Business Drivers Framework

When Should We Use this Framework?

HR transformation and the envisioned new world of HR must be hard wired to the critical business issues. Our starting point is, therefore, to consider critical business drivers. Why? Without this thought, it will be impossible to:

• make a coherent case for HR transformation;
• identify HR's priorities;
• link the new world of HR to the realities that face your business.

Put another way, identifying your critical business drivers helps the HR function to answer:

• What is wrong with the way things are?
• Where is the focus for the future?
• How will the proposed way of delivering HR help the business to perform more effectively?

What Does the Framework Look Like?

Figure 1 represents visually the business drivers framework. This framework has been used in the private, public and not-for-profit sectors; hence its broad applicability has been proven.

 

Figure 1: Business drivers framework.

The framework considers the three main drivers of organisational effectiveness: revenue growth, cost efficiency and brand identity. Each of the drivers is then considered from three perspectives (you may wish to tailor these, but we have found that they tend to work well).

For revenue growth we consider:

• Customers, who are the recipients of the products/services provided by the organisation (who are they, how do we retain them, how do we attract new customers in existing markets and will we need to move into new markets and attract new types of customer?),
• Geography (where do we operate now and where are we likely to operate in the future?),
• Innovation around new products and services (what do we need to do differently to compete effectively or satisfy customer requirements?).

For cost efficiency we consider:

• Productivity (how productive are we compared to relevant benchmarks? Where do we need to raise performance and productivity? How well do we measure and reward productivity?),
• Work process efficiency/effectiveness (how well do key processes work? What are the areas of strength, areas for improvement and future needs?)
• Capital project returns (What are our key capital projects? What is our track record in delivering anticipated benefits?).

For brand identity we consider:

• Brand values (what do we stand for as an organisation and how well do we demonstrate our values internally and externally?),
• Image and reputation (what is our current image and reputation, what might undermine it and how can we protect/enhance it?),
• Consistency (to what extent are we acting in a consistent way with our customers and employees and how might future challenges help/hinder our ability to deliver consistently?).
  
  

How Do I Use this Framework?

This framework is best used in a workshop setting. We have also found it useful in one-to-one discussions to get individual perspectives and stimulate debate, but ultimately there needs to be a sharing of perspectives on critical business drivers, and this is best achieved when people are in the same room and are able to engage with one another.

To have a meaningful discussion about business drivers requires some preparation. You should draw on current knowledge of the business to populate these areas in advance of the workshop or, if you are confident that workshop attendees will have sufficient knowledge, you can populate these areas at the workshop. Where we have doubted that sufficient information will surface at a workshop, we have used a combination of pre-briefing people, inviting a senior internal client to talk about key organisational issues, and allocating pre-work so that participants can research an area.

Once there is a shared understanding of the critical business drivers, this then enables the key HR leaders and stakeholders to address three questions:

1. What are the critical people priorities that emerge from these business drivers?
2. How well are we currently equipped as an HR function to deliver these priorities?
3. How does the HR function need to change to help the business succeed?

Discussion of these areas will move you a long way towards defining the HR transformation agenda and priorities.

Going About Envisioning | New World of HR

Perhaps the most important thing we have learnt about this phase is the importance of actually doing it! Many HR functions embark on the HR transformation journey without really engaging business colleagues and the broader HR team in shaping a vision for HR.

Here are the three principles that should underpin your approach to envisioning:

1. Adopt a systems mindset. HR transformation is about change, and change cannot be effected in isolation; for example, technology-driven change inevitably impacts structure, processes, capability and culture. Change in HR impacts and is also impacted by change in the wider organisational system. 
2. See HR transformation as a process that needs to be worked through step by step. This process is not predetermined. There is no schematic approach that sets out in advance every step: a form of 'painting by numbers' approach to change. The broad stages of change are clear and are reflected in the change cycle but the detailed steps needed to effect change will be unique to each organisation. When we refer to 'transformation', we refer to a significant shift in changing the way HR contributes in organisations. But this will not be an end-game — a final destination. There will always be another step beyond.
3. Focus on the unique circumstances of each business. Learn from the experiences of others, yes, but do not become obsessed with 'me too' external benchmarking. Too many organisations blindly follow supposed 'best practice'. What is right for one organisation is not always right for another. The most powerful results will be driven through a strong identification with the unique circumstances faced by your organisation at this point in its history. This highlights the need for an approach to change that is highly contingent, with the focus being on shaping HR in ways that will help the business now at this point in time.

So how do you combine the trends described previously with the practical steps set out above to ensure purposeful envisioning? In our change tool kit, we have a number of tools and frameworks which organisations have found helpful in creating an environment for effective envisioning.

Five Strategic Opportunities | Envisioning the New World of HR

The proposition that HR needs to focus less effort on transactional/administrative tasks and become more strategic in focus is not new. Over the past couple of decades, much has been written about transition to a strategic HR function (and, to be fair, in some organisations a great deal of progress has been made). Yet in too many organisations, the identity of HR remains firmly in the transactional/operational/advisory zones — comfort zones that often suit HR practitioners and line managers alike.

Yet the opportunities for a more strategic and value-adding contribution from HR are probably greater now than ever before.

Here are five opportunities that explain why:

1. Many Critical Organisational Issues are About People/Organisational Development

Some examples of these issues are as follows:

• developing organisational cultures that will adapt quickly to external change;
• performing despite economic downturn;
• raising organisational, team and individual performance year on year;
• improving customer service;
• delivering operational efficiency;
• securing business benefits from capital investment/strategic projects;
• attracting and retaining prized staff;
• reducing overall personnel-related costs/managing workforce costs more effectively;
• improving management 'bench strength';
• dealing with increased globalisation/scale/complexity in organisational life;
• increasing organisational flexibility;
• driving higher levels of employee engagement;
• improving the people management capability of line managers;
• encouraging and capturing innovations.

The list could go on. Hopefully, you will recognise the relevance of many of these issues to your business. The door of opportunity stands open for HR to be an active contributor in each of these areas.

2. Advances in Technology

There are now many major players that offer enterprise-wide technology solutions. This has enabled the HR function to make its business case for technological investment alongside other support functions, such as finance and procurement. Although there is still likely to be debate in each organisation concerning the extent to which Web-based HR will be adopted, there is now sufficient critical mass to give organisations genuine cost-effective alternatives. Additionally, the core HR Information System (HRIS) backbone offers in-built 'leading practices' in HR processes and the ability to apply solutions globally. HR not only has the opportunity to utilise technology, but now the means to make a convincing business case for this investment as well.

The creation of Web 2.0 and social networking provides HR with even greater opportunity to use technology to engage with people more effectively.

3. New Organisational Alternatives

In the past two decades, the management consultancy sector has grown rapidly, offering genuine alternatives to the in-house HR function. At the strategic end, consultants are increasingly stepping into the HR strategy and organisational development spaces where the in-house HR function either has insufficient capacity, or lacks sufficient capability to make a full contribution. At the operational level, there are now many sourcing alternatives in the areas of recruitment, training and development, reward, HR policy development, etc. At the transactional/advisory end, there are now serious players offering HR outsourcing, not just from a technological infrastructure/transactional perspective, but increasingly pitching at a full service handling back office recruitment, learning and HR decision support/advisory functions. 

4. Research Linking Developed People Management Practices and Performance

There is now a growing body of research linking progressive people management practices to superior organisational performance. For example, found that firms with the greatest intensity of HR practices that reinforce performance had the highest market value per employee. Their thesis is that improving HR practices can impact enterprise market value quite significantly. Their conclusions are hugely challenging for organisational leaders: that the best firms achieve strategic and operational excellence in HR.

5. Clearer Functional View on What a Strategic Contribution Means

The emergence of the HR management movement and the contributions made by academics (and especially Dave Ulrich) have helped HR find a greater sense of identity. The HR roles set out by Ulrich (see Figure 1) have found resonance within the HR community, and have become the starting point in exploring what business partnership means for HR.

 

Figure 1: HR roles.

Whilst the above developments suggest that there are some clear opportunities for HR, the challenge for each HR function is to define for itself a way of making a value-adding contribution that is right for its organisation. In a nutshell, there are no 'off-the-shelf' solutions, and unless HR is clear about the way it can add value, the threat is that the business will turn elsewhere for that contribution and the in-house HR function will become insignificant and impotent.

It is also true that aspiring to be in the top two quadrants of the Ulrich model without delivering effectively in the transactional/administrative area will not give HR business partners sufficient credibility with line managers for there to be a serious conversation around strategy and change. HR functions must still deliver on the basics if value is to be added and credibility gained.