What Is HR Transformation — and What Does It Achieve?

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    HR transformation describes the evolution of the HR function such that service delivery, talent and technology are seamlessly adapted and integrated into HR strategy to create greater business value — by driving both operational excellence and strategic impact.

    For chief human resources officers (CHROs), HR transformation is about evolving their own role and the HR function to better align people strategy, processes and technology with business goals to deliver more impact for all stakeholders.

    The HR function has always been critical to enterprise operations, involved as it is in everything from workforce planning to performance management and compensation. But HR transformation has become more urgent in the pandemic era as talent becomes an even greater driver of competitive advantage.

    Hybrid work models, cost pressures and fast-evolving employee expectations create both risks and opportunities for organizations to differentiate themselves through the way they attract, retain and treat people. HR transformation is likely to be a critical prerequisite for success.

    What does HR transformation deliver?

    1. World-class leadership. CHROs must surface and deliver against stakeholder expectations for them to be strategic thinkers and visionaries who successfully lead their HR team and the enterprise through volatile business conditions and an increasingly hybrid work environment.
    2. Modern HR operating model. HR structures must evolve to deliver the expanding and increasing “on-demand” service options that business leaders, managers and employees seek today — and to meet core needs for business value and agility in HR service delivery.
    3. Future-forward roles and competencies. HR business partners (HRBPs) need to be effective in the evolving operating model, and HR teams need the skills to advise and strategize with business leaders around evolving hybrid and other work models.
    4. Integrated HR technology and analytics. HR leaders must be able to identify and leverage technologies and talent analytics that can help them plan workforce strategies, innovate on process, secure remote operations, keep employee data private and help business leaders make faster, smarter decisions.

    4 Key Components of HR Transformation

    HR leadership

    Where effective CHROs focus

    Highly effective chief human resources officers (CHRO) drive impact and business results by:

    • Building a strategy for the HR function and adapting it as the business changes
    • Spearheading business strategy development
    • Positioning the HR function (operating model, structure and staffing) to meet business needs
    • Optimizing the HR function’s budget

    The best CHROs also know how to distribute HR leadership among their direct reports to balance efficiency and control of key projects and create a future-focused, financially disciplined function.

    Model of a World-Class CHRO

    The Gartner Model of the World-Class CHRO provides a roadmap for greater personal effectiveness and leadership, based on the best demonstrated qualities of HR leaders in five core roles:

    1. Board’s leader of human capital
    2. Creator of talent strategy
    3. Enterprise change leader
    4. Driver of culture and purpose
    5. Trusted advisor and coach

    To be most effective, CHROs must discuss with their CEOs which of these roles to prioritize, based on the imperatives facing senior leadership and the strategic position and direction of the business. (CHROs should never ignore any of these roles, despite prioritizing some over others at times.)

    In their increasingly strategic position, CHROs are also having more interactions with the board, yet many still struggle to influence board decisions. Gartner defines success in board interactions as ensuring the board is best-positioned to have discussions and make decisions that help the CEO, C-suite and organization achieve their goals.

    CHROs can drive greater success by ensuring the board composition and culture are designed to encourage openness, trust, inclusivity and respect, and that executives and nonexecutive directors understand the role of each member and commit to continuous improvement.

    CHRO’s critical role as creator of talent strategy

    Notably, while the pandemic and hybrid work environments have not changed the Model of a World-Class CHRO, the CHRO’s role as creator of talent strategy — and associated strategic workforce planning — have shot to the fore. (Also explore “What Is HR Strategy?”)

    Devising a people strategy that maps to business needs requires CHROs to identify strategic priorities, analyze emerging trends, translate priorities and trends into workforce capability needs, and prioritize those capabilities.

    Gartner research shows that headed into 2022, building critical skills and competencies was a priority for 59% of HR leaders — but the challenge is complex. Gartner TalentNeuron™ data reveals that the total number of skills required for a single job is increasing 6.3% annually. Many of today’s new and emerging skills are also difficult to obtain.

    World-class CHROs will leverage labor market intelligence (see Gartner TalentNeuron™) and talent analytics (also known as HR analytics, workforce analytics and people analytics) to forecast the future workforce and create long- and short-term sourcing plans with deep knowledge of the competitive landscape for critical skills. This enables them to be effective human capital leaders for the board.

    The HR operating model is a foundational piece of any HR transformation effort as it structures and organizes the people, processes and mechanisms by which the HR function delivers value to stakeholders, both internal and external.

    In evaluating the performance of the existing operating model, HR leaders must consider all its moving parts — from the use of HR business partners (HRBPs) and shared service centers (SSCs) to the opportunities for leveraging technology. But first, HR leaders must know the strategic objectives for the HR function and their enterprise — and be ready to adapt as needed.

    4 ways HR operating models are evolving

    Gartner expects progressive CHROs to transform the HR operating model in the following key ways:

    • Reinvent the HRBP role as one of strategic talent leadership
    • Create a dynamic pool of HR problem solvers
    • Provide agile support with next-generation centers of excellence (COEs)
    • Build a robust HR operations and service delivery team
       

    For more detail, see What Is an HR Operating Model – and How Can You Evolve Yours?”

    HR transformation will require HR leaders and teams to build new capabilities to tackle a range of business priorities, including:

    • New ways of working. In today’s hybrid and other new working environments, HR leaders and teams need new skills and competencies — and must develop them in the organization’s managers and leaders — to ensure a happy, healthy workforce that can generate sustained performance.

    • Increasing competition for talent. Tight labor-market conditions and new ways of working make it more difficult to find critical talent. HR increasingly needs data-driven workforce insights — and the skills needed to turn talent analytics into workforce plans and decisions.

    • Evolving HRBP roles. As the HR operating model changes, optimizing the use of centers of excellence (COEs) and shared services centers (SSCs), the HRBP role is likely to be split among three new and more specialized roles, each requiring unique skills and capabilities. 

    HR competencies to tackle new workforce needs

    Pandemic-era workplace trends include employees being more vocal about their need for flexibility, influence and self-determination in the workplace, and an all-time low tolerance of subpar conditions. HR teams must have the skills and competencies to create and deliver a human-centric work proposition — and develop managers and leaders who can be empathetic to the increasingly divergent needs and preferences of employees dispersed in remote and hybrid working environments. 

    HR must also be able to collaborate effectively with business leaders to ensure they can effectively manage their hybrid workforce and maintain a healthy culture, while aligning goal-setting and performance management to drive enterprise goals.

    HR analytics to compete for talent

    Talent analytics is one of the fastest growing areas in HR, with new ways of working and a competitive labor market driving increased demand for data-driven workforce insights.

    Gartner research finds that the most common talent analytics roles are:

    • Analyst/consultant (found on 90% of teams)
    • Data and analytics manager (found on 60% of teams)
    • Data scientist (found on 57% of teams)

    As talent analytics leaders scale their teams, they expect to focus on hiring:

    • Data scientists (63% of leaders anticipate hiring in 2022)
    • Analytics and talent intelligence developers (56% of leaders anticipate hiring in 2022)
    • Analysts/consultants (50% of leaders anticipate hiring in 2022)

    Many talent analytics leaders are prioritizing training, technology and vendors as they look to upskill their workforce and maximize HR’s effective use of analytics. In addition to technical skills, talent analytics leaders must ensure their teams have the collaboration and storytelling skills needed to share insights effectively. This empowers end users to use data and analytics to inform decision making and buy into the adoption of tools. (Also see “HR Technology and Analytics” tab.)

    Labor market intelligence tools and platforms like Gartner TalentNeuron™ can help HR departments analyze competitor hiring trends, discover new demand for key talent and understand market disruptors, but HR leaders and their teams must be able to turn such insights into decisions by:

    • Incorporating competitive intelligence into talent and business strategic planning

    • Acquiring talent based on what the competition is doing

    • Using data on emerging trends and risks and external labor market data to forecast talent demand

    More specialized roles for HRBPs

    As the HR operating model evolves, the HRBP role is likely to be split into three more specialized roles, each requiring certain skills and capabilities. 

    HRBP as strategic talent leaders

    Strategic talent leaders are a new, VP-level evolution of the HRBP, focusing solely on HR’s strategic priorities. They tackle the most pressing talent opportunities and challenges throughout the organization and are aligned with a specific business unit or function for which they own talent management strategies.

    Success requires strong partnership skills and the ability to influence the aligned business unit or functional leader. Using and interpreting labor market intelligence and other talent analytics is critical to inform decision making and guide the business effectively.

    For example, labor market intelligence (see Gartner TalentNeuron™) integrated into strategy from the outset can help drive decisions about:

    • Optimal locations for future investment based on the availability of talent, competition, cost and macroeconomic factors

    • The best locations to consolidate your footprint based on talent availability

    • The positive or negative impact your location decision will have on diversity, equity and inclusion (DEI) objectives

    HRBPs as problem solvers

    A dynamic pool of problem solvers is critical to the success of the HR operating model of the future. HRBPs will be key members of such teams, which will work on a variety of projects and include a range of experts, such as consultants and COE partners. HRBP contributors to these teams will lie at the heart of the HR function, driving resource creation and upgrades, practices and policies used by HR and the entire workforce.

    The primary responsibility of problem-solving HRBPs is to define talent problems and hypothesize, test and build solutions. Core competencies for this role are similar to those of a consultant competency model: project management, stakeholder management, strong inductive and deductive reasoning skills, as well as creativity and innovation.

    HRBPs as people relations managers

    These are a central pool of HR staff who help address employees’ and managers’ most urgent needs. This role takes on much of the work that is traditionally owned by the HRBP role, including compliance, employee relations issues and manager support.

    The role is similar to a traditional junior-level HRBP, making those with a strong understanding of the processes, policies and systems within HR well-suited for it.

    HR technology, managed properly, can deliver on a range of outcomes, but technology leaders must be able to demonstrate the impact of technology on cost optimization, digital transformation, operational efficiency and employee experience.

    As radical flexibility and hybrid work environments become the norm, it’s imperative to use technology to provide a seamless employee experience with technology. Virtual and technology-enabled processes can create both positive and negative impacts, and Gartner research shows that employees who are dissatisfied with workplace technology are twice as likely to look for new positions externally than internally.

    People-first technology strategy

    A humanized HR technology strategy improves the employee experience by ensuring the technology is simple and augments employees’ and managers’ workflows rather than demanding technology adoption for its own sake. HR technology roadmaps must also provide equal access to digital resources for all employees, regardless of where work takes place.

    To empower and engage their workforce, HR leaders need a people-first HR technology function. This means that the pillars of their operating model — the processes, structure, team capabilities and network — must be informed and aligned to create a better employee experience. When successful, a people-first HR technology function can improve key people and business metrics around DEI, well-being, collaboration and innovation.

    Emerging HR technology

    Innovations such as artificial intelligence (AI), machine learning (ML), natural language processing (NLP), virtual assistants (VAs) and virtual and augmented reality (VR and AR) all play a part in this evolution toward more virtual HR processes. However, understanding these innovations and selecting the most appropriate solutions are not enough to ensure HR supports the whole employee life cycle.

    HR leaders responsible for investing in emerging technology need to:

    • Focus on trends that have an immediate impact for employees and HR operations

    • Drive HR process innovation using a digital-first, location-independent strategy by creating a roadmap to move from ad hoc, task-based automation projects to end-to-end process transformations 

    • Create a more secure remote operations environment by enhancing employee data privacy and adopting adaptive access management strategies

    • Assess trends that are likely to impact HR strategy over the next five years by evaluating the function’s capabilities in collecting, maintaining and analyzing complex datasets to turn them into actionable insights that influence employee behavior

    Talent analytics technology solutions

    With the growing importance of talent strategy, CHROs also need new approaches and supporting technologies to track, develop and deploy talent. AI-enabled talent marketplaces and skills and worker data platforms are key. Application leaders must plan to incorporate them into their technology roadmaps.

    For example, HR leaders need more automated ways to map and detect skills — in conjunction with strategic workforce planning efforts. They can apply skills data across many processes, including hiring, staffing, scheduling, learning and development, labor market analysis and workforce planning. (It is also an essential component of the internal talent marketplace.)

    What CHROs need, though, is to turn data into actionable insights. This means locating critical talent hotspots and identifying skill relationships and competition for in-demand skills.

    Consider, for example, the current state of the labor market for AI-oriented roles in research and development (R&D). By scoping the labor market outlook for these roles, including data on hiring difficulty, talent pools, salary and the most sought-after skills, Gartner TalentNeuron™ data shows how great the competition is for talent in the U.S. (where there are only 8 candidates per job opening for AI-oriented R&D roles) compared to India (173 candidates per job).

    CHROs need these types of insights to start formulating or adjusting talent strategies to prepare their organizations to pursue their future ambitions.

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