Building

strategic
HR
fit for today and fit for the future

Given the increasing executive focus on people and talent, HR has

an unprecedented opportunity to position itself as a true strategic
partner to the business. Yet very little tangible, pragmatic advice
exists as to how specifically HR can make a real difference to
organisational performance. Here Hay Group unveils the six key
requirements for building a strategic HR function that is fit for
your organisation’s needs both today and in the future.

www.haygroup.co.uk
2 Building strategic HR www.haygroup.com

People management is becoming
increasingly important to organisations,
casting HR firmly in the spotlight as
an increasing number of executives
are citing human capital – how best to
This is a significant opportunity for HR. As organisations face
the many and varied challenges of operating in an increasingly
complex, fast paced and volatile business environment, the function
is uniquely positioned to support the organisation in achieving
strategic goals. In particular, HR has the potential to provide vital
insights and direction to leaders on organisational and employee
effectiveness, and what it takes to really drive performance.
How can you build strategic HR fit for today and for the future?
1 Align to the business strategy By balancing this flexibility with the advantages of
standardised global practices – and by understanding the
To really add value at board level, HR professionals must
value of difference – HR can play a critical role in developing
understand and leverage the linkages between strategy,
people and work. And that begins by asking the right questions
organisational agility at the right price.

develop, engage, manage, and retain
talent1 – as their biggest challenge to
driving organisational performance.
Six key requirements for building strategic HR
Working in partnership with our clients, we identify how HR can
align to business strategy and then develop robust workforce plans
to drive performance through people. We also help to identify
the right things to focus on, analysing where HR can afford to be
‘lean’ and where practices need to be cutting edge to deliver the
strategy. We recognise too, that one size does not necessarily
fit all – particularly for our global, multinational clients – so we
work with them to balance standardisation and differentiation.
However, a general consensus persists among business leaders that
the HR profession has so far fallen short of making a real impact.
And recent Hay Group research indicates that almost two thirds of
HR professionals agree.2 So how can HR really make a difference?
We then help to evaluate how the function currently works and
what may need to change to develop an integrated HR operating
model. Next, we develop pragmatic, sustainable implementation
plans for both discrete, stand alone solutions and large scale
transformation programmes. Finally, using our expert knowledge
of HR, we help our clients build the HR capability required to
confidently engage with the business and operate as a true
strategic partner.
like ‘what are the organisation’s people requirements over the
next five years in line with our strategy?’
Determining the answer requires a solid understanding of
the business, as well as the impact of a number of external
factors on the organisation’s human capital needs. These
include economic conditions, competitor activity, industry
and market trends, regulation and advances in technology.
This understanding must then be translated into robust
workforce plans to deliver the ‘five rights’ – the right number
of people, with the right skills, in the right place, at the right
level and at the right cost.
2 Focus on the right things
Understanding where there is a requirement for basic – versus
best practice – HR practice and service is critical to becoming
a strategic partner. Exploring what ‘lean’ HR could look like,
and then identifying where additional resource should be
focused to deliver the strategy, enables the function to have
a commercial conversation around the value it adds and its
return on investment. It also maintains focus on those key
services which are essential to the organisation’s future.
4 Create an integrated HR operating model
Thinking about how the function works and creating an
HR model which is fit for purpose now, yet scalable for the
future, is critical to delivering short and long term functional
value. This means translating HR activity into detailed
processes and policy, delivered by the right number and
level of capable people, in the right structure and location,
supported by the right data and technology. It also means
putting the right governance and performance management
in place to ensure focused delivery, and designing for
scalability in line with changing business requirements.
5 Ensure pragmatic, sustainable implementation
Delivering pragmatically and sustainably means acceptance of
constant change, and recognition that adapting quickly is key
to organisational agility and competitive advantage. This
necessitates incorporating ‘future proofing’ into the design
of discrete, stand alone solutions, and understanding the
interdependencies across key HR activities and processes for
larger scale programmes to maximise value.

1 Align to 3 Balance standardisation and differentiation 6 Build HR capability

the business
strategy The dominant focus on functional standardisation over recent The final requirement for building a strategic HR function that is
years has failed to meet business needs, leading to shadow fit for today and for the future, is creating a confident, capable
resources and creeping costs. The reality in today’s increasingly and agile HR team. By developing HR professionals who have
complex business environment is that some level of the necessary skills to understand the business environment,
6 Build HR 2 Focus differentiation in HR practice and service is required. It is essential translate the organisation’s strategy into human capital
capability on the to understand how much flexibility is really needed, whether requirements and engage with the business effectively,
right things
by business segment, market, region or employee group. the HR function can have real strategic impact.

How to build
strategic HR
5 Ensure
pragmatic, How fit for purpose are your HR services?
sustainable 3 Balance
implementation standardisation
and differentiation Understanding where there is a requirement for basic – versus
best practice – HR service can be a true source of competitive
The goal for HR must be to deliver fit for purpose HR services
advantage in delivering an organisation’s people requirements.
to generate the best possible return on people. This means
4 Create an integrated Very few organisations need to be cutting edge across the board,
discarding the notion of holistic best practice in favour of
HR operating model and making an investment decision informed by factors such
focused differentiation as a source of competitive advantage
as the business environment, level of organisational maturity
in line with the organisation’s strategy and culture.
and industry issues enables the function to maximise the return
on investment of functional spend.
1
The Conference Board CEO Challenge, 2013
2
Next Generation HR, Hay Group, 2012

©2014 Hay Group. All rights reserved

4 Building strategic HR www.haygroup.com

Use our diagnostic below to assess where you are currently, and where you need to be, for each key HR service.

Attraction, recruitment and retention Resourcing and workforce planning Performance management and reward Learning and development

n No clear employer brand n Focus on reacting to short term supply n Focus is on base pay n Ad hoc skills and class room
n Ad hoc hiring to meet short-term needs C pressures for today’s skills and capabilities C n No clear line of sight between C based training for basic qualifications and C
n No tracking of employee education, skills performance and reward induction
Basic n Basic vetting and selection with a focus Basic
on interviews and capabilities n Minimal differentiation n Limited leadership development
n Basic induction in place D n Ad hoc use of contingent workers D n Basic benefits provision with limited choice
D D
n Limited retention n Ad hoc international assignments
n Established performance management cycle n Blendof learning and development
n Some employer brand differentiation n Basic workforce analytics to meet local needs approaches
n Underperformance is managed effectively
n Established recruitment processes n Basic data on employee skills and n Learning and development offer spans
n Some variable pay differentiation C C
n Varied assessment / selection methods C capabilities captured as part of C technical and behavioural competencies
hiring process n Some level of periodic base pay
Progressing
Progressing n Local onboarding benchmarking for critical roles n Ad hoc leadership development
n Some local graduates and apprentices
n Ad hoc, reactive retention n Online benefits administration via multiple D n Learning evaluation measures immediate D
employed on an ad hoc basis
D D systems, sites and suppliers participant feedback
n Some level of procurement to manage
contingent workers

n Strong brand with clear employee value
proposition, incorporating corporate and
social responsibility, sustainability and ethics
n Targeted campaigns
n Articulated employee value proposition
n Mature employee referral programme
n Selection on both capability and ‘fit’
n Onboarding tailored by level and function,
Advanced
with global and local content
n Global recruitment strategy linked to
workforce plans
n Sophisticated digital employer brand
n Employee advocacy measured and
rewarded
n Flexible recruitment model incorporating
physical, virtual, digital and mobile
channels to engage with potential,
current ex-employees
Best n Sophisticated use of technology to
practice facilitate direct sourcing of candidates
n Corporate and social responsibility,
sustainability and ethics incorporated
into candidate assessments
n Onboarding tailored to individual needs
and requirements for critical roles
n Individual preventative retention plans
in place for stars and critical roles
n Global analysis of exit data,
translated into actionable plans
n Workforce planning integrated into
business planning and performance
management
n Resourcing models cater for flexible
working patterns, locations and contracts
n Developing alumni and contingent
workforce management
C C
n Employee skills and capabilities data
collected via annual performance D
management process
D D
n Formal global graduate and
apprenticeship programmes, with
defined competencies and structured
development
n International assignments managed
centrally according to business need and
succession plans
n Deep understanding of future capability
requirements in line with business
scenario planning
n Integrated, global plans for transforming
workforce capabilities
n Sophisticated, proactive contingent
workforce management (including alumni,
freelancers, independent professionals,
C consultants) using a range of sources
(direct, indirect, crowdsourcing)
n Flexible delivery models to cater for
D both planned and unplanned global
fluctuations in business activity
n Integrated global graduate and
apprenticeship programmes
n Global mobility at the right price,
incorporating permanent moves
and assignments
n Explicit link between overall
remuneration, performance measures
and strategy execution
n Differentiated remuneration at all
levels with visible impact of individual
performance
n Wide range of flexible benefits,
Advanced benchmarked periodically against
sector peers
n Increased focus on employee health
and wellbeing
n Global recognition programmes
n Holistic performance culture,
incorporating behaviours, CSR,
sustainability and ethics
n Focus on intrinsic and
self-determined extrinsic
motivators at an individual level
n Wide range of benefits
appealing to multi-cultural and
multi-generational workforce
n Total reward benchmarked annually
for all disciplines against sector and
C Best non-sector peers
practice n Global recognition programmes
incorporating peer and customer
D nominations
n Learning Academy provides a ‘one stop
shop’ for employees to access leadership,
technical and behavioural development
n Clear linkages exist between
competencies, career paths,
C and learning and development C
n Leadership development programmes
exist at different levels, equipping leaders
to manage and inspire an increasingly
D
diverse workforce
n Learning evaluation measures change
in performance and behaviour
n Sophisticated
knowledge transfer
between employee groups
n Sophisticated learning organisation with
segmented, blended learning, spanning
languages, cultures, styles, geographies
and generations
n Application of advanced cognitive
techniques and neuroscience research
to achieve behavioural change
n Use of innovative technologies and
delivery mechanisms
C n Global platforms to share knowledge and C
learning and encourage collaboration
n Integrated leadership assessment
and development, aligned with
D D
business strategy
n Balancebetween organisation and
employee led learning
n Learning evaluation measures
impact on business results and
return on investment

C Current state: where you are now

D Desired state: where you need to be

©2014 Hay Group. All rights reserved

6 Building strategic HR
Talent management
n No formal succession planning other than
at board level
n No high potential programmes
n Promotions managed locally on an
Basic
ad hoc basis
n Limited diversity management
n Diversity managed at a local level
n Some level of local succession
planning, high potential identification
Progressing and development
n Formal, calibrated promotion process,
supported by competencies
n Diversity managed at a global level
n Clearly articulated career paths,
supported by defined competencies and
development
n Formal succession planning for key
leadership, technical and professional
roles
n Global high potential programme to
identify a diverse pool of candidates for
defined roles and capabilities
Advanced
n Formal learning and development for high
potentials with ongoing assessment
n Promotions built into the performance
management and salary planning cycle
with clear exception management and
sign offs
n Focus is on individual employee and
organisational needs
n Proactive, global diversity management
with regular reviews of business policy,
practice and processes
n Integrated global succession plan for
all key leadership, technical and
professional roles
n Integrated high potential programme
incorporating managed moves, linked to
employee development plans
Best
n Accurate forecasting of promotions
practice
©2014 Hay Group. All rights reserved
Employee relations, communications
and engagement
n Largely reactive industrial relations
practices with a focus on grievance and
C disciplinary proceedings, and trade union
activity if required
n Basic understanding of local legal
and regulatory requirements, with
D basic, local policies
n Ad hoc communications and basic
employee engagement
n Specialist capability in employee relations
n Employee relations issues are managed by
C C
HR, with some knowledge transfer to the line
n Coordinated communications and
engagement plans
D D
n Employee engagement measured by
periodic survey
n Employee relations understood in a global
context, with clarity on comparative
practices across geographies
n Flexible guidelines cater for a wide variety
of contracts in response to increasingly
fluid working practices and careers
n Centrally defined guidelines are
adopted locally
C n Business led grievance and disciplinary
proceedings with HR support
n Clearly defined and communicated
D employee engagement strategy
n Engagement success measured by periodic
survey. Results are analysed and translated
into action
n ‘Employee’ engagement extends beyond
the organisation’s boundary to include
alumni and contingent workers
n Coordinated, multimedia communications,
segmented by employee group
n Proactive industrial relations approach
with a focus on ‘win win’ and corporate
and social responsibility
n People-related operational, legal and
regulatory risks are fully integrated into
corporate risk management
n Managers own ‘people issues’. HR
C C
intervention limited to coaching or specialist
support in complex or high risk cases
n Employee engagement fully owned by
D the Executive Team and the engagement
needs of different employee groups are
understood, articulated and actioned
n ‘Adult’ culture with policies limited to the
essential
n Global platforms and multiple channels
are utilised for two way engagement and
communications
n Ongoing measurement of communications
impact, engagement and enablement
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Managing change Managing employee data
n Ad hoc, reactive approach to change C n Local management of employee data C
n Limited change management toolkit n Combination of paper and
Basic
n Limited organisational development electronic media
C
capability D n Local, manual reporting D
n Developing change management and n Accurate employee data managed
D organisational development capability, C via local system or application C
Progressing supported by basic toolkits and practices n Local, automated reporting
n HR own or contribute to ‘people’ related
workstreams in transformation projects D D
n Strong organisational development n Basic employee data integrated globally,
capability with a range human capital supported by standard data ‘dictionary’
implications incorporated into business n Some global, systematic reporting
scenario planning C C
n Developing capability in data analytics
n Systematic approach to anchoring
Advanced
change, including deployment of
sophisticated change management
D D
and culture change practices
n HR mobilise transformation teams in
line with business need and activity
n Business strategy aligned with business n Global, cloud based system providing
model, operating model, organisational one source of employee data with full use
structure, culture and processes to of workflow capabilities, incorporating
optimise organisational effectiveness performance management, reward, talent,
C learning and development
n Application of advanced systems
thinking, cognitive techniques and n Easy access to data for managers via apps,
C C
neuroscience research to achieve tablets and hand held devices to facilitate
D business outcomes decision making and development
Best
practice n Extensive use of advanced facilitation n Employee and manager self-service is
techniques and change environments D accessible via multiple channels D
to foster collaboration, innovation and n Global, systematic reporting
engagement
n Integrated HR data used by other functions
n Human capital measures are linked to e.g. finance
business and transformation outcomes,
n ‘Big data’ capability to enable complex
with articulated benefits and a clear
analysis e.g. sophisticated algorithms to
return on investment
predict workforce trends
C Current state: where you are now
D Desired state: where you need to be
Case study: transforming HR to deliver
The arrival of a new CEO at this blue chip manufacturing company heralded sweeping change. Previously highly centralised,
the company was to move to a more agile, service-minded approach with a focus on emerging markets, and HR had to
D
transform accordingly.
Drawing on interviews and workshops with HR employees, leaders and stakeholders, we worked closely with the chief HR
officer to redefine the HR vision and create a new operating model and structure. New roles, accountabilities and a streamlined
service model have created the flexible, decentralised approach the client needed. Now more efficient, HR is also more closely
linked to strategy. To date, the exercise has identified $7m savings in one HR functional area alone.
8 Building strategic HR

Why Hay Group?

We know HR We have proven international project management

We are experts in HR practice because it is our daily
business. Every day, HR professionals in 70 per cent
of the FORTUNE 200 rely on Hay Group’s proven tools
to get the job done.
We fully understand the merits of different operating
models and we conduct ongoing research into the
priorities and challenges facing HR professionals in
today’s business world.
credentials through numerous large scale, global
projects that cross boundaries and business units.
Unparalleled data and analytics
Our advice is underpinned by the richest and most
comprehensive global databases and we have world-class
workforce analytics based on decades of job and workforce
research. We have analysed and assessed workforces in
every major industry and sector.

We are global yet local
We understand how important it is to balance the
advantages of global scale with the benefits of local
market sensitivity and our global presence reflects this.
Business impact
Because we develop solutions from a business results
perspective, we are able to make tangible links that
demonstrate value through meaningful measures such
as cost, time, efficiency and customer satisfaction.

Contact us

If you would like to discuss how your organisation can transform to deliver
its future business strategy, please contact:
John Douglas Natasha Dillon
d +44 (0)20 7856 7165 d +44 (0)20 7856 7157
t +44 (0)20 7856 7000 t +44 (0)20 7856 7000
e john.douglas@haygroup.com e natasha.dillon@haygroup.com

About Hay Group

Hay Group is a global management consulting firm that works with

leaders to transform strategy into reality. We develop talent, organise
people to be more effective and motivate them to perform at their
best. Our focus is on making change happen and helping people and
organisations realise their potential.

We have over 3000 employees working in 87 offices in 49 countries. Our

v2 July 2104

insight is supported by robust data from over 125 countries. Our clients
are from the private, public and not-for-profit sectors, across every major
industry. For more information please contact your local office through
www.haygroup.co.uk

©2014 Hay Group. All rights reserved