The HR Operating Model (HOM) refers to a structured framework or approach used by organisations to manage their human capital effectively. It encompasses various components such as talent acquisition, HR, compensation and benefits, training and development.
The model typically aligns with the organisation’s overall business strategy and goals, aiming to optimise the workforce to achieve desired outcomes.
The model chosen by an organisation should be tailored to its overall business strategy and goals, while also considering best practices and emerging trends in the HR field.
History of HR
HR emerges into the modern organisation with the formation of the first Personnel Department around 1900. It was during the Industrial Revolution that modern HR practices started to emerge. With the rise of factories and mass production, the need for managing large numbers of workers became apparent.
During the period around 1950-1970, HR functions began to formalise and specialise, focusing on administrative tasks such as payroll, benefits administration, and personnel record-keeping. The emphasis was on compliance with labour laws and managing employee transactions.
Whereas in the late 80s the predominant HR Operating Model was the three-legged stool of the Ulrich Model. Ulrich started researching HR from the perspective of customer satisfaction and skills required in HR.
Drivers of HR Transformation
In 2010, with the clouds of the financial crisis still firmly in our minds, significant cost-cutting programmes were implemented, as well as cost savings in the HR function itself. Year on year the focus on HR cost and HR service quality continued. The drivers of HR transformation in business were:
- Adjustment of HR strategies to high cost / low-cost markets.
- Simplifying the HR model by standardising HR processes and policies.
- Enhancement of leadership.
- Building and managing of capabilities globally.
- Driving higher levels of productivity and performance.
Strategic HR Model
Nowadays, the core of the most chosen HR model by organisations consists of HR Business Partner (BPs) roles, supported by a central team and the platform for transactional services, and a group of specialists in Centres of Expertise (COEs). HR resources were taken out the teams, and functions were created in the central COEs and in HR services provider team (Shared Services in-house or outsourced).
The methodologies used are lean and agile, and are being applied to also other areas of business, including the HR function.
The HR BPs are business coaches with a full range of specialist tools at their disposal. They provide input for strategic analysis to business management at group and business unit level. The partners translate strategic choices into HR consequences.
The HR advisor/ service provider includes a wide variety of roles – both internal and external to the organisation – and are placed at the center of the model where they should be as the focal point for delivery of HR capabilities. They deliver excellent service at lowest possible costs, with work instructions and agreed services level agreements.
Communities / Centers of Expertise (COEs) drive leading practices and processes by applying deep HR functional domain knowledge, a strong understanding of business imperatives, and market trends to deliver thought leadership.
Future Challenges of the HR Model
The advent of technology, particularly HR information systems (HRIS), revolutionised HR practices by automating routine tasks, improving data management, and enabling more sophisticated analytics. This facilitated better decision-making and increased efficiency in HR processes.
More recently, there has been a shift towards prioritising employee experience and well-being in HR models. Organisations are increasingly focusing on creating positive work environments, promoting work-life balance, and supporting employee mental health to attract and retain talent.
Inspired by principles from software development, there is a growing trend towards adopting agile and adaptive HR models. These models emphasise flexibility, collaboration, and iterative approaches to HR processes, enabling organisations to respond more effectively to changing business needs and market dynamics.
In the end, not all HR activities are suitable for management via self-service tools AI, or automation, primarily due to the necessity for local expertise or adherence to specific language requirements.
Efficiency and cost reduction have always been part of the HR evolution. However, in today’s context of a global economy, and shifting demands, organisations should be spending more time to carefully selecting their HR model when scaling their businesses.
Is your business prepared for expansion? Allow our team of experts to assist you at every stage of the scaling process. From strategic planning, selecting the right HR Operating Model, to seamless implementation, ensuring a smooth transition towards a future of success. Reach out to us today.