Executive Summary: The Evolving HR Function

Changes on the surface of HR don't begin to reveal the complexity of what's going on behind the scenes.

Changes on the surface of HR don't begin to reveal the complexity of what's going on behind the scenes. HR professionals are rethinking everything from HR's structure to its delivery of services to the very competencies that it needs to survive and succeed.

In fact, 38% of HR professionals had responsibilities added to their plates during the preceding year, according to the Bureau of National Affairs' (BNA) HR Department Benchmarks and Analysis 2004. New roles such as managing strategic partnerships, protecting trade secrets and monitoring corporate ethics programs are becoming part of the expectations for HR professionals. Add these to the pulls of the daily administrative load and a growing focus on human capital measurement and the HR platter has become heavy indeed.

These broad responsibilities are likely to call into focus a completely new crop of HR competencies. Financial literacy, business acumen, cultural astuteness, negotiation skills and the ability to follow and forecast trends are among the talents sought in HR practitioners.

Just how HR professionals will use these new skills to bring value-added services to the organization is also of concern. HR continues to experiment with centralization, decentralization, what and how much to outsource and other decisions concerning HR's structure and its ideal service delivery scheme.

While the outsourcing of HR continues to rise, Gartner, Inc. predicted that 2004 would see the signing of smaller, more focused deals rather than multiyear mega-deals. And the Center of Excellence approach, using HR content experts who serve as consultants to business units, is still very evident. These centers may include such key areas as talent management, total compensation, workforce planning, HR/IT infrastructure or the quest to develop a "global franchise," a company brand recognizable in any location or culture.

Even as talk of reinventing HR transpires, though, benchmarks appear relatively stable. Ratios of median HR staff per 100 employees remained at 1.0 in 2004, a level it's hovered near for over a decade, while budgets for 2004 rose a moderate 5% over actual 2003 HR costs, according to the BNA report. The budgeted median HR cost per employee rose from $855 in 2003 to $965 in 2004, an increase of over $100 per employee. Still, median total cash compensation for HR managers increased only 2.4% in 2004, according to the 2004 Mercer Benchmark Database Human Resource Management survey.

The credibility HR professionals build in the workplace can influence the move toward becoming a full strategic partner. Over half (54.8%) of HR professionals say the most frequently encountered obstacle to career advancement is HR's not being held in high esteem, according to a report from SHRM/SHRM Global Forum. Technology, globalization, laws, the labor market and HR's own governance will also influence HR's direction and ability to move to a more strategic role.

While technology may lighten the load of "day-to-day 'administrivia,' ... we will still need highly developed human input to be effective," said Edward Lawler III of the Center for Effective Organizations. And that skilled HR input is likely to be called into play as a result of some exciting trends on the horizon. An improving economy points to increased merger and acquisition activity, requiring HR's strategic involvement. A new focus on customization and the ability to come up with solutions in real time emphasizes HR's need for agility in analyzing ideas and measures. In addition, the desire for an improved bottom line through increased performance of human capital assets means HR will need to demonstrate a stronger role in strategy development and execution.

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The Institute for Corporate Productivity (i4cp, inc.) improves corporate productivity through a combination of research, community, tools and technology focused on the management of human capital. With more than 100 leading organizations as members, including many of the best-known companies in the world, i4cp draws upon one of the industry’s largest and most-experienced research teams and Executives-in-Residence to produce more than 10,000 pages annually of rapid, reliable and respected research and analysis surrounding all facets of the management of people in organizations. Additionally, i4cp identifies and analyzes the upcoming major issues and future trends that are expected to influence workforce productivity and provides member clients with tools and technology to execute leading-edge strategies and "next" practices on these issues and trends. i4cp is a for-profit company with offices in St. Petersburg, Florida.
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