Mercer: Only 1 in 3 organizations deploy high-performing HR service delivery model

Human resources is typically among the most expensive expense categories in any business, and so CFOs are or should be interested in initiatives to make the function more efficient and effective and possibly lower cost – or at least keep the growth of expenses at a moderate pace.   

But according to Mercer’s 2017 HR Transformation Study – How HR Needs to Change, just more than one-third (35%) of organizations worldwide, and 33% in Asia, employ an HR service delivery model that includes the three components of Centers of Expertise (COEs), HR Business Partners (HRBPs), and HR Shared Services (HRSS).

The successful operation of all three components is an attribute of high-performing HR functions, says Mercer, a global consultant in talent, health, retirement and investments management.

Align with strategy

The finding on the HR function does not align with broader plans by organizations, Mercer notes. Its 2017 Global Talent Trends research, launched this March, finds that the majority (93%) of executives are planning an organization redesign in the next two years, with 41% expecting to move support functions to shared services.

“Organizations are making changes in the interest of greater efficiency and increased agility, which requires a combination of technologies,” said Karen Piercy, Partner in Mercer’s HR Transformation business. “Those that have been expanding shared services and business partnering skills have had the best success aligning HR to business needs.”

As service delivery models evolve, organizations with high-performing HR functions are aligning Centers of Expertise and HR practices with the overall business strategy, shifting transactions to shared services, and providing more learning and rotational career development opportunities for their HR team.  

According to Mercer’s study, more than two-thirds (69%) of CHROs/executive HR leaders in high performing HR functions meet with the CEO or COO to discuss business and HR strategy at least twice a month to ensure strategic alignment. In Asia Pacific, this number increases to 78%.

“These meetings are important to strengthen the partnership between these leaders and help ensure that HR is aligned tightly with business strategies,” said Denise LaForte, North American Leader of Mercer’s HR Transformation practice.

“When business leaders see HR programs aligned to the business strategy, they understand the value and importance of those programs, which is particularly significant since less than half of CEOs recognize HR for its capability and competence.”

Invest in technology

Investing in human capital management technologies that provide workforce analytics to drive strategic decision-making and deliver a consumer-based HR experience for both managers and employees should be a top priority on HR’s agenda, especially since only one-third (35%) of CEOs believe their HR function provides a digital experience for employees.

Mercer’s study finds that organizations with high-performing HR functions have embraced technology and have realized significant results assessing and applying analytics. Specifically, they achieved better business outcomes, such as delivering exceptional customer value (94%), reacting proactively to disruptive change (83%), and driving innovation (89%).

Additionally, they are viewed as great places to work (86%) and attract the talent needed to excel (91%).

Despite organizations with high-performing HR functions using technology much more than others, it is still limited. While 69% have employee self-service in place, just 36% have manager self-service and only 27% have mobile talent applications.

“Clearly, there is significant opportunity for the HR function to grow its digital presence,” said Piercy. “As HR functions adopt technology and advance their skills in data analytics, they are strengthening strategic decision-making, enhancing partnerships with business leaders and other functions, and providing a more digital and consumer-oriented manager and employee experience.”

“In Asia Pacific, where technology and innovation are paramount, it is important for companies to invest in the optimal mix of technology to leverage data for decision-making – a key trait of high performing HR organizations,” said Siddarth Mehta, Leader, Workforce Planning & Analytics, Mercer.