SHRM Foundation Research The Future of HR: Longitudinal Study and 2010 Survey Funded: June 2010 Completed: June 2012 John Boudreau, Ph.D. and Edward E. Lawler, III, Ph.D., Marshall School of Business, University of Southern California Effective Human Resource Management Executive Summary This is the Center for Effective Organizations’ (CEO’s) sixth study of the human resources (HR) function in large corporations. Like the previous studies, it measures whether the HR function is changing and whether it is effective. All of our research studies have focused on whether the HR function is changing to become an effective strategic partner. The present study also analyzed how organizations can more effectively manage their human capital. It gathered data from many of the same corporations that we studied in 1995, 1998, 2001, 2004 and 2007. Thus it allows us to compare data from our earlier studies to data we collected in 2010. For the first time we collected data from multiple countries (Australia, China, Canada, the United Kingdom, and other European countries) so that we can determine how corporations in the U.S. and other countries differ. KEY FINDINGS AND IMPLICATIONS FOR PRACTICE This study focused on eleven areas: 1. HR Activities. To assess how HR has changed, questions were asked about how the activities of HR have changed—is HR doing less administration and more strategic work? 2. HR Role and Activities. Another focus is to learn to what extent the HR function is changing—is it becoming a strategic partner and how much increase or decrease has there been in the emphasis on traditional HR functions (e.g. HR planning, compensation, recruitment, selection, and HR information systems). Our findings indicated that HR has not changed how it allocates its time. It remains a function that spends the majority of its time on services, controlling and record keeping. This is true in the U.S. and in the other countries studied.. 3. Decision Science for Talent Resources. Organizations are increasingly competing for human capital and that their ability to successfully compete can be a source of competitive advantage. We focused on whether organizations have developed a decision science for talent decisions and whether this is related to how effectively they manage it and to organizational effectiveness. Our findings continue to argue for the strategic value of organizations having a strong human capital decision support capacity both within and outside their HR functions. The results provide strong evidence of the value of improving the decision-science capacity in organizations. 4. The design of the HR function. We examined whether changes have occurred in the way the HR function organizes in order to increase the value that it delivers. We looked at the adoption of shared services and centers of excellence and the use of self service and HR generalists. There was relatively little change in the utilization of the HR organizational design approaches studied. There has been significant growth in teams and centers of excellence, changes that are related to HRs being more of a strategic partner. A trend toward less utilization of HR practices varying across business units and a greater emphasis on self-service HR practices. 5. Outsourcing. Outsourcing is becoming an increasingly popular way to deliver HR services and gain HR expertise. It is a way to deal with changes in the demand for HR services as well as a way to control costs. We focused both on how common different approaches to outsourcing and its effectiveness. There is little evidence that outsourcing is in a strong growth mode. Organizations may be missing an opportunity to improve their HR activities. Outsourcing can allow them to access knowledge and expertise that they lack and are not in a good position to develop. 6. Information technology. HRIS systems can potentially radically change the way HR services are delivered and managed. Thus, we examine how companies are using information technology in their HR functions. We focused on how effective organizations consider their HRIS systems to be in influencing employee satisfaction and providing strategic information. The evidence indicates that HRISs are most effective when they fit the strategy of an organization. They are likely to be perceived as successful in companies with knowledge and information-based strategies. One finding is that the more things a HRIS can do, and the more services it performs, the more effective it is perceived to be. The future of HR is dependent upon it developing comprehensive HRISs. 7. Metrics and Analytics. It is important to know both what measures HR organizations collect and how they analyze them. Our study looked at what metrics are being collected and utilized; and how effectively metrics and analytics are being used. The results presented evidence that there may be systematic variations in how HR measures are used. The pattern of use significantly relates to the strategies and management approaches of organizations, as well as HR’s strategic role. There is no doubt that HR metrics and analytics remain underdeveloped and underutilized. 8. HR Skills. Critical to the effectiveness of any HR function are the skills of the HR professionals and staff. This study examined how satisfied organizations are with their HR professionals’ skills in a variety of areas. It also looked at the importance of the skills needed in order for HR professionals to serve as true business and strategic partners. The results suggest that HR professionals suffer from a skills deficit; thus, limiting their role in business strategy development and implementation. Most ratings in all the countries fall around the neutral point. There has been an improvement in some business partner skills, yet there is much work to be done on enhancing HR skills, as well as developing a common understanding about the level those skills needs to be at in order to have an effective HR organization. 9. HR Effectiveness. The effectiveness of the HR function is a critical issue—managing change, contributing to strategy, managing the outsourcing of HR, and operating shared service units. The study focused on what HR structures, approaches, and practices are associated with the effectiveness in an HR organization. HR executives and managers say that an emphasis needs to be placed on HR’s role as a business partner and on improving decisions about human capital. These are areas of low effectiveness for HR. There are also areas that are related to the strategic involvement of the HR function. By making improvements in these areas, HR is likely to become much more of a strategic contributor. 10. Organizational Performance. Human capital is an important driver of organizational performance in most organizations—the relationship between organizational performance and how the HR function is designed and operates is an important focus of this study. Our results show a number of strong relationships between organizational performance and the way HR is organized, managed and staffed. HR can make important contributions to organizational performance by developing its role as a strategic contributor. 11. International. In our previous surveys we gathered data only from U.S. corporations. The economy has become increasingly global since we began this research in 1995, thus it is important to consider how HR functions in different countries. For the first time in our 2010 survey we collected data from corporations in five countries in addition to collecting data from U.S. corporations. There were some interesting differences among the six countries studied. HR organizations are very similar in the developed countries studied and are more strategic than they are in the less developed countries. The similarity among the developed countries is not surprising since most of the organizations studied are large global competitors. Study Methods Data were collected from companies with 1,000 or more employees via a web link. For the first time data were also collected from multiple countries. In addition to the U.S., data were collected from HR executives in Australia, Canada, Europe, United Kingdom, and China. Our analyses is based on: 190 respondents from USA; 36 respondents from Australia; 45 respondents from Canada, 215 respondents from China, 66 respondents from Europe; and 45 respondents from the United Kingdom. Manager’s questionnaires were also made available via a web link. At least one manager questionnaire was received from 35 U.S. organizations. When multiple responses were received from a company, a mean response for the company was computed and used in all the data analyses. Effective Human Resource Management: A Global Analysis, the book based on this research, is now available and may be purchased through the SHRM store. View the full list of SHRM Foundation funded research.