Produce HR Transformation Roadmap

The transformation roadmap is a single high-level view of the key activities that are required to deliver an HR transformation programme. The purpose of the roadmap is to define the key milestones that are required to bridge the gap from current to future HR. There are many different approaches to producing transformation maps;presents two potential options.

An example of a transformation roadmap that was developed to support an HR transformation is provided in Figure 1. The challenge facing HR within the company was how to communicate the aims, objectives and key changes that would be introduced by its transformation programme to staff from a variety of professions and backgrounds. The transformation programme found that it had a large number of traditional project plans with considerable detail and high-level presentations but it had nothing that could communicate to staff and senior stakeholders what HR transformation would deliver to them, their managers and their employees.

Figure 1: HR transformation roadmap.

The company, therefore, developed a transformation roadmap which is divided into:

• streams such as skills, performance, change, structures, process and technology. However, the map could also be divided into the organisational levers, that is, technology, structure, processes and people/culture;
• timeline which can be divided into 90-day periods or years and in every period there are specific milestones for each stream;
• objectives for the programme which are located in the top right-hand corner.

This map satisfied three important objectives for the company:

• a picture of key activities and deliverables for the different work streams within the programme to provide the programme management team with a tool for viewing and controlling what would happen and when;
• a communication tool that could be used to engage with stakeholders from across the company, including trade unions, to explain the impact of the transformation programme.
• an overview of the HR transformation programme that could be used to link into other transformation programmes taking place.

HR transformation programmes will have interdependencies with other programmes and initiatives within the organisation and these can be integrated into the transformation map. Examples of common interdependencies include those shown in the table below:

Interdependency area	Description
Technology	Linkages to programmes that upgrade network capacity and PCs
Interfaces	Systems interfaces with other core systems, for example, finance, procurement (especially workflow/organisation structure)
Change programmes	Change projects in other functional areas

The above transformation can, however, also be expressed in an alternative format, as demonstrated by Figure 2. 

In this version of the roadmap, initial high-level milestones are broken down to the next level of detail. The headings of process, people and technology are used to segment the roadmap horizontally so that in every 90-day period there are specific milestones for the process, people and technology elements of the programme. Further views of the roadmap can also be developed. For example, a view that defines when the different elements of the new HR service delivery model will be delivered from a senior management, line manager, employee and HR practitioner perspective for each 90-day period provides a tangible plan by which expectations can be set across each of those groups. Through creating these different views, the roadmap becomes an important communications tool in engaging people in the programme.

Figure 2: Ninety-day milestones—key steps to HR transformation.

In the first part of the roadmap, it is often preferable to split this into individual months for the first 3 months of the roadmap in order to provide month-by-month clarity over that period. Similarly, for the later parts half-yearly periods may be more appropriate. After the business case has been approved and the roadmap becomes a working plan, keeping the first part at an individual month level of detail for a rolling 3-month period is very effective for managing expectations across the business and the programme team.

In the first parts of the roadmap, the delivery will typically be around 'quick wins' or 'early implementations'. Quick wins typically begin to put the new process and people elements in place supported by existing technology that has been tuned and modified ahead of the longer-term, enduring technology implementation (if this is what is planned). This provides the opportunity to deliver benefits early, build the credibility of the programme and encourage behaviour change throughout the life of the programme rather than in a 'big bang' at the end.

Conduct Cost—Benefit and Risk Analysis

By this stage, you should have a financial estimate of benefits and costs, and when these will be incurred. These are now brought together in a cost—benefit analysis. The cost—benefit analysis will determine the value for money of the transformation programme.

A variety of measures exist to analyse costs and benefits. These include such measures as Return on Investment (ROI), internal rate of return (IRR) and net present value (NPV). The measure that is most widely used across both public and private sectors is the NPV.

NPV is widely used because it provides a more accurate tool for evaluating costs and benefits over a number of years. A traditional analysis of a programme's costs and benefits simply adds together each year's cost or benefit and subtracts total costs from total benefits to produce a total net benefit figure for the programme. This analysis does not recognise that a £5 million saving today will not necessarily be a £5 million saving next year or the year after because the financial value of costs and benefits changes over time.

The NPV method addresses this problem of fluctuating costs and benefits by converting the value of future costs and benefits to today's actual value. The NPV delivers this analysis by applying a discount rate to the costs and benefits in future years of a transformation programme which compensates for the fact that costs and benefits will fluctuate over time.

Therefore, when using the NPV there are three key steps:

• forecast the costs and benefits for each year of the transformation programme;
• apply a discount factor to the forecasted costs and benefits for future years;
• add the cumulative savings after the discount factor rate has been applied.

The cost—benefit analysis is, however, not the only factor that will be taken into account in approving the business case. The risks in achieving the predicted benefits need to be considered. It demonstrates that when assessing risks there are a number of factors to consider, these include:

• Defining the risk. This should provide a clear statement of what will happen if the risk is not managed.
• Mitigation. This should summarise the actions that are required to manage the risk and prevent it from happening.
• Probability. This is a subjective assessment of the likelihood of the risk materialising and could change when the risk register is reviewed. Typically these are classified as:
  • 0% — will not happen
  • 25% — unlikely to happen
  • 50% — equally likely to happen or not to happen
  • 75% — likely to happen
  • 100% — will definitely happen
• Impact. This is an assessment of the impact that the risk will have upon the programme if it materialises and involves determining whether the impact is high (red), medium (amber) and low (green). The impact is also considered in three areas:
  • time, that is, will the risk extend the deadlines and time required for the programme;
  • cost, that is, will the risk require additional expenditure to manage if it materialises;
  • performance, that is, will the risk adversely affect the ability of the programme to deliver its benefits and hit its financial and non-financial targets.

Costs | Business Rationale

Benefits are only part of the story in the business case. All benefits need to be balanced with costs. When identifying costs it is important to consider both one-off costs — that is, those attributable to the delivery of the HR transformation programme — and those costs that are ongoing — that is, those required to maintain the HR transformation solution. The following table provides guidance on this classification and example technology and people-related costs.

Cost	Description
One off/transformation programme related costs
Capability development	Redeployment and redundancy costs
Programme resource	Internal and external labour costs on the programme team, also including wider business costs covering development-related costs such as design workshops, testing and training
Content	Development of initial self service content
Hardware	Server and associated implementation costs
Network	Costs of capacity to deliver HR to the desktop, telecommunications-related costs for service centres
Method of access	Providing sufficiently high-specification machines and software to access HR functionality
Licences	Initial software licence costs
Ongoing/maintenance costs
Content	Maintenance of content
Capability development	Development of skills and expertise to manage and maintain processes and systems
Support	Both IS/helpdesk support and business support
Operational	For example: software upgrades and licence maintenance costs, costs of running a service centre, outsource charges, HR staff costs, etc.

Often some of the most significant one-off costs are those surrounding the people element of the solution or the capability development costs that support the main tenet of HR transformation — that is, the move from the administrative and transactional to business partnering.

The components of the capability development costs typically include:

• Increase in resources to support senior managers. HR transformation will result in an increase in resources dedicated to senior management support in the form of internal consultancy and business partnering. Some of these resources may already exist within the organisation, some may require a capability development programme, and others may need to be recruited externally. The cost implications are that whilst a smaller number of business partners may be required than the current HR generalist population, the total employment costs for this group may be as great as or greater than the current HR generalist population.
• Redundancy and redeployment. The combination of a reduction in administrative and transactional resources and an increase in consultancy and business partnering resources implies a reduction in the requirement for traditional HR management and HR transaction support. Clearly, some HR managers will move to business partnering roles and some transaction focused staff may move to service centre teams, but this will not be the case for all, and provision needs to be made for the costs of redeployment or redundancy.
• An increase in the capability and skills of HR staff. The implementation of new strategic roles, such as business partners and new roles in the service centre, such as helpdesk support will require HR staff to adopt new ways of working. These roles will also require new capabilities and skills, which HR staff may need to develop. It is, therefore, important to understand existing capabilities and to estimate the cost of investing in development courses and programmes to address any capability gaps.
• An increase in line managers' capability. Investment in line manager capability and increasing the amount of people management undertaken by the line can be a key factor in some HR transformation exercises. The degree to which line managers have become or are becoming responsible for people management processes such as sickness absence, performance management, career development and managing disputes varies across organisations. In some organisations, there is an increasing move to develop line managers into people managers who require limited support from HR. In other organisations, this is not the case.

However, regardless of the degree of people management responsibilities transferred for line managers, it is important to clarify to line managers exactly what people management processes they are responsible for delivering. It is, therefore, important to define the role of line managers and understand the level of training and support that line managers require to successfully deliver this role. This can include:

• training to use self service, delivered either through a classroom, interactive Web training or computer based training packages;
• training on how to manage specific issues such as sickness absence or performance management. This can be delivered through a classroom or through on line courses where line managers are shown scenario's and asked questions relating to the scenario's and given direction on correct responses to different situations and pressures;
• management and leadership training or training on such skills as how to manage conflict and resistance;
• HR guidance training where managers are advised through short courses on the people issues that they will have to manage, given the latest policy guidance and shown where, when and how to access support.

Capability costs are, however, only part of the investment requirement. HR transformation may also require an investment in HR technology. This provides a good opportunity to engage with colleagues from the IT function at an early stage. Key questions for IT include, do you enhance what you have by upgrading or is a new system the only feasible option? Working with your IT colleagues here will assist in getting the right solution and builds buy-in with the IT community.

Technology providers will usually be pleased to demonstrate their products and this can be an excellent way to capture the imagination of colleagues. However, do make sure that the technology provider covers their implementation strategy and other non-technical areas, as the technical elements of the solution are only one part of the costs. Key technology costs include:

• Labour. This will involve HR, IT and business staff as well as, usually, external consultants on the core programme team. It is also important to estimate the costs of providing cover or backfill for the HR and business people seconded to the programme team which may be needed and not to overlook 'hidden' costs such as HR and line people participating in workshops, testing and training.
• Developing content. HR technology is of no use unless the content supports the new ways of working, for example, online learning materials or performance management tools. There will be both one-off and ongoing maintenance costs associated with content.
• Software licences. It is important to consider the net effect of these, which is netting them off against the costs of the systems that are being removed. This is usually done by including the removal of the other systems in the benefits calculation.
• Hardware costs. Look out for opportunities to share costs and economies of scale with other programmes that are in progress.
• Method of access in order to interact with an HR system. Clearly, it is critical that employees have access to it. Costs will potentially need to cover laptops, desktops and other mobile devices, kiosks and possibly even home PCs, depending on the access solution defined.
• Ongoing support and maintenance of the solution. There will also be contractual costs if there are any outsourced arrangements here as well as the costs of system upgrades and other maintenance going forward.

Case Study

The HR leadership team of a UK government department wanted to seek ways of reducing resources engaged in routine administrative tasks, and to concentrate resources on supporting departmental managers in delivering government targets.

The solution was to implement new HR technologies and a new model and governance structure for the HR service. The key changes within the HR service included:

• re-engineering HR processes to use HR technology and self-service tools to improve the performance of administrative processes and reduce costs;
• the development of an HR shared service centre;
• the creation of expert policy teams and centres of excellence to harness scarce HR expertise and provide strategic HR advice to the Board;
• the establishment of a small group of strategic business partners to work with leadership teams within the department's different business units.

Intangible Benefits | Business Rationale

Intangible benefits can often be estimated but not attributed to particular budget holders. They would not normally be included in the cost—benefit analysis, as accountability for the delivery of that benefit is diffused across the organisation, making it extremely difficult to attribute the achievement of a benefit to a particular change that the HR transformation programme has made.

Again, if we consider a move to on line recruitment, there should be a reduction in the time from a vacancy arising to when a new recruit arrives, starts their induction process, and subsequently contributes to the business. In this case, it is harder to pin down to whom this benefit accrues. The following table shows examples of intangible benefits for the same selection of HR services' constituent processes. However, whilst beneficiaries are identified, it is at the business function rather than budget holder level.

HR service	Constituent process
Resource management	Recruitment and selection
People development and performance management	Training and development
Retention and reward	Reward strategy and reward levels

Intangible benefit	Beneficiary
Reduced time from vacancy to hire	All business units and functions
Improved match of skills to roles	All business units and functions
Improved retention	All business units and functions

Whilst intangible benefits are not included in the cost—benefit calculation, beware of thinking that they are not as important as tangible ones. Intangible benefits that contribute to the development of improved public services for example, are often strategically significant. Therefore, it can also be useful to further distinguish intangible benefits in terms of their strategic importance. In the case of transforming the HR function, these are often the benefits associated with how the HR function will add value to the products and services that the company delivers to its customers. Often the benefits sought in this area are delivered through the business partner role, and it is here that measurement of these benefits usually takes place. However, this area of benefit is one that does not lend itself directly to quantitative measurement, and comparative and qualitative data are often used here.

Having considered the changes that each process will undergo and determined what the benefits are, whether each benefit is tangible or intangible and who the beneficiaries are, the next step is to determine when you expect each benefit to be delivered and what its magnitude is. The milestone plan provides a starting point for estimating when benefits will be achieved, taking into account the fact that usually benefits are not realised immediately upon implementation, but there needs to be a period of transition.

Estimating the magnitude of benefits depends on the nature of the benefit. For example, reductions in cost may be calculated by estimating how much less effort the new way of working will involve, and multiplying that by the number of transactions made and unit cost of performing each transaction. In order to do this, it is critical to have baseline measures of process performance from which estimates can be made.

In determining and estimating benefits a number of assumptions will be made which need to be recorded. If these assumptions change through the course of the programme then that particular benefit may need to be revised. Taking the Web recruitment example, typical assumptions include:

• How much do you plan to use the Web to recruit rather than agencies?
• Will agencies perform any pre-screening?
• Will you to continue to use specialist agencies?

Once the benefits identification and estimation process is complete across all process areas, then the individual benefits should be aggregated together to determine if the targets set at the macro-level can be supported by the benefits at the detail level. Typically, this process of aggregation and benefits identification and estimation is iterative.

Finally, one of the main levers for influencing achievement of the targets is flexing the scope of HR transformation. Clearly, increasing the scope should increase benefits and decreasing the scope should reduce benefits. However, this will of course have an effect on costs.

Tangible Benefits | Business Rationale

Tangible benefits can be measured and attributed to the transformation programme, and crucially to particular budget holders. Therefore, as well as identifying the benefit, it is important to determine the recipient or recipients of that benefit and ensure that they buy-in to it, as they need to be accountable for the delivery of that benefit.

For example, if we consider online recruitment, who will be the beneficiary of reduced agency fees: the HR function or a business unit? The answer depends on how costs are allocated in the organisation but, whichever it is, a tangible benefit will accrue to the budget holder(s) for those costs. The following table shows examples of tangible benefits for a selection of HR services' constituent processes and potential beneficiaries.

HR service	Constituent process
Resource management	Recruitment and selection
People development and performance management	Learning and development
Retention and reward	Reward strategy and reward levels

Tangible benefit	Beneficiary
Reduced agency fees	Business unit heads
Reduction in external training costs	Vice President, L&D
Manual reward data processing eliminated	Compensation and Benefits Manager

Define Benefits and Associated Costs

A key element in establishing the value of HR is to demonstrate how a transformed HR service will better enable the organisation to deliver its overall goals and objectives. It is, therefore, important that the benefits of HR transformation are clearly linked to the corporate and HR strategic objectives. The process for establishing this link is an iterative one, working from the whole to the part. The process starts with the strategic objectives for the organisation and involves:

1. taking the strategic objectives for the organisation as a whole and identifying the customer requirements for the HR service;
2. identifying how the HR transformation objectives will address customer requirements;
3. identifying the benefits that will be delivered by each of the HR transformation objectives.

The above approach will provide a clear flow from strategic objectives to transformation objectives and benefits and demonstrate how the transformation programme will support the organisation's overall strategy and goals.

An example of how to link HR transformation objectives and benefits to the organisation's overall strategic benefits are provided in the case study below.

Case Study

An international services company needed to clearly demonstrate how its HR transformation programme would support the company with the delivery of its corporate strategy. The HR transformation programme began by taking each of the strategic objectives and defining the requirements for the HR service, as illustrated in Figure 1.

 

Figure 1: Defining customer requirements.

The transformation programme then identified how the programme's objectives would meet the strategic objectives and customer requirements, as demonstrated in Figure 2.

 

Figure 2: Aligning customer requirements with transformation objectives.

Finally the transformation programme linked the benefits of HR transformation to provide a clear flow from strategic objectives to benefits, demonstrating how HR transformation would support not just HR but the entire organisation (Figure 3).

 

Figure 3: Aligning benefits.

When defining benefits it is also important to attach measures and targets to ensure that these benefits can be tracked and realised. An example of measures and targets for benefits could be a reduction in the HR budget of 30% or a change in the ratio of HR staff to employee base from 1:70 to 1:150. The key in setting measures and targets is to make them challenging enough so that it is not possible to achieve them without significant change (otherwise why would you embark on the HR transformation?) whilst ensuring that they are realistic enough to be achieved, as this will be a measure of the success of the transformation. To assist in setting measures and targets it is often helpful to compare yourself to leading practice found elsewhere. Benchmarking where you sit in comparison to other organisations will give you an indication of what would be realistic targets for your transformation programme. However, the risks with using benchmarks is that you may have to dig very deep into another organisation to find whether you are comparing like with like. So we advocate using benchmarks as a guide only, and spending enough time collecting your own baseline data so that you know where you are now and can then set targets in relation to that baseline. Once the targets are set, the next stage is to break them down to determine the detailed benefits that will collectively contribute to meeting the overall target. 

Before considering what those benefits are in detail it is worth spending some time defining what we mean by a benefit, particularly the difference between tangible and intangible benefits.