In today’s world of rapid globalization, accelerating innovation, relentless competition and talent shortages, business models are changing so that companies can stay relevant and viable. The people business must keep pace to add value and remain relevant.
Most efforts to modernize or transform HR usually include implementation of technology to improve experience and processes, new job roles, define HR competencies and reorganization. But one critical aspect of HR modernization that is often overlooked is the examination and definition of HR capabilities.
A capability is the collective skills, abilities, and expertise of an HR organization. Capabilities are the outcome of investments in staffing, training, compensation, communication and other human resources areas. Capabilities are what HR does. Although the word “capability” is used interchangeably with “competency”. It’s important to understand that they differ.
Core competencies are attributes that individuals bring to a job including knowledge, a skill or ability that contributes to the successful completion of a task or activity on the job. To demonstrate competence, workers must be able to perform certain tasks or skills with a required level of proficiency. HR Functional capabilities are the ability to perform an activity or a collection of related activities. Capabilities are delivered through a combination of competency and capacity.
CHROs should include HR capability assessment at the top of their agenda. HR senior leaders need to be very intentional to evaluate HR capabilities. The HR capability process includes defining an HR capability model by envisioning a future state, conducting a gap analysis and creating a plan to close the capability gaps. This can follow a seven step process that goes as follows:
- Convene a meeting with key HR leaders and high potential talent and collectively begin listing desired HR capabilities that are required to support the business and its strategic plans. Examples of HR capabilities include:
- Merger and acquisition management
- Benefits administration
- Employee wellbeing
- Talent acquisition
- Performance consulting
- Workforce analytics
- Workforce planning
This process is iterative and several meetings may be required. An HR business capability model is a logical decomposition of HR activities. Be careful not to confuse a capability with a process which is how things get done. For example, talent acquisition is a capability whereas “college recruiting” is a process that supports one aspect of overall talent acquisition. Ensure that each capability is clearly defined. Once the list is completed, group the capabilities into levels. For example, Level 1 could be basic Human Resources Management and level 2 can be Talent Management.
- Each HR leader/stakeholder involved in the capability project should assess current capability maturity based on the following categories:
- The level of process support
- Fit of toolset to deliver capability
- Adoption in the organization
- Level of performance measurement
- Level of competency and capacity to execute.
The rating scale is based on 0 (incomplete) to 5 (optimized). The scores for each capability should be averaged by HR leaders and discussed as a team.
- Assess target capability maturity on the same scale as above. Some capabilities may not need or warrant fully optimized maturity (a score of 5). For example, for the Workforce Planning capability, the “Fit of tool-set” category can be assessed as a 3 in future state because only some process need to be automated.
- After the initial list is developed, survey key HR Stakeholders/Customers to assess the level of current performance and importance of each capability. The results of the survey will serve to fine-tune the list.
- After all the data are collected, the HR senior leader team should develop plans to close the gaps. For example, if Workforce Planning is a desired capability and does not exist in current state, you should consider whether to build, borrow or buy the capability. If you decide to build, then you must:
- Consider what function in HR will assume the activity
- Create capacity to conduct the activity
- Train HR talent to become competent to conduct workforce planning with business leaders
- Consider any required tools or technology
- Determine the time frame in which you want to introduce the new capability.
Alternatively, if you want to buy the capability, then you want to find a vendor partner who can conduct the activity for you.
- Key performance indicators (KPI) are a critical part of capability review. Select 1 to 3 KPIs for each capability level.
- Once the HR capabilities model is built, you should conduct an annual audit. It will highlight which capabilities are most important given your company’s strategy.
The value of human resources capabilities is immense. They bridge the gap between business and HR, help understand the essence of what HR does and align development efforts to strategic priorities. This self-evaluation is a critical part of HR’s self-awareness to ensure its maturity and relevance to the business it supports.
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