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Strategic HR Review – for publication 03/04 2007

The concept of Lean HR
Introduction and context Over the past two decades, the HR function has changed beyond recognition. Where once there was a personnel function manually recording individual employee details, guardians of the organisation’s recruitment process and main responsibility for industrial relations and payroll; now the HR function has a potential remit that covers 93 main activities stretching from HR governance and organisation design and change through to reward, performance, learning and development, talent, employee relations and communications, resourcing, HR information systems, measurement and payroll. Where once HR functions were commonly sited at HQs with one location, now there are multiple sites across the globe with matrix-type reporting lines; centres of excellence, shared services, individual country structures, outsourcing and offshoring and of course the onset of ‘e-enablement’. It is not uncommon to find HR functions in multinationals staffed with over two thousand people and budgets of over 50 million – a business unit in itself. Increasingly, HR can identify its value proposition through assisting in improving and/or maintaining organisational performance, supplying a portfolio of ‘HR productservices’ through ‘HR delivery channels’. HR activities and processes have now evolved into elaborate ‘systems’, whilst organisational and HR operational risk is now the focus in relation to compliance. Thus, effectiveness, efficiency and performance are key drivers of HR existence and as a result, business concepts such as supply chain management excellence, lean and six sigma are equally as applicable if HR operational excellence is sought.

HR operational excellence To provide a context for Lean HR it is important to derive underlying parameters of what defines HR operational excellence. There are eight core fundamentals which are referred to as the ‘clock’. These are: Governance Value proposition Structure Processes Technology People (capability) Measurement Financial acumen An explanatory brief on each of these is provided in the box [inset]

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Strategic HR Review – for publication 03/04 2007 • • • • • • • • Strong HR governance in terms of strategy. there is no one HR function that can yet state that it has reached world class in each of these areas. not technology for technology’s sake. © VaLUENTiS NOT FOR DISTRIBUTION UNTIL GENERAL RELEASE 2 . which enhances HR functional performance Governance (HR strategy and leadership) Financial acumen Value proposition (mandate) Measurement (Analytics and reporting) World Class HR (Capability & Performance) Structure (Delivery model) Process People (Activity/task/ system) Technology Thus. leadership and execution with regard to the other ‘clock’ dimensions A defined set of value propositions to clarify expectation and HR delivery parameters An appropriate HR delivery structure that retains flexibility and resilience Efficient HR processes that maximise value-added work drivers and minimise duplication/non-added value work A defined high performance competency set for HR professionals with supporting infrastructure that maintains/enhances their individual knowledge capability Strong financial acumen that results in HR spend proficiency and commercial aptitude. is that certain aspects of operational excellence are attained. However. high performing HR functions look to apply ‘best practice’ across the eight components of operational excellence. given the modern-day demands and increasing use of HR procurement and outsourcing A systematic focus on measurement and reporting on both the HR function and the wider aspect of human capital performance Appropriate use of technology. More common.

in any debate to label HR functions as more effective/efficient. there is a wide dispersion with a ‘bump’ in the middle. However. not only in terms of HR delivery but in terms of management expectation within organisations. supporting HR processes and systems whereas lower performing HR functions have more incidence of broken processes or ‘system failure’ • High performing HR functions manage to balance their role between support and compliance whereas lower performing HR functions tend to be heavily compliant-focused. many of these undertakings have been mainly driven as a cost-reduction exercise with greater focus on restructuring ‘HR delivery’ with less attention given to other aspects of HR operational excellence. Our study also yielded insight into why considerable gaps exist across organisations: • High performing HR functions have more defined HR strategy that connect parts of people management into a more integrated approach • Lower performing HR functions have HR strategies that are disconnected from ‘line’ expectation • High performing HR functions generally score higher in their use of workforce intelligence and measurement • Lower performing HR functions tend to limit themselves to little measurement and/or operational benchmarking (with its inherent limitations) • Those organisations with high performing HR functions also. it is important to point out that based on our previous VB-HR™ Rating HCM100 study. whereas others with a far more broad portfolio were deemed ‘poor’. HR functional effectiveness across organisations displays the same properties.Strategic HR Review – for publication 03/04 2007 HR functional effectiveness differentiators Like any naturally occurring (normal) distribution. Unfortunately. However. one needs to ensure comparability. score higher in line management capability and competence • High performing HR functions have robust HR architecture.e. these ‘transformations’ have not always benefited the function nor the organisation in terms of the potential loss of capability and subsequent increased costs realised as a result of inadequate © VaLUENTiS NOT FOR DISTRIBUTION UNTIL GENERAL RELEASE 3 . HR functions have undergone successive functional realignments and transformations through various cost-reduction and outsourcing strategies. i. The wide-ranging remit of HR and the subsequent differences in delivery expectations between organisations means that distinguishing individual ‘best practice’ can be sometimes misleading. in most cases. On a spectrum of high effectiveness and efficiency and low effectiveness and efficiency. Lean HR as both philosophy and organisational application In recent times. though the ways of calibrating what is high/low effectiveness and efficiency has different interpretations applied across different parts of the HR delivery map. there were more HR functions at the lower end rather than the top end. Other market evidence reaches similar conclusions. Thus. Examples were found of HR functions with narrow duties who were viewed as effective. The study also revealed the differing propositions HR functions displayed.

such as Lean HR. Value-add Increased HR capability through expanded team DEGREE OF HR VALUE-ADD/ CAPABILITY Lean/ Dynamic/ Value-Based HR e. Lean HR first maps the entirety of HR delivery as illustrated in the diagram below. Taking the baseline approach of looking at people management activities across the organisation. The diagram below provides an illustration as to the benefits/problems encountered with the various strategies adopted. the bottom left-hand box has been the outcome. ill-conceived transformation effort Cost increase HR cost reduction – narrow focus e. provides a means of changing this in terms of the value-cost relationship. ‘lumping’ administration into a shared service centre and/or HR processes that have been outsourced. A structured approach. particularly at business unit level together with extra risk. correctly applied HR functional transformation HR capability acquisition by buying-in of added expertise HR transstrategy HR cost reduction – poor business case Reduced capability e.g. growing duplication of effort. © VaLUENTiS NOT FOR DISTRIBUTION UNTIL GENERAL RELEASE 4 . HR process redesign such as automation but with reduced post-support capability Cost decrease DEGREE OF HR COST CHANGE Too often. Poor business case design has overly focused on HR FTE/total FTE ratios.Strategic HR Review – for publication 03/04 2007 business case construction.g. This means that any material benefits are quickly nullified with the additional relationship management required.g.

7 Healthcare/ Welfare/ Statutory/ Other Benefit Programmes 7.3 Performance Reviews 6.3 Organisationa l Design/ Capability Planning – Global Level 3.9 Managing ASP/software/ Outsource Providers 10.9 Reporting/ Interfaces 3.4 Senior/ Executive Compensatio n 7.3 Bonus/Incenti ve/ Stock Options Compensatio n 7.8 Pension Management 7.4 Job Classification/ Evaluation 3.2 Employee/ Manager Interaction/ Problem Resolution 1.4 Succession (Talent) Management 6.3 Job Profile Services/ Requisition Processing 4.6 Employee Coaching 6.1 Employer brand 2.6 Compensatio n Analysis/Pay review 6.9 Consulting To Line Managers On Performance Issues 6.5 Attendance Management 6.5 Employee Induction/ Orientation 5.10 Managing External Consultants/ Outsource Providers 7.2 General Training Design.10 Managing ASP/ERP/ Software Providers 7.7 Employee Records/Case management/ Data Maintenance 10.10 Managing Outsource Providers 3.5 Payroll Accounting/ Recon/ Manual Calculations & Disbursement 10.3 Training & Development Management 5.6 General Employment Services 4.1 Risk Management/ Regulatory Compliance/ Security HRIS & MEASUREMENT PAYROLL 6.11 Managing ASP/software/ Outsource Providers 4.8 Reporting/ Interfaces 10.3 Time Reporting 1.6 Competencies / Skills Model Development And Assessment 5.Strategic HR Review – for publication 03/04 2007 PERFORMANCE HR ORGANISATION RESOURCING TRAINING & (TALENT) GOVERNANCE DESIGN DEVELOPMENT MANAGEMENT 1.5 Company Policies And Procedures 8.9 Employment Law Services 4.1 Needs Assessment 5.8 Outplacement Services 4.1 Workforce Planning 4.3 HRIS Support 10.4 Special Pay.1 HRIS Strategy 10.4 HC Reporting 2.8 Managing External Consultants/ Outsource Providers 3.4 Health/Medica l Programmes 9.7 Relocation 4.2 HR Value Proposition 3.1 Performance (Talent) Management Assessment REWARD EMPLOYEE RELATIONS & COMMS 7.8 Statutory Benefits/ Miscellaneous Admin 3.2 Performance (Talent) Management Development 6.5 Organisation Restructure/ Change/ Development 3.5 Incident Tracking and Reporting 9.2 HRIS Planning 10.1 Payroll 1.7 HR Performance/ Strategy Review/ Audit 3.9 Career Development 5. Each of these has a series of inter-related activities which are designed to provide: • • • • • • A business case (if one is not readily available or clarified) An ‘As Is’ state of HR delivery A review of current HR (HCM) strategy and value proposition A ‘To Be roadmap’ which provides the ‘transformation plan’ from communications strategy through to the tactical steps of individual task (re)design The actual implementation and follow-on embedding Ongoing review Phases 1-4 Phases 11-15 Phases 22-26 es se ha Ph Phases 5-10 Phases 16-21 © VaLUENTiS NOT FOR DISTRIBUTION UNTIL GENERAL RELEASE 27 -3 Setting the agenda/ business case Conducting the ‘As Is’ HCM strategy (clarification) & design Designing the ‘To Be’ roadmap Implementation and embedding Alignment & review 2 5 .11 Managing ASP/ERP/soft ware/Outsour ce Providers 7.9 Corporate/ Community Social Responsibility 9.4 Technical/ Functional/ Policy & Procedure Training 5.2 Risk Assessment 9.3 Accident Prevention and Training Programmes 9.1 Organisationa l Design/ Capability Planning – Business Unit Level 2.6 Acquisition/ Divestiture/ Start-up Due Diligence/ Support 2.8 Executive Development 5.2 Benefits 8.5 HR Capability 2.6 Measurement and Reporting 1.7 Managing External Consultants/ Outsource Providers 3.9 Retirement Planning/ Counselling And Administratio n 6.5 Expatriate Compensatio n 7.2 Candidate Identification Services 4.2 Organisationa l Design/ Capability Planning – Multi-country Level 2.5 Benchmarkin g 1.7 Employee Reimburseme nt 1.7 Leadership/ Management Development 5.10 Consulting Line Managers On Staffing Issues 4.2 Wage And Salary Management 7.6 HR Policy 2.7 Work Practices For Represented Employees 8.3 HR Delivery Structure 3.4 Candidate Selection 4.10 Government/ Legislative Issues 10.1 Total Reward Programme 9. Adjustments And Deductions 10.10 Consulting On Managerial Issues 5.3 Attendance/ Leave Of Absence/ Exit Interviews 8. Development and Delivery 5.1 Employee Communications EMPLOYEE HEALTH & SAFETY 8.6 Collective Bargaining/ Negotiating/ Consultative Processes 7.8 PM Compliance Support 6.6 Managing External Consultants/ Outsource Providers 9.6 Tax Reporting/ Audit 1.11 Managing External Consultants © VaLUENTiS LeanHR® Global Profiler A structured approach incorporates a generic 6-step methodology contains a number of phases (not all of which will be used for any individual organisation).5 Temporary and Contractor Staffing 4.8 Conflict and Issue Resolution 9.4 Return-ToWork and Job Accommodati on 8.4 Employee Research & Modelling 10.7 Employee Counselling/ Case management 9.

© VaLUENTiS NOT FOR DISTRIBUTION UNTIL GENERAL RELEASE 6 . partly due to practicality (certain ‘quick-wins’). being able to execute the required HR delivery • The HR function needs to carry out an assessment of current HR personnel in terms of capability and potential • Use of external advisors.e. in order for organisations to achieve Lean HR. • HR leaders and their functions need to articulate their value proposition to the organisation in terms of setting and meeting expectation. Means of overcoming these challenges include: • HR teams need to ensure that they have a map of HR delivery. particularly where resource is at a premium • Providing a ‘blended’ approach. The HR function undertakes analysis and assessment both in terms of a new approach and being able to collate appropriate data. after the initial phase of Lean HR transition 6. 7. particularly on HR budgets. HR having a working. • HR teams need to undergo education on both the topic of operational excellence and wider commonly-used business methods. a mix of activities. Common challenges for HR functions So what are the common challenges facing HR functions who wish to implement Lean HR? They include: 1. HR teams realising that HR delivery has similar properties to certain management methodology/principles that can be applied to HR 4. The resistance encountered within the HR function 8. i. The actual undertaking of the exercise as ‘business as usual’ always poses a challenge 10. The HR function has the right capability both during and. HR understanding the need to focus on operational excellence on a daily basis (as opposed to cost-reduction exercises driven by organisation directive) 3. The collation of appropriate comparative benchmark data that provides informed insight for decision-making 9. skilled in qualitative and quantitative assessment. particularly. defined HR value proposition 5. similar to the graphic illustration shown earlier. The engaging of the line management in seeing how HR adds value to the organisation (not necessarily to an individual manager). to engaging line managers in the process of defining and acknowledging HR’s contribution Achieving Lean HR Having outlined the rationale and objectives of Lean HR using the operational excellence model we can now turn to the individual parameters and to their properties. HR teams understanding the breadth of HR delivery.Strategic HR Review – for publication 03/04 2007 These main steps are much more inter-related than the linear process reflects. can provide the necessary rigour of analysis. and partly due to the ‘messier’ context that prevails. 2.

© VaLUENTiS NOT FOR DISTRIBUTION UNTIL GENERAL RELEASE 7 . The basic point is that there is something measurable in place to calibrate the contribution. the HR function has articulated a basic value proposition regarding its contribution to the organisation. The HR function will have a clear picture on the efficiency of current HR spend. By mapping out the entire HR process delivery chain. In conjunction with the governance perspective. whilst eliminating any wasteful duplication and risk of non-delivery. This may manifest in a number of propositions relating to areas such as reward. Also the potential to expand general HR proficiency. i. should be following the most appropriate process/system. shared services. training and development. payroll etc. centres of excellence (and any hybrids) require clear boundaries and hand-offs to avoid ‘service holes’. The HR function prioritises its HR initiatives and ‘business as usual’ delivery to the organisation.e. both functionally and organisationally. responsibilities and accountability among the HR team Lean HR is all about evaluating (and redesigning) efficient HR activities which optimise the use of individual HR/line resource. HR team to undergo training on basic Lean HR principles and 6sigma techniques and accredited where necessary. The focus of Lean HR is to use technology to streamline existing processes that lend themselves to automation rather than to upgrade across the board.Strategic HR Review – for publication 03/04 2007 The table below itemises both parameter objectives and ways to achieving them: Operational Excellence Parameter HR Governance HR value proposition(s) HR structure HCM Processes Technology HR Professionals HC Measurement Financial acumen Applying supply chain management principles with an HR calendar in use. The HR structure is engineered around the value propositions. talent/management development. A few HR functions have used an adopted version of the Quality Function Deployment tool as a means of identifying delivery excellence and expectation. Some form of structured HR scorecard may exist. HR functions can ‘drill down’ and assign HR delivery roles. Use of evaluative analytics such as employee engagement and/or specific HR activity outputs around efficiency. recruitment.

based on internal and external best practice. a ‘high level’ process map established an integrated picture of HR/human capital management. broken/incomplete processes or absent human capital management components (e. Historically. processes and measurement approaches. a global exercise was developed with the joint aims of reducing overall HR functional costs whilst standardising and improving the quality and consistency of HR support and monitoring. Accordingly. Legacy approaches had resulted in the following: • Roles of HR professionals differed across sites as did expertise and service delivery • No means existed to identify and share internal HR ‘best practice’ • HR ‘system failures’ were known to exist • Questions raised about the quality and cost of HR support. the adoption of Six Sigma principles combined with deep understanding of HR delivery. the organisation faced the challenge of centralising its HR team and standardising service delivery. Through developing a related measurement framework to © VaLUENTiS NOT FOR DISTRIBUTION UNTIL GENERAL RELEASE 8 . FTSE100 manufacturing/mining The organisation is a FTSE100 global mining company. the organisation has identified developed standard approaches. Following the rollout of the HR toolkits across a global HR project team. Each of the 93 activities additionally has a series of related metrics which aggregate up into a series of scorecard layers. its mining operations had been supported with individual HR teams providing ‘on the ground’ support with limited central oversight. failure to link appraisals with personal development planning). providing an overall measurement approach. Over 500 linkages exist between the 93 activities. This allowed rapid identification of ‘system failures’.Strategic HR Review – for publication 03/04 2007 Lean HR – two case studies Having outlined the rationale and objectives of LeanHR® through the operational excellence model. as an ‘HR toolkit’ was developed to provide HR teams with a common approach.g. Following the implementation of a shared technology platform. For each activity. we now turn to two case studies to highlight the components of applying LeanHR® principles. The approach adopted by the HR function had the following aims: • To understand how HR processes should be linked/integrated for maximum efficiency and effectiveness • To utilise template process maps for 93 areas of HR delivery to identify system failures • To apply Six Sigma methodologies and principles to HR processes and outcomes • To introduce a measurement framework across 93 areas of HR delivery (linking to Six Sigma measurement approaches) • To enhance individual capability within the HR team through understanding of LeanHR® and its linkage to the commercial operations. Through utilising LeanHR®.

first in a generic sense. The responses were telling in that business units had quite differing expectations around certain core processes which HR had assumed to be similar (based on previous conversations) thus making delivery impossible under the current modus operandi. the increased levels of capability within the HR team have resulted in clarified accountabilities and additional responsibility for individual managers. the organisation is on target to realise in excess of 15% cost savings from a global annual budget in excess of £40m. the hand-offs and who had the ultimate authority to ensure decisions were made. A number of subsequent HR initiatives were successfully delivered to the line using the new improved leanHR® design. This was particularly acute for the international operations because of the variety in scale of enterprise. An interesting insight was the correlation between the people manager population and the number of cases/events that HR had to deal with. who was involved. performance management. FTSE100 business services This global company was structured with over 12 business units that operated in different market segments. the function had never clarified value propositions to each business unit. As such. As a result a number of processes and activities were recognised as redundant and a decision protocol was put into place to speed up reaction to line requests or issues. customising where appropriate. with a structured template. training and international policy. Due to the size of some of the business units.Strategic HR Review – for publication 03/04 2007 monitor outcomes and efficiency. The team realised the intricate nature of hand-offs between many activities that had not always been apparent and decisions had essentially been bogged down by no overall accountability. some business partners looked after more than one business unit. the senior team of each business unit. Having mapped the generic ‘core platform’ of HR delivery. © VaLUENTiS NOT FOR DISTRIBUTION UNTIL GENERAL RELEASE 9 . taking into account the nuances of each BU context. The HR function had migrated to a semi-shared service centre environment with business partners allocated to each business unit. These had manifested in the handoffs between the various channels leaving the HR function open to criticism over its execution despite the fact that some of these issues were down to the line (for example recruitment requisition). defining the underlying tasks. Issues had appeared with regard to design and delivery of certain HR practices particularly in recruitment. The Lean HR approach helped to clarify the business case through interviewing. individual team members then used it to map. a re-alignment took place with regard to the ‘business partner to business unit’ allocation making it more equitable in terms of workload. Though the delivery structure was in place. The HR team were then involved in a number of workshops and exercises to map out the HR delivery in entirety. Additionally. This last point was very important.

Strategic HR Review – for publication 03/04 2007 The future evolution of HR Lean HR is actually the first step on an evolutionary journey with added depth and breadth which sees HR functions adopting value based management principles... London 01. Nicholas J Higgins Dean... & CEO VaLUENTiS. private or NFP. Lean HR® Dynamic HR® Value Based HR Value Based Management True value based management principles put people and other stakeholders at the heart of the organisation whether public. acting as lead within an organisation rather than as a laggard.03. International School of Human Capital Management. HR has a bright future. incorporating the best in management practice..07 WORD COUNT = 2685 (excluding inset box text on page 2) © VaLUENTiS NOT FOR DISTRIBUTION UNTIL GENERAL RELEASE 10 . it just needs to embrace the present.