It's hardly surprising if reviewing sequential annual human resource (HR) plans creates, in many organisations, an eerie and ultimately deeply disturbing sense of deja vu. The way long-time human resource practitioner Peter Smith sees it, the human resource processes have been built and rebuilt, discarded and reinvented so frequently the work starts to seem like a deranged obsession.
Small wonder each new proposal makes senior executives wonder if the past is coming back to haunt them.
Fortunately there is a way to reduce the costs and improve the value of HR activity, as Smith discovered during his time with Shell Australia.
If the endless redevelopment of the HR process suite has provided discernible benefit to only a small minority, Smith says an answer is in sight. And if perpetual modifications to processes typically not only fail to deliver anywhere near the substance promised but also add to cost, frustration and bewilderment, Smith says that need not be the case. And he says the first thing to do is to abandon the old mind-set about HR application development.
"The search for the HR 'Holy Grail' should be replaced by a quest to deliver simple, common sense approaches to people management; by an aggressive drive to eliminate non-value adding HR processes; and to streamline, integrate, simplify and, where possible, automate the rest," Smith says. "Put very simply, we need to answer three fundamental questions: What do we need? What have we got? How do we close the gap?"During his time at Shell, Smith says he learned many lessons about the way to halve the cost and double the value of HR. He started in Shell Australia's corporate HR information systems group, where he developed a decision support tool. Then he moved on to head up an international project to model best practice in HR business processes/systems, with the aim of reviewing and dramatically simplifying HR processes. Both projects delivered tangible benefits to Shell.
Now managing director of Melbourne-based HR process consulting and decision smartware firm HRPartnering, Smith says the lessons he learned are vital, since it is rare to find a business not under pressure to reduce the costs or improve the value of its HR activity.
Indeed, those involved in HR information, processes or systems are being challenged on many fronts. There's demand to replace HR bureaucracy with tangible business value, to eliminate complexity, to meet the emerging business capability needs of the organisation, and to align to the changing priorities of the business and its people. At the same time, there's pressure to share resources and consume fewer of them; or to meet the challenges of either decentralising or converging business structures. And Shell has gone a long way to achieving many of these goals.
Three years ago, Shell Australia recognised a line management need to improve the decision-making process involved in resourcing decisions. The existing human resource system wasn't influencing important decisions because it couldn't bring key data items together at the point where the decision was being made. Traditional HR systems are highly transaction-oriented. While they handle pay, superannuation and leave well, Shell wanted to unlock the data to do with business capability -- people, jobs and competency.
Increasingly, organisations are demanding better value from HR at a reduced time and cost impost. Smith says the agenda for Shell was to improve the value of information, process and systems initiatives while driving down the time and cost burden of HR. "A paper-based process costs a lot of money," says Smith.
"The question is: what value does it deliver when there's rework, duplication and effort in creating documentation that ends up in a cupboard delivering marginal value?"At Shell, those traditional costs included the costs of a supervisor and an individual getting together to have a career discussion, a performance management discussion or a discussion about training/development needs. "That might have solved some micro issues about that individual's performance and requirements. What it didn't do was deliver the ability to aggregate that information to determine, across the business, whether we had the right people in place -- and if not, what we would have to do to build the business capability we were after," Smith says .
In other words, line managers were finding that paper-based career management, performance management and other processes offered little help when it came to decisions about who to recruit, who to promote, who to move laterally, and whether the right skills were in place to run the business. At the same time, the company wanted to address employee frustration at the lack of information available to help with career decisions.
"The difficulty was that with the paper-based processes, the data supporting those decisions was all locked away in cupboards. Yet in a multi-division environment we were trying to share people across business boundaries and allow people to aspire to jobs outside their immediate area," Smith says. "Those traditional paper processes -- paper-based career plan, or paper-based performance appraisal, or paper-based succession plan -- were rarely able to influence those decisions that affected people crossing business boundaries, and people expressing interests and aspirations beyond where their supervisor could influence," he explains.
"In the Shell experience, paper-based processes fundamentally don't affect the decisions. Decisions are taken real time, not in batches. The real value of collecting information about performance, career and succession is to have all that information accessible at the point a decision is being made. It improves the quality and objectivity and certainty of the decision," says Smith.
To overcome the problems, the company defined the need for a decision support system (DSS), a tool it developed on an ongoing basis. The DSS was written in MS Access over a 12-month period and focused on the 400Ð500 staff in the marketing areas.
"The data focused particularly on the issues of who do we have working for us? What are their skill sets? What are their interests and aspirations? What are the jobs that we have that need to be filled?" Smith says. "The critical outcome was that now data -- which had been traditionally locked away in cupboards -- was being delivered [to the desktop] and directly influencing the decisions that were being taken at management meetings and succession management conferences."According to Smith, at the strategic level, the DSS is helping Shell's HR processes deliver four primary benefits. By providing managers with access to necessary data, and giving staff the ability to influence the decision process by ensuring information they input gets through to decision makers, the system is helping manage the contribution people make to the business.
By using competency as a unit of measure, the DSS is helping to build the people capability needed to achieve Shell's business goals. "The system lets us ask how much competency is required to run the business. 'I need 300 units of marketing expertise to run the marketing department. I've got 250. I've got a gap, how do I close it?' " Smith explains.
By making it easier to evaluate the human resource implication of a move from one sort of business to another, or the creation of a new department, the system is responding to the emerging needs of the organisation to help achieve tomorrow's business goals. And by improving objectivity and the influence of objective data over decisions, it is helping to reduce the uncertainty and risk involved in managing people.
At the same time the system is meeting major objectives at the tactical and operational levels. These include the need to operate the HR processes at least cost; to meet the growing needs of staff for openness and transparency; to accurately and cost-effectively deliver the transactional needs of the reward and recognition processes; and to reduce the time and cost impost of the administrative implications of HR processesAutomated bureaucracyAccording to Smith, many HR systems have merely automated what were already highly bureaucratic, non-value adding HR processes. Indeed, because of their set-up and ongoing costs, in some implementations the latest generation of systems have increased rather than decreased the gap between value and cost. He says there are some key questions an organisation must ask when designing new HR processes or implementing new HR systems. Will this new process, system, data item, screen or report or whatever* be actively adopted by the business? (Or is it an HR indulgence?)* materially improve a decision that must be made?* dramatically reduce the cost of transaction processing?* lower the unit-rate cost of the process or transaction?And since HR processes travel backwards and forwards through three distinctly different but highly inter-dependent stages -- decision making, administrative support and transaction processing -- processes and systems must be designed to ensure each of these three stages is equally well satisfied.
The project Smith managed in Holland to implement a fundamental review of Shell's HR processes taught him one key lesson: HR processes are fundamentally simple. Indeed, in essence, he says, the ability to deliver in HR is as much to do with creating sensible and simple processes to address issues like reward and recognition, career management and succession management, as anything else.
The process review project sought to identify the fundamental business processes to do with people management and find ways to eliminate non-value added activity, to streamline, simplify and then automate with an integrated systems approach. "It was going right back to the drawing board and asking what it is we want these human resource processes to deliver in terms of value. And asking how can we do it in a way that delivers the value across international boundaries where traditionally everybody has done things in different ways," Smith says.
The design project spanned the last six months of last year, with an inter-business team of about a dozen people locked away to identify ways to invest in integrated business packages. Their ultimate goal was to have a fundamental rethink about processes, design a common suite of activities and get each business to sign off on them. "Then all you've got to do is implement the technology once and roll it out," Smith says.
Systems design work is now under way. Over time, those systems will be rolled out across Shell's businesses internationally. Smith says the business case was very strong. This was a project that would eliminate the need for numbers of companies to try to solve the same problems in numbers of ways. Instead the idea was to get the processes right the first time centrally, so that all the companies could piggyback off that development effort. "Such piggybacking is increasingly common in Shell" he says. "It's part of an integrated process and package roll-out strategy that they've adopted worldwide."Since those processes had to span international boundaries, the team expected there would be a need to have at least a certain number of different, country-specific processes. Not so. "We found there was an enormous core, which we ended up calling the backbone, of common processes that were the same in each business," says Smith. "I think the lesson for other companies to learn from that is that whatever the nature of your business, the HR processes are fundamentally the same. Their [HR's] objectives are fundamentally the same, and often the differences are indulgent rather than fundamental."Smith says the process modelling project clarified for him that a breakthrough in the cost/benefit of HR processes and systems is realised through:* an aggressive drive for integration, simplicity and commonsense within the HR process suite;* alignment of HR processes and systems with the business, other business processes and integrated information/system strategies;* open access to reliable data and processes by stakeholders (staff, supervisors and management);* elimination of bureaucracy, inconsistency and unnecessary complexity;* creation of an HR backbone of common processes and data;* harnessing the benefits of commonality;* sharing resources and consuming fewer of them; and* seamless sharing of data across a business.
The project also clarified that achieving a common approach to the core set of HR processes across a diverse, international group vastly facilitates business convergence and benchmarking.
"That's a real business benefit," Smith says. "If in four or five different countries I'm undertaking the process the same way, then I can look for opportunities to converge what had been duplications of effort into central administrative activities.
"Even if I don't centralise my activities, I can leverage off the same technology. So a system can sit in Melbourne and somebody can be using it in the United States and never know the difference.
"But if each of us has even just a slight variation to the way we go about things, then everybody is going to want a slightly different technology enablement. If you can squeeze out the stuff that is absolutely not adding value by being different, companies can lever off that process design work.
They get one system when they might have had four or five. One way of doing things instead of four or five. One group of people delivering low-cost administrative support rather than four or five all doing it slightly differently," Smith says.
At the same time, a common approach still permits practices responsive to the local market. As long as the core or backbone processes are the same, there is still scope to make systems responsive to local tax laws and local legislative requirements. "Do you need a fundamentally different system to support that?" Smith asks. "No. Are you actually operating a different process? No. All you're doing is changing a couple of the business rules in the process, to allow a different decision to come out the other end.
"That is not the same as indulging individual departments within large corporations, that want to operate in a different way to other units," Smith says. "People must look at those fundamental values the HR process is supposed to deliver, and find ways to create commonality rather than divergence, because divergence just has an unbelievable multiplying effect on cost."The bottom line, Smith says, is to create HR processes that are sleek, fast, accurate, value adding and least costly by combining aggressively re-engineered (simplified and integrated) processes with today's technology. Oh -- and since the new generation of HR systems can be dangerously seductive without necessarily adding real value, Smith says that while it may sound glib, not taking HR too seriously is a great starting point.
"I don't see it as a parapsychological arena that we're working in," he says.
"I treat HR as an asset management process, where there needs to be congruence between the needs of the individual and the needs of the business.
"Do some basic things really well and I reckon you are 80 per cent of the way there, and that's where I reckon you should stop. Leave the psychologists outside. Just not taking people for granted solves 80 per cent of the problem," he says.
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