Employers Are Slow to Transform HR

CU360
January 21, 2009 | COMMENTS

More than 84% of 150 global companies surveyed say they're revamping their HR functions, but many are missing an opportunity to build value and make the department an integral part of their company's business strategies.

Revamping HR is still mostly about savings, systems, and processes, according to the survey by Deloitte Consulting reported in the American Society for Training and Development's T&D magazine. These changes, however, fail to address rising demands for HR departments to meet the challenges of an increasingly competitive business environment.

One strategy that companies are using to improve their HR functions is outsourcing administrative activities while retaining HR's strategic capabilities in-house. Approximately 40% of surveyed companies that are transforming HR have outsourced some routine activities such as compensation and benefits, HR administration inquiry, shared service center operations, HR information system, and payroll.

Other companies are now looking to outsource more strategic HR activities, such as training and development (42%), recruiting and staffing (36%), compliance (36%), and talent management (27%).

"HR needs to focus more on supporting business objectives—revenue growth and talent," says Robin Lissak, Deloitte Consulting principal and survey director. "For instance, new market entry is an important growth strategy for many companies and is often a risky proposition because talent can't be sourced, retained, or trained in the company's culture. It's clear to us that a long-term focus can have a bigger positive impact on corporate results."

The primary motivations behind HR improvements continue to be cost savings or efficiency (85%) and effectiveness of service (75%). Only one-third of respondents cite building HR capability as a driver for the overhaul and even fewer (30%) say they were making improvements to free HR to undertake a more strategic role.

Some organizations are moving toward business-HR alignment and are identifying key business issues that are driving future HR improvements—training the next generation of leaders, handling mergers and acquisitions, and adjusting to an aging workforce. Only 40% of respondents, however, have structured processes for future HR planning. Without a formal mechanism to solidify this alignment, HR will find it difficult to support business strategy.