HR organizations and RPA
– A game changer for businesses?
By Arnold Kinzel
Consultant | Advisory
Jul 25, 2019 | Frankfurt, Germany
In an interview with the Harvard Business Manager on the 16thof May 2017, Dave Ulrich said that “HR is not about HR; HR is about the business” (Höhmann 2017). By this, he also acknowledges a major problem of many companies, especially however of large organizations – inefficiencies by non-business-related resource allocation. While HR is still perceived as an administrative function in the organization, several studies have shown that companies that include HR in their strategic vision perform better than companies that do not (Strack, et al. 2012). Companies across divers industries recognized this and re-focused their HR departments on strategy while reducing administrative work (Gora and Jentsch 2015). This HR transformation should have had a positive effect on profitability since HR is now able to focus on business outcomes while reducing costs and inefficiencies of administrative work.
The profitability gap of Human Resource departments
Although businesses have widely adopted a more strategic framework, such as the Dave Ulrich model, HR’s strategic role in organizations is not perfectly accepted yet, which leaves potential for improvements in profitability. In fact, a PricewaterhouseCoopers study shows that there are ‘perception gaps’ within organizations concerning the role of HR Business Partners (HRBP), who should focus primarily on transforming HR strategy according to the needs of the business and thereby making HR a strategic partner of the upper management. Especially frustrating is the perception in change management and strategic competencies. For the former, 67.7% of HR Business Partners see change management as being very important in comparison to 41.9% perceived by business units when being asked about the HRBP’s competencies (Lohmann and Görtz 2011). For the latter one, the gap is even wider with 71.0% and 29.0% respectively. Competencies, in this context, do not refer to the actual skills of the HRBP but rather what HRBP’s role in the organization is perceived to be.
Partly, this is due to bad communication and low buy-in on upper management levels, however, another reason is that HR still functions in an administrative fashion and prohibits itself from freeing necessary resources to fulfill its strategic role in the organization. In fact, 80% of German HR departments have not included digitization in their HR strategy while 39% of all resources are assigned to service operations (Kienbaum 2017)where the most digitization opportunities are identified. Considering that a more strategic focus supports a firm’s profitability, the situation in HR departments discussed above seems rather contradictory. Indeed, other areas of the business might have been more important in terms of change and technology implementation and HR departments had to remain with their current administrative function in the past.
HR operating models
Most HR departments are still organized within a competence-based functional organization with 37% while 31% have adopted the Dave Ulrich model (Kienbaum 2017). Other organizational structures are primarily based upon the Dave Ulrich model but aim at being more agile and thereby reacting to the ‘future of work’. While new models might indeed be more relevant going forward, the central idea of Dave Ulrich remains as relevant as it has been since its first publication in 1997 in his book Human Resource Champions– the business-oriented HR department contributing strategically and directly to the business’ profitability. To conclude, although over one third of HR departments are still organized in rigid functional structures, managers acknowledge the positive impact HR strategy can have on the business and take steps towards a strategic and agile HR organization.
RPA as an enabler of HR strategy
Coming from above logic, HR wants to interact strategically within the firm since it positively affects profitability, however, is held back by management’s priorities, the perception of HR as a purely administrative department, or the lack of possibilities to free necessary resources to enable a strategic re-focusing.
RPA offers a cutting-edge solution for HR departments to attack these problems. It is defined as a technology, possibly with machine learning and artificial intelligence (AI) capabilities, that automates repetitive, high-volume tasks previously performed by humans. While problems of perceptions of Human Resources can only be solved by better communication and buy-in from top management, RPA can liberate resources necessary for HR to become the strategic partner any organization deserves and demands. The service delivery model (SDM) provides good insights into where RPA makes sense to be implemented. The SDM looks at HR from the perspective of a customer and HR as an independent entity in the organization.
This view is appropriate since, ultimately, every entity in any organization can be viewed as a separate company serving clients and having to establish their own customer focused strategy to serve its purpose. For Human Resource, clients can be employees, line-managers, or change management requests from the top management level. HR, therefore, needs a customer-oriented model that provides fast support and solutions at Tier 0 and Tier 1 levels while having the change management capabilities at higher levels to satisfy top-management requests. Thus, resource allocation should extend as the support level increases and automation should be high during the first support levels to guarantee optimal customer focus.
Intuitively, RPA potentials are identified during the first two support levels where technology use is much higher. However, there is more to consider here as to why RPA is especially helpful during these stages. HR departments, specifically of large companies, increasingly build Shared Service Centers (SSC) and develop global End-to-End service processes that further increase efficiency and transaction volumes. From this, problems in quality standards may arise from outsourced Shared Services.
In this scenario, RPA can solve the problem in two different dimensions. By implementing RPA solutions, either (1) SSC’s might not have to be outsourced as costs are dramatically reduced and the ROI of any RPA project is generally considered to be collected swiftly or (2) quality problems can be resolved since automated processes follow pre-defined rules that will not change for geographic reasons. To conclude, RPA solutions during the first support level stages lead to higher quality services, increased efficiency and lowered costs.
Apart from the reasons analyzed above, a major secondary outcome of RPA are additional resources available to re-focus HR departments on strategic projects that bear the most profitability potential for the business. It might indeed enable agile departments with Dave Ulrich’s original vision from 1997 of HR as a strategic partner and hence improve the overall performance and profitability of the organization.
Gora, Walter, and Philipp Jentsch.Cisar GmbH. Moderne HR-Aufbau- und Aublauforganisationen.January 2015. https://www.cisar-gmbh.com/files/cisar/Cisar_Praesentation/Moderne%20HR-Organisationen-Teil-1.pdf.
Höhmann, Ingmar. Harvard Business Manager.5 16, 2017. https://www.harvardbusinessmanager.de/blogs/management-guru-dave-ulrich-im-gespraech-a-1076693.html.
Kienbaum. dgfp.de.Kienbaum Studie Hr-Strategie & – Organisation 2017.2017. https://www.dgfp.de/fileadmin/user_upload/DGFP_e.V/Medien/Publikationen/2017-201xx/CO10-51_Studie_HR-SO_Web_A4.pdf.
Lohmann, Till, and Elmar Görtz. pwc. March 2011. https://www.pwc-wissen.de/pwc/de/shop/publikationen/Das+Personalmanagement+im+Wandel/?card=13543.
Strack, Rainer, Jean-Michel Caye, Carsten von der Linden, Horacio Quiros, and Pieter Haen. Boston Consulting Group. From capability to profitability.July 2012. http://image-src.bcg.com/Images/BCG_From_Capability_to_Profitability_Jul_2012_tcm9-103684.pdf.