August 09, 2017

HR Transformation: How to Improve Human Resources Departments with Lean HR Process Improvement Initiatives

Our last case study spanned the front, middle, and back offices of a global bank. For this story, the bank is also one of the world’s prominent institutions: They boast over $2 trillion in assets and operate across 60 countries.

Yet this story is more focused. It zeroes in on one crucial shared-services group that was supporting operations in both North America and Europe. The group in the spotlight here was human resources, or HR operations. The bank was concerned: After consolidating several country-based groups to create this mega-center for HR shared services, the promised economies of scale were simply not materializing.

The bank’s Global Head of Human Resources reached out to The Lab as our sponsor. He and other senior executives within the bank’s HR operations were looking for some seriously lean improvements, ASAP.

Lean HR Transformation Improvement Initiative Case Study

Consider this sobering backstory: Prior to contacting The Lab, this bank’s internal HR process improvement project team had just spent a year working with a global technology integrator to deploy new HR operations technology for the bank.

The deployment itself was on track. But the HR cost savings were not. Where were the human resources process improvements the technology had promised? Where was the boost in service levels and HR productivity? Both senior management and internal team leaders believed that far more lean process improvement was possible. But they struggled with how to improve the human resources department, until they got a call from The Lab.

Scoping the HR transformation initiative: Applying lean shared services principles to improve cost for value

We were tasked with finding lean HR process improvement ideas across a diversity of HR shared services operating groups, including:

  • Recruiting, hiring, onboarding, and off-boarding.
  • HR generalists’ operations.
  • Training and development.
  • Benefits administration.
  • Compensation administration.
  • Expatriate management.

Within just eight weeks, The Lab’s wall-to-wall, template-based HR improvement initiative of these operations identified more than 400 lean non-technology HR process improvement ideas that could be implemented quickly. Eighty-five percent of these were combined into a six-month, self-funding implementation work plan.

This non-technology HR improvement initiative capitalized on numerous lean transformation opportunities to apply lean HR practices for cost optimization—and to improve customer satisfaction with the business unit. Because these also simplified and standardized the work, they helped get more productivity from the new technology. Here are just three HR process improvement examples:

Human Resources Process Improvement Example 1: Applying lean HR practices to recruiting and hiring

The Lab helped the bank to uncover a glut of inconsistent “one-off” recruiting processes which spanned multiple business units and locations. Some businesses used outside recruiters, while other did not. Some created quarterly staffing plans; others did not. Authorization procedures for requisitions varied extensively within businesses—and even in the same department. As you can well imagine, these undocumented and unnecessary deviations created mind-numbing complexity. They prolonged hiring cycle times. And they resulted in cost exceeding 30 percent per hire. Nobody noticed. It was business as usual.

The Lab implemented lean HR process improvement to reduce the needless variances in process complexity, cut costs, and improve service performance.

Are your recruiting and hiring practices as locked-down and lean as they could—and should—be? Think about the efficiencies that a lean HR transformation implementation could create for your organization.

HR Process Improvement Example 2: How to improve human resources department generalists’ productivity with lean thinking

HR generalists will usually tell you: “My work is different every single day. It cannot be predicted or standardized.” But work always seems that way—until you write it down. Document it. That’s when the patterns emerge.

It’s true that demand on HR operations from the bank’s various business units to the generalist groups varied significantly—day by day. Yet these demand patterns were never studied or documented. Skill levels, complexities, and frequencies for the diverse range of transactions were never recorded. Service-level agreements, or SLAs, were non-existent.

A quick inventory revealed that fewer than 40 percent of the HR operation’s generalists even had the skills to address the full range of transaction demands. The other 60 percent had to struggle – usually in embarrassed silence. And yet, all generalists received the full range of demands to process. You can imagine the delays, questions, and rework that arose in such a haphazard, ad-hoc environment. And you can surely sympathize with the generalists’ frazzled perception of their unpredictable workload.

The human resources process improvements that The Lab helped to implement addressed opportunities on multiple fronts. We helped the bank to:

  • Stratify HR tasks required for various levels of demand complexity. This helped ensure that the right type of work was getting completed by the right level of generalist employee—no more entry level admin work for senior professional human resources operations staff. Likewise this lean HR practice prevented assignment of high-risk tasks to inexperienced generalists.
  • The most basic lean HR capacity planning tools enabled the smoothing of demand patterns of inbound requests from the business units by prioritizing these based on urgency—many fewer fire drills.
  • Applying this lean thinking in HR generalist operations increased business-unit satisfaction by 50 percent almost immediately. As the credibility of the generalists increased, they were able to play a more consultative and influential role, convincing the business units to plan a bit further ahead further aiding in HR cost optimization.

HR Improvement Idea 3: Use lean HR improvement for employee compensation plans transformation

When The Lab intervened, history—in the form of prior acquisitions—was catching up to this bank. So were its historically high levels of business-unit autonomy. Each unit designed its own compensation and incentive plans. All this added up to a needlessly complex collection of more than 140 allegedly “unique” compensation plans, each with mind-boggling, arcane incentive schemes. In each business unit, only a few “high priests” of compensation understood these plans. Documentation was woefully inadequate. This was preventing the handoff of plan administration to the new shared-service center.

The Lab’s first step was to create a comparative inventory of the fundamental elements of each plan. This revealed that there were essentially only four to six fundamentally different plans with lots of similar incentives—ideal for consolidation and standardization.

These simplification improvements helped to standardize and consolidate the common administrative HR operations tasks for the plans. This, in turn, enabled a smooth handoff of the plans from the business units to the new shared-services center—without revising the terms of the plans themselves. That was a true feat of lean implementation.

Lean human resources process improvement and HR shared services: Bottom-line impact

Using non-technology process improvements, this bank’s worldwide HR shared-services center was finally able to wring the most benefits from its prior technology investment. The results speak for themselves:

  • Internal service levels improved more than 50 percent.
  • Headcount requirements were reduced 30 percent.
  • Operating cost was cut more than 30 percent.

It gets even better: The entire HR transformation initiative broke even in just three months. And by month 12, payback on the bank’s investment in The Lab stood at 5x. That’s lean HR operations improvement in action.

Are your shared-services operations in general, and HR in particular, performing according to the best lean principles? If not, consider contacting The Lab. For 25 years, we’ve specialized in lean, non-technology improvements, using our unique self-funding engagement model and money-back guarantee. Learn more about how we work right here.

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