LACBF – SPRING MEETING HR TRANSFORMATION · PDF fileLACBF – SPRING MEETING HR ......

LACBF – SPRING MEETINGHR TRANSFORMATIONApril 2015

Martin Ibañez-Frocham

Mercer

MERCER 1April 24, 2015

Agenda

This meeting presents the results of different benchmarks regarding HR organizational design.

The presentation have the following points:

1. Overview of HR Concept in Latin America

2. HR Impact and relative cost position

3. Service Catalog, Roles and Responsibilities

4. HR Service Delivery Model

MERCER 2

Overview of HR Concept in LatinAmerica1

MERCER 33

The key issues and challenges facing HR functions globally

HUMAN CAPITAL CHALLENGES

Driving cultural andbehavioral change

Acquiringand retaining

talent

Buildingleadershipcapability

BusinessContribution

CostPressure

CENTRAL ISSUESThe debate onoutsourcing

Productive discontentwith metrics

Globalization

Human Resources functions need to move from being a high cost, lowvalue function to a low cost, high value function, aligned with the business

MERCER 44

Technology and outsourcing are key enablers to streamlining HR’soperational capabilities

The primary goal of transformation has been to change the shape of HRAway from administration towards HR program design and alignmentwith the businessStreamlining HR operational capabilities typically generates the savingsneeded to expand the role of HR as a strategic partner and consultant:

Administration

Procedures/compliance

Design

Strategy

Planning

HR makes its strongestorganizational contribution by:

• Building HR’s capability as astrategic partner

• Increasing the focus onstrategic HR programdevelopment

• Optimizing the deployment ofHR resources

• Improving the efficiency of HRservice delivery

• Achieving flawless executionin transactions

• Enhancing HR reporting,analytics, and metrics

Planning

Design

Procedures/compliance

Strategy

Administration

MERCER 5

Rec

ruitm

ent

Lear

ning

&de

velo

pmen

t

HRP

olic

y&

plan

ning

Com

pens

atio

n&

bene

fits

Per

sonn

elad

min

istra

tion

HR

IT

Functional silo 3-legged stool – “Today” Next generation HR – “Tomorrow”

Most organizations have replaced theoriginal HR model with a customer-centric “3-legged stool” structure whereclient interactions are managedthrough three major streams: Advise,Transact and Consult.

These streams have been separated toensure that the appropriate HR focus,attention and time are allocated to thetask in hand

When moving to the “3-legged stool”model, organizations have struggled ina number of areas (highlighted on thenext page), resulting in a sub-optimaldeployment

The diagram above represents thenext generation HR model weimplement with our clients to provideenhanced value to the business.

HRLeadership

HR BusinessPartner

HR Centersof Expertise

HR SharedServices HRIS

HRISHRIS

Strategic HR

Operational HR

HRLeadership

HR BusinessPartner



HRISHRIS

Strategic HR

Operational HR

HRLeadership

HRBusiness

Partner


HR SharedServices

People DevManagers

LineManagers

HRIS

TIER 0

TIER 1

TIER 2

HR CaseManager

HR GeographyManager

HRIS

HRLeadership

HRBusiness

Partner


HR SharedServices

People DevManagers

LineManagers

People DevManagers

LineManagers

HRIS

TIER 0

TIER 1

TIER 2

HR CaseManager

HR GeographyManager

HRISHRIS

TIER 0

TIER 1

TIER 2

HR CaseManager

HR GeographyManager

HRIS

Originally, HR was organized aroundspecialty areas in functional silos.

This structure fostered a lack ofcoordination and unnecessary overlap.

Cross-functional integration wasdifficult to achieve

The evolution of HR service delivery modelSDM

MERCER 66

In practice, the “3-legged stool” model has had limited successWhat is not working

The model requires capabilities that HR, as a whole,does not have

HR skill set

Baseline transactional services are often not beingdelivered flawlessly

Transactional services

Line managers need to have the skills and tools tomanage their employees and are not getting thesupport they need from HR

Line managers

The current model often does not account for deliveringoperational services that require specialist knowledge,in person

Geographic focus

Strategic HROperational HR

HRbusinesspartners

HRcenters ofexpertise

HRshared

services

HRleader-

ship

HRIS

MERCER 7

„Touch“(physical, tailored, individual)

high

low

„Rigor“(policy, standards,process, HRIS)

„bare bone“ „hybrid / segmented“ „gold“

Service Level

= EmployeePortal /Self ServiceTechnology

high

Approach HR Services Illustrative

Source: Mercer project experience & research

We see different approaches towards the scope and way HR servicesare delivered

HR Operating Model as it stands todayHigh touch vs. low touch

MERCER 8

HR Impact and relative cost position2

MERCER

HR Impact and Relative Cost PositionList of metrics

• FTE Efficiency– 1. Total FTE / Total HR FTE– 2. HR FTE mix per function

• HR Cost– 3. HR Cost / Total HR FTE (average cost per HR

FTE)– 4. HR Cost / Total FTE (average HR cost per

employee)

9April 24, 2015

Mercer Benchmark Other benchmarks• 5. Total FTE / BP FTE (BP FTE ratio)

– Saratoga

• 6. Total FTE / SSC FTE (SSC FTE ratio)– Saratoga

MERCER

HR Impact and Relative Cost Position1. Total FTEs / Total FTEs RH TotalMercer DB and Club HR Latam

10April 24, 2015

0

50

100

150

200

250

300

350

400

Q FTEs total org / Q FTEs total HRAbsolute figures

Benchmark companies

Source: Mercer TRS 2014, Mercer analysis

25P = 60

50P = 78

75P = 113

+

-

Club HR Latam

Organization #

A 55

B 111

C 243

D 128

E 46

F 57

G 72

H 48

I 40

Benchmark

25thpercentile Median 75th

percentile

67 90 125

MERCER

HR Impact and Relative Cost Position1. Total FTEs / Total FTEs RH TotalLACBF

11April 24, 2015

0

50

100

150

200

250

300

350

400

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43

Q FTEs total org / Q FTEs total HRAbsolute figures

Benchmark companies


25P = 60

50P = 78

75P = 113

+

-

Club HR Latam

Organization #

A 55

B 60

C 56

D 87

E 46

F 43

G 72

H 30

I 58

MERCER

HR Impact and Relative Cost Position3. Total HR Cost / Total HR FTE (average HR FTE cost)Mercer

12April 24, 2015

-10000

10000

30000

50000

70000

90000

110000

130000

150000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43

Total HR Cost / Total HR FTEUSD 000


25P = 109.844

50P = 91.256

75P = 75.348

+

- > 150000

Benchmark companies

MERCER

HR Impact and Relative Cost Position4. Total HR Cost / Total FTE (HR cost per employee)Mercer

13April 24, 2015

0

500

1000

1500

2000

2500

3000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43

Total HR Cost / Total FTEUSD


75P = 647

50P = 1112

25P = 1979

+

- > 3000

Benchmark companies


HR Impact and Relative Cost Position5. Total FTE / BP FTE (BP FTE ratio) - SaratogaBusiness Partners FTE Ratio measures the number of full-time equivalent (FTE) employees supported byeach Business Partners FTE. Saratoga defines Business Partners as HR Director level and aboveemployees who work primarily with senior management levels within lines of business design and businessstrategy execution. While this metric can be heavily skewed by organizations that outsource their HRfunctions, this metric provides insight into the size and support level of HR.

Benchmark

25th percentile Median 75th percentile

397 695 1.231

This benchmark is for General Market

Source: Organizational Structure Results U.S. Human Capital Effectiveness Report 2013/2014 SARATOGA**Information provided by Club HR Latam Companies***Taking into account that HR BP with Multiple role divide their time on different activities not necessarily related with BP

Club HR Latam75P 354

Median 299

25P 129


HR Impact and Relative Cost Position6. Total FTE / SSC FTE (SSC FTE ratio) - Saratoga

HR Shared Service Center Headcount Ratio measures the number of headcount employees supported byeach employee who has costs charged to the HR Shared Service Center. While this metric can be heavilyskewed by organizations that outsource their HR functions, this metric provides insight into the size andsupport level of the HR Shared Service Center.

This benchmark is for General Market

Source: Organizational Structure Results U.S. Human Capital Effectiveness Report 2013/2014 SARATOGA**Information provided by BASF

Benchmark

25th percentile Median 75th percentile

443 567 1.262

Club HR Latam75P 509

Median 331

25P 308

MERCER 16

Service Catalog, Roles andResponsibilities3

MERCER

HR Service Catalog, Roles and ResponsibilitiesHR Service Catalog overview – LACBF

17April 24, 2015

Category Service A B C D E F G H I

General HR

Recruit & place employees ü / Out ü / Out ü /Shadow ü ü / Out ü ü ü ü

Manage international assignments ü ü ü ü ü üü/ Out /Shadow ü ü / Out

Manage termination ü ü ü ü ü ü Out ü ü

Manage inquiries & concerns ü ü ü üü /

Shadow ü ü ü ü

Evaluate & maintain job grades ü ü ü ü ü ü ü ü ü

Manage individual performance ü ü ü ü ü ü ü ü ü

Manage labor relations ü n/a ü / S n/a ü / S ü ü ü ü

Manage health & safety issues ü n/a ü / S n/a ü / S ü ü ü ü

Comp & Benand OtherPrograms

Manage Compensation ü ü ü ü ü ü ü ü ü

Manage Benefits ü ü ü ü ü ü ü ü ü

Manage Wellness and WLBprograms ü ü üt ü ü ü ü ü ü

Developmentand Training

Manage talents ü ü ü ü ü ü ü ü ü

Develop & Train employees Out ü üü/ Out /Shadow ü ü ü ü ü

Controlling,Technology and

Processes

Manage Workforce & PersonnelCost planning ü ü ü ü

ü /Shadow ü ü ü ü

Manage personnel administration ü ü ü ü ü ü Out ü ü

HR Reporting ü ü ü ü ü ü ü ü ü

Manage time & attendance ü ü ü ü / Out ü ü Out ü ü

Manage payroll ü ü ü ü Out Out Out ü ü

Manage HR Technology andApplications ü ü ü / Out ü Out ü Out ü ü

Source: Mercer, Latam HR Function benchmark, 2014

ü: in companyOut: outsourcedShadow: non HR area

MERCER

HR Service Catalog, Roles and ResponsibilitiesTypes of COEs (Latam)LACBF

18April 24, 2015

Company

A B C D E F G H I

HR FTEs 245 224 26 80 37 119 350 76 193

Countrieswith HR FTEs 15 7 10 6 6 9 15 7 14

Has HR COEsimplemented?

Yes Yes Yes Yes Yes Yes No Yes Yes

Which COEsareimplemented?

• C&B

• Talent

• COE HRSystems

• COE HROps

• C & B

• T & D

• C & B

• TalentAcquisition

• TalentDevelopment

• C & B

• T & D

• HRPlanning

• C&B


• COEfunctionsperformedlocally

• Expects tomove intoCOEstructure in2015

• C&B

• T&D


• C&B


• HRIS

• C&B and T&D are the most common COEs• Succession Planning and Talent Acquisition have more than one mention• HR Planning, HR Systems, Org Development and Line HR are specific initiatives


300+ HR Activities

Function Role Processes Service Delivery Model

Organized by commonlyreferred to HR work areasor disciplines.

Including:• Staffing• Organization

Development• Training• Employee Relations• Labor Relations• Compensation• Non-Retirement

Benefits• Retirement Benefits• HRIS/HR Applications• Time & Attendance• Payroll• HR Department

Management

Organized by the type ofHR work being completed.

Including:• Transacting/

Recordkeeping• Strategic Partnering• Delivering HR Services• Designing HR

Programs• Compliance/ Auditing• Internal Management

Organized by theprocesses related tomultiple activities.

Includes processes suchas:

• HR Department Mgmtand Administration

• Program Strategy,Design, andDevelopment

• Data Processing/Maintenance

• Program Delivery• Customer Service• Vendor Management• Employee Relations

Issue Resolution• Salary Planning• Policy Development• Health Benefits

Administration• Selection

Organized by whereprocesses should beperformed in the future

Including:• Shared Services• Centers of Expertise• Business Partners

Operations Scanner™Time Allocation survey structure

MERCER

HR Service Catalog, Roles and ResponsibilitiesOverview of functions

20April 24, 2015

Current XX RoleIdeal Role

COE SSC InternalManagement Non HR BP Total

Assistant 1% 59% 35% 0% 5% 100%BC HR Head 53% 21% 18% 3% 4% 100%COE Rem, Ben, IT 24% 60% 9% 0% 6% 100%COE T&D, TA 39% 42% 15% 0% 4% 100%SSC HR BR 6% 78% 11% 2% 3% 100%Diversity 38% 45% 11% 0% 7% 100%Intern 21% 58% 14% 4% 2% 100%HR BP 30% 40% 8% 1% 22% 100%HR BP Leader 37% 25% 16% 1% 20% 100%Multiple Role 33% 38% 17% 8% 4% 100%Multiple Role with HR BP 31% 49% 10% 1% 10% 100%Projects 16% 19% 5% 60% 0% 100%Labor Relations 30% 43% 18% 1% 9% 100%HR Services 11% 73% 10% 3% 4% 100%

• This table indicates that a lot of SSC activities are currently performed by non-SSC resources• Also, although to a lesser extent, COE activities are being performed by non-COE resources• All represent optimization opportunities

Source: Mercer, HR Operations Scanner, Mercer analysis

Example of a company who worked with Mercer. This example shows that there areroles that do not respect the activities they should be doing.

Some conclusions that we have extracted:

MERCER 21

HR Service Delivery Model4

MERCER 22

Rec

ruitm

ent

Lear

ning

&de

velo

pmen

t

HRP

olic

y&

plan

ning

Com

pens

atio

n&

bene

fits

Per

sonn

elad

min

istra

tion

HR

IT

Functional silo 3-legged stool – “Today” Next generation HR – “Tomorrow”

Most organizations have replaced theoriginal HR model with a customer-centric “3-legged stool” structure whereclient interactions are managedthrough three major streams: Advise,Transact and Consult.

The diagram above represents thenext generation HR model weimplement with our clients to provideenhanced value to the business.

HRLeadership

HR BusinessPartner



HRISHRIS

Strategic HR

Operational HR

HRLeadership

HR BusinessPartner



HRISHRIS

Strategic HR

Operational HR

HRLeadership

HRBusiness

Partner


HR SharedServices

People DevManagers

LineManagers

HRIS

TIER 0

TIER 1

TIER 2

HR CaseManager

HR GeographyManager

HRIS

HRLeadership

HRBusiness

Partner


HR SharedServices

People DevManagers

LineManagers

People DevManagers

LineManagers

HRIS

TIER 0

TIER 1

TIER 2

HR CaseManager

HR GeographyManager

HRISHRIS

TIER 0

TIER 1

TIER 2

HR CaseManager

HR GeographyManager

HRIS

Originally, HR was organized aroundspecialty areas in functional silos.

The evolution of HR service delivery modelSDM

MERCER 2323

The future CS shared service structure should be able to take on furtherdelivery work from SME and HRBP

Processexperts

Processimprovement

team

TIER 0

TIER 1

TIER 2

HR shared services

HRIS

StructureHR shared services theory Practice

Employee/manager self service

Ben

efits

adm

inis

tratio

n

New

hire

adm

inis

tratio

n

Em

ploy

eere

latio

ns

Trai

ning

&pe

rform

ance

Pay

roll

(fron

t-end

only

)

Leav

es

Vendor management

HR technology management

Contact center – Tier 1

Contact center – Tier 2

• 70% of HR transactions and inquiries• Enhance self-service capability

• 25% of HR transactions and inquiries• Be staffed by teams with customer service

skills – not primarily HR skills

• Day-to-day administration of HRprocesses and activities for functionalHR areas

• Execution of functional strategy and designdetermined by HR leadership and HRcenters of expertise

• Provide focus for operational control andinvestment

• Enable consolidation and optimization ofend-to-end processes from across thebusiness

• Allow flexibility in capacity utilization• Be managed by process management

experts

• Ongoing management of HR systems

• Ongoing management of vendorrelationships

MERCER 2424

The use of self service can be increased through technology, enforcingusage and better change management

Best practice tier-delivery model% all user access

Increase of self service adoption as key HR cost lever

Multiple possible measures to encourage usage – Peercompanies have used various approaches to encourage usage:

• Better change management through further marketingand training of users in order to improve adoption of the selfservice functionality

• Simplify access by improving self service functionalities,typically through a new portal delivering services in a simpleand intuitive manner

• Build out self service capabilities by increasing processcoverage of existing self service portals, prioritizing mostcommon user requirements; in parallel adjust processes tomake them user friendly to increase process coverage

• Strengthen incentives and compliance measures, forexample by rejecting direct inquiries when self servicefunctionality is available, charging a fee for inappropriate usage,blocking HR access to completing transactions for other users

70%

20%

6%4%

Tier 0 - Self ServiceTier 1 - Help DeskTier 2 - Specialist & Case ManagersTier 3 - SME

From our experience, the most effective way tomove employees/managers to self service is toremove all other alternatives

MERCER

SourcingFramework for HR outsourcing and regionalization analysis

25April 24, 2015

Identification ofOpportunities

HR Outsourcing analysis

HR Regionalization analysis

• Main issues

• Relativeimportance

• Benchmark

• Activitiesalreadyoutsourced

• HR GovernancePrinciples(Global /Regional / Local)

• Benchmark

• ActivitiesalreadyRegionalized

MERCER

SourcingBenchmark - Scope of outsourced areas

26April 24, 2015

Benchmark: Sourcing by Service Area

Source: HR Delivery Practices – HR SS Institute – 2013, Mercer analysis

0 10 20 30 40 50 60 70 80 90 100

Employee Data/Transaction Administration

Call Center (Employee inquiries)

HR Analytics and Reporting

New Hire Onboarding (incl. Offer/Contract Admin.)

Leave of Absence Administration

HRIS Maintenance & Support

Compensation Administration

Payroll Administration

Health & Welfare Benefits Administration

Performance Management Cycle Administration

Staffing &Recruiting Administration

Training Administration

Employee Relations

Pension/Retirement Administration

Inpat/Expat/Immigration Support

Relocation Services

Succession Planning Administration

HR SSC Other internal (e.g. COE) 3rd Party

Trend for outsourcing

MERCER

SourcingBenchmark - Scope of global – regional - local areas / processes

27April 24, 2015

0 10 20 30 40 50 60 70 80 90 100

Health and Welfare Benefits Administration

Pension/Retirement Administration

Employee Relations

Leave of Absence Administration

New Hire Onboarding (incl. Offer/Contract Admin.)

Payroll Administration

Staffing & Recruiting Administration

Call Center (employees inquiries)

Relocation Services

Training Administration

Employee Data/Transaction Administration

Compensation Administration

Inpat/Expat/Immmigration Support

Succession Planning Administration

HR Analytics and Reporting

Performance Management Cycle Administration

HRIS Maintenance & Support

Global Process Regional Process Local (in country) Process

Source: HR Delivery Practices – HR SS Institute - 2013

Benchmark: Globalization by Service Area / Process

60%+ global / regional

MERCER

“The future is already here – it's just not evenly distributed.”William Ford Gibson

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