HR transformation : managing complexities

Many global financial organisations and banks are currently undertaking major efforts to transform their operational functions including HR, Finance, Legal and Audit post M&A. The drive is to achieve strategic operating model alignment, operational excellence and cost efficiencies.

This requires an integral enterprise approach to assess, evaluate, measure and mitigate impact to upstream and downstream functions and business units. In particular, HR transformation may lead to the creation of a shared services organisation, centres of excellence, maturing and streamlining of employee benefit offerings and provision of value added HR services across the enterprise.

Often, specialist business process outsourcing (BPO) vendors advising on these transformational journeys lack the end to end organisational picture as well as understanding and realisation of wider internal and external impact to the organisation. They advise purely on HR unit level changes in terms of changes to products, services and processes but are ill prepared to advise on the wider organisational impact,  thus risking bank’s operational service stability, reputation and also creating adverse impact to the transformation plan, benefits, costs and journey.

It is essential for organisations to realise that HR transformation also requires understanding of its impact and adequate preparation in the following key areas:

1. Alignment with business – the transformational journey should be aligned to the strategic business direction and goals. The future HR operating model must reflect and meet the current business demands as well as future challenges;
2. Focus on employees as customers – the need for dedicated focus on providing integrated and seamless employee services at a balanced cost to the organisation;
3. Finance – impact to financial accounting and general ledger postings related to employee benefits changes as well as ensuring the chosen target HR operating model aligns with business units;
4. Budget and cost impact  – cost impact and cross charging to the business units related to target employee benefits  and HR shared services provision depending on target operating model;
5. Statutory and management reporting – impact to statutory and management reporting related to employee benefits  changes, particularly pensions, etc.;
6. Procurement – for supplier selection, SLA agreements development, ROI assessments, business case due diligence, negotiating the costs and terms with suppliers for providing new employee benefits, IT support and managed HR shared and value add services;
7. IT – for developing/incorporating and supporting required IT system changes, process and services to support HR value added services, employee benefits and management reporting;
8. Suppliers – for providing managed HR services provision, employee benefits offerings, IT system/services and on-going support.

In addition, the transformation efforts need to be supported by a holistic communication strategy. There must be efforts across the bank to ensure that the changes and impact to employees, business units and regulatory compliance are fully understood, managed and supported by all functions within the organisation.

Integrated governance comprising of all key stakeholder groups being affected will enable them to understand the transformation goals and benefits and will prepare the rest of the organisation to support and sustain the changes introduced.

Our engagements have shown us that many organisations don’t recognise the complexity and challenges involved in these types of projects.  It is time to take a holistic approach to these types of transformations. What are your experiences in this area? Please share your thought with us.