What Makes an Effective HR
Function?
By Dave Ulrich, Joe Grochowski, Norm Smallwood, Joe Hanson, and Ernesto Uscher
Key Takeaways:
• Build a business case for how people and
organization issues are pivotal to stake-
holder value
• Review emerging ways to create an HR
operating model from 9 leading consulting
firms that creates value for stakeholders
• Recognize and rely on rigorous and rel-
evant research to identify 10 dimensions
for an effective HR function that delivers
value
• Assess and invest in actionable insights
that will deliver a more effective HR func-
tion in Leading for HR Excellence
I n this article, we review the value of HR
for key stakeholders, nine approaches
to characterize the HR function, recent
research and insights by RBL on HR
effectiveness, and implications for HR
value creation. Apply the findings and
insight of this article in Leading for HR
Excellence, RBL’s newest guided-learning
journey.
The value of HR for key
stakeholders to build
the business case.
We show why human capability (talent +
leadership + organization + HR) delivers
value to all stakeholders in today’s
changing business context, thus building
the case for HR functional excellence
from a value logic. This value logic means
that the “customer” of HR is not just
the employee inside the company, but
customers, investors, communities, and
boards outside.
Nine recent approaches to
characterize today’s HR function.
We review and synthesize nine leading
consulting firms’ positions on the HR
function to show the commonly held views
of HR.
Recent research and insights
by The RBL Group (RBL) on
HR effectiveness leading to
an HR value creation logic.
We share three comprehensive recent
research studies with tens of thousands of
individuals in and out of HR and thousands
of organizations that define our HR value-
added approach to functional excellence.
From this research and experience, we
identify 10 dimensions of HR functional
excellence. Our work integrates and
expands other work. Our research shows
that HR design (dimension #4) is necessary Figure 1. HR Value Creation Logic: Function Connected to Business Context
but not sufficient for HR value added and
that while using different labels, HR design
has commonly accepted approaches. We
update each of the other 9 dimensions so
that they add value to stakeholders.

Action implications for

diagnosis and improvements
for HR value creation.
We suggest specific actions to improve
HR value creation. These actions include Figure 2. Stakeholder Value From Human Capability Initiatives
diagnosis to assess your HR function and
tools/actions to upgrade your HR function.
In brief, we believe that HR functional
effectiveness is about creating value for all
stakeholders. Through extensive research
and practice, we have identified 10
dimensions to create value-based HR. By
using these ideas, HR is not about HR, but
about creating value. This work integrates
and advances how to deliver HR functional
excellence.

The Value of HR for Key

Stakeholders
In our work, HR is not about HR but about
the value HR creates for stakeholders.
This simple mantra means that we connect
the business context and the HR function.
We call this the HR value creation logic
(See Figure 1) because it has an outside-
in logic with HR actions designed to create
value for stakeholders.
Given this logic, (See Figure 2) summarizes
what stakeholders receive from human
capability (talent, leadership, organization,
and HR department) initiatives, which
defines the effectiveness of the HR
function.
Nine Recent Approaches to
Characterize Today’s HR Function
Because of the increased attention
to human capability, most leading
consulting firms have expanded their HR
services to offer clients ideas that will
improve the HR function. Each consulting
firm suggests a theme for improving
HR and focuses on dimensions of the
HR function. We have synthesized this
work to help discover what thoughtful
colleagues recommend for HR functional
effectiveness (See Figure 3). More details
are available from The RBL Institute
by contacting Joe Grochowski at
jgrochowski@rbl.net.
Recent Research and Insights by
RBL on HR Effectiveness Leading
to an HR Value Creation Logic
We appreciate, learn from, and build
on the outstanding work done by our
colleagues in these nine (and other)
consulting firms, plus exceptional research
by so many academic scholars. We believe
that HR functional effectiveness requires
theory, research, and practice. From
theory and research emerge practices
and solutions that offer evidence-based
insights to make knowledge productive.
We have crafted both long-term and
short-term insights through three major
research projects that shape HR functional
excellence (See Figure 4).
RBL’s View of Characteristics of an
Effective HR Function: HR Value
Analyzing the nine models of HR function
and our research reported above, we
would suggest that any effective HR
function has ten dimensions that make up
the HR value logic, as highlighted in Figure
5. In this figure, we highlight the question
for each of the ten dimensions and our
contribution on how to answer these
questions.
RBL Comparison to Other
HR Functional Models
Given our work on defining HR functional
effectiveness into ten dimensions, we
highlight how the nine HR operating
models compare to RBL and each other in
order to help HR leaders know where and
how to focus to build functional excellence.
Figure 6 on page 7 shares each of
the nine models (columns), the research
behind the model (as reported in row 1),
and the concepts from these nine models
as they relate to the ten HR functional
effectiveness work we have done.
We identified a number of observations
from this chart. First, the nine operating
models use a host of research approaches
(some did not report their research)
from case studies to targeted interviews

2
What Makes an Effective HR Function
to surveys of senior HR leaders to
participants in training programs. We
are confident that our ideas come from a
rigorous research base that guides actions.
Second, while most approaches used
the term “customers” of HR, the primary
customer is the employee, and HR is
designed to increase employee experience
(measured by satisfaction, productivity,
and retention). Little mention is made of
defining HR success through value created
for external customers and investors or
of including customers and investors in
designing and delivering HR practices.
Third, as noted above, almost all discuss
a mostly similar design of the HR
department (or operating model) using
different terms to highlight how HR
expertise (specialized knowledge) can
be applied to business problems. Roles
in an HR department include specialist,
generalist, and technology experts. As
Marc Effron, a thought leader in the HR
space who summarized five of these
models, said, “The striking consistency
in these approaches to existing HR design
suggests that the debate around design is
largely settled and HR should now focus on
what enables the success of its structure. . .
A new approach to HR design isn’t needed
to stay competitive. The model originally
championed 20 years ago is still relevant to
managing today’s workplace and workforce
and can be easily adapted to a variety of
situations, as seen in our examination of
the identical models used by top consulting
firms” (Marc Effron, “It’s the Mortar, not
the Bricks: The State of HR Organization
Design,” May 14, 2020). We agree.
As we have said previously, HR as a depart-
ment operates like any professional ser-
vice firm that turns its knowledge and
expertise into its client’s success. The
HR department structure or design should
match the business structure or design. If
a business is centralized (single business),
HR is likely to be organized by function

Figure 3. Stakeholder Value From Human Capability Initiatives

FIRM THEME FOCUS

Business operat- • Resilience / make the change • 6 CHRO skills: systems thinking,
ing model • 6 key capabilities: agile, technology, financial acumen, leadership, tech-
Accenture
configure, ecosystem, decision mak- nology/data, strategic talent, busi-
“High – res” ing, re-skill ness acumen
• 5 HR operating models from HR cen- • Best practices: link to business strat-
Academy HR operating tralization to decentralization egy, collaborate, map competen-
to Innovate
HR (AIHR) models cies, redesign operating model and
structure
Core elements/philosophies or base • Business HR: deploy workforce
assumptions: solutions
• HR customers … workforce • Communities of expertise: rel-
experience evant, data-based, experience
• Digital workplace empowers the designed workforce solutions
High impact HR workforce
Deloitte • External networks to add work-
operating model
• Workforce insights inform busi- force solutions
ness strategy • HR leadership sets vision and
• Fluid interactions: breaking silos priorities
• HR operational services: deliver • HR enablers
data and services
Agile principles: HR operating role:
• Create space for strategic thinkers • HR business partner
• Implement customer centric • HR problem solvers
model • Agile COEs
• Manage portfolio not set agenda • HR shared services center for ser-
vice delivery
Gartner Agile HR: flexible
HR technology:
• Connect with employees
• Manage employee performance
and productivity
• Conduct workforce planning and
deployment

3
What Makes an Effective HR Function
 FIRM THEME FOCUS

94 individual competencies • Apply principles of organization

in 20 domains design
• Coaching individuals for
Priorities:
HR Capabilities performance
Josh Bersin • Develop leaders and managers
(competencies) • Understanding global cultural issues
• Change management and • Terminating senior executives
communication
• Operating as business partner
HR functional model: Areas of impact:
• Remove boundaries • “S” in ESG: talent pool
• Meet employee expectations • “Total workforce”: talent manage-
• Digital drives processes ment, personalized employee
experience, skill gaps
Lessons:
• Reimagine the world of work:
• Live values, connect with
employees adapt, workforce,
KPMG Pathfinders employees
employee experience
• Evolve/adapt employee
experience Priorities:
• HR strategy/operating model
• Lead with humanity
• Workforce strategy
• Adapt to change
• Experience
• Talent marketplace
Five HR operating models/
options:
HR operating • Leader-led
McKinsey • Ulrich +
model • Machine powered
• Agile
• Employee experience
People centric HR HR customer: candidate, external
operation model: workforce, employee, people leader,
• Employee lifecycle top management
Target Interaction
Mercer • Place people needs at front of HR Operations: people operations
Model
agenda
platform, personal support,
• HR transforms around people functional expertise
• Measure employee satisfaction
Next generation HR: Roles:
• Adapt to pace of change • HR experts
Shaping next gen-
PwC • Put advisors close to business to • HR advisors
eration HR
adapt to business needs • HR leadership
• Is flexible and resilient • HR partners

(staffing, training, compensation, organi-
zation design) for the entire business. If
a business is completely decentralized
(essentially a holding company), then each
business would have its own unique HR
functional experts. Since most businesses
are some version of both centralization
and decentralization (called a multi-divi-
sional firm, allied/related, conglomerate,
or diversified), HR’s most common design
response is to have specialists (centers
of expertise, experts) who have deep
expertise and then transfer or adapt their
knowledge to HR generalists who work
in the business, geography, or functional
organization units (See Figure 7).
Fourth, the human capability outcomes
both within the HR department and what
HR offers to a business are focused almost
exclusively on employees (at times called
workforce, people, or talent) and on the
organization capability of agility.
Fifth, analytics plays an increasingly critical
role to deliver HR. Most of the analytics is
about reporting what HR does more than
what it delivers, leading to benchmarks
that offer comparisons more than
guidance about what actions a specific
company might take.
Sixth, we are seeing a dramatic increase

4
What Makes an Effective HR Function
Figure 4. Overview of RBL Insights Research

HUMAN CAPABILITY INITIATIVES

STUDY NAME SAMPLE
IMPACTING STAKEHOLDER VALUE

More than 120,000 global • Organization / business capabilities

HR Competency Study
respondents in 8 rounds of • HR department
(HRCS)
data collection over 35 years • HR competencies

Organization Guidance • 37 human capability initiatives in Talent, Leader-

More than 1,000 organizations
System (OGS) ship, Organization, and HR (www.rbl.ai)

Governance and • Four human capability pathways and

7,000 firms reporting SEC data
Guidance for Growth impact on financial, employee, and citizenship
using machine learning / NLP
through Human Capa- outcomes (double traditional results)
analysis
bility (G3HC) see www.g3humancapability.com

work, relies on rigorous research, and this offering, contact us.

in the utilization of digital information
through technology to drive efficiency,
improve HR practices, and to connect
employees who may be working remotely.
The digital and technology agenda affects
both how HR can help a business integrate
technology into its strategic agenda and
how HR can use digital information in
doing human capability work.
Seventh, we see many lists of
competencies that HR professionals
should demonstrate, often defined by HR
people as knowledge, skills, and abilities
they should possess. Few link these
competencies to personal, stakeholder, or
business outcomes, but we have a call to
upgrade HR.
Finally, most models recognize that HR
professionals need to work together (with
agility, fluidity, collaboration) to bring the
elements of HR into an integrated solution.
In brief, the literature of outstanding
thinking is growing, and ongoing work
continues to deliver HR functional
excellence. Like a piano keyboard with 88
keys nd some played more than others,
many of these HR models are touching on
a subset of the ten characteristics of an
effective HR function. Our G3HC work on
5,760 companies shows that when human
capability work is integrated and complete,
better outcomes occur.
Action Implications for
Diagnosis and Improvements
for HR Value Creation
Our value logic and research for HR
functional excellence builds on previous
leads to relevant actions. We propose
Figures 5 - 9 on next pages.
a six-step logic for improving HR value
creation for any organization (See Figure
8).
Measuring the ten dimensions is helpful
in getting started. Begin with the survey in
figure 9 to diagnose and help prioritize
where to focus. This is a perceptual
survey that can be filled out over and
over by both HR professionals and other
stakeholders to track current state and
progress
Conclusion
Making the HR function more effective
becomes ever more critical in today’s
changing business context. My thoughtful
colleagues are engaged in upgrading
HR work with the development and
launch of our latest guided learning
journey, Leading for HR Excellence,
which engages your organization’s most
experienced HR leaders in understanding
and implementing these ten critical
dimensions. As we review these nine
models and our research, we propose an
HR value logic with ten dimensions of an
effective HR function. By improving on
these ten dimensions, HR leaders will help
create human capability (talent, leadership,
organization, and HR department) that will
then be used to deliver stakeholder value.
The best is always yet ahead. We hope we
can help you create your value-added HR
function. We’d love to partner with you to
ensure your HR Transformation delivers
optimal value. If you’re ready to explore

5
What Makes an Effective HR Function
Figure 5. RBL’s HR Value Contribution to HR Functional Effectiveness on Ten Dimensions

HR DIMENSIONS QUESTION RBL CONTRIBUTION

What is HR known for by Build the HR reputation for efficiency – innovative

1: HR Reputation
stakeholders? practices – strategy – customer value

Create value for stakeholders inside (employee) and

2: HR Customers Who are HR’s customers?
outside (customer, investor, community)

What is our HR mission? Define purpose/mission as who we are; what we do

3: HR Purpose
Why do we exist? (human capability); why we do it (value creation)

How is the HR department Match HR to business design; connect specialists

4: HR Design
organized? (experts) to generalists with agility

5: Organization How does HR facilitate the right Deliver talent, leadership, and organization to create
Capability human capability for the business? stakeholder value

Provide rigorous and relevant information to improve

How can HR access information to
6: HR Analytics decision making by offering guidance not just bench-
make better decisions?
marking or best practices

7: HR Digital How can we use technology/digital Use digital to be efficient, innovate, share informa-
Technology to manage outcomes? tion, and form relationships even across boundaries

How do we create and deploy HR Innovate, align, and integrate HR practices (people,
8: HR Practices
practices? performance, information, work)

What do HR professionals need to Upgrade the quality of HR professionals with compe-

9: HR Professionals
be, know, and do to be effective? tencies that have impact on stakeholder outcomes

How does HR go about doing its Form positive and collaborative relationships among
10: HR Relationships
work? HR and between HR and others

6
What Makes an Effective HR Function
Figure 6. Overview of HR Operating Models

Author /
RBL ACCENTURE AIHR DELOITTE
Dimension

• HRCS (round 8) with 28,500

people Executive surveys "Research by Ber-
Research
• OGS with 1,000 orgs 570 CHRO surveys sin Deloitte"
• G3HC with 5,700 firms
Build the reputation from effi-
Reputation ciency to innovation to strategy to “high res”
customer value outside in
Create value for stakeholders
HR customer
Customers inside (employee) and outside Inside/employees
(workforce)
(customer, investor, community)
Define purpose/mission as who
Change, new
we are; what we do (human
Purpose Let strategy lead products, cost,
capability); why we do it (value
customer
creation)
• Match HR to business design Operational, COE,
5 approaches to
Design • Connect specialists (exerts) to Fluid business HR part-
HR governance
generalists with agility ner, digital
Deliver talent + leadership + orga-
Human Workforce Focus on skills, not Drive talent and
nization to create stakeholder
Capability 6 org. capabilities roles workforce; culture
value
Provide rigorous and relevant
information to improve decision
Insights; analytic
Analytics making by offering guidance Workforce insights
capabilities
not just benchmarking or best
practices
Use digital to be efficient, inno-
vate, share information, and Digital connects Digital access to
Digital/IT
form relationships even across workplace information
boundaries
Innovate, align, and integrate HR
Practices practices (people, performance,
information, work)
Upgrade the quality of HR pro- Systems, leader-
fessionals with competencies ship, talent tech- Have capabilities Customer, digital,
People
that have impact on stakeholder nology, business, (not listed) adaptability, agile
outcomes finance
Form positive and collaborative
Fluid interaction/ Partner to Beyond structure
Relationship relationships among HR and
breaking silos implement to ways of working
between others

7
What Makes an Effective HR Function
Figure 6 cont. Overview of HR Operating Models

Author / JOSH MARC

GARTNER KPMG MCKINSEY MERCER PWC
Dimension BERSIN EFFRON

4,000
18 HR Survey of
Research Academy Case study
leaders HR leaders
members

Target
Reputation Pathfinders
interaction

Global
Employee
Customers Workforce Business led trends
experience
Business
Employee Employee
Employee
Purpose experience; and
experience
agility workforce
specialized
HR experts, Compares
roles/ ser- Five models
HR service Manage advi- 5 models
Design vice team; based on
delivery employee sors, ops, with similar
shared goals
partners logic
services
Employee Adaptabil-
Workforce/ Front line
Human well-being ity Agility,
talent, agil- employee, Employee
Capability / workforce change
ity, culture agile
plan; agility Flexible

Insights for High growth

Analytics AI, big data
business companies

Machine
Use learning Fully digital Modular
Digital/IT
technology automate; experience apps
machine led
Person-
COE: talent,
Practices alized,
DEI, comp
cafeteria
94 skills in
Live values; Know
Strategic 20 domains
People humanity; and love
thinkers mostly on
flexibility business
HR tools

Mortar not
Relationship Business led
bricks

8
What Makes an Effective HR Function
Figure 7. Align HR Department Structure to Business Strategy and Structure

High
HR function orga- HR solutions cen- HR as
nization (single ter / professional
business) process leader services

BUSINESS CENTRALIZED
Insight / Logic:
The HR structure should HR community
match the business struc- of practice
ture whether centralized or
decentralized

HR decentral-
HR outsourced ized organization
(holding company)

Low BUSINESS DECENTRALIZED High

Books: HR Champions, HR Competencies, Transformation, HR Value Added, HR from the Outside-In, Victory Through Organization

Figure 8. Steps to a More Effective HR Function

9
What Makes an Effective HR Function
Figure 9. Assessment of Ten Dimensions of HR Effectiveness

HOW WELL DO HOW IMPOR-

HR FUNCTION
Diagnostic questions WE DO? TANT IS IT?
DIMENSION
Low 1 – 5 High Low 1 – 5 High
Have a reputation for creating value for all
1: HR Reputation
stakeholders?
Serve all stakeholders inside (employees) and
2: HR Customers
outside (customers)?
Share an HR mission about who we are, what
3: HR Purpose
we do, and why we exist?
Clearly allocate roles and work together to
4: HR Design
make knowledge productive?
Build human capability (talent, leadership,
5: Human Capability
organization) in businesses?
Access relevant and rigorous information to
6: HR Analytics
make better decisions?
Invest in and use technology/digital to do work
7: HR Digital Technology
and connect people?

8: HR Practices Innovate, align, and integrate HR initiatives?

Define and upgrade HR professionals compe-

9: HR Professionals
tencies to be effective?
Form positive working relationships within HR
10: HR Relationships
and with others?

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