in any given country will depend in part on whether regulators enable or inhibit business from taking advantage of the opportunity.
The reason this model is so challenging is that it says that HR must focus on “getting work done” rather than “employees in jobs.” Essentially, the whole history of HR has been about employees in jobs, so this is a difficult shift in perspective.
Digging a bit deeper, many of HR’s skills are relevant to this new world—issues around finding, motivating and rewarding talent all exist in the gig economy. Furthermore, there will still be employees in jobs where the familiar world of HR won’t change.
From the perspective of a CMO of People, this adds an important new dimension to their role. The tactic of a predictable, immersive employee experience that drives productivity will manifest itself very differently for free agents, especially if they are working remotely.
You can learn more about the Lead the Work model in the book Lead the Work: Navigating a World Beyond Employment by John Boudreau, Ravin Jesuthasan and David Creelman. There is also a good report on the gig economy in the UK by the RSA called Good Gigs: A Fairer Future for the UK’s Gig Economy, available for free at www.thersa.org.
What Can You Do Today?
Try to hire a virtual free agent (using a talent platform such as Upwork) to do a small task you’d rather not do yourself (e.g., tidying up the look of a PowerPoint presentation). Does your organization make it easy or does it erect barriers to using the gig economy?
Synthesizing the Models
What do the models have in common?
The First Common Element: Elevating the Function
Most of the models envision an elevated role for the HR function. It is not just about being more effective or focusing on new things—it’s increasing the centrality of HR in running the organization. Is this always a good idea?
One can imagine other functions—such as IT, Risk, and Marketing—making similar arguments that the future lies in elevating their function. Similarly, the most powerful functions—Finance, Sales and Operations—would argue that their centrality should be, at the very least, maintained. On its own, each argument would likely be persuasive, but not everyone can be in the inner circle.
It’s unlikely to be productive to pursue the argument of “Who matters most?” since all functions are essential. Each organization must look at its own situation and, in particular, ask if a function is being seriously underutilized. I believe that, in many cases, that underutilized function is HR.
If your organization finds that its competitive advantage is in people, then the suggestion from these models to elevate HR makes sense.
The Second Common Element: Business Focus
I once heard an HR consultant relate the story of an HR manager saying, “I don’t want to learn about the business—that’s why I’m in HR.” It’s hard to imagine that being said in any other function (except perhaps IT).
Some HR departments are not business-focused because the function has its roots in generic administrative and compliance issues. If you are processing payroll, then you genuinely don’t need to know a lot about the business, its strategy, its products, or its competitors. Secondly, many HR professionals and managers see HR as the “people people.” A consultant for law firms said, “Don’t you know what HR is? Those are the people you send employees to when they complain a co-worker has smelly feet.” If HR’s role, as set by the CEO’s expectations, is to do things that don’t require business savvy, then I shouldn’t expect the function to have it.
It’s fair to say the argument that HR must be more business-savvy is now old news. Today, many HR professionals are business-focused and get fed up by being told that this is something they need to learn. The counterpoint is that some are less business-savvy than they think they are; the experience of many managers is that HR hasn’t shown good business sense.
The legitimate challenge for HR to being more business-focused is that the human dimension of organizations is particularly unruly, where the causal relationships between HR interventions and business outcomes can be difficult to discern. Expectations that HR can fix the human element of production as readily as an engineer can fix the mechanical elements are misguided.
The important issue is how the organization executes on the idea that HR should be business-focused. Execution depends primarily on who is brought into HR and the day-to-day expectations manifested by the top leadership team.
What Can You Do Today?
Go through the models and highlight the elements that would make the biggest difference to your organization.
Outside Perspective: Dan Schawbel
A futurist considers HR’s future
When futurist Dan Schawbel, author of Promote Yourself: The New Rules for Career Success considers different models for the HR function, the first thing that comes to mind is the different environment that they will be working in (Note that CHREATE, discussed earlier in this chapter, started from a similar place by outlining the forces they felt were shaping the future environment).
Top Trends for the New Generation of Workers
For example, Schawbel points out that an important need for the younger segments of the workforce is flexibility. Flexibility is a more complex issue than it first appears. It is not just a matter of flexible work hours—it extends to flexibility about whether you work in the office or elsewhere, some flexibility about what employees work on, and even flexibility around the sort of workplace environment they work in. (That is, they’ve got someplace to work other than their cubicle—visit a WeWork office to get a sense of what the younger generation looks for in a workplace.)
The issue of working from home is particularly contentious with some companies reversing their flexible telework policies and requiring people to return to the office. Schawbel says this may be more an example of a failure to know how to manage teleworkers than a failure in the concept itself. It does take extra effort to connect at a human level, on a regular basis, with teleworkers, but if HR can enable that, then telework can be successful.
Another disruptive trend is a change in the nature of educational credentials. In the past HR could concentrate on credentials from colleges. Now all kinds of different organizations are providing credentials of varying quality. How should HR assess the meaning of a certification in math from the YouTube-based Khan Academy?
Perhaps much of the complexity can be captured in what Schawbel calls the blended workforce. The workforce is comprised of different generations, located in different work environments, with different employment relationships. This brings us a long way from a world where a one-size fits all approach to HR is effective.
Schawbel says the HR department of the future will need to be alert to, and ready to respond to, the many different changes taking place in the world, only a few of which are laid out here.
Bewilderment or Irrelevance?
A common reaction for senior leadership to these kinds of revelations about the future is that they’re interesting and possibly important, but it is not clear what the impact on the bottom line would be or what actions the business should take in response to these changes. It’s rare for a CEO to read about trends and take action—at best, they will pass the ball to HR and hope they don’t need to think about it further.
What is the normal approach in HR? HR’s traditional stance is to create programs and provide training. For example, there may be policy changes to allow more flexibility and training for managers to handle a dispersed workforce. Of course, there are a bewildering range of trends and possible responses, far more than HR can react to, and so they tackle a few that seem easy or happen to be top of mind.
The CEO may agree HR is doing things that seem reasonable, but they will not see it as sufficiently business-critical that they need to be involved. It is not sufficiently relevant to the business for anyone other than HR to care.
How a Business-Focused Framework Brings Relevance
HR should work from a business-focused framework so that it knows how to respond to the myriad of real or possible trends. In the CMO of People model, these trends will be seen in terms of their impact on how the employee experience that drives productivity is delivered.
If we think about the distributed workforce, then it begins as an analysis of a potential source of talent. In the past, we would have filtered out candidates who couldn’t or wouldn’t work in our location. If attracting talent who works at our location isn’t a problem, we wouldn’t waste time creating a flexible option. If it’s important to attract new pools of talent, then one goes back to the talent funnel (recall the napkin diagram on the first page of the introduction) and thinks about how to change the funnel so that’s it’s pulling in, and not filtering out, remote workers. After considering the talent funnel, the focus turns to how a predictable, immersive employment experience that drives productivity could be delivered to remote workers.
You could expound on the options and mechanics for how to make these changes, but that would be a distraction. What matters is an HR function that can readily understand what’s relevant to the business and can respond in a way that integrates with how everything else is doing. This has quite a different feel from simply adding a number of new programs that individually look good. Most important, the CEO will immediately be able to see the how what HR is doing will drive business results and, as a result, will have no doubts about the relevance of those activities.
Takeaways
–There is widespread interest in finding a way to reform HR; that’s a sign that professionals feel there is an opportunity to get much more leverage out of the function.
–There are several different models to choose from or to mix together into a unique approach.
–Almost universally, people feel a core problem with HR is how it can become detached from the business.
–Changes in technology will likely have their own disruptive impact on HR, quite apart from any other attempts to reinvent the function.