Facing future challenges

Dig­i­tal­i­sa­tion, includ­ing robot­ics, cloud and ana­lyt­ics, socio-eco­nom­ic changes, glob­al­i­sa­tion, greater focus on organ­i­sa­tion­al pur­pose, agili­ty and work­place cul­ture are fac­tors that add up to major changes with­in busi­ness, the work­force and, con­se­quent­ly, the HR func­tion.

As Stu­art Steele, part­ner in the Peo­ple Advi­so­ry Ser­vices prac­tice at EY, points out, HR can trace its ori­gins back to the late-1800s when it focused on wel­fare, pro­duc­tiv­i­ty and labour rela­tions. How­ev­er, the demands have changed sig­nif­i­cant­ly over the years. A crit­i­cal analy­sis of many HR func­tions today would reveal between 60 per cent and 80 per cent of activ­i­ty and asso­ci­at­ed cost remains focused on what are pri­mar­i­ly trans­ac­tion­al or com­pli­ance-based activ­i­ties, sug­gest­ing the func­tion may not be that dif­fer­ent to what it was 30-plus years ago.

So is this a case of HR pro­fes­sion­als step­ping up to the chal­lenges or do they risk becom­ing irrel­e­vant?

Mr Steele says: “Trans­ac­tion­al and com­pli­ance-based activ­i­ties – HR oper­a­tions – are nec­es­sary and will remain. How­ev­er, we now have the oppor­tu­ni­ty to replace many of the peo­ple who under­take trans­ac­tion­al activ­i­ties with robots, more specif­i­cal­ly robot­ic soft­ware that can fol­low defined process­es. For exam­ple, using sys­tems, writ­ing e‑mails, clean­ing and analysing data, mak­ing pre-defined deci­sions, we will see a sig­nif­i­cant reduc­tion in the num­ber of peo­ple in HR oper­a­tions.

“Tak­ing a con­ser­v­a­tive approach, we may look to one robot replac­ing the efforts of five peo­ple. How­ev­er, there are already exam­ples where this ratio is push­ing clos­er to one robot replac­ing the efforts of 20 peo­ple. The use of robots and the scale of ben­e­fit real­i­sa­tion will only con­tin­ue as tech­no­log­i­cal capa­bil­i­ties increase over the next few years.

“When you look at the type of ser­vices typ­i­cal­ly deliv­ered out of shared ser­vice cen­tres, and fac­tor in shift pat­terns and a 24/7 demand, the oppor­tu­ni­ty to fur­ther extend the robot/person ratio sig­nif­i­cant­ly increas­es the poten­tial sav­ings, even when con­sid­er­ing low­er-cost, off-shore cen­tres. The adop­tion of robot­ic process automa­tion by out­sourced busi­ness ser­vice providers will also facil­i­tate fur­ther cost reduc­tions.

“As robot­ics and arti­fi­cial intel­li­gence tech­nolo­gies con­tin­ue to evolve and enhance their capa­bil­i­ties, today’s cost-sav­ings will soon look con­ser­v­a­tive. You may be for­giv­en for just think­ing about reduced costs, how­ev­er the ben­e­fits are broad­er and include improved speed, greater accu­ra­cy and auditabil­i­ty, and from a cus­tomer or col­league per­spec­tive, increas­es in the sat­is­fac­tion with HR’s ser­vices.”

The impact of the robot­ics rev­o­lu­tion on the work­force is not the only sober­ing thought for HR. The mar­ket has already seen the devel­op­ment in glob­al busi­ness ser­vices (GBS), a mod­el that com­bines all oper­a­tions and func­tions with­in a busi­ness, such as finance, IT and HR, and dri­ves syn­er­gies by com­bin­ing them into one team.

Mr Steele says: “The sub­tle­ty here is that where­as GBS is about dri­ving ben­e­fits through syn­er­gies, which in part includes reduc­tions in full-time equiv­a­lents (FTEs), when cou­pled with the poten­tial of robot­ics, the FTE required to deliv­er HR oper­a­tional activ­i­ties can be even small­er. It’s impor­tant to appre­ci­ate that we are not talk­ing about the HR oper­a­tions activ­i­ty going away, rather it is like­ly to be removed from the HR func­tion and classed as a core oper­a­tions activ­i­ty.”

This trans­for­ma­tion leaves most HR func­tions with two key groups. The first is a cen­tre of exper­tise, con­sist­ing of HR prac­ti­tion­ers with deep tech­ni­cal exper­tise in spe­cial­ist areas such as recruit­ment, reward and tal­ent man­age­ment. They cre­ate pol­i­cy and process­es, deal with excep­tions and help pro­vide solu­tions to organ­i­sa­tion­al peo­ple chal­lenges.

HR may be sig­nif­i­cant­ly small­er in the future, but arguably more impor­tant

The sec­ond group, HR busi­ness part­ners, whose role is to team up with a divi­sion or busi­ness unit, under­stand their strat­e­gy and busi­ness plan, and design tai­lored peo­ple solu­tions that con­tribute to the suc­cess­ful exe­cu­tion of the plan.

“HR busi­ness-part­ner­ing is per­haps the area that busi­ness lead­ers often say they have been most dis­ap­point­ed with over last decade,” says Mr Steele. “Busi­ness lead­ers have often assumed this is due to busi­ness part­ners hav­ing a lack of detailed knowl­edge about the divi­sion, busi­ness unit or sec­tor they are oper­at­ing in. Giv­en this, we have seen a trend where busi­ness part­ners have been sourced from the busi­ness rather than HR. This allows for an inter­est­ing future sce­nario when, in ten years’ time, HR oper­a­tions could be robo­tised and tran­si­tioned into a GBS func­tion.

“In par­al­lel, busi­ness knowl­edge and con­text will be sourced direct­ly from the busi­ness reduc­ing the require­ment for HR busi­ness part­ners. What remains in HR is a cen­tre of exper­tise, with inte­grat­ed teams of prac­ti­tion­ers bring­ing deep tech­ni­cal exper­tise and con­sult­ing com­pe­tence, team­ing with the busi­ness in the devel­op­ment and exe­cu­tion of work­force strate­gies, direct­ly con­nect­ed to busi­ness needs and out­comes.”

Inde­pen­dent fore­casts pre­dict that by 2030 up to half of the peo­ple in the work­force will be con­tin­gent work­ers, not employ­ees; a group that many HR func­tions have tra­di­tion­al­ly not man­aged. The result is that the HR func­tion may have few­er peo­ple in its purview; an out­come that rein­forces the per­spec­tive that HR may be sig­nif­i­cant­ly small­er in the future, but arguably more impor­tant if the own­er­ship of deliv­er­ing against the peo­ple needs of an organ­i­sa­tion remains vest­ed in the func­tion.

“Robot­ic process automa­tion, glob­al busi­ness ser­vices, HR busi­ness part­ners being sourced from the busi­ness are all real and hap­pen­ing today,” says Mr Steele. “What we have not yet seen is many organ­i­sa­tions adopt­ing all these ini­tia­tives in an inte­grat­ed man­ner, but it will hap­pen.

“HR has spent the last 40 years pri­mar­i­ly doing oper­a­tional activ­i­ty and doing it well. There are excep­tions, but in gen­er­al the func­tion still strug­gles to artic­u­late in clear, busi­ness terms how its actions dri­ve busi­ness val­ue, and how it makes a mate­r­i­al con­tri­bu­tion to top or bot­tom line growth.

“HR func­tions may become sig­nif­i­cant­ly small­er, but there is an oppor­tu­ni­ty to be recog­nised as the best team to part­ner with the busi­ness to dri­ve tan­gi­ble busi­ness out­comes through its peo­ple. Ask most busi­ness lead­ers what the sin­gle most impor­tant con­trib­u­tor to busi­ness suc­cess is – the vast major­i­ty will tell you it’s their peo­ple.”

So is HR look­ing to the future through a lens of unwel­come dis­rup­tion or oppor­tu­ni­ty?

For fur­ther infor­ma­tion please con­tact
Stu­art Steele, part­ner, Peo­ple Advi­so­ry Ser­vices
SSteele1@uk.ey.com