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In the past several decades, the human resource (HR) profession has evolved to become an integral component of the organization. As the HR department's role and the value HR brings to the organization continue to change, the way in which HR is staffed should also evolve.
This toolkit addresses actions necessary to develop a framework for strategic HR staffing:
The role of the HR professional has changed dramatically along with the workforce and economy, and that evolution will continue as machines and technology replace tasks once performed by humans. Tomorrow's HR leaders will need to think bigger and broadly, and they'll have to be tech-savvy and nimble enough to deal with an increasingly agile and restless workforce.
See HR 2025: 7 Critical Strategies to Prepare for the Future of HR.
HR departments are increasingly mobilized to offer organizations more than the transactional HR activities of record-keeping, payroll and employee benefits administration. According to Human Resources Management Policies and Practices in the United States, a report produced by the Cranfield Network on International Human Resource Management in collaboration with the Society for Human Resource Management, 70 percent of responding organizations said HR has a place on the board of directors, and 66 percent reported having a written HR management strategy. Responses also indicated that HR is taking sole responsibility for major policy decisions.
See: Engaging in Strategic Planning and Practicing Strategic Human Resources.
Staffing the HR function to enable the HR department to play a strategic role requires an organization to do the following:
To staff the HR function strategically, an organization needs to be aware of the essential elements of a strategic HR department in order to select an appropriate department structure and to determine which HR responsibilities are to be sourced internally or externally.
Understand the characteristics of a strategic HR function
Organizations that have integrated their HR functions to address the business strategy—and are considered to be world-class in HR—typically:
Create an aligned HR structure based on HR strategy
There are numerous ways to structure an HR department to meet its goals. The choice of structure should be based on a variety of factors, including the desired degree of strategic impact, the speed of change in the industry, the resources available to the HR department, the level of talent in the HR department and the HR strategies used by competitors.
Centralized: A strong corporate HR office that serves as a central decision-making authority and supplies HR services throughout the organization.
Decentralized: Autonomous HR functions housed in separated business units (e.g., by product line or geography) that operate and make decisions mostly independently of the other units.
Mix of both/matrix: A shared, centralized corporate HR body combined with other relatively independent, localized HR functions that benefit from both centralization and decentralization.
Outsourced: HR structures that primarily use external brokers and networks to perform the HR function.
Within the first three structures, common HR service delivery methods include:
Centers of excellence. Specialists in areas such as staffing, compensation, training, benefits and labor relations offer services across the organization upon request to executives in business units.
Shared services. Self-service or call center operations promote HR expertise and deliver improved services across the organization. This model relies on the division of HR tasks and expertise.
HR business partners. HR professionals operate as internal consultants assigned to heads of divisions or otherwise embedded within business units. Arguably, this approach can have the greatest influence on the organization's strategic success.
Research from Mercer indicates that high-performing HR functions incorporate facets of all three of these delivery methods.
See How Centralized and Decentralized HR Department Structures Influence HR Metrics and 'Knowledge Is Power' for HR Business Partner
Consider internal versus external HR responsibility sourcing
HR department staffing decisions should align with business operating plans and should be analyzed on a risk-versus-reward basis to determine what activities should be retained or outsourced.
Those activities that add the greatest value should be handled internally using highly qualified HR professionals, whereas "high-risk, low-reward" HR tasks are good candidates for outsourcing. World-class organizations combine HR outsourcing with internal HR design, invest heavily in designing new HR roles, and place emphasis on selecting, orienting and training staff.
Although conducting business and managing a workforce involves many human resource activities, some HR functional areas are more critical than others to the organization's business strategies and operating plans. Organizations often prefer to maintain control over the following HR responsibilities, rather than outsource them to a third party:
These HR tasks may require the most in-depth understanding of the organization's workforce and may be the most difficult for a third party to perform competently on the organization's behalf.
Conversely, HR activities that are primarily transactional or administrative are prime candidates for outsourcing:
See Outsourcing the HR Function and Small and Large Employers Outsource HR Duties Differently.
Turning internal HR into a strategic asset is a top priority for organizations. To ensure that HR functions are handled effectively, internal HR leaders and staff should already possess or should acquire competencies associated with strategic HR performance. Accordingly, those in charge of staffing the HR function should carefully consider the pros and cons of retraining existing HR staff and hiring additional staff with the needed level of HR competency.
Identify HR competencies for strategic human resource management
Competencies are individual characteristics, including knowledge, skills, abilities, self-image, traits, mindsets, feelings and ways of thinking, that achieve a desired result when used with the appropriate roles. With its unique focus on the global HR community, SHRM developed and extensively validated, with input from more than 32,000 subject matter experts, a model that identifies the competencies needed to be a confident, successful HR professional.
According to the SHRM Competency Model, nine competencies are most correlated with high-performing HR professionals. Although HR professionals will vary in their proficiency at these competencies based on their level of experience, expertise and opportunity to develop, they must develop and demonstrate each competency when staffing the HR function.
The identified competencies are listed below, along with a brief explanation of what proficiency in this competency may look like:
These competencies can be developed and demonstrated by HR professionals at all levels, from entry to executive. SHRM provides vital information for measuring and improving these competencies in the Competency Model, as well as a more complete list of the subcompetencies supporting each, which will be valuable to any HR professional.
See SHRM Competency Model FAQs.
Decide whether to retrain or hire new HR staff
When an organization has identified the competencies needed by internal staff to enable the HR function to operate strategically, the next step is deciding whether to retain and reskill some or all of the existing staff. HR leaders commonly use formal competency assessments and interviews to decide which staff members to keep during a transformation of the HR function. Sometimes organizations determine that retaining the HR function in-house requires external recruitment, and it may necessitate staff reductions and severance to install new recruits with higher-level skills in areas such as talent management and workforce planning.
Typically, high-performing organizations have set higher competency standards, have been more likely to use formal assessment processes to evaluate internal staff and have been more willing to hire externally. These employers also consistently invest more than their counterparts in HR skills training, including consultative skills training, which includes teaching staff how to diagnose problem areas, assess the scope of the problems and contract with internal customers to facilitate change.
Many organizations use outsourcing as a key element in staffing a strategic HR function. Although most organizations in this model outsource discrete HR activities, some organizations have outsourced the entire HR function. Obviously, employers should not outsource HR responsibilities just because the staff does not like a particular aspect of the overall job. However, the many compelling reasons to outsource HR functions include:
See Outsourcing the HR Function and SHRM Human Resource Vendor Directory.
Despite the popularity and advantages of outsourcing, some organizations put a high value on the "human factor" in conducting their HR functions. Top reasons given by HR professionals for not outsourcing include:
To avoid possible problems and achieve maximum value from outsourcing, organizations should:
Selecting providers
Providers of outsourced HR services should be carefully selected and managed. When evaluating potential HR outsourcing partners, each candidate should be assessed at a minimum on the following criteria:
Managing the outsourcing relationship
Outsourcing to the right vendor—and using that vendor correctly—can save the organization money in the long run. The key to successful outsourcing of HR functions is to successfully manage relationships with outsourcing partners, which involves working with vendors collaboratively to establish trust and open communication. This can be accomplished by creating a formalized statement of expected benefits that includes quantitative and qualitative targets and by using established practices that have demonstrated good outcomes.
Some of the practices that help organizations obtain value from their outsourcing relationships include:
A key indicator used to measure the effectiveness of HR staffing is the HR-to-employee ratio. The staffing of an organization's HR function can also be evaluated by HR cost metrics, the return on investment (ROI) on outsourced HR functions, benchmarking comparisons or analysis of the competencies, and diversity of retained HR staff.
HR-to-employee ratios
The ratio of HR employees to all employees, referred to as the HR-to-employee ratio, is fundamental in understanding the relationship between the HR department and the rest of the organization. It can be a useful indicator of overall efficiency of HR services. This ratio measures the numbers of HR full-time equivalents (FTEs) for every 100 FTE employees in the organization and is useful when comparing the HR functions in organizations of differing sizes.
Organizations using the HR-to-employee ratio should keep the following points in mind when evaluating an HR department's efficiency:
Other metrics
In addition to the HR-to-employee ratio, HR staffing effectiveness can be assessed in the following ways:
See How can the balanced scorecard be applied to human resources?
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