HR TRANSFORMATION IN THE PUBLIC SECTOR Since the arrival and widespread acceptance of the Gershon Efficiency Report in 2004 there has been a clear steer in the Public Sector towards the new world of shared services and economies of scale. If we look specifically at the area of HR services this has led to the initiation of a number of “transformation” programmes, many of which have involved partnership with private sector BPO providers. But what is being transformed, and what are the vital foundations for getting it right? The last five years of public sector experiences give us an opportunity to take stock, to think about what worked well and what did not. HR transformation is now offered by many consultancies and many service providers, so how do you know which approach will work best in your particular situation? To what extent are you really prepared to be driven towards “best practice” if it means deconstructing the way you currently run HR? Shared services as a concept is now well understood but the implementation and steady-state service delivery are highlighting different challenges to those experienced in the more traditional private sector model. This article discusses five of the significant differences and what you need to know upfront. CHALLENGE 1 – Overcoming Inertia The public sector is by its very nature accountable to the public for its performance. It is primarily service-driven rather than a producer of products but its services are often highly complex in terms of scale and impact. Senior HR executives have often benefited from external benchmarking visits to observe best practice. They will also have taken advantage of thought leadership available from the works of Ulrich, Fitz-Enz, and Huselid to name but a few. Lastly, they may have received guidance from one of the large consultancies or independent advisers who specialise in transformation. However, the same is not true for the majority of their HR staff who are focused on getting the day to day operational job done to the best of their ability. It is this larger HR group who are in need of more change management support than their seniors and their line organisation customers. Unless adequately resourced and directed from Day 1 of the transformation programme such change management interventions can be too little, too late. The tipping point for fully embracing change is much later than in the private sector. Impact if not addressed: Transformation programme timescale increases dramatically because it is unable to overcome inherent resistance to change CHALLENGE 2 – Accepting Standardisation While the public sector’s operational methods may often look bureaucratic from the outside they have evolved over long time periods and the reasons for certain practices are not always fully documented. When it comes to re-engineering HR processes to achieve standardisation and simplification there is an inherent danger in only using private sector assumptions about how HR processes should work. Local HR staff tend to rely on a large amount of tacit knowledge and experience to identify correct handling of their workload. Therefore, process re-design workshops need to include methods for exposing and challenging “the way we do things here” without alienating the local subject matter experts. Quite often different practices will have developed in different areas and all participants will be certain that their local methods are non-negotiable requirements. In situations such as these there needs to be a clear escalation and decision-making process in order for essential standardization and simplification to take place during the design. Impact if not addressed: Sub-optimised, non-standardised services result in increased costs and reduced value for money CHALLENGE 3 – Understanding Information Systems The typical route into acquiring an HR System is often part of a major ERP investment. These large multi-purpose databases featuring self-service and automated routing have evolved through several versions over the last decades from green screen to client-server to

web browser to software-as-a-service. HR information systems (or Human Capital Management systems as they are sometimes known) have moved in line with the main iterations of information technology thinking. The current crop tend to be browser-based requiring little or no installation of software on client desktops, so roll-outs have become much easier to manage providing modern web browsers are available. Balanced against this you need to factor in the disappointment that these HR systems were not primarily designed for the UK public sector and that there are limits to how much you can change their look and feel via configuration. The road to “customisation”, i.e. bespoke coding for your needs, is full of expensive and unsupported dead-ends and detours. These can be as subtle as the new system using a different taxonomy to local public sector practice; or as complicated as major differences between a current HR process and that offered “out of the box” by the chosen system. The key to success is to understand exactly what operational constraints come with each system, to differentiate between what is available right now and what is “in the next release”, and to maximise the use of self-service and automation wherever it makes good sense. Based on personal experience, I recommend that wherever possible HR transformation focus on transforming HR processes to take advantage of the efficiencies that an integrated HR information system can bring rather than customising the software to fit local HR methods. There is a perpetuated myth that HR systems can be fully configured to comply with the way you choose to work. This is not true. Instead, they are based on tried and tested global HR best practice. In the worst case it is better not to use some of the available functionality rather than try to make it do something for which it was not intended. Impact if not addressed: Customised developments increase costs and timescales to implement fundamental HR services such as recruitment and performance appraisal. CHALLENGE 4 – Developing the effective HR Business Partner

Despite the industry-driven focus on the mechanical aspects of implementing new HR service delivery models, most organisations are now becoming more aware of the importance of the „retained‟ HR organisation. However, it is all too easy to define a new HR organisational structure, define new roles such as HR Business Partner, and even appoint people to those roles, but experience shows that it is much harder to make these new roles work. The risk is that once the HR organisational redesign has been completed and everyone is in there new roles the “customers” will not see a significant difference in service. If retained HR harbour any uncertainty about their new roles then the overall service will still be reactive to the needs of their customers rather than becoming a proactive strategic or operational partner. The HR Business Partner role is almost certainly new to the organisation, and as such demands a set of skills and competencies that are probably not widely found in the legacy HR organisation. It may be possible to identify those in the legacy HR organisation who have the aptitude to become successful HR Business Partners, but they will normally need support to develop the required skills and competencies. It may be appropriate to source these roles from outside the organisation, or to develop them through secondments to and from the HR function – all of which needs planning and managing as part of the overall HR transformation. Impact if not addressed: HR Business Partner becomes “the Emperor’s new clothes.” Behaviours centre on the comfort zone of super-administration and checking what the rest of the HR service delivery model is doing, rather than adding better HR value and expertise to the business client. CHALLENGE 5 – Reversion

When all is said and done the public sector is a robust self-healing mechanism. It won’t go out of business and its shareholders / customers are generally not able to choose to receive their services from an alternative source. They are subject to a level of scrutiny and critique not often found in the private sector. Their HR staff generally have a deeper understanding of subjects such as equality and diversity than their private sector counterparts and the organisations they support must have one of the widest ranges of society representation and capabilities that exists in the UK today. But this brings with it the danger that they can choose to deal with HR transformation by absorbing it superficially but reverting back to their comfort zone at every available opportunity. Because of this it is important not to see HR transformation as a one-off project which ends when all the deliverables have been signed off. There is an ongoing role for good governance, performance measurement and quality review. There will be mistakes and there will be things that don’t work as you thought they would. The important thing is to put in place a structure to learn from those mistakes and to refine HR services where they don’t work as advertised. Impact if not addressed: One-off transformation projects are subsumed into “business as usual.” Money has been spent, HR job titles have changed, disruption has been coped with but overall there has been little impact on end users of the services. So what preventative steps can you take?

1. Don’t make change management a theoretical add-on to the main transformation programme. Take the time to analyse and understand your stakeholders and what practical interventions need to be made and when. Help them visualise and understand the future before it arrives and ensure they understand how they can contribute to its success.

2. Make sure for every defined HR process area there is a single design authority who is respected by local subject matter experts and is prepared to take binding decisions about standardisation. The moment you permit alternative methods to creep back in you add to the operational costs and reduce the ability to develop transferable skills within the HR team.

3. Don’t be fooled into thinking that any of the market-leading HR Information Systems can be totally redesigned around your “unique” demands. Just as spreadsheet software comes with pre-built functionality, so do large scale ERP systems. You do not have a blank sheet of paper. The moment you select a system then you need to accept its constraints and adapt your way of working to suit its strengths.

4. Invest time and money into developing your retained HR roles and aligning them with your organisation’s needs. The HR Business Partner is a critical point of contact for senior management and you will be judged by their ability to deliver.

5. Regularly assess the progress and impact of your HR transformation on end users, i.e. senior managers, middle managers and employees. Be prepared to take an agile approach to service delivery and learn from what works and what doesn’t. Make sure your HR team understand this is a journey and not a fixed destination.

These are not the only five challenges you will meet in a major HR transformation programme, but if you have them on your radar then the odds of a successful transition will greatly improve.

About the author Shaun Dunphy is a Senior Manager at Alsbridge plc and specialises in HR transformation, HR process optimisation, shared services and outsourcing. If you wish to discuss any of the issues raised in this article you are welcome to contact him at shaun.dunphy@alsbridge.eu or on +44 (0) 20 7242 0666.