In recent years many large organisations have moved towards new operating models with Shared Services, Centres of Excellence and “Strategic” HR Business Partners.

Much of this is based on the so-called “Ulrich Model” derived from the writings of Dave Ulrich, one of the pre-eminent HR academics and consultants.

While the appeal of this model is obvious; the process of turning the theory into practice is not straightforward.

Bruce Harries, former Consulting Director at Catalyste shares his experiences in the first of a two-part series on this topic.

Many organisations jump into an HR restructure with a very narrow frame of reference – usually cost reduction, efficiency improvement or a combination of both.

While these are valid objectives, the cost-benefit equation tends to be exclusively based on quantitative measures such as headcount, ratio and cost rather than qualitative measures of business relevance, service quality and accessibility.

The starting point for any HR leader, who is thinking about reorganising the HR function; or who may be about to be subsumed by a Group edict to establish an Ulrich Model is to consider the business context.  The well-worn mantra that “structure follows strategy” is still applicable.

Ulrich’s writings on the subject are also explicit in saying that the HR structure should reflect the business organisation.

To this end, ask yourself the following questions:

  • What is your business strategy or business context?

  • What are the HR priorities needed to support and enable the strategy?

  • How should HR be structured to deliver those priorities?

Once you have clear line of sight between the strategic goals of the business and the role of the Human Resources function in achieving those goals, the issue of structure moves away from a one-dimensional discussion about HR costs and becomes a multi-dimensional debate.

As an HR leader you can then enter into an objective analysis of what HR functions are needed, how they should be distributed, what should be standard and what should be customised.

The key success factor is to look at the HR solutions and services from the perspective of the business stakeholder/customer. The more you can demonstrate how HR can help a business leader achieve their goals, the more likely you will create a “pull” for HR, and the business case for your new HR structure becomes more straightforward.

 

Answering the 3 Key Questions

1. What is your business strategy / business context?
As a strong believer in the adage that structure follows strategy, it is vital to have a clear understanding of the business strategy and the organisational success drivers before embarking on an HR restructure.  For example:

  • Is the business diversified or single/functional?
  • Is the focus on growth or consolidation?
  • Innovation or process efficiency?

The drivers need to be well defined and translated into business objectives that can in turn be used as the basis for developing appropriately aligned strategies for each functional area of the business.

2. What are the HR priorities needed to support/enable the strategy?
Once the business strategy is clear, the HR leaders can develop their strategies and plans to support and enable the broader business objectives. For example, if a key business goal is growth, then HR should be focusing on resource planning, recruitment and capability development.

If a goal is to increase revenue, HR should be thinking about how it can increase sales effectiveness through new incentive plans and skills development.  If the goal is to create greater workforce flexibility and productivity, HR should be prioritising employee relations interventions and the design of new performance management processes.

3. How should HR be structured to deliver those priorities?
The HR structure can now be developed to ensure that the business strategy is supported and the HR priorities can be enabled.  “Structure” in this context is not simply boxes on a page, but a complete Operating Model that defines the roles required, the key accountabilities, capabilities, supporting processes, service levels and interrelationships.

 

Operating Models and the Ulrich Model

The design of the Operating Model is where the “Ulrich Model” discussion should occur.  The first thing to note is that the model of distributed HR Business Partners, functional Centres of Excellence and Shared Services is only one of four broad organisational models defined by Ulrich.  They can be broadly defined as follows:

  1. Centralised HR – typically a strong central corporate HR function that creates and manages HR solutions and services for the whole organisation through functional specialists that create standardised solutions and policies

  2. Decentralised HR – typically a series of independent business units (by geography or business function) where HR operates separately in each business unit with minimal central control, and each HR team can create their own solutions

  3. Matrix / Shared Services HR – central HR strategy and solution development through Centres of Excellence with embedded HR Business Partners to co-ordinate delivery and translate business needs.  Standard and/or routine services will be delivered through a shared HR delivery function

  4. Outsourced HR – typically a small organisation that uses bureau services and/or third parties to provide HR services

 

The Matrix Model

It is the matrix HR model that has become the default definition for the Ulrich Model, and is the one that many large organisations are applying – or wishing to apply – in the never ending journey to increase the effectiveness and efficiency of the human resources function.

If you are considering an HR restructure it is worth familiarising yourself with the definitions of each of these organisational models and assessing which of them is applicable to your business.  These are discussed in “The HR Value Proposition” by Ulrich & Brockbank (HBS Press 2005) and are also summarised in an article by Ulrich, Younger & Brockbank titled “21st Century HR Organization”.

In the next article, I will discuss some of the practical steps to be taken in designing and implementing an HR Operating Model.

 

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Click here to view further Catalyste Insights on Operating Models and Shared Services.