What does high‑performance HR look like in 2023?
25 April 2023
HR leaders are navigating a lot while carrying a heavy and unbalanced workload. They’re grappling with issues such as the redesign of work around skills, labor market tensions, and the acceleration of AI and machine learning. On top of that, compliance demands, evolving technology, shifting rewards and benefits, and operational challenges are making it hard for HR leaders to see where potential pitfalls may lie.
Balancing the tension and time between the multiple roles HR teams play, struggling to make sense of data, while not feeling agile enough for new business and employee requirements is enough to make HR question whether they have what it takes to be truly strategic.
According to Mercer’s HR Operation Model Research, 65% of HR leaders are not convinced business leaders view their HR function as state of the art. Only 4% of HR teams believe they deliver an exemplary experience today while 58% of companies are re-designing the function to become more people-centric.
Our recent HR Operating Model Research uncovered three traps lurking below the surface that prevent HR teams from driving real value to the business.
Trap 1: Insufficient HR Operating Model
But having all three elements and centralizing operations are just the beginning. Leveraging the interactions, technology and data among COEs, HRBPs and Shared Services is where HR teams differentiate themselves. Overall, high-performing HR teams make it a priority to:
- Align HR governance and strategy with business strategy: High-performing HR teams (66%) do this at 4X the rate of low-performers (16%).
- Eliminate a siloed mindset in terms of people, governance, roles, technology, and data.
- Alleviate HRBP involvement in “day-to-day” (employee and management) inquiries and transactional services so that HRBPs can focus on strategic people initiatives in the lines of business. In fact, high-performing teams are 9.5X more likely to have HRBPs regarded as true strategic partners by business leaders as compared to low-performing teams.
- Integrate technology to be data-driven: partner across COEs, HRBPs and Shared Services to deliver real-time data and detailed workforce analytics reports and dashboards to support data-driven business decision-making.
Organizations that are on the right track will:
- Have leadership buy-in accountability and policies and procedures are aligned, established and integrated.
- Continuously look for ways to mature the model. High performing teams continually optimize their model over time.
- Leverage interactions among HR and operational leaders by setting clear delegation of responsibilities, engagement and technology adoption that are HR driven and robust.
- Optimize target metrics and benchmarks - with measurement and monitoring in place to adjust to market shifts.
Trap 2: Underutilization of technology
Less than 15% of US companies (with more than 500 employees) have in place and fully utilize:
- Manager or employee-specific mobile apps to access HR data anytime/anywhere
- User-friendly interface to make self-service personalized and easy to use
In the US, 6 in 10 companies have no plans to use chatbots to answer simple HR questions.
Executives and HR continue to put workforce planning and skills at the top of their agenda. But half of the companies have no plans to use AI/machine learning technology in the following ways:
- Highlight employees for promotion consideration
- Provide recommendations for individual learning
- Identify skills needed for the next job
- Identify individual’s current skills inventory
According to Mercer’s 2022 Global Talent Trends Study, 34% of companies have identified which roles are most suitable for agile work models. By fostering hybrid skills, leveraging data analytics and providing learning experiences to bridge any gap, HR can break the cycle. HR also drives value by implementing a cross-functional talent analytics team. Having a co-facilitated COE team and Shared Services team dedicated to Workforce Analytics leads to more data sharing with HRBPs and the business. While only 23% of US companies have both a dedicated Workforce Analytics COE and a Workforce Analytics Shared Services function/team - these teams also leverage all three elements of the Federated model. Almost all (81%) of these partnered analytics teams report that they share self-service data tools/dashboards with HRBPs and business leaders on a regular basis.
The good news is HR is planning to invest in HR tech in 2023. Among US companies increasing their total HR spend, 63% are spending more on HR tech in 2023 with 32% increasing their spend by more than 20%.
Trap 3: Understaffed & Under-skilled HR Team
It is clear that HR continues to have limited bandwidth for strategic advisory with almost 70% of HR leaders saying they believe their business operations leaders desire an increase in HR’s strategic consulting capabilities.
At the same time, there is a talent crisis within HR that must be acted upon. Retention of HR talent is a challenge. Attrition in HR is real. According to Mercer’s recent Inside Employee’s Minds research: 36% of HR staff report feeling frustrated on a typical day and 43% are looking to leave their current employer. Our 2022 Global Talent Trends research reports that HR in the US is pulled in too many directions, is exhausted, is under-skilled and feels undervalued - and these realities derail HR transformation ambitions.
Over half of US companies are recruiting or planning to recruit new HR staff in 2023.
Due to these sobering realities, over half (55%) of US companies are recruiting or planning to recruit new HR staff in 2023. HRBPs, Talent Acquisition and COE specialists top the HR recruitment list. HR talent is scarce but finding adept, agile, and strategic HRBPs internally and externally is especially challenging.
In addition to staff turnover and burnout, HR leaders foresee a real need to upskill their HR staff. According to Mercer’s 2022 Global Talent Trends Study, about 50-60% of HR leaders expect a permanent change in the need to upskill HR staff due to new enterprise-wide responsibilities post-pandemic. Want to be a high-performing HR function? Invest in HR-specific upskilling - as high-performing HR functions are 3.5X more likely to invest in HR skill development.
Where are HR leaders investing in their own people?
High-performing HR teams are 3.5X more likely to invest in HR skill development compared to low-performing teams.
High-performance HR teams are investing the most in learning activities that advance:
- Persuasive communication skills and negotiation techniques for eye-level conversations with executive business leaders.
- Basic analytics, insight generation and accurate interpretation as a basis for strategic decision-making.
Low-performance HR teams, trying to improve performance are more likely to invest in building HR skills across the board. In comparison to mid and high-performance HR, these teams report especially elevated HR investments in:
- Systems, process or critical thinking skills
- Leading change or transformation
- Building commercial or industry acumen
- General emotional intelligence: collaboration, coaching, conflict management, inclusive teaming or relationship-building skills