Reinventing the HR function

After a difficult couple of years, in which new ways of working had to be considered, rapidly devised and then adopted at scale, HR professionals face new challenges with long-term consequences.

The so-called Great Resignation has seen extraordinary levels of staff turnover. At the same time, certain industries are coming to terms with what might best be described as the Great Retirement, with demographic trends reaching their inevitable end-point and older staff leaving the workforce entirely, often taking their expertise with them.

Human resource leaders now find themselves in the spotlight. They have the opportunity to become key players in the development of employers’ growth and survival strategies, responsible for retaining talent in an employee’s market while responding to changing expectations of potential and current workers alongside new and significant financial pressures.

Ayming’s People Performance & development team has launched its inaugural UK HR Barometer,  looking at the ways in which the HR function has already changed, the new responsibilities being taken on, and how businesses in the IT and tech, construction, financial services, fintech and public sectors have grasped the new opportunities.

We then look specifically at the Great Resignation and explore the impacts, reasons and responses to this period of significant upheaval, and discuss how HR leaders need to distinguish between short-term, feel-good tactics and long-term strategic imperatives.

Overview of performance

Over the last couple of years, HR staff have been thrown into the deep end. The challenges that came with Covid-19 and the ongoing Great Resignation has put HR in the spotlight, raising the status of the function within organisations.

With HR staff stepping up recruitment and retention strategies as well as picking up additional responsibilities like wellbeing, HR leaders have been forced to review the function, search for efficiencies, and innovate.

Reinventing the HR function

Budgets vary substantially from business to business, reflecting the range of views on what the function is responsible for. The most popular response was five per cent of revenue, which was selected by one-third of the respondents.

Clearly, this is a relatively low percentage, and firms should make sure they are giving their HR function the resources it deserves. Positively, very few businesses (only three per cent) spend one per cent or less of revenue on HR.

HR budgets have traditionally been relatively rigid. Most businesses will have a certain amount of budget ringfenced, which mainly accounts for their core staff and basic functions. Karen Demetrious, Head of People & Practices at Our Health Partnership, says, “A big part of HR is quite legal and structured. In many businesses, it is something you only pull in when it’s needed.”

However, the challenges of the last couple of years have demanded a more reactive approach, and many HR teams have had to review their HR function. This is causing a paradigm shift, the impact of which will be long-lasting. The role is reinventing itself.

Scott Ward, Partner of People, Performance & Development at Ayming, says, “Organisations have had to take a deeper dive into what the role needs to be. What does HR actually entail? What responsibility falls on the lap of the employer? HR now has to wear a few more hats and dip its toes into new areas like wellbeing. It’s not being looked at in the same way as it was two years ago.”

While it’s fantastic that we’re now looking at the more holistic picture of how firms can support their employees, this is putting pressure on HR teams. The figures show that six per cent of firms are spending more than 10 per cent of revenue on HR, but some businesses will have expanded the responsibilities of the team without a parallel increase in budget.

As the function expands, it has raised questions about how far the HR function is responsible for wellbeing, which is a separate function in some organisations. Ward says, “The danger is that a lot of HR staff might not have the know-how or experience to be responsible for staff wellbeing. It’s important they’re not taking on responsibilities that should really belong to those who have been working in this space for some time and have a deep understanding of the requirements.”

Should they be taking on extra responsibilities, organisations must think long and hard about their budgets and whether they can find efficiencies to support their staff. It is fundamentally unfair to ask more of HR staff without giving them the ability to tackle these challenges. As Hannah O’Sullivan, Head of Learning & Development at Volker Vessels, says, “We have to put our innovation hats on. How can we do more? How can we be better?”

The importance of resources in HR

Firms can shuffle resources and the structure of their HR, such as by centralising resources to provide guidance to their different teams, whether they are across other offices or countries.

This has already taken place with lots of businesses recently. Demetrious explains,

A year ago, we launched an in-house service that offers guidance to our GP practices. Each practice is allocated a certain number of hours, which allows them to reach out quickly and easily for any questions.”

It can be better to use an individual specialist who knows the businesses and understands the context. Instead of avoiding external partners, HR teams can make sure they use them to tackle HR problems early. By being smart with their outsourcing, it frees up the capacity for HR teams to think more about the value additive, proactive, and preventative approaches, which have never been more important.

Although we are going through a turbulent economic period, 90 per cent of firms are increasing budgets, a considerable finding that elegantly supports the theory that the HR role is being reinvented, especially considering HR has historically been one of the areas where businesses might initially cut costs. O’Sullivan says,

There’s never been a time in my career when HR and L&D talent have had such a big seat at the table. The issues that we’re facing are so people-centric.”

Even though some businesses have already gone through considerable HR restructuring since Covid-19, some of the budget increases are quite significant, with 19 per cent of businesses expecting a 25-50 per cent boost in their budget. This may be indicative of the expansion of the HR role itself, specifically into wellbeing, which a lot of firms are only really thinking about for the first time. Until now, businesses haven’t really known where wellbeing sits in their business.

Demetrious says,

After the couple of years that we’ve had, I think most of the new budget will be channelled towards wellbeing and staff’s mental health, which would still come under the HR umbrella. But I don’t necessarily think that people look at it under that umbrella.”

By the looks of it, though, this may be changing as people review their HR function.

For further insights, download Ayming’s HR Barometer in full here.