2021 HR Transformation Report

2021 HR Transformation Report

Welcome to our 2021 HR Transformation Report. This research presents insights and
data for more than 200 companies around the globe representing every industry, ge-
ography and size of organization.

We have conducted this research to provide you with practical advice and guidance
as you consider your organization’s HR transformation. We were pleased to find
that many organizations have made strong progress In their transformation efforts.
However, our findings also show that most organizations overestimate what they will
achieve and the speed with which they will achieve it.

On behalf of myself and the research team at Talent Strategy Group, we thank you for
your interest in this report. We appreciate the opportunity to serve the human re-
sources community in this way.

Best regards,

Marc Effron
President
Talent Strategy Group

Our Report in Brief

The CHRO’s Guide to the Report and Action Planning ..............2
HR Transformation Summary............................................................6
HR Effectiveness Changes.................................................................8
The HR Team....................................................................................... 12
Change Drivers and Direction........................................................ 14
HR Technology.................................................................................... 17
About this Report & Participant Data............................................ 19

Talent Strategy Group

ADVISORY | EDUCATION | PUBLISHING
www.talentstrategygroup.com
1
The CHRO’s Guide to the
HR Transformation Report
CHROs should clearly define transformation
success and build HR strategic capability earlier
to get more value from HR transformation

Our first HR Transformation Report brings generally good news but with warning
flags and specific guidance for CHROs who are planning a transformation. We
find that many companies achieve their HR transformation goals but often more
slowly, less completely and with less satisfaction than they expected.

Those findings, detailed in this report, provide three clear insights for how CHROs
should manage their approach to HR transformation.

Findings and Recommended Actions

Finding #1: HR leaders were less satisfied than expected with HR’s effectiveness
after the HR transformation. There were meaningful gaps between HR’s predict-
ed effectiveness and the post-transformation reality.

Take Action:
• Set collective and individual accountability for HRLT members: Your HRLT
should have a collective metric around HR Transformation success that influ-
ences their compensation. The measure(s) should be the specific transforma-
tion goal(s) that you set before transformation and that your CEO is holding
you accountable to deliver. We typically see metrics around cost or headcount
reduction and a measure of client satisfaction with HR.
• Clearly define post-transformation HR standards: Identify the three key per-
formance standards for each sub-function (TM, TA, DE&I, Regional HR, etc.)
post-transformation. These should be measurable standards with both the
metric and measurement tool identified. For example, “Talent acquisition will
manage candidates and hiring managers to ensure 95% candidate satisfaction
with the recruiting process. This will be measured with a 5-question survey ad-
ministered 60 days after Day 1. Scores of Agree and Strongly Agree will count
towards the 95% standard.”
• Be transparent about the future state with your internal clients/customers:
Give your internal customers a specific, 1-page, From/To description for each

2
 sub-function that describes how you’ll provide services to them post-transfor-
mation.
Make this an operating document, not a marketing document. If they will no
longer have an HR representative at their location, explain why and how they
will access HR services. Do not spin this as “easy 24/7 answers right at your
fingertips” unless they’ll have a better experience interacting with your technol-
ogy than with your HR leaders.

Finding #2: HR leaders took longer than expected to perform in the new organi-
zation. This finding is not surprising given the minimal training that most respon-
dents reported their HR teams received to perform in the transformed organiza-
tion.
Take Action:
• Make key HRLT changes before the transformation: We often hear CHROs say
that they need to retain their team members until the transformation is
complete and they will make changes at that point. Make those tough calls
before the transformation so that you have the right team members to guide
you through it and accelerate your Journey out of it.
It makes more sense to delay your transformation for 6 months to make need-
ed HRLT changes than to bring in HR leaders afterwards who have to live in a
system that their predecessor or a consulting firm designed.
• Conduct mid-transformation, “dry run” training in the new operating model:
The statement, “I’m sure our HR leaders can figure out how to work in a ma-
trix” accurately predicts a challenging post-transformation environment. There
is nothing natural about competing with peers for resources, decision rights
and authority. Even absent this type of change, your HR team needs sufficient
rehearsal in all elements of the transformed organization, not just your new
technology.
Conduct live scenario training with your HRLT where you practice making
decisions in the new, realistic scenarios that will occur after the transformation.
Examples include: How will your regional HR leader make a compensation
decision now that you have a centralized compensation philosophy? How will
talent management help an HRBP produce an internal candidate slate with 48
hours of request?
Identify process gaps and disagreements to fix before the go-live date.

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Finding #3: HR leaders over-estimated the improvement in how the HR orga-
nization would function post-transformation.
Take Action:
• Define what will improve in HR leaders and how: A common refrain in HR
transformation is that this effort will free up HRBPs to focus on strategic ac-
tivities. If this is your objective, write out in long form what that looks like and
exactly how it will occur. Use our category list on page 10 to guide that dis-
cussion. Your goal is to understand the exact mechanisms that will improve
individual leader’s strategic capability.
Our experience suggests that no magical transformation occurs from HR
tactician to HR strategist simply because tactical work has been removed
from someone’s plate. Transformation may provide HRBPs with the time to
be strategic, but it does not provide them with the skills, mindset and experi-
ence. To our earlier counsel, selection and training are far more essential in-
gredients to ensure highly competent HR teams in the transformed function.
• Deliver comprehensive training to build strategic capability: Deliver a com-
prehensive development program to the HR team to support the individual
transformation described above, and to align the capabilities and mindsets
of all your HR leaders. This training should help them to understand and
practice the realities of strategic HR, with a focus on talent-building, map-
ping strategic needs and developing their individual influencing and consult-
ing abilities.
• Conduct a post-transformation “metrics and loose ends” session: This ses-
sion should occur a few months after completing the transformation, once
you’ve had a chance to gather data on your key metrics and listen to your
key customers. The purpose of this session is to objectively evaluate the suc-
cess of the transformation and make agile corrections given early customer
feedback.
In this session, the HR team compares actual functioning to the promised
metrics. Gaps are identified and an owner is assigned to close those gaps in
a specific period of time. Feedback from your customers/clients (which you
have thoroughly collected) is reviewed, prioritized and assigned to specific
individuals to resolve.

4
5
HR Transformation Summary
Positive changes but slower, less complete and
less satisfied than expected
Our first HR Transformation survey brings generally good news but with a num-
ber of warning flags. We found that many companies achieve their HR transfor-
mation goals, but often slower, less completely and with less satisfaction about the
results than they expected.

Our primary conclusions are:

Strong but slow progress in transformations: While 65% of companies reported

improvements in core HR functions after HR transformation, it took them twice
as long as they expected to complete those changes and they drove less change
than they predicted they would.

HR teams transform more slowly than expected: Companies found that the aver-
age HR team took twice as long as expected to perform in the new HR operating
model and they often received less than a day’s worth of training in how to suc-
ceed in the new model.

Broad-based change in HR operating models: 86% of organizations said they

have or will change their HR operating models as part of HR transformation. One
notable shift was towards the “Ulrich model”,1 with 68% of respondents using a
pure Ulrich model or a hybrid Ulrich model prior to transformation and 88% plan-
ning to use one of those choices post-transformation.

How satisfied are you with the results of your company’s HR

Transformation compared to your expectations?

Far better than my expectations 5%

Better than my expectations 27%
Met my expectations 33%
Worse than my expectations 28%
Much worse than my expectations 6%

3% 13%
Companies whose HR Companies reporting that
transformation was one or more HR functions
primarily because of the were less effective post-
COVID pandemic transformation
1
This statement refers to the original framework attributed to Professor Dave Ulrich and popularized partially through his book Human
Resource Champions. As Dave will point out, the model has been updated many times since then through RBL’s HR Competency Study.

6
7
HR Effectiveness Changes
HR transformations delivered significant change
but not always in the expected direction
The good news from the 200+ companies that participated in our survey was
that most saw positive change from their efforts. We found that more than half of
companies reported positive changes in the effectiveness of HR functions, with the
largest positive changes in Shared Services and People Analytics.

However, all of the positive changes were less than the amount predicted prior to
transformation. The largest gaps in Actual vs. Predicted Change were in Talent
Acquisition (23% less than predicted), Talent Management (18% less) and Compen-
sation and Benefits (15% less). Surprisingly, a small number of companies reported
that practices were less effective after transformation, including 21% reporting that
Talent Acquisition and Shared Services were less effective.
Actual vs.
Change in function’s effectiveness following HR transformation Predicted
Change
Shared Services/HR Op’s 79% 21% -6%
People Analytics 79% 11% 10% -6%
HR Business Partnering 74% 16% 11% -11%
Talent Management 73% 21% 6% -18%
Diversity and Inclusion 67% 27% 6% -13%
Employee Relations 63% 22% 15% -9%
Talent Acquisition 58% 21% 21% -23%
Compensation & Benefits 53% 42% 5% -15%

More Effective Equally Effective Less Effective

Expected Length vs. Actual Length of HR transformation

Expected length
Difference between expected and
Less than 6 months 1% actual length of HR transformation

+1.3
6 months - 1 year 11%
1 year - 2 years 45%
3 years - 4 years
5 years or more
34%
8%
Years
8
 HR Structure
HR transformation translated into structural changes at most companies but not al-
ways in the expected direction. Consistent with the typical desire to increase spans of
control and decrease layers, the average span in HR increased in 53% of companies and
the number of CHRO direct reports increased in 42%. The total number of layers in the HR
organization increased in 32% of companies.

Most companies increased the number of outsourced services but few reduced the num-
ber of locations where there was an on-site HR employee. 1 in 7 companies increased the
number of locations with an HR employee.

HR Structural Changes

% % %
Structural Change Area Increased No Change Decreased

Average span of control in HR 53 31 16

Number of outsourced HR services 53 42 5

Number of CHRO direct reports 42 37 21

Total HR headcount 37 37 26

Number of layers in the HR organization 32 53 15

Number of company locations with at least 1 HR emp. 16 62 22

Structural Surprises
Changes don’t always happen in the expected direction when transforming an HR orga-
nization. Headcount reductions did not happen in fully half of the companies that pre-
dicted reductions. The number of layers was expected to increase in very few companies
but nearly 1/3 ended their transformation with more layers than when they started.

Number of Layers in HR Average HR Headcount

Expected to Actual that Expected to Actual that

Increase Layers Increased Layers Reduce Headcount Reduced Headcount

14% 32% 52% 26%

9
 HR Effectiveness
One of the larger surprises in our HR Transformation study was the extent to which
HR leaders overestimated the transformation’s likely impact on the HR department.
Respondents projected improvement in 80% to 95% of most areas, and only a fraction
projected worse outcomes in any area.

In reality, outcomes improved in 60% - 70% of most areas and became worse or much
worse in up to 1 in 4 companies. The largest shortfalls versus expectations were in Deci-
sion speed in HR (-32% below expectations) and Clarity in HR about roles and responsibil-
ities (-31%).

Companies that predicted HR Companies that rated HR as

would function Better/Much Better functioning Better/Much Better
after transformation after transformation

85% 66%
+/- vs. Predicted
Actual improvements in HR effectiveness as a result of HR Transformation Better/Much Better
The relationships among HR leaders 50% 28% 22% -15%
Decision-making speed in HR 56% 22% 22% -32%
Clarity in HR about roles and responsibilities 61% 22% 17% -31%
Decision quality in HR 61% 21% 18% -27%
HR engagement levels 66% 18% 16% -14%
HR’s reputation with senior executives 67% 16% 17% -16%
HR’s focus on strategic activities 68% 16% 16% -27%
Company satisfaction with HR services 72% 28% -18%
Use of people analytics data in decisions 74% 26% -19%
HR’s influence with senior executives 78% 17% 5% -5%

Better/ No change Worse/Much

Much Better Worse

“28% of companies rated Company Satisfaction with HR services as “

Worse/Much Worse after HR transformation.

10
11
The HR Team
HR leaders took longer than predicted to perform in
the new system; received minimal support
HR leaders came up to speed more slowly than expected in their transformed organi-
zations, possibly due to a relatively light investment in building their capabilities. The
average HR team took five months longer than expected to operate effectively in their
new organization. HR departments often invested a day or less to develop their team’s
capabilities.

How long do you expect it will take the average HR leader to

perform effectively in the transformed organization? Actual HR leader

5
4% effectiveness took
Immediately
Within 3 months 6%
3 - 6 months 27%
months
6 months - 1 year 30%
longer than
More than 1 year but less than 2 21% expected to achieve
More than 2 years 11%

Even the light expectations for training HR leaders to succeed in the transformed orga-
nization were not met

In total, how much live training do you plan to provide to HR leaders to

help them excel in the transformed organization?
Less than More than
None 1 - 2 hours A half day A full day a week a week
7% 9% 15% 11% 29% 29%
Prior to transformation, 42% of companies planned
to invest 1 day or less in training their HR leaders to
be effective in the transformed organization.

The actual time invested

in training HR leaders by 53% invested
organizations that completed
HR transformation 1 day or less
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13
Change Drivers & Direction
Firms coalesce around an “Ulrich” or “Ulrich-like”
model as the best way to structure HR operations
A steady trend continues towards there being clear lines and divisions between HR busi-
ness partners, centers of expertise and HR service centers. Organizations are already
using the traditional Ulrich model and will continue to do so. Those companies that are
not currently using it will largely shift to it or a hybrid version of it.

Did you put in place a new HR operating How many years was your CHRO in that
model as part of your transformation? role before the HR transformation started?

Yes: 95% Less than 3 years: 72%

What are the primary reasons that your company
is/was engaged in an HR transformation?
80%
To increase the quality of the HR services that we deliver.
To modernize our HR structure and organization design.
70%

60%
To better align our processes and/or staffing with business needs.
It is part of a larger company transformation effort.
50%

40%
To decrease the cost of the HR services that we deliver.
It is driven by an HR technology implementation.
30%
It is part of a larger technology implementation at our company. 20%
To align our HR systems/processes after a merger/acquisition.

73% Percentage of organizations offering a formal change

management process to help HR leaders become effective
in the transformed organization

14
 Is your HR organization structure currently the traditional
“Ulrich model” – clearly defined centers of excellence, HRBP’s
Structure
Despite recent suggestions that
and service centers? After the HR transformation? novel organizational structures
After are required for a “new world
Model Today* Transformation of work,” HR seems fully aligned
around a traditional model of
The Ulrich model 31% 36% HR structure and operations.
A hybrid that is close to, but
not exactly, the Ulrich model 37% 52% Barely one in 10 organizations
plans to use something other
Not the Ulrich model 31% 12% than the Ulrich model or a vari-
* total is 99% due to rounding.
ation after their transformation.

Outsourcing In which areas do you expect the extent of outsourcing to

Very few organizations mean- change because of the HR transformation?
ingfully shifted HR responsibili-
ties to outsource service pro- Shared Services/HR Op’s 10% 50% 40%
viders, except in the expected Talent Acquisition 21% 52% 27%
areas of shared services and
talent acquisition. Benefits 9% 65% 26%
Compensation 8% 71% 21%
As many companies will be
decreasing their outsourcing Talent Management 18% 67% 15%
investment as increasing it in
People Analytics 9% 78% 13%
talent management, people
analytics, diversity and inclu- Diversity & Inclusion 15% 76% 9%
sion and employee relations.
Employee Relations 13% 82% 5%
Results from companies that
have completed their trans- Much Less/ No Change Much More/
Slightly Less Slightly More
formation shows that their Outsourcing Outsourcing
outsourcing predictions were
highly accurate.

Which of the following metrics will you/do you formally Metrics

measure to evaluate the success of your HR Transformation? Soft metrics (effectiveness) are
more frequently used to eval-
HR BP COE Process HR Cost HR uate the success of HR trans-
Effectiveness Effectiveness Savings Headcount Other formations than quantitative

71% 65% 55% 47% 16%

metrics like cost savings or HR
headcount.

This may help to explain the

No: 61%
Does your company have a specific cost surprising rise in post-transfor-
savings target as part of HR Transformation? mation headcounts that was
noted earlier.

15
16
HR Technology
Mixed messages as nearly 40% of technology
implementations miss the target.
HR leaders remain underwhelmed by their HR technology more than 13 years after the
first Workday system implementation, and with an abundant array of HR technology to
choose from. While a majority of respondents felt that their changed HR technology met
or exceeded their expectations, a sizable minority disagreed.

The open question is whether HR vendors are making promises that are difficult or im-
possible for their technology to deliver, or if HR departments are not investing sufficient
time to customize the software and train users.

How satisfied are you with your changes in HR technology?

Exceeded our expectations 19%

Somewhat exceed our expectations 6%
Met our expectations 38%
Somewhat met our expectations 31%
Did not meet our expectations 6%

How will your HR technology change in your HR Transformation?

We will implement technology that replaces largely manual processes. We 55%
will upgrade our existing HR technology suite to a new technology suite
or updated version. 53%
We will integrate various HR technology platform/systems into one platform. 45%
We will shift our technology from in-house to outsourced. 9%
We do not plan on making any significant changes to our HR technology. 12%

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About This Report/Participants
About This Report
We conducted data gathering over a two month period in early 2021, soliciting partici-
pation through direct mail and LinkedIn. We received 252 responses and eliminated 47
of them. Criteria for elimination were:
• Consultants
• Responses from consultants who tried to resubmit their data as a corporation after
initial rejection because they were consultants (tracked by IP address)
• Duplicate IP addresses. When we found duplicate IP addresses, we selected the re-
sponse with the most complete data.
The participant pool is subject to all of the typical research biases including convenience
sampling, impression management, faulty recall, etc. We believe the participant pool
size helps to reduce the potential impact of these factors but it certainly does not elimi-
nate the risk of them.

Participant organization revenue (in USD)

25%
14% 12%
10% 9% 8% 8% 7%
6%
< $500M $0.5B - $1.0B $1B - $3B $3B - $5B $5B - $10B $10B - $20B $20B - $50B $50B - $100B > $100B

Participant organization employees

26%

12% 7% 13% 10% 12% 10% 10%

< 1,000 1K - 2.5K 2.5K - 5.0K 5K - 10K 10K - 25K 25K - 50K 50K - 100K > 100K

Organization type Partially or wholly Geographic Headquarters

Publicly owned 51% PE owned? North America 65%
Privately owned 40% Yes 18% Asia 17%
Not-for-profit 6% No 82% Europe 13%
Other 3% Middle East 4%
South America 2%

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