Why it eludes so many

An effective HR function provides a business with the right people, at the right price point and in sufficient (but not excessive) numbers. It supports and engages people in doing the right things to achieve business objectives and does all this in ways that conform to applicable laws and regulations while meeting stakeholder needs.

When HR is highly effective, the payoff for the business can be substantial. We found that highly effective HR functions have higher employee engagement rates, higher revenue per employee and lower voluntary turnover rates than their peers, among other benefits.

HR functions have been pursuing greater effectiveness in these terms for decades, and a lot has been written on this topic. Yet, effectiveness is still elusive for many. In a recent survey of HR leaders, we found that nearly two-thirds (63%) find their HR functions to be moderately effective at best.

What’s holding a majority of HR functions back? In this article, we define the most common barriers to HR effectiveness and share research-backed elements that can set the foundation for HR excellence.

See also: What’s the ROI of AI in HR?

6 obstacles to HR effectiveness

There are a number of barriers that HR faces when trying to do its job most effectively. Each of these barriers alone is enough to hold HR back, but the reality is that most HR functions face many if not all of them.

Culture collision

Whether it’s related to HR technology, HR processes or HR staff, ways of thinking about and working with HR are deeply ingrained. Changing direction is hard because it often involves making changes to structure that are interwoven throughout an organization, its culture and its ways of working.

The power paradox

In many cases, HR has influence but not authority. To make sustainable changes that help the business, HR has to use its influence to enlist support from a variety of different stakeholders, each of which has unique needs and different frameworks for thinking about HR.

Opportunity overwhelm

Not only does HR need to influence a lot of stakeholders, but it needs to be influential about many things. With the move from administrative to strategic HR and the focus on the employee experience, HR functions are being asked to do more than ever. Even outsourcing or automating work will take time and oversight.

Shrinking budgets for growing needs

HR is also expected to do more at a time when many companies are trying to reduce HR budgets and headcount. The challenge of having to do more with less means that HR cannot meet all of the needs of all of its stakeholders, all of the time. Instead, HR has to continuously make decisions about where to focus limited resources.

Long timelines for short attention spans

Some of the things that can make HR most effective—for example, setting up shared services or adopting new technology—are usually multi-stage endeavors that can take years to implement. Even if HR can get the support it needs today, there’s always a chance that shifting priorities or unexpected events will undo any hard-won progress.

Transformation tornadoes

Fueled by factors like shorter leadership tenure, mergers and acquisitions, and environmental, technological and political shifts, organizations are making major changes faster than ever. Just as one transformation has been planned, another major transformation is added or overtakes those already in progress. In the case of leadership change, HR not only needs to switch gears, but also develop relationships with a totally new set of business leaders.

How to move a boulder uphill

In the face of barriers like these, HR leaders might feel a lot like Sisyphus, a character from ancient Greek mythology whose divine punishment was to endlessly push a boulder uphill. Each time the boulder began to reach the top, it would roll back down to the bottom, forcing him to begin the heavy task yet again.

The quest for greater effectiveness can feel like an endless uphill climb, but the good news is that this does not need to be HR’s fate. More than a third of our respondents, in fact, see their HR function as very or extremely effective. How did these organizations push the boulder over the top, so to speak?

6 foundations for effective HR

As part of APQC’s research on highly effective HR functions, we evaluated factors including employee engagement, HR customer satisfaction, voluntary turnover rate and revenue per employee. Through this research, we identified statistically significant differences in how the most effective HR functions operate compared to their less effective peers. These form the basis for the six foundations for effective HR that we describe below. Each foundation is powerful individually, but collectively they are even more impactful.

Strategy

Highly effective HR functions are significantly more likely to say that they tightly align HR strategy with business strategy (95% versus 70% of everyone else). They are also significantly more likely to say that they contribute to the business’ digital strategy (91% versus 63%).

Structure

Highly effective HR functions are significantly more likely to have HR structures that include business partners, centers of expertise and shared services. They are also significantly more likely to centralize HR or use a mix of centralization and decentralization. These features help to enable high levels of collaboration across the HR function and strong relationships with business leaders.

Staff

Investments in training and development for HR staff pay off with greater effectiveness. Leading HR functions offer training and development opportunities across different HR career stages, including early-career HR development, job rotations across HR and the business, and leadership development for current HR leaders.

Process

Standardized, integrated and well-executed HR processes are another critical foundation for effectiveness because they help guide how HR staff carry out their work. Highly effective HR functions are significantly more likely to have this level of process maturity and to use a common HR process framework.

Technology

A strong process foundation enables highly effective HR functions to be more strategic about the ways in which they use technology. For example, they are significantly more likely to consider how technology would fit with existing HR processes and significantly more likely to be highly digital as a function.

Measures

HR outcome metrics and human capital management outcome metrics can help HR establish credibility and build strong relationships with business leaders. Highly effective HR functions are significantly more likely to use both of these types of measures (in conjunction with analytics technology and AI) to develop and sustain valuable partnerships with the business and continuously improve HR’s performance.

Evolution for HR effectiveness is incremental

Even as the broader business environment evolves, many barriers to HR effectiveness remain the same. In many cases, the biggest barrier is not that HR doesn’t know what to do, but the fact that the key drivers of improvement are often difficult, resource-intensive endeavors.

At the end of the day, the answer to why more HR functions are not more effective is that HR effectiveness, at its core, is about continuous improvement and the continual evolution of the HR function. Put simply, you don’t need to go all the way up the hill in one try. The most effective HR functions strive to make incremental progress and find sustainable places where they can stop without having to start all over again. We hope the fundamentals we’ve described above can give you a solid foundation for doing the same.