In software development, it becomes increasingly difficult to change a solution as it matures, because of interdependencies and overall levels of complexity. This is known as “technical debt”. The same concept can be applied to business transformation – where organisations move onto the ‘next big thing’ – but are constrained by the legacy of previous transformation efforts that did not deliver their intended benefits. As it leaves the organisation with a legacy of over-complexity, this issue becomes a ‘transformation debt’.
Change and transformation are now essential parts of business-as-usual. But while HR is already involved in change projects, these efforts are sometimes not closely linked to tangible business outcomes. HR often takes a ‘best-efforts’ approach, and their transformation capability can be fragmented and isolated within the organisation. However, business transformation itself is evolving, with a growing emphasis on driving commercial objectives and prioritising people-centric changes over technology or process-centric ones. Organisations are facing external and internal pressures to change on multiple fronts, such as AI and automation, market and regulatory changes, the need to adapt to climate change and the constant flux of mergers and divestments. With the current state of the world, it’s becoming clear these forces present an undeniable impetus for transformation.
As businesses grapple with transformation, it quickly becomes apparent that their approach is context dependent. For example, with lengthy research and development processes and stringent regulations, life science companies understand the importance of aligning their workforce with the long lifecycle. This is a stark contrast to retail businesses that operate on daily results and struggle to envision the long-term future. Understanding the specific context and industry dynamics is crucial in determining the most effective approach to transformation. Each business must consider its unique challenges, goals and operational realities to develop a transformation strategy that aligns with its vision and maximises its chances of success. Historically, transformation programmes were perceived as operating models, which would usually consist of several layers such as technology, data, supply chain and people. However, companies usually forgot to focus on the way people work. There is an argument that what people do at work are processes – and for many, this is true – but for an increasing proportion of the working population, the process elements of their work have been automated. Instead, they focus on optimising existing processes or creating future value for the business. So, rather than looking at transformation as a process of changing the operating model, organisations need to focus on changing the entire “operating system” of their business. Changing technology, datasets and channels in an organisation alone is myopic and is likely to significantly impact the benefits and time to value from the transformation effort. To put the transformation programme on the right track, it’s important to see how all the elements combine and, most importantly, how these changes will impact the way people work. Indeed, there is a growing realisation that the human element cannot be overlooked. Business transformation programmes often fail and this has prompted a shift in mindset. It’s now recognised that considering HR and workforce needs are key to achieving successful outcomes, leading to HR being more actively involved in transformation initiatives.
In practice, the role HR plays varies across industries and individual organisations. Some businesses already have HR as an integral part of their transformation efforts, while others are just starting to recognise the need for HR expertise. It isn’t always smooth sailing. Sometimes, there is a misalignment between the transformation goals and the capabilities or mindset of the HR team. This often stems from individuals who have been in the HR function for a long time and are unaccustomed to the demands of a rapidly changing business landscape. Transformational leaders entering these businesses are faced with challenging conversations as they try to bridge the gap. There is also a challenge in the relationship between HR’s role in enabling business objectives and driving the employee value proposition (EVP) and its more traditional role as providing services and managing workforce-related risks. HR can be overly focused on implementing policies and practices that seem too remote from the day-to-day issues the business faces or not aligned with the business strategic objectives. It’s essential for HR to align with the business’s strategic goals and ensure that their transformation efforts drive tangible outcomes. One common scenario is for HR to be drawn into the minutiae, perhaps implementing new HR policies that only impact a small portion of the workforce. While these initiatives might be well-intentioned, they can sometimes overshadow more pressing priorities within the organisation. It’s crucial for HR to focus their attention on initiatives that directly contribute to the business’s overall success rather than being caught up in initiatives that have minimal impact. Another challenge exists for HR business partners, who typically lead transformation initiatives, as they may struggle to receive the necessary support from centres of excellence or shared service centres. This disconnect can hinder HR’s ability to effectively support the business and provide the resources needed to drive successful outcomes. It’s essential for different HR functions, such as strategic workforce planning, people analytics and talent management, to collaborate and have ongoing conversations to ensure a cohesive and integrated approach.
In some cases, organisations may work with external consultants to support their transformation efforts. However, it’s important to remember the ultimate responsibility for driving change lies with the business itself. While consultants can provide expertise and pace and serve as facilitators; it is essential that the business takes ownership of the transformation process. To achieve successful HR transformation that aligns with business objectives, organisations need to enhance their capabilities, capacity, agility, and mindset. Collaboration and communication are key here too. HR leaders need to work closely with the business and other functions involved in transformation – finance, strategy, and transformation teams. This approach ensures that HR’s efforts are tightly aligned with the overall goals of the organisation. By actively participating in shaping and delivering the business strategy, HR can demonstrate its value and contribute to organisational success. This shift in mindset presents a significant opportunity for HR to play a pivotal role. Transformation has been associated with large-scale programmes that occur every decade or so, involving significant reorganisations and widespread impact on the workforce. However, a new perspective is emerging, transformation as business as usual. Rather than approaching transformation as a massive endeavour that affects everyone for a limited time, view it as a series of continuous micro-improvements that align with the overall strategic goals. This shift emphasises the importance of incremental progress and learning how to extract value from each change rather than focusing solely on large-scale changes that may be difficult to implement and even more difficult to yield results. By adopting this mindset and embracing continuous micro improvements, organisations can effectively manage transformation debt, achieve greater alignment with business goals, and create a culture of sustainable change. It requires a shift in perspective and a commitment to maximising the value of each incremental change, ultimately leading to long-term success and continuous improvement. The need for transformation is an ever-present reality in the business world. The way businesses approach it is shaped by industry context, with some industries naturally inclined to think long-term while others struggle – for understandable reasons – to break free from short-term thinking. What remains constant is the growing awareness that HR plays a pivotal role in ensuring the success of transformation initiatives. HR transformation, too, is important in achieving strategic and commercial objectives within the organisation.
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