What Is an HR Operating Model — and How Can You Evolve Yours?

HR functions are expected to adapt to the changing work environment while still providing effective service delivery to their organization and employees. The HR operating model, then, must go beyond improving individual roles and integrate activities that create business value from end to end. Especially in today’s volatile business conditions, an effective operating model requires greater levels of clarity, automation, flexibility and collaboration than in the past to ensure roles collectively drive strategic impact and operational excellence. 

Most organizations still use a three-part HR operating model (see “What is the Ulrich model?”) to structure their HR function, but HR’s key objectives increasingly focus on agility, customer centricity and operational efficiency, which can cause tension in that model.

Gartner argues that creating a flexible and effective HR operating model will likely require four key changes:

1. Splitting the human resources business partner (HRBP) role into more specialized activities
2. Creating a dynamic pool of HR problem solvers
3. Providing agile support with next-generation centers of excellence (COEs)
4. Building a robust HR operations and service delivery team

The Ulrich model is the most common framework for organizing HR roles into HRBPs, HR shared services centers (SSCs) and HR COEs. This three-part model can drive greater effectiveness by leveraging the component parts. 

For example, the HR function can shift transactional tasks from HRBPs to SSCs to deliver HR transactions inexpensively while freeing up HRBPs for more strategic and proactive HR tasks. Tensions can arise in an Ulrich-type three-part model if it lacks flexibility — and cannot, for instance, allow HR teams to take on more specialist or value-added roles. 

This is especially the case as the Ulrich model provides a set of guiding principles for HR structure but does not demand as absolute any specific reporting relationships or role structures (including global vs. local / region-/business unit-specific.) Another challenge is balancing the benefits of scale economies of HR SSCs against the need for local insight and flexibility.

HR leaders should gauge the potential impact of tensions before determining that an alternative structure will necessarily be preferable. Failing to choose the right structure has serious implications for CHROs — particularly as HR transformation projects come with high costs and expectations. The need for agility — and the ability to shift resources to more strategic imperatives — will be key to decisions about whether and how to maintain an Ulrich-type three-part model (see “What is agile HR?”).

“Agile” practices seek to deliver value in small but consumable increments. Initially used mainly in IT project management (think: successive updates by software development teams), agile incorporates a set of values designed to make teams more responsive to change.

Gartner translates agile principles into three agile HR key success factors (KSFs) for redesigning the operating model:

1. Create space for strategic thinkers. Minimize or eliminate the need for strategic thinkers to work on operational tasks. Remove silos in major workstreams, and ensure visibility from team to team so it’s easier to prioritize both strategic and tactical work. 

2. Implement a proactive, customer-sensing HR model to identify where HR can have the most strategic impact. Currently, many HR functions try to better understand their customers and stakeholders via engagement, exit and pulse surveys — and more experimental techniques such as data scraping — but still fail to truly understand customer needs. 

3. Manage work as an investment portfolio, not a set agenda. Many HR teams conduct regular strategic planning sessions but struggle to adapt midcycle as priorities change.

Agile HR approaches enable the function to provide value, drive results and keep up with transformations occurring throughout the rest of the business, but the operating model itself may not support these efforts — especially among HR organizations that are trying to be agile while strictly organized around an Ulrich model.

HR business partners (HRBPs) are the core of effective HR functions, and they typically play one of the following four roles in the HR operating model: 

1. HRBP as operations manager measures and monitors existing policies and procedures. Activities include:

   • Communicating organizational culture, policies and procedures to employees

   • Designing HR programs

2. HRBP as a strategic partner crafts and implements enterprisewide strategies to tackle chronic challenges. Activities include:

   • Adjusting HR strategies to respond to changing business needs

   • Creating a vision for talent strategy in the business unit

3. HRBP as emergency responder provides immediate fixes to emergencies. Activities include:

   • Quickly responding to line manager questions and employee complaints

   • Preparing for different employee scenarios

4. HRBP as an employee mediator creates sustained solutions to individual employee challenges. Activities include:

   • Managing competing personalities in the organization, including conflict within employees and managers

   • Responding to organizational changes

Each HRBP role requires core competencies, but today’s increasingly complex and changing work environments also demand different skills from HRBPs, especially if they expect to play a more strategic role.

HR services cover a range of activities, including: 

1. Workforce management strategy

2. Talent acquisition

3. HR operations

4. Total rewards 

5. Talent development

6. Employee experience

7. Organizational design and change management

8. Diversity, equity and inclusion (DEI)

HR operations, total rewards and talent acquisition are considered must-haves for HR to drive employee productivity and engagement. Gartner research shows that HR operations is the top enabler of employee engagement and performance for both managers and executives. 

Knowing the impact each set of HR services has on critical talent outcomes is key to setting functional priorities and making the right investment decisions throughout the HR service delivery model. The pandemic era has also resulted in new emphasis on delivering superior employee experience and, for example, creating opportunities for employees and leaders to engage with and own DEI strategy and outcomes.

The HR operating model must also be able to accommodate and deliver against evolving demands and preferences. Line managers and employees now expect more “on-demand” access to services — for instance, different generations of workers have evolving expectations of what they can “self-serve” from their HR systems.

Especially in today’s hybrid work environments, HR teams have to evolve beyond offering transactional services into more strategic, value-added activities that drive critical talent outcomes. But they can’t do that without best-in-class HR operations.

Upgrading the capabilities of the HR operations team will likely mean:

• Building a centralized, dedicated team servicing managers with proper technological infrastructure

• Supporting it with transactional HR services

• Acting as people relations advisors

• Providing relevant talent intelligence that enables managers to effectively carry out their day-to-day people management challenges

Gartner defines a COE as a physical or virtual center of knowledge, concentrating expertise and resources in a discipline or capability to sustain or increase performance and value. In HR, COEs are a group of subfunctions that use best practices to develop and support critical capabilities that align with organizational priorities. 

A COE is staffed with employees who have specific expertise in a given area. Organizations often see COEs as a mechanism to achieve cost efficiencies, but their real purpose is to develop and scale the capabilities most critical to the organization’s growth. 

Common HR COEs include:

• Talent acquisition (TA), where COEs typically consolidate specialized TA knowledge that recruiters and recruiting leaders cannot feasibly acquire due to their focus on the daily process of filling open positions

• Learning and development

• Talent analytics

Many HR COEs have grown in capacity in recent years, largely because more activities were added to their mandate, such as implementing central processes. The challenge now is how to deploy COE resources in more agile ways and refocus them to ideate, own and deliver value-added services, such as specialized local offerings.

There are alternatives to COEs, including shared-services centers (SSCs), and understanding the differences is key to selecting the optimal model for your organization. SSCs, for example, are especially good at transactional and rule-based work. COEs are better deployed for value-added services that require specialized expertise and where the focus is on just one process or service area. Scale, complexity and cost are all considerations when justifying a COE.

The COE’s structure plays a role in the degree to which it implements the procedures and infrastructure around key HR activities (rather than leaving implementation to HRBPs and SSCs). Once drawn into implementation, COEs may be less able to design or refresh their approaches or take a more strategic view of organizationwide needs.

Where the COE structure does not align with its intended role, or fails to adapt to it over time, COEs can come into conflict with other parts of HR over their responsibilities or duplication of activities begins to creep in.

HR operations teams design, implement and administer HR services to deliver maximum talent outcomes. To be most effective, the operating model can assign responsibility in various ways, splitting it among:

• HR shared service centers (SSCs)

• The non-SSC HR team, such as HR business partners (HRBPs) and HR centers of excellence (COEs) 

• Business process outsourcing (BPO) providers

Organizations typically use HR SSCs to capture a number of benefits, including:

• Cost efficiency — which is still the biggest single driver of SSC utility

• Greater division of strategic and operational HR activities within the operating model

• Enhanced service quality

• Improved employee value proposition (EVP) 

• Better customer experience

As you face cost pressures in the ongoing pandemic era, you will likely look to capture these benefits as you transform your HR structure and service offering.  The division of strategic and operational tasks within the HR structure remains a pain point for many HR functions, and transformation presents an opportunity to clarify the responsibility for those tasks.

Gartner research shows that HR leaders expecting to rely more on shared services to drive their service delivery effectiveness plan to shift responsibility to SSCs for:

• Analytics

• Employee data and document administration

• Employee support

Technology has become a critical enabler of key talent outcomes. With radical flexibility and hybrid work environments becoming the norm, HR technology enables HR to provide a more seamless service experience for employees. 

HR leaders responsible for HR technology can help their organizations generate talent outcomes by:

• Diagnosing how the hybrid experience is changing the way the organization’s critical talent segments interact with its platforms and solutions

• Emphasizing the voice of the employee and continuing to investigate the growing sophistication of sentiment analysis

• Balancing workplace and personal influences to determine how a solution impacts employees

These steps will help ensure HR technology supports new ways of being an employee in a hybrid world, now and in the future, rather than focusing on employees’ current tasks, for which they are already receiving adequate support.

HR technology can also help with other critical challenges, such as using business-model and process disruption to prompt innovation, and driving agility and digital dexterity in both the HR function and the workforce as a whole.

To shift HR technology from supporting processes to driving innovation, HR leaders will need to explore emerging human capital management (HCM) technologies to understand the capabilities and maturity of new and established technologies, along with their applicability to specific business challenges.

Gartner expects to see more HR organizations using HCM technology for the following purposes:

1. Connect with employees and support their development and well-being. As organizations develop a more human-centric value proposition, they will need to invest in employee well-being and development. Tools such as voice of the employee (VoE) and learning experience platforms (LEPs) will facilitate continuous education and help foster employee feedback and transparency.

2. Better manage employee performance and productivity. As employers try to manage productivity in hybrid, flexible work models, an increasing number are turning to tools that enable them to track employees’ time and productivity remotely. Done poorly, this risks creating a toxic work culture. Done well, analytics on employees’ activities — such as how time is spent, work locations and work patterns — can be deployed to improve both productivity and employee experience.

3. Conduct workforce planning and redeploy employees. Workforce planning and modeling technology enables HR professionals to plan and monitor the evolution of their organization by aligning talent supply and demand with various business scenarios. Innovations like talent marketplaces can match customer demand to less traditional (e.g., “gig”) workers who are offering products, services or solutions.

To take advantage of the increasing need for technology solutions, automation and analytics, HR should develop a dedicated and sophisticated HR technology team. If tech expertise doesn’t yet reside in HR, it is increasingly important to prioritize a gap analysis and begin to build a robust technology team.