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Accelerating the journey to HR 3.0 Ten ways to transform in a time of upheaval In collaboration with: Research Insights How IBM can help As business and society face unprecedented uncertainty, sustaining communication, collaboration, capacity, and culture within the workforce are required like never before. Organizations must adapt in order to keep employees inspired and enabled and to maintain business continuity. Doing so will require new ways of working and a focus on reskilling the workforce. IBM is a trusted partner who can provide a unique approach to reinventing your workforce, leveraging AI, employee experience design, and digital technologies to accelerate innovation. We partner with business leaders like you to help enhance employee engagement and productivity, reskill your workforce faster, and reimagine ways of working. For more information visit talent-management HR reinvention: The time has come The Human Resources (HR) profession plays a heroic role in business. As companies deal with issues such as public health, resilience, social unrest, and rapid business transformation, the HR department has become more important than ever. Historically, HR departments have largely been administrative. They take responsibility for hiring, pay, compliance, and basic job design. Today, however, as we recover from the pandemic, companies need HR to focus on the employee experience and drive reskilling, cultural transformation, and an evolution to new models of work. As our research clearly shows, companies that make this evolution far outperform their peersespecially in this time of business reinvention. Over the last two years we studied hundreds of global companies, and we found the HR departments fall into three categories. Traditional HR 1.0 departments focus on compliance, administration, and highly efficient service delivery. HR 2.0 teams move toward integrated centers of excellence, and focus on training and empowering business partners to deliver solutions at the point of need. HR 3.0, which only 10 percent of companies have achieved, turns HR into an agile consulting organization, one that not only delivers efficient services, but also practices design thinking to push innovative solutions, cognitive tools, and transparency into the organization. The exciting thing about our findings is that HR 3.0 is not an idea: its a reality you can achieve. As you will read in our report, the disciplines of design thinking, the use of highly intelligent cognitive tools, and a focus on transparency, inclusion, and change are all goals you can achieve. And supporting these new disciplines, we identified the need to continuously train and upskill HR itself. As we recover from the global pandemic, every organization is rethinking work, the way we support our people, the role of technology, and the new role of leadership. HR 3.0 is a goal that every company can achieve, and we are excited to help you get there. Josh Bersin Global Industry Analyst Dean, Josh Bersin Academy 1 Introduction Of all the ramifications of the change rocking the world of business today, the implications for people are arguably the most profound. Its true that new marketplace realities are forcing businesses to adapt their strategies and business models and continue their digital transformations. Companies are deploying at scale new technologiesespecially those called “exponential” because their impact scales so quicklyto make use of the massive volumes of data being produced and captured by devices in an Internet of Things (IoT). Businesses are also using these technologies especially artificial intelligence (AI) and automationto build new business platforms and restructure the flow of work across their extended ecosystems. And, of course, most recently, the global pandemic has drastically accelerated everything, including a massive, unprecedented shift in where work gets done. But at the heart of all these changes are the people making them, the people charged with implementing them, and the people directly or indirectly affected by them. And with diminished human contact wrought by the pandemic, enterprises now must become inherently humanized, build engagement with remote employees, foster trust in uncertain times and cultivate a resilient, diverse workforce capable of facing whatever the future may hold. In fact, what enterprises need now is a sustainable workforce. Just as energy sustainability requires shifting from resources that are extracted, used and exhausted to renewable ones, an enterprise cultivates a sustainable workforce by shifting its view of employees from a resource to be tapped as needed to one that is cared for, protected and nourished. Humanity at the heart of the Cognitive Enterprise As exponential technologies, new business models and global disruptions converge to help transform the enterprise, it has become more important than ever to elevate the work and skills of employees and teams. HR 3.0 is a business imperative Business executives overwhelmingly agree that HR must be radically redefined. Guiding principles of personalization, skills at the core, data-driven decision-making, transparency and agility are at the core of the journey to HR 3.0. The best companies are already taking bold steps Ten action areas in HR emerge as priorities for transformation. Leading companies are outpacing their peers by innovating in all of these areas. Key takeaways By Amy Wright, Diane Gherson, Josh Bersin, and Janet Mertens 2 7 10 HR executives say the function is ripe for reinvention 10% of HR executives are living HR 3.0 today double their efforts in the next two years to skill their HR teams in new capabilities Talent executives plan to Only out of In practice, this means building a workforce that is diverse and inclusive, bringing together individuals with different skills, talents and ideas and giving them room to innovate.It also means providing flexibility in work locationespecially in times of disruption from weather events or disease outbreakwhile making sure employees have full access to all the tools they need to be productive. It means that across all work locations, employees feel safe and trust the organization to keep them healthy. In a sense, every company becomes a health company, understanding the best ways to protect employee health, as well as contribute to the health of the community in which the business operatesfor many, this means health on a global scale. According to emerging evidence, this is a critical need, not optional. Our monthly COVID-19 consumer surveys have shown that employees now expect their employers to take an active role in supporting their physical and emotional health, in addition to the skills they need to work in new ways. At the same time, businesses leaders call out organizational complexity, inadequate skills and employee burnout as their biggest hurdles to progress. 1 But theres a problem. The study finds a significant disconnect between what leaders and employees believe about how effectively companies are addressing these gaps. Seventy-four percent of executives believe they have been helping their employees learn the skills needed to work in a new way. But just 38 percent of employees agree. Eighty percent of employers say that they are supporting the physical and emotional health of their workforce. Just 46 percent of employees say they feel that support. HR obviously has a mandate here, but also a huge challenge. Enabling a sustainable workforce by building trust and confidence among employees will be critical. How they are treated now will lay the foundations for future perceptions. Industrial HR 1.0 Internet HR 2.0 Digital HR 3.0 Key focus Compliance Administration design Programs and jobs Process excellence Standardization Self-service Shared services Employee experience Cognitive Personalized Transparent Organization Functions, Service Centers, HR Partners Geographic COEs, Shared Services, HR Business Partners Mostly globally standardized Offering Managers, Intelligent Chatbots, Pop up squads, HR Business Partners Design driven by Best practice benchmarking Process experts Design thinking with users Decisions driven by Intuition Analytics with historical HR data Actionable insights with predictive AI and rich external/internal data Key area of measurement Job evaluation Performance assessment Attrition rates Employee satisfaction Headcount Competencies Diversity representation Efficiency metrics Employee engagement Critical Skills Leadership pipeline diversity Inclusion Attrition rate NPS, Pulse surveys Figure 1 The evolution of Human Resources The evolution of the HR operating model Like most corporate functions, Human Resources has evolved greatly over the past decades to meet the needs of a changing business environment (see Figure 1). In the Industrial era, an operating model now referred to as HR 1.0 saw the function focus on programs and jobs, while organizations typically outsourced payroll and administration systems. CHROs built strong administrative skills in the function and fostered a culture of quality and compliance. The introduction of the Internet provided new opportunities for integration and globalization not available previously. Driven by this development, the move to HR 2.0 shifted the function to focus on process and headcount, with efficiency seen as the primary goal. The HR 2.0 function relied on an integrated HR model with established, formalized centers of expertise, formalized service delivery teams, and efforts to cross-train and rotate HR professionals around the function. Now, in a business landscape characterized by near constant disruption, HR 3.0 is the next evolutionary step, representing a major paradigm shift for CHROs and their teams. The precise definition of this next generation operating model has remained somewhat unclear however, so the IBM Institute for Business Value, in collaboration with Josh Bersin, conducted worldwide research to better understand if talent executives agree on a singular vision of the HR 3.0 operating model, and if so, how they are achieving it. 2 Surveying more than 1500 HR executives from more than a dozen industries, we sought to examine how the evolution of the function is being accelerated in leading companies, which specific factors play a role in the success of HR reinvention, and how the most successful CHROs can provide a roadmap for reinvention. 4 HR 3.0: A business imperative and a paradigm shift Our research shows that the radical reinvention of Human Resources is a critical imperative for organizations, especially now: more than two thirds of the executives we surveyed say that the global HR function is ripe for disruption. Even more convincing? The best companies in the worldthose outpacing all others in profitability, revenue growth and innovationare extremely confident in the need to reinvent HR. Eight times as many HR execs from these north star companies are already driving the disruption in their organizations, as compared to others. We also uncovered widespread agreement on five common characteristics that underpin HR 3.0: deeply personalized experience-centric design; skills placed at the core of the enterprise; data-driven decision making powered by AI; agile practices for speed and responsiveness; and consistent transparency to preserve trust and reduce reputational risk. Employee experience is central in 3.0, as HR helps drive a companys overall enterprise transformation. But today its insufficient to think of employee experience as limited to the employee. In an era where the line between office and home continues to blur, the employees family experiences the company, too, and therefore should be considered when designing and enhancing any employee experience. Figure 2 Five imperatives for the future of HR Deeply personalized experience-centric design Skills at the core 61% 29% 59% 28% Data-driven decision making powered by AI Agile practices 69% 38% 68% 34% Level of importance to future of HR Level of achievement today Transparency to preserve trust 66% 35% The worlds best companies are taking bold steps to accelerate their HR transformation with speed and purpose. 5 Burger King (BK) Brasil reinvents its communication with employees BK Brasil knew the moment was now. Pandemic concerns made it crucial to accelerate a digital reinvention it had begun in 2019 to keep its workforce informed and engaged. And just in time. By tapping AI and cloud-based services, it was able to stay close to its workforce and quickly address their questions and concerns with a tool with a virtual agent during the pandemic. Prior to launching the project, BKs communications with its 18,000 employees was centralized and relied on the restaurants leadership team to initiate and manage. After the adoption of the virtual assistant connected to employees WhatsApp accounts, employees can now quickly get HR-related information via their mobile devices using natural language interaction. The platform isnt just for pandemic-related updates. While it enables employees to easily access information from the Ministry of Healths official content about the coronavirus, it also quickly disseminates the companys position on various topics. In fact, in addition to the expected COVID-19-related inquiries, the most frequent consultation with the tool are on topics related to salary, remuneration and benefits. In April 2020, BKs virtual assistant answered more than 1,100 questions on average per day, with a total of more than 33,100 responses in the month. To accomplish this, the HR function will become more automated and AI-driven, more data-centric and consultative, and more agile than before. However, achieving this future vision is not easy (see Figure 2). Only 30 percent of companies tell us they are living some of the principles today, and only 1 in 10 are leading in all five. It appears that HR executives are unsure how best to evolve their operating model to HR 3.0. Which programs and activities should they prioritize? What investments will accelerate the journey? To answer these questions, we examined a multitude of people practices that HR units around the globe are deploying at various stages of maturity. We tested each for its impact on enabling enterprise transformation to understand the activities in HR that will have the most value. Our analysis has identified ten priority Action Areas critical to the HR 3.0 model. The Action Areas span the breadth of the human resources function, in some cases wholly reinventing traditional people practices. The worlds best companies are acting in all these areas, taking bold steps to apply the principles of HR 3.0 to accelerate their transformation with speed and purpose. Based on our analysis of what outperforming companies are successfully doing, we next give clear guidance on how to make the shift to operate at HR 3.0 in each of the ten Action Areas. We also share a taxonom
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