Reinventing HR to deliver on human-centered transformation by Armin von Rohrscheidt

The Human-Centric Enterprise ebook is the result of a partnership between Thinkers50 and Mercer. The subject is close to our hearts at Thinkers50: understanding how to manage and lead organisations in the most humane way — in a way which truly maximizes the amazing variety of human potential.

With contributions from Mercer experts, The Human-Centric Enterprise portrays a working world in which best practice is being realigned to accord with the needs and aspirations of people rather than balance sheets or restrictive notions of efficiency. It acknowledges the powerful evolution of amazing technologies, but places them in the human context, as enablers of human achievement rather than replacements for people.

Read Armin von Rohrscheidt’s chapter and find out how HR will need to change to support the new world of work. 

Armin is a partner at Mercer I Promerit and the HR Transformation Leader for the international region. He leads global transformation projects and programs through the (re-)alignment of HR management — from strategy adaption over conception to effective execution into steady process — and organisation models. In his hybrid role, he is also able to keep HR and HR-IT aligned and coordinate both activities, and he is the thought leader behind the new target interaction model (TIM) in HR.

Armin has more than 20 years of experience in HR consulting and management. Before joining Promerit in 2015, Armin served as the Global Head of HR Transformation at MHP – A Porsche Company. Prior to his HR consulting work, he was the Director for HR Germany and Senior Director for Global Compensation Benefits, HR Processes and HRIO at Carl Zeiss. 

Armin holds degrees in business and economics education from the University of Stuttgart and in business administration from the University of Applied Sciences Nuertingen-Geislingen. He spent a couple of years in the US for study, work, and privately and is fluent in English, German and Italian.

Watch our interview with Armin von Rohrscheidt here:

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The human-centric enterprise

As the future of work rapidly evolves, we must urgently reassess our understanding of where, how and why we work.

Developed by Mercer and Thinkers50, The Human-Centric Enterprise redefines our perspective on putting people at the center of modern workplaces.

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Chapter 7: Reinventing HR to deliver on human-centered transformation

We have talked about how powerful human-centered transformations can be — across all different aspects of workforce management. From culture and employee experience (EX) to skills and total rewards, organizations are successfully rethinking how they organize jobs or processes and making people the foundational building blocks of the organization. The results speak for themselves.

Along the way, we’ve shared many different strategies and approaches for transformation to a more sustainable and human workplace. There has been one constant across all the ideas we’ve presented: the presence of your people teams as guardians and executors of this change.

Whether you call these teams human resources (HR), people operations or employee success (let’s settle on HR for our purposes here), this group is made up of pivotal stakeholders in your people processes. They are absolutely foundational to your success in delivering a more human-centric organization. As guardians of your talent and work processes, HR will be called upon most to plan, shepherd and support change throughout your organization.

This begs the question: How will HR itself need to change to support this new world of work? The answer is by reorienting to a more fluid, human-centric approach.

Changing people needs in a changing world of work

There’s no arguing with change. And as every leader and HR practitioner knows, change is already upon us. We’re in the middle of a historic evolution and revolution in work. Trends that were already accelerating in 2019 have been thrown into hyperdrive by a confluence of the pandemic, rapid increases in AI and automation, talent shortages, climate change, world events, economic pressure, and more.

In just a few years, we’ve experienced massive societal changes that have not only deeply impacted how, when and where we work — but also leave us questioning the very nature of what work we do and why we do it.

In response, throughout our organizations, we’re shifting to more agile, flexible models that center the human experience and needs of employees — flowing work to people based on their skills instead of centering organizations and fitting people to work and static roles.

The HR function is critical to sustainably planning and managing these fundamental changes — and helping employees deal with disruption, stress, uncertainty and rapid change.

To have the capacity to lead transformation efforts in the business, HR needs to start by putting on its own oxygen mask first. This means rethinking the entire employee and HR life cycles. At a minimum, this requires focusing on EX, adopting new technology (including direct-access tools, artificial intelligence and chatbots) and embracing agile ways of working.

In late 2022, Mercer surveyed 857 organizations about their HR operating models and asked them to self- evaluate the strength of the HR function. This research revealed that most HR leaders believe they have a ways to go. For example, 59% tell us they don’t think their HR functions are sourced with the right mix of human capital management (HCM) technology, and 52% of HR leaders aren’t convinced that business leaders view their HR functions as “state of the art.” Fortunately, organizations are applying resources in these areas: Nearly half (45%) are currently recruiting or planning to recruit new HR staff in 2023 to handle additional complexity, and 37% are increasing their HR spending overall — up from just 26% in 2017.

But headcount and technology alone cannot solve for the transformational challenges HR faces. We must also look to the organization itself — inverting a paradigm that has always adapted employees and work to the organization — and think more intentionally about how stakeholders interact with HR.

The traditional ‘TOM’ approach: Centered around the organization

Many HR organizations are still struggling to emerge from an older model — one that centered the organization and infrastructure, layered in processes, designed delivery of content and, only after these steps, began to look at EX.

Commonly referred to as a target operations model (TOM) approach, it’s built around business efficiencies and cost savings and rests on three pillars: HR business partners (HRBPs), centers or communities of excellence (COEs) and HR shared services.

TOM by itself has failed to achieve the intended cost benefit it promised and has ultimately had a negative impact on employees. It wasn’t effective when first implemented and is now more antiquated than ever.

Regrettably, in the past, much of the effort and attention regarding HR transformation has gone toward trying to tinker with and make surface improvements to this underlying structure. In most cases, this has meant throwing good money after bad.

On paper, TOM seems like it should work. It focuses on moments that matter and tries to streamline operations by outsourcing HR services. So why does TOM on its own break down in practice? Here are a few of the flaws in the TOM model:

  • An approach that is too tactical overlooks the entirety of EX

TOM is intended to focus on moments that matter — on the principle that putting the most effort into the most important experiences will yield the best results. However, we’ve discovered that what happens in between those moments — the whole EX — is just as important. And gaps and shortfalls are often missed.

A focus on discrete moments obscures a more holistic view of EX — being more reactive, transactional and support driven. This lack of strategic thinking can also cause HR to become more static and make it more difficult to embrace changing work and workplace design.

  • Isolated functions become more siloed and less collaborative

In Mercer’s 2022 survey of HR operating models, 69% of HR leaders say they use some form of a three- pillar model, with 50% saying they employ a model with all three main elements. However, in larger organizations, pillars turn into silos. These organizations report the lowest rates of fully federated structures, relying instead on hybrid models that don’t get the same results. If not sufficiently centralized — or federated — the three pillars become more distant, more isolated, more territorial and less functional. For example:

  • The HR operations function has become invested in guarding the complexity it has built up over the past 40 years. The focus is often on leveraging efficiencies, but complexity always grows back.
  • HRBP roles are in a never-ending crisis of purpose and mired in transactional work. Our 2022 survey found that high-performing HRBPs are those that spend a majority (60% or more) of their time on business advisory rather than mundane tasks — yet 47% of organizations say their HRBPs are still trapped in these kinds of transactions.
  • The COE organization is largely occupied with special missions — such as talent management and acquisition, strategic workforce planning, and new work. Although these are very close to the

business, they’re far away from the rest of HR. The outcomes they produce tend to be unsustainable, and they’re plagued with frustration, high attrition and burnout.

  • Form doesn’t follow function, increasing complexity and blocks

In a TOM model, the organization delivering the work is the last thing to be designed. But how can you design a function or organization without first understanding what this function should deliver and the needs of the stakeholders? Form should follow function, and in the TOM model, this is backward.

As a result, dozens of programs are created without any consideration for interdependencies and never find their way into the HR portfolio in a holistic manner. Data are difficult to obtain and synthesize — providing real-time data and analytics dashboards is a challenge for about 33% of shared services teams according to our 2022 survey. Similarly, technology is tacked on and out of step with what is state of the art. Our survey found that 59% of HR leaders don’t think their HR functions are sourced with the right mix of HCM tech.

A new ‘TIM’ approach: Re-centering around human experience

The TOM approach is flawed because it lacks fundamental centralization and — most importantly — works from the organization outward and leaves the employee interaction as an afterthought.

So what if we flip the script? If we invert the TOM paradigm and instead begin with EX, move to content delivery, layer in process and only move to organizational design at the end, we have a different and much more sustainable model.

This approach is commonly referred to as a target interaction model (TIM). A TIM is a generic model that provides targeted interactions with and within the HR function. It is always individually tailored to the organization and focuses on what HR services are required and how they are delivered.

The TIM-first model is a solid foundation on which to build an HR function as it can realize the people side of the business strategy, a maturity check and ideal state for HR roles, and a first indication for capacity requirements. This approach works because:

  • It is rooted in a centralized, holistic strategy

The TIM model is truly rooted in an organization’s strategy and unique needs. Because the organization is the last piece to put in place, this opens up the opportunity to update and add new and important items to the HR portfolio (such as DEI, skills-based talent process and true “one-HR” analytics).

  • It is a human-centric approach that leads with EX

In a TIM model, EX is put front and center. EX is too often just a buzzword or nice add-on that HR picked up — but not fully embraced or used as the core of holistic employee journeys in the way we described in Chapter 3 and elsewhere in this book. EX is at the forefront of everything HR is developing and proceeds naturally from HR mechanisms — being a guiding principle for process and governance design and shaping the mindset for every HR role.

  • It builds on the strongest parts of TOM

It’s important to note that this is an additive model. TIM is preliminary to TOM but does not replace it. Rather, the two models work together. TIM merely imbues TOM with a proactive, anticipative, experience- based and value-oriented way of operating — focusing not on making moments that matter but on ensuring that every moment matters.

Putting TIM before TOM: Four ways of rethinking HR

For a sustainable and flexible HR setup with real business impact, organizations need to place TIM before TOM — designing the future TIM and then evaluating and evolving the TOM to match. This will require four ways of fundamentally rethinking HR:

  1. Rethink what it means to be HR
    The most difficult part of any human-centered transformation lies in HR itself, the people involved and their mindset. This is especially true when the transformation is inside the house. HR needs to reimagine how it sees itself — as a business strategy and not (only) as a support function.To do this, you first conduct a thorough, honest appraisal of where the function is today. Success lies in focusing on outstanding EX while always taking organizational strategy and constraints into account. Evaluate your business model, workforce composition, skill and knowledge inventory, and other internal and external factors. This will include organizational effectiveness, desired EX, and general and talent-related industry trends impacting people strategy.

    You can also help leaders and decision makers migrate how they think about HR and ensure that you have the right change management skills and attitudes in place in HR and across the organization.

  2. Recalibrate your HR content and tone
    Up to 90% of all policies are owned or enforced by HR, so consider the interactions that will deliver your service portfolio. Content is an interaction point between HR and the workforce — comprising tangible actions, procedures, guidelines, policies and aspirations.You will want to take an honest look at your current tone. Using new, human-centric language that extends to all employees — regardless of work location or role — will be crucial to creating a culture of belonging. Unfortunately, HR is often seen as policing, due in part to “ordering” style language and policy content. Framing along the lines of “must comply,” “the employee is supposed to” can be alienating and distancing.

    Take this moment to embrace opportunity-driven and valuing language. Instead of setting close limits or building walls, you can leave space and establish guardrails — inviting the employee to be a more active and enabled stakeholder.

  3. Reassess people processes and technology
    The topic of processes and technology is the most significant and most underestimated in HR transformation. As the bridge between TIM and TOM, processes and technology comprise the connections and experiences that link employees to the organization.Most HR processes were born 30–40 years ago, and technology since then has just been retrofits to these processes — moving from paper to digital and, later, online. User experience and service adoption were almost never at the center of those original design exercises; these processes are often completely independent of the available system support, negatively impacting usability (experience) and effectiveness.

    HR technology suites have been similarly inflexible and functionally slow to evolve. Many are taking a more user-focused approach, but this is lagging for a digitally mature workforce that is demanding consumer-grade tools.

    When HR technology tools are state of the art, they tend to be implemented around talent events like hiring, performance reviews or succession — which are used more infrequently. Research shows that 72% of all interactions between HR and employees are not talent related but rather process and technology oriented.

    Use this transformation to gather and read people data to establish a better baseline user experience and to reexamine the technology that underpins it. In the future, big HCM suites will act more like the operating system on a mobile phone. The real value drivers will come from apps and best-of-breed solutions — a vital combination of system of record, talent intelligence, marketplace tools, skill brokerage and other people operations platforms.

  4. Reevaluate the HR organization and roles
    With interactions, content and services in place, you’re ready to talk about how to use TOM to deliver these holistically across the organization.There is no one template for an HR operating model that works in every organization. A strong TOM will express your unique TIM in how it sets up roles, locations and governance — and how it works with technology. What matters is building an organization that can support the above goals, content and processes you’ve articulated.

    And, as we said earlier, this isn’t necessarily going to be a new model. A centralized TOM can still follow the three-pillar approach, for example — but it does so in a more federated, centralized way. It may, however, require new roles, responsibilities and capabilities regarding how the function is set up to operate.

Here are a few principles to keep in mind:

  • Don’t let role design be trapped by the structure of the past. This isn’t about boxes and lines; it’s not about hierarchies; it’s not about titles. One person can distribute capacity between more than one role, for example, and role owners can be located anywhere, independent of their responsibility areas.
  • Ensure that role and function design prevent interaction gaps. Create a counterpart for every interaction — so that every employee’s needs will be answered.
  • Identify skills gaps, and create a plan for meeting future emerging HR skills — such as data analysis, workforce planning, human-centric design, EX implementation and storytelling around your HR data. Our 2022 survey data show that high-performing organizations are twice as likely to be investing in HR skill development.
  • Think about sizing. Determine specific roles and how they’re expressed in your organization with the actual FTE ratios required to deliver excellent HR work.
  • Before launch, evaluate the change impact per role. This doesn’t mean applying a generic and stable benchmark number — such as for an HRBP — but truly taking the individual, organizational context and role expectations into account.

Depending on maturity, degree of automation and size differences, these scenarios should all be considered, tried and pressure tested before they’re locked in. Only then can boxes and final organization charts be drawn up.

Tracking the trends

The future of HR — just like the future of work — is already upon us. In our 2022 survey, almost two-thirds of respondents report that aligning HR and business strategies has taken higher priority since the pandemic. Here’s what you can look for as the trend toward TIM grows and matures across more organizations:

Slowing down

Expect a decrease in HRBPs operating in a micro-environment or only supporting the HR operational needs of one pivotal people leader. HRBPs are currently being aligned to where they add value, but this is challenging the effectiveness of their much-touted transition into strategic partners.

Shared services are more often being digitalized and automated than outsourced. That said, we will continue to see HR service consultants handle exceptional cases and special requests from employees. These may simply be segmented by persona to deliver on a more differentiated value proposition.

Staying the course

Expect continuity in COEs as experts design the organization’s global talent philosophy in collaboration with the C-suite — conceptualizing services from rewards and performance management to talent succession strategies and future-of-work metrics. COEs will execute HR processes — such as talent acquisition or talent mobility — in alignment with specific geographies or business lines, delivering on concepts they’ve developed.

On the rise

Expect a rise in HR strategic advisors representing the service portfolio, providing insights and advice to senior executives on how the workforce supports the business strategy. Collaboration experts will be excellent communicators, storytellers and organizational psychologists who facilitate the flow of information, skills and capabilities between workforce populations, helping employees learn and adapt to change.

And, finally, expect greater expertise in how we design EX — designers will create an intuitive and fuss-free consumer-grade EX, often for specific personas, such as new hires or business or function groups.

Crafting the ideal human-centered HR function of the future

In leading HR operational design with TIM, you will be fundamentally challenging a traditional optimization approach that builds on predefined siloed structures. In the short term, this might cause consternation, hinder end-to-end processes and efficiencies, or leave open questions as to how things are run day to day.

But the benefits of a new and improved way of performing human-centric HR work are clear: true customer- centricity, an outstanding EX, high business relevance and — perhaps most interesting — capacity gain for many organizations.

But this will require doing the work to change mindsets about HR, shining a light on the function’s evolving role and the value the function delivers.

A properly designed TIM frees your HR resources from transactional tasks and allows HR to become a strategic partner and deliver more relevant advisory and services. Building a TIM and adjusting governance can unlock a return on investment after 24 months of 7.5%–10% efficiency gains. As you mature — further simplifying processes and making technology changes — this can lead to gains of up to 30%.

As with every other human-centric transformation in this book, the results speak for themselves. Putting people at the center of the work we do creates more sustainable, productive and engaged workforces — in HR and across the organization.

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