Change Within

Align your HR team’s goals with corporate strategy. Here’s how.

By Eric Krell Aug 1, 2011
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HR professionals frequently help those in other parts of the organization respond to big and swift change, but what happens when the HR department becomes the epicenter of change? Such transformations can be more difficult than other types of organizational development—and even more important to get right, say HR leaders who speak from experience.

“Lead by example,” says Christine Deputy, senior vice president of human resources for Dunkin’ Brands Inc., the Canton, Mass.-based home of Dunkin’ Donuts and Baskin-Robbins brands. “Do exactly what we so often ask our clients to do.”

When members of HR departments experience transformational changes such as moving to a shared services model, integrating with another HR function following a merger or delivering new services to new clients, they face challenges.

First, HR professionals’ responsibilities never cease. They continue to serve employees while contending with the discomfort, confusion and demands that department-specific change creates.

Second, few organizational changes occur in isolation. If senior leaders decide to implement an HR shared services model, for instance, the information technology, finance and procurement functions likely are also moving to a similar model or initiating efficiency projects. At HSBC Canada, HR staff members are immersed in a worldwide efficiency project. Or, transformations arise from changes in ownership and executive leaders. New York City-based drug retailer Duane Reade, for example, was purchased by private equity firm Oakhill Capital in 2004, introduced a new CEO in late 2005, and launched phases of change in 2006 and 2008—one of which was centered in HR. Finally, thanks in part to these waves of change, Duane Reade was purchased by Walgreen Co. last year.

Third, HR departments appear to have endured more efficiency-related change than other back-office functions in response to the bruising economy of the past two years, making insights from the following three HR initiatives of particular value.

Readiness vs. Engagement

Before plunging into change, measure the degree to which your staff is prepared to change, experts say.

And understand the change management challenges HR leaders face.

In two years, global HR functions endured larger reductions in staff—as measured by full-time equivalent positions—and operating budgets than other support functions, according to an analysis of the more than 200 global mid-size companies in The Hackett Group’s research database. From 2008 to 2010, these HR functions reduced positions by an average of roughly 11 percent, while information technology, finance and procurement departments reduced positions by an average of roughly 6 percent. During the same two years, HR functions reduced operating budgets by roughly 15 percent, while other support functions reduced operating budgets by an average of about 8 percent.

Notably, companies in this sample earned an average of 4 percent less revenue from 2008 to 2009 and 4 percent more revenue from 2009 to 2010. This upturn clearly qualifies as a jobless recovery within HR, where leaders currently focus on becoming “more efficient while still driving value-added services,” explains Harry Osle, HR practice leader for The Hackett Group.

To get a read on whether your team members are prepared to undergo transformation, Osle says, assess their readiness and engagement. Engagement reflects how willing employees are to change. Readiness, which relates to skills and capabilities, contains numerous dimensions—quality of leadership, relevant communication, appropriate staffing—and can be distilled to one question: Has my staff gone through change before?

HSBC Canada Invests in Upfront Planning

Two years ago, leaders in this subsidiary of London-based HSBC Holdings plc determined that they were ready to move to shared services for all support functions, including HR. The change was part of a global transformation initiated at the parent banking and financial services company.

While the tenets and structure of the model were established by leaders at the parent company, subsidiaries’ functional teams were given the authority to “fine-tune and plug in the details” for how the operation would function in practice, according to Pat Brosseau, vice president of human resources for HSBC Canada and its more than 6,000 employees.

The objectives of the shift were clear: lower HR costs and help operational partners become more self-sufficient for HR services. Achieving this required Brosseau and her team to reduce the number of HR generalists working with business-line colleagues daily. And, HSBC launched a multiyear enterprise resource planning initiative to ensure that employees in every part of the corporation use the same version of Oracle’s PeopleSoft HR applications.

Leading this change, Brosseau asserts, requires defining the change. She and her team invested considerable time and energy:

  • Understanding what the operating model would look like.
  • Defining the HR experience that all HSBC employees would have.
  • Detailing each HR role.

“We went into granular detail using process maps and policy reviews to understand, for example, exactly how the role of an employee relations specialist would differ from an HR generalist in the new operating model,” she explains.

The challenge of defining roles intensifies “when you get into gray areas,” Brosseau adds. For example, she and her team debated whether an HR generalist, employee relations specialist or project manager should take responsibility for subsequent restructuring.

Three factors help the team progress:

A change management unit within HR, which is staffed with three HR generalists with organizational design experience and skills, develops road maps, communications plans and tactics for their HR “clients.”

HR professionals collaborate with the HSBC Canada project management team. A certified project manager “made sure we stayed on track,” Brosseau says.

Communications specialists in the corporate communications department review individual messages and the overall communications plan to ensure relevance and effectiveness.

“We are two years into our transformation, we continue to refine it, and we are getting there,” Brosseau says of an effort that will likely continue for two to three more years.

Dunkin’ Brands Sweetens HR Skills Sets

Deputy joined Dunkin’ Brands shortly after Nigel Travis was named chief executive officer in January 2009. Travis was hired to increase operational excellence, heighten a focus on employees and franchise staffs, and stimulate international growth. Travis then hired Deputy to assist with these efforts.

Each objective created demands for change among the HR staff. They were previously more focused on transactions for Dunkin’ Brands’ 1,000 employees rather than Dunkin’ Donuts and Baskin-Robbins franchise employees, who number roughly 260,000. While Dunkin’ Brands’ HR team members previously provided functional training to new franchise owners, these services did not extend to advising them on recruiting and talent management for front-line franchise employees, who now represent a client set for corporate HR professionals.

Habits of Highly Effective HR Change

Change management hinges on relevant and timely communication. In HR change efforts, experts say the following qualities must be visible:

Strategic partnership. Duane Reade’s Senior Vice President of Human Resources Jim Scarfone and Dunkin’ Brands’ Senior Vice President of Human Resources Christine Deputy each had the freedom to shape their HR transformations, and each enjoy visible support from chief executive officers. Such credibility is crucial, says Rick Mauer, president of Mauer & Associates in Arlington, Va., and author of Beyond the Wall of Resistance: Why 70% of All Changes Still Fail—and What You Can Do About It (Bard, 2010). “If you are not a strategic partner, you’re not going to be one tomorrow, but you need to get in front of people who are making decisions that affect your function,” he says.

Readiness and engagement. These qualities determine the outcome of change management activities, says Harry Osle, HR practice leader for The Hackett Group. He suggests that HR leaders measure readiness through interviews and engagement through surveys, evaluate the results, and make necessary adjustments in staff members’ readiness and engagement levels before proceeding with a transformation.

The right talent. Most HR transformations require fresh, or refreshed, talent. HR leaders can fire and hire as executives at Duane Reade did, or they can retrain and develop as executives at Dunkin’ Brands did. Bringing in talent can lower the morale of existing staff, although it can also motivate them. Retraining requires time and money.

Jim Reid, vice president of global human resources and organizational development for Husky Injection Molding Systems in Bolton, Ontario, says his company’s HR transformation from a largely administrative function to a department that delivers “real business value” hinged on “getting the right people in the right seats.”

Management through measurement. During Duane Reade’s transformation, Scarfone frequently measured turnover, retention and customer satisfaction to keep tabs on the effectiveness of his function’s training and development offerings. At Husky, Reid used benchmarks from an external research firm and other measures to show how investments in HR changes could reduce total HR operational costs by up to 30 percent—an objective Scarfone and his team subsequently achieved.

Deputy initiated HR transformation by inviting fresh faces to the inaugural HR strategy-setting session. Travis kicked off the meeting by presenting his vision of what a people-focused organization looks like. Deputy invited colleagues from business units as well as franchise owners and managers. Together, this group crafted a five-year HR plan. The group will continue to meet periodically as the HR plan evolves, and Deputy says its diverse makeup helps foster support for HR’s changing mission.

The mission requires a more active role in driving the business, supporting front-line restaurant employees employed by franchise owners—not Dunkin’ Brands—and delivering a broader array of HR services.

Rather than firing and rehiring, Deputy opted to retain and retrain her HR staff to address these demands.

“Development is not just vertical,” Deputy says. “It needs to be horizontal as well.” So, she rotated HR generalists into organizational development assignments and moved compensation specialists to training jobs. This approach helped prepare all HR professionals to address service needs for a variety of clients. It also helped them understand when and how to enlist colleagues with specific HR specialties—collaboration that occurred only rarely prior to the transformation.

Deputy hired a few external consultants to facilitate redevelopment. A single consultant would serve as a project leader while guiding a small staff of HR professionals through projects such as selecting an online hiring and assessment program and redefining the employee value proposition.

Retraining existing HR staff cost less than replacing them, asserts Deputy, who measures her department’s progress on executing its plan by tapping a range of measures, including guest service. Improvements in customer experience measures suggest that the training HR professionals provide to franchise owners, managers and employees boosts end-customer satisfaction.

“When you are leading a transformation in HR, you have to prioritize,” Deputy notes. “In HR, we love connecting and solving the human aspect of problems. But if we spend too much time doing that, we can neglect what you need to accomplish to bring about the change.”

Duane Reade Turns It Around

“You cannot afford to say, ‘I couldn’t get it done’ or ‘I missed that budget number,’ ” says Jim Scarfone, senior vice president of human resources for Duane Reade. During transformation, “You have to make sure that everyone in your department is accountable for delivering the results. We sent the message that we really need everybody to step up and stretch.”

The need arose from the regional drugstore’s stabilization and turnaround following its purchase by a private equity firm in 2004 and its subsequent drive to become more competitive. Together, these changes required an HR transformation to:

  • Strengthen managers’ relationships with a retail union workforce.
  • Improve the customer experience through enhanced training.
  • Groom the company for a second sale.

Unlike Dunkin’ Brands’ transformation, Duane Reade’s effort required turnover within HR. Scarfone replaced several HR managers to elevate the quality of talent in recruiting, training, employee relations, and compensation and benefits, and to provide new and improved services to workers, particularly those that serve customers.

Bringing in talent during a transformation requires tact because “You have to manage through the ‘new people vs. old people’ syndrome,” Scarfone explains. That said, fresh faces can provide motivation. “The people coming in have new ideas, and they tend to be energetic. Your existing team sees that and says, ‘I have to play at that level.’ ”

That realization supports Scarfone’s “step up and stretch” message. And, the dramatic changes were more readily accepted by staff members because Scarfone serves on the management committee whose members developed the strategy for the turnaround and transformation.

Following roughly two years of concerted trust building, Scarfone says union relations stabilized and improved. Then, HR transformation began. It centered on:

  • Understanding the customer experience called for in the corporate strategy.
  • Developing awareness and training programs to educate workers on this customer experience.
  • Designing and rolling out training to equip front-line colleagues with the skills necessary to deliver improved customer experiences.

Scarfone credits his people with stepping up to the challenge. In 2010, the company was ready for another sale: That year, Duane Reade was purchased by Walgreen Co., in large part because of the turnaround and change, including the HR transformation.

The author is a business writer based in Austin, Texas, who covers human resource and finance issues.

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