Transforming HR for the ‘New Normal’

Kiran Ahuja, the newly confirmed director of the Office of Personnel Management, may just be the leader the embattled human resources agency has needed. Let’s hope so. She is taking over at a time when government has serious workforce problems and OPM’s influence has declined. In other sectors, HR’s role is undergoing revolutionary change. It was not too many years ago that the function was slammed as a “necessary evil” in a Fast Company article titled "Why We Hate HR." OPM has been called worse.

In the private sector, the transformation is discussed in a new report, “Accelerating the Journey to HR 3.0,” based on research by IBM and Josh Bersin, a prominent researcher on HR issues. With the changes in work management prompted by the pandemic and President Biden’s commitment to repair and rebuild the civil service, this is the time for government’s chief human capital officers to take that seat at the table. As the report argues, HR offices need “to focus on the employee experience and drive reskilling, cultural transformation, and an evolution to new models of work.” Research in organizations that have undergone reform confirms that is important to making government careers attractive and raising performance levels.

Government is starting with a clear disadvantage—civil service laws and regulations are a barrier to needed change. The report succinctly depicts government’s problem in a description of the three stages of HR: 

1. “Traditional HR 1.0 departments focus on compliance, administration, and highly efficient service delivery.” 
2. “HR 2.0 teams move toward integrated centers of excellence, and focus on training and empowering business partners to deliver solutions at the point of need.” 
3. “HR 3.0, which only 10% of companies have achieved, turns HR into an agile consulting organization, one that not only delivers efficient services, but also practices design thinking to push innovative solutions, cognitive tools, and transparency into the organization.”

It would be interesting to learn how federal managers and employees would describe their HR office. The researchers concluded, “Business executives overwhelmingly agree that HR must be radically redefined.” The focus of HR shifts from the policies and practices adopted to maintain control to one where HR generalists work as partners with line managers to create high performance work environments.

The report was not drafted for government, however. Federal practices are mired even deeper in the past than HR 1.0 offices in the private sector. It is highly doubtful any employer relies on a management model that dates to 1949.  

HR 1.0 offices emphasize control through enforcement of regulations, centralized administration, job classification, performance ratings, and employee satisfaction. The researchers concluded HR 1.0 offices rely on benchmarking to improve practices, and noted that decisions are based largely on intuition, not metrics. OPM, however, continues to rely on decades old practices. 

In contrast, HR 3.0 offices focus on building and sustaining a positive work experience where employees can perform at their best. HR specialists work closely with line managers as business partners to create high performance organizations. New practices and systems related to workforce management are developed with line manager input. Temporary internal teams are formed to address problems, rather than take the time to bring in outside experts. Decision making is based on external/internal data and predictive artificial intelligence. The focus shifts from diversity and inclusion headcounts to maintaining a pipeline of diverse candidates for leadership roles. It’s not “your grandfather’s HR.”

Expected Changes in HR Practices

The researchers developed a list of action areas where change is in progress; in some cases, the changes will “wholly reinvent traditional people practices.”

First on the list is employee performance management. The practice is expected to shift from the annual, brief meeting focused on the rating to continuous feedback. Coaching and continual skill building are important themes. Mobile apps and frequently updated performance data support continuous feedback. Transparency is a goal. Goals and projects are “transparent, enabling people to see what’s important, what other people are working on, and the organization’s overall progress toward results. Managers and employees revisit and adjust goals throughout the year and change course and goals as necessary.”

Next on the list is investing in the leadership skills needed for tomorrow’s organizations, including collaboration, listening, and the ability to navigate periods of change and uncertainty. Effective leaders are seen as “coaches, empowering their teams to innovate.” In HR 1.0 organizations, employee tenure is important in selecting new leaders. In the future, organizations will rely on behavioral science-based assessments and predictive analytics to identify potential leaders.  

“Pay for performance—and skills—in a fair and transparent way” is also high on the list of action areas. “Today’s workforce expects transparency into pay . . . race, gender, age and other pay inequities must be eliminated.” The HR 1.0 emphasis on tenure is erased. Pay is tied to capabilities and performance and to skills deemed important in the labor market. Deep skill specialization is incentivized.

A related action area is relying on AI to provide “the right learning at the right time.” Employers make job-related content available in a variety of digital modalities, giving employees a choice of how to enhance their knowledge and skills. One idea is to provide brief 2-3 minute videos at the start of each day, based on the individual’s experience. HR offices need to develop the capability to identify essential skills in each career ladder and to rely on individual performance metrics and feedback from supervisors and co-workers to understand skill development needs. Learning is moving rapidly to digital platforms.

Developing the skills and reorienting HR specialists as business partners and strategic advisors is also on the list. The role of HR business partners surfaced roughly two decades ago. It combines HR expertise with “business savvy.” OPM conducted a study in 2000, The HR Workforce: Meeting the Challenge of Change. It concluded “more than 90% of HR executives say there is a gap between the requirements and the actual competencies of current HR professionals. Almost 70% of this group said their agencies had little or no formal plan to close the gaps.” It’s not clear if or how OPM ever followed up on these findings. That should be a priority. 

HR and the Need for Culture Change

The pandemic’s impact on work—working remotely, layoffs, burnout, family concerns, and the lost opportunities for informal exchanges—has had a devastating impact on workers in every sector. A new complication is the hybrid reality of some employees returning to offices full or part time while co-workers are on different schedules. Many corporations plan to hire workers aggressively as the U.S. economy comes back to life. Experts predict heavy resignation levels as better qualified workers move to new jobs.  

In federal agencies, the Trump administration left many agencies short staffed. Further, there have been reports that retirement-eligible employees are accelerating their retirement plans. While agencies are working to add employees, state and local public employers are experiencing serious problems filling vacancies in a long list of occupations. All of this has weakened social networks and impeded information sharing across teams and work units, making it difficult to function optimally. 

In this context, it's important to remember agencies were experiencing performance and workforce problems years before the 2016 election. A National Academy of Public Administration report that highlighted the phrase “culture of compliance” was based on input from a long list of individuals with years of federal experience. Peter Drucker was right: “culture eats strategy for breakfast.” 

Developing a strategy to overcome agency workforce problems is fundamentally important to rebuilding and revitalizing government. Central to those problems is government’s brand as an employer, the work experience, and the contributing factor for many workforce problems—the culture.  

Now, as agencies transition to a new normal, the continuing effects of the pandemic over the next several months will be instrumental in defining the culture going forward. To borrow a statement by a prominent consultant, McKinsey’s Bill Schaninger, the current transition period is “an unbelievable opportunity to remake culture.” Agency leaders and their CHCOs should make it a priority to tackle this problem. If ignored, it will continue to undermine efforts to rebuild staff and improve performance. 

It's been reported in any number of studies that culture change initiatives frequently fail. People naturally resist change, especially when they cannot anticipate how it will affect them. In government, the laws governing workforce management date to a time when workers and management were in frequent conflict, a factor that complicates progress. 

It makes no sense to tackle the problem as a top-down solution, especially in government. And reform definitely will not be successful if it's perceived as an HR initiative. But experience confirms that change initiatives must have a solid top management commitment. Plus, HR should be prominent as the lead for managing reform. 

Another prominent consultant, Jon Katzenbach, has written a lot about culture and culture change. He argues for starting at the bottom. Following the state of Tennessee’s successful reform strategy, a senior agency official and the CHCO should hold a series of “safe space” group discussions, asking what’s working and not working. Katzenbach also advocates involving “exemplars”—individuals known to be respected and knowledgeable about what’s important to high performance. 

It should be emphasized that this approach starts with relatively small, local change. As it's accepted and employees see how it impacts results, they are more likely to support broader changes. Employees want their agency to be successful and to believe they are involved in that success. HR’s role as facilitator is essential.