Taking a planned approach to HR operating model transformation can redefine how the function delivers value to the organisation and its stakeholders. This can range from large-scale disruptive overhauls, involving the restructuring of the entire function, to incremental, small-scale changes and adaptations of the model that appear outdated and inefficient. Regardless of the degree and scale of transformation, it’s critical that the operating model of the people function aligns to the organisation’s goals, vision and strategy to enable the function to be a strategic partner to the wider business.  

In CIPD’s 2015 operating model research, Barry Fry, a former global director of organisation development, argues that models may need to compromise on some areas to maximise the overall value of the function and serve the business needs at the time. “It is a myth that there is a perfect structure. Every structure entails a series of compromises, for example the loss of standardisation for the benefit of localisation, or vice versa.” 

For the people function to add value and impact, the HR structure needs to align to the wider organisation and business strategy. Taking an organisation design (OD) approach enables an effective review of the function and helps determine how to optimise the model so that it is fit for purpose. It is inevitable that there will be different ways to deliver on this, and no one right way, but taking an OD approach will help to ensure the people function is more effectively set up to deliver value to its stakeholders. Let’s consider how some organisations are tackling this in practice.  

Understanding the drivers for the restructure 

Establishing the current picture through data, insights and expert consultation will help identify opportunities for optimisation and diagnose current gaps in the model. For example, a thorough analysis may highlight where the people strategy lacks alignment to the organisational strategy or where the current HR model fails to deliver against growth plans.

In the first article of this series, we outline three main reasons for redesigning HR structures: in response to an internal or external factor, to better align with the organisation’s strategy and purpose, or to increase efficiency.  

People professionals at the large organisations we spoke to had their finger on the pulse when it came to horizon scanning for key trends impacting their workforce and business. These trends included: 

  • changing employee expectations  
  • competition for talent in their sectors  
  • economic and market-specific challenges 
  • opportunities for business growth and technological advancement. 

A key part of this was gaining input from the leadership and executive teams to explore the strategic areas that are driving change and how the people function needed to shift in response to this. The CIPD’s PESTLE analysis template can offer a way of exploring the external influences on your business and what’s driving the need for transformation.  

On the other hand, medium-sized organisations were more likely to focus on the internal drivers and undertook basic planning exercises to identify capability gaps. This included what roles were needed to enable a future-fit people function, and how teams should be organised and interact with the wider business. Sally Hopper, Director of Human Resources at Hertfordshire County Council, used the CIPD Profession Map to inform and define HR roles that were needed within their new HR structure.  

Developing your vision for the people function 

Once the drivers are understood, use this to develop your vision for the people function. Here are the strategic shifts that some people functions identified to crystallise their vision and drive perceived value and impact:  

  • Becoming more strategic as a function: This included developing new roles and responsibilities (see Peabody, Homebase, Firstsource case studies) 
  • Mirroring the wider business strategy: For example, Peabody had a clear aim to improve their L&D offering in line with their corporate responsibility values  
  • Rebranding the team: Peabody rebranded their HR team to the People & Culture team to signal to the business what the function is responsible for  
  • Responding to external influences: NatWest Group focused on improving the digital employee experience in response to changing demographics and fierce competition for talent 
  • Consistent HR delivery globally: Tesco wanted to deploy a model that was internationally applicable and served their group businesses.  

Medium-sized organisations mostly made smaller tweaks or variations to their existing structure. This included the reorganisation of teams, introduction of new roles (or making changes to existing roles), and decisions around whether to in-source or outsource HR activity. However, the larger case study organisations undertook significant shifts in their operating models, resulting in high levels of disruption to current operations and innovations which required a change in the organisational culture, and behaviours and skills of the people function. 

Some common key decisions that people functions made when designing their future HR structure included:  

1. Deciding what activities to centralise (or decentralise)  

The decision to be more or less centralised as a function should fit the wider business structure (Ulrich, 2023). In practice this is normally a hybrid model, where activities that can be standardised are centralised, while those that need to respond to local needs are decentralised (see Figure 1 for pros and cons). Organisation size, geographical spread or the need for localisation are some factors that influence this decision.  

“It’s important to avoid overlaps and gaps in service delivery,” said Natalie Sheils, Founder and CEO of Talenaut and former Chief People Officer at Mosaic Group. That includes making sure there are no overlaps or gaps in roles, responsibilities and accountabilities within the structure. Sheils added: “Regular feedback loops between centralised and decentralised teams can drive continuous improvement and alignment with business needs.” 

Figure 1: Pros and cons of centralised, decentralised and hybrid functions
Model Pros Cons
Centralised HR maintains control and coordination of functions at a central location

Better alignment with overall business objectives and standardise processes across the organisation.

Drive efficiency through reduced duplication and simplified processes

Lack of localisation. Not adapting to local market or business needs
Decentralised teams embed decision-making and control at a local level, within business units or geographies

Swiftly respond to local needs to provide tailored and flexible HR support.

Closer collaboration with local business or department leaders.

Can be inconsistent, duplicating efforts at organisation level. Less standardised approach to implementing HR processes and technology.

A hybrid model balances centralised strategic functions with decentralised operational capabilities

A more balanced mix of global consistency and local adaptability Requires more management and collaboration between teams

2. Leveraging digital technology to drive efficiency  

Automating HR processes and improving systems was a key consideration for most practitioners that we interviewed. The aim was two-fold – to maximise efficiency and provide a positive employee experience when stakeholders interact with the function (see NatWest Group and Tesco).  

For Peck Kem, Chief HR Officer for the Singapore Civil Service, leveraging digital technology is about: “How should we structure not only the organisation but also the work? What [elements of HR] could be self-service?” Another way to look at it could be to identify tasks that need a simple outcome and those that would be valuable or necessary to interact with someone.

3. Reallocating responsibilities 

When developing a future-fit operating model for the function, people teams commonly tackled considerations around what HR should take ownership for.

We found responsibilities were reallocated in these ways: 

  • Consolidating teams and business areas or creating leaner models: For example, Peabody consolidated talent and reward to build a stronger value proposition and attract new talent. They also combined their employee relations, wellbeing and engagement teams to develop a more holistic approach to employee engagement and wellbeing.
  • Separating operational tasks from roles or teams: Homebase developed their business partnering roles to be more strategic by removing employee relations and operational work from the role. However, being involved in operational activities might be a better tactic for people teams in organisations that need to strengthen their influence and effectiveness (Teo and Rodwell, 2007). In addition Truss (2008) also argues that while HR roles have evolved to be a more complex integration of operational and strategic roles, the two can work alongside each other. 
  • In-sourcing or outsourcing: Firstsource brought employee relations in-house to reduce costs and build internal capability, while Homebase has outsourced front-line advice and employee relations to ensure line managers are fully supported and well advised. Louise Wilson, non-executive director, adviser and HR mentor, highlights that decisions to outsource or in-source depend on the level of specialism needed and whether there’s good-quality data to support shared service operations: “How much [HR] specialism do you need versus [what tasks] can be process-oriented through HR systems, underpinned by good-quality analytics and data? Could [these services] align to a finance or IT shared service centre?”

Identifying the key enablers to support the new model  

Key enablers that were highlighted in the case studies included:  

  • Partner with key stakeholders across functions to influence and inform the transformation strategy, outcomes and provide feedback. Tesco and NatWest Group used ‘big room planning’, while Peabody held stakeholder meetings with their leadership teams.  
  • Have consistent and open lines of communication to align priorities, manage expectations and minimise disruption to business operations. Firstsource talked about the importance of buy-in from senior leaders to help communicate the transformation changes in a positive way.  
  • Develop skills and functional capability to tackle skills gaps and areas of development within the people function, whether through formal development programmes, opportunities to work across projects or through CIPD courses.  
  • Focus on leadership development to champion the model and lead teams through the transformation. Tesco provided line managers with training on talent, learning, resourcing and HR systems to support self-service.  
  • Have tangible objectives and measures to ensure teams are clear on responsibilities towards achieving the desired outcomes. A key part of this is clarifying new roles and responsibilities across the function and building accountability within teams. The NatWest Group also developed tangible outcomes to guide design choices and key priorities for the function.  

Enabling factors like technology, leadership and capability support the people function to optimise their HR operating models and build an effective HR function. In the next article of the series, we’ll be taking a deeper dive into these key enablers which support how such models are embedded.  

Planning and communicating the transformation 

It’s important to develop a clear transformation plan outlining what will be implemented (including how and when) and the potential impact upon the wider business. The people function will need to maintain the day-to-day operational functions, minimise disruption, manage expectations and effectively communicate the upcoming changes. If there are large shifts in how HR services are being provided to the business, this will take longer to put into practice. For example, moving from a high-support HR service to a more self-service/leader-led model.  

Outlined above as a key enabler, it is critical to identify key stakeholders and influencers within the people function and wider business. Not only is their input critical for optimisation, but the support and buy-in from leaders within the business is crucial for landing the transformation, especially when there are high levels of disruption to critical parts of the business. Joanne Carlin, Senior Vice President HR Europe at Firstsource, emphasises this point: “Without them [business leaders], it wouldn’t have happened. I needed them to talk positively in their peer groups about the changes that were happening.”  

Post-implementation: Reviewing, refining and continuously improving 

The case study organisations benchmarked outcomes against their key objectives to assess the effectiveness and impact of the transformation. Key metrics included:  

  • workforce measures (eg attrition rates, employee engagement levels)  
  • performance metrics (eg first-time resolution of queries and colleague feedback)  
  • user and engagement metrics (eg usage of improved HR systems).  

NatWest Group also developed objectives to reflect the future vision of the model, including annual objectives and key results to provide tangible measures of success.  

Both Tesco and NatWest Group used ‘big room planning’ to embed the new model and allow key stakeholders, across functions, to meet on a regular basis. These structured sessions allowed decision-makers to agree strategic priorities, collaborate on projects and deploy the relevant resources as necessary. The operating model will be reviewed in line with key objectives and changing business needs. To sum up, businesses tackled the transformation of their HR operating models in very different ways depending on their aims for their future vision of the function, the scale of transformation, resource constraints/levels of investment and business imperative for making these changes. The HR operating model is one piece of the puzzle for effective and high-performing people functions. In the next article in the series, we cover other enabling factors that are needed to support the implementation of a new HR model.  

Access the full case studies and article series here.  

Acknowledgements and key contributors: Natalie Sheils, Peck Kem, Louise Wilson, Sally Hopper. 

Case study organisations: Firstsource, Homebase, Peabody, Tesco and NatWest Group.

 

HR
operating models

A series of podcasts, thought leadership and case studies on current practices, future models and successful transformations 

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About the author

Rebecca Peters

Rebecca Peters, Research Adviser

Rebecca joined the Research team in 2019, specialising in the area of health and wellbeing at work as both a practitioner and a researcher. Before joining the CIPD Rebecca worked part-time at Kingston University in the Business School research department, where she worked on several research-driven projects. Additionally, Rebecca worked part-time at a health and wellbeing consultancy where she facilitated various wellbeing workshops, both externally and in-house. 

Rebecca has a master’s degree in Occupational Psychology from Kingston University, where she conducted research on Prison Officers’ resilience and coping strategies. The output of this research consisted of a behavioural framework which highlighted positive and negative strategies that Prison Officers used in their daily working life.   

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