HR’s role in the modern organization is being tested and stretched beyond its traditional model. While calls for improvement continue to echo through many companies, the target is shifting faster than ever. What worked in the past no longer suits a more sophisticated and expansive set of conditions in which the HR function not only operates, but must respond to with greater agility, adaptability, objectivity, and certainty. While some foundational elements remain, a more robust HR capability model better meets organizations' needs as they adapt and evolve to changing business circumstances. 

The operating environment for businesses is rapidly changing, impacting the traditional HR capability model, with shifts driven by:

• Rapidly changing commercial, financial, and labor market conditions that require significantly heightened adaptability and agility by HR and business leaders. 
• Expanding AI adoption that is increasing demand to reduce internal (HR and other enabling functions) expenses to support growing investments in the AI arms race.
• More volatile commercial markets due to nationalistic retrenchment in trade and supply chains.
• Labor force shortages driving increased pressure to deliver more with fewer people, often with more automation.
• The rapid growth and availability of more accessible and usable analytic technologies that provide greater access to advanced analytics and insights with a lower need for advanced statistical expertise.
• A continuing lack of patience for direct and visible HR contributions to business priorities and operational success.

What is needed is a modern HR capability model and framework to define what HR teams and professionals need to know and do across the full range of their business contributions, including strategy, technology, analytics, consulting, and service delivery.

The context for updating the HR capability model

The pace and scope of change businesses must respond to and manage appear to be universally accepted as a primary concern across industries worldwide. With the advent, rapid ascent, and productivity-improvement promise of AI, the race to adopt and create winning use cases is about achieving competitive balance or dominance. That alone is changing the calculus for many organizations, which must not only generate a profitable return on the enormous investments currently required, but do so while understanding its potential impact on workforce employment and deployment.

Wowledge has used its expert partners to propose an updated operating concept for the AI age, the Human Readiness Model, built to address the new realities and challenges that will emerge from adopting these related technologies. With intelligent technologies augmenting (or replacing) human task performance, a new mandate for HR also emerges that pushes it away from a focus on compliance and administrative processing, responsive hiring and training, and handling of inquiries to five key roles and activities: 

1. Architecting an organization designed for perpetual change
2. Engineering the systems that optimize how work gets done
3. Curating and integrating a diverse talent ecosystem
4. Acting as the steward of culture and the worker experience
5. Upholding trust through transparent and ethical people practices

This model addresses not only the advent of AI as a new industrial revolution, but also the increased volatility in commercial, financial, and labor markets that it influences and coexists with. It is designed to meet the need for greater adaptability, agility, cost-effectiveness, and tailored responses to changes that affect different parts of a business in unique ways. As a result, the Human Readiness model is built on six key operating principles on which HR service design and delivery are based: 

• Centralized data with embedded analytics
• Strategic governance of people technologies
• On-demand expertise for complex cases
• Accessed expertise for regulatory compliance
• Change leadership as a core discipline
• Clear business ownership of outcomes
  
  

Understanding the essential elements of the HR capability model

The specific components of an HR capability model that is designed to enhance the functions’ ability to support and drive business, financial, and operational objectives may sound familiar to some, but it is the combination of, and the massing of individual skills across an HR organization that creates a capability. Having one or two experts in any one of these, or having them limited to only leadership team members, is not sufficient to claim these as “capabilities”. Rather, a capability model is defined as having depth and breadth of each of these across an organization, such that experts at different levels of proficiency can be (in the extreme) effectively gathered and deployed at scale to address urgent business needs or operational crises.

A well-equipped HR team has sufficient levels of the following HR capability model elements:

Business acumen

The core element of a highly capable, impactful HR function is a sound understanding of how the business creates value. This involves expertise in the value chain and associated work processes that each function and operational unit operates under. This knowledge helps diagnose issues and challenges in delivering the business value proposition, identify how people-related decisions affect those outcomes, and design targeted solutions to address and resolve shortcomings.

Systems thinking

This capability enables HR to view the organization and its processes, programs, practices, platforms, and people as an integrated system. This big-picture view supports the ability to see the interconnection points, diagnose problems and ineffective people/process/technology interactions, and develop holistic solutions.

Human-centered design and experience curation

HR has a unique perspective, positioning, and ability to understand the relationship between human capabilities, preferences, and the motivation required to do the work. The old process-improvement adage, “it’s the process, not the people,” remains central to design thinking, which intentionally designs worker interactions (or “experiences”) with systems and processes to streamline them and simplify the activity.

Data literacy and sensemaking

HR is a data-saturated function, with systems that collect, track, and report on all types of employee activities. Add the systems other functions (e.g., sales, finance, supply chain, production) use; the availability of quantitative insights into human performance and outcomes is substantial. As a result, HR must assess situations objectively, ask the right questions of data, interpret the answers, and translate quantitative insights into clear implications for business and talent outcomes.

Consulting and influencing

Across HR functions (e.g., HRBPs, COEs, Shared Services), HR must share guidance and expertise with business and line leaders accurately, in a tailored way, and with trust. With limited authority, HR must influence direction and decision-making through solid, meaningful judgment, counsel, advice, coaching, and solution recommendations.

Network and relationship management

This capability involves building and actively sustaining networks of expertise, influence, and collaboration with people and teams inside and outside of the organization. Internal relationships and networks enable cross-functional and business-unit solutions, solution-teaming arrangements, and stronger collaboration and innovation. At the same time, as outsourcing becomes a larger part of a workforce staffing solution set, external vendor and subject matter expert relationships and partnerships become a strategic HR capability.

How the HR capability model elements are embedded into critical HR contributions

Operationalizing the HR capability model requires understanding how its essential elements are leveraged and implemented in key HR activities. The following use cases and examples can bring these to life and highlight their applicability and value in driving HR contributions.

Strategy 

HR Capabilities: Business Acumen and Systems Thinking

Strategic HR combines business-aligned strategies, planning, and tactics that together focus on delivering and improving business, financial, and operational success. While talent outcomes are essential to achieving each of these, they are NOT the paramount purpose or end-game of great, business-responsive HR. In that way, the strategic capabilities of HR at every level (e.g., enterprise, business unit, function, etc.) and function (e.g., business partners, centers of excellence, shared services) must be transparently targeted towards influencing or driving specific business outcomes in sales, operations, manufacturing, supply chain, etc. Thus, business acumen is essential to establishing those linkages. 

At the same time, systems thinking is required to understand how business and operational processes interact, rely upon, and feed into or flow from each other. It establishes a baseline for interpreting how various HR processes (performance management, succession planning) are designed to impact each of those, and how they can then be synchronized to drive those business outcomes. Building (and executing) effective HR strategies requires a broad view of how changes in one or more processes affect goals or outcomes in other areas.

Digital transformation

HR Capabilities: Business Acumen, Systems Thinking, Human-centered Design and Experience curation

Technology adoption and upgrades across business functions are commonplace, but HR involvement and thinking are too often limited to traditional change management strategies and activities (if any). The introduction of advanced, intelligent systems and capabilities (AI, robots, Internet of Things) is changing HR’s role and opportunities to define the future of operations. More advanced technologies are changing how work is performed, and value is created, requiring adaptations to workforce staffing and deployment plans, role and responsibility definitions, sourcing and hiring criteria, learning and development content, compensation plans, and organizational design. 

The HR capability model must shift to accommodate the projected impact of these workflow and workplace changes as they evolve, focusing on supporting operational adoption (speed and scale), user experience, and developing skills associated with technology co-working.

Analytics 

HR Capabilities: Data Literacy and Sensemaking, Consulting and Influencing

The increasing availability of automated HR data analysis and reporting tools and platforms means HR teams can more easily access valuable, advanced insights into trends and occurrences without advanced statistical expertise. While expertise is certainly required to generate and present these insights, field HRBPs, HR Managers, and Generalists, as well as specialized HR (e.g., L&D, compensation, legal compliance) teams need to have the skills to understand the outputs, request further details and insights, and interpret how those relate to business, financial, or operational shortcomings. This also requires HR pros to translate those insights into action plans that target root causes and remove barriers to business success.

Consulting 

HR Capabilities: Consulting and Influencing, Network and Relationship Management, Business Acumen

HR consulting is driven by understanding the assigned business unit or function, acting as a trusted advisor and partner, accurately identifying problems, and applying proven methodologies to resolve operating issues. Trust is built over time by demonstrating business acumen, asking powerful questions that elicit new perspectives and possibilities from line leaders, and developing solution options that ultimately prove to be effective. 

Approaches such as evidence-based HR (EBHR), developing an HR business case, and building an effective “narrative” or explanation that resonates with leaders bring greater objectivity and credibility to the proposed root causes and solution sets.

Given the naturally intertwined nature of product and service value generation and delivery, having an established network of trusted relationships across the organization and valuable external experts builds uniquely powerful value-add consulting and advisory capabilities.

HR service delivery

HR Capabilities: Human-centered Design and Experience curation, Systems Thinking, Consulting and Influencing, Network and Relationship management

How HR teams design, organize, and develop their operating models is a crucial driver of delivering the value organizations need. The HR capability model brings considerations and concepts related to optimized organization design, process improvement, outcome-based HR, and effective insourcing/automation/outsourcing strategies and choices to create impactful processes, programs, practices, and tech platforms that deliver responsive and cost-effective solutions to the business. 

Other critical capabilities that support enhanced, streamlined employee experiences include employee listening strategies, HR productization, and design thinking strategies and approaches.

Critical individual skills that enable the HR capability model

An organizational capability is the aggregation of individual skills and proficiencies in a targeted area(s) of competence. An HR capability model is built by acquiring, developing, managing, and promoting career-long development of employees who demonstrate not only the presence of each skill, but the level of proficiency required at each successively higher level of job responsibility (e.g., HR Manager vs. HR Director vs. HRBP vs. CHRO). The skills flow from the capabilities outlined above and should form the basis of an updated HR competency model that can be used across talent processes. These, in turn, should be adapted to the education, experience, and skills application requirements appropriate to the career level and performance/contribution expectations of HR employees.

Business literacy

Understanding of general market, business, and financial management concepts and industry fundamentals. These include how product/service value is created, customer expectations and preferences, the company’s competitors, and what/how external forces impact business, financial, operational, and talent goals and success. Critically, it includes knowledge and understanding of internal operations, their strengths and risk points, and the metrics and analytics used to assess and track operational achievement.

Critical thinking

The ability to objectively analyze, assess, and draw conclusions about an issue with logic and sound judgment. Given the nature of many HR topics, such as employee engagement, motivation, suitability, or acceptance, there is substantial room for human emotion, bias, and assumptions to enter into evaluations and decisions. As such, the ability and aspiration to seek the “truth” (or root cause) of an issue or trend position HR professionals as trusted partners who provide solid, clear assessments. Similarly, skills and expertise in structured, disciplined, objective, data-reliant methodologies such as organization development, process improvement, performance consulting, and evidence-based HR support the logical progression from problem identification to solution.

Coaching, influencing, and negotiating

The ability to act as a sounding board, leverage business and talent-related insights, gain stakeholder support for proposed solutions and changes, and drive adoption is equally critical for CHROs, HRBPs, and COE leaders. As the foundation for HR business alignment and partnership, it is built on traits and skills such as trust-building, active listening, clear and transparent communication, and emotional intelligence. As part of an HR capability model, it also involves effectively leveraging fact- and data-supported approaches such as Lean or Six Sigma, customer experience, organization development (OD), employee listening, and business case development.

Culture management

Expertise in the creation, articulation, and reinforcement of a culture that is aligned with and drives achievement of an organization’s mission, vision, values, and objectives. Understanding how to adapt and define it for the unique circumstances and local interpretation of each business unit, function, and operation in ways that are consistent with the larger organization. This involves designing and executing employee listening strategies, facilitating values and mission discovery sessions, interpreting culture assessment results, and integrating the outputs into practices, programs, policies, behaviors, decision-making, and platforms.

Analytics and data-driven decision-making

A crucial element of the HR capability model is the scale (organizational breadth and depth) of individual skills related to understanding basic statistics and analyses, interpreting reports, performing drill-downs, assessing and using analyses for decision-making, and communicating findings to client leaders and managers. Advanced ability to design analyses using data from various HR and business systems (e.g., ERP, vendor management, or financial reporting) brings HR value and increases the impact of analysis and resulting insights.

Change management

Planning and structuring change management strategies that drive targeted/affected employee awareness, acceptance, alignment, and adoption of organizational changes that will impact them and their work is a core and essential part of any contemporary HR capability model. Given the rate and frequency with which companies are adopting AI as supplemental (or replacement) “co-workers,” support for introducing new work methods and approaches, technologies, and upskilling (or reskilling) requirements is particularly important.

In addition to activities related to such technology transformations, other work and workplace disruptions such as reorganizations, “rightsizing”, outsourcing, new product or service development or delivery processes, or other major operational shifts are being implemented. These drive changes not only in how the work is performed, but also in who does it, where, when, and under whose direct or higher-level management.

Building skills and capabilities at scale

Skill building should be targeted at the enterprise level, with HR professionals across the function being evaluated and developed. That means building the skills and abilities that support the HR capability model early in careers and expanding proficiency through development as job responsibilities evolve and job/career levels advance. As always, a blended learning approach is highly recommended to build skills, develop proficiency, and deepen and broaden application. Recommended steps include:

1. Implement a skills-based approach

Start by identifying the skills and proficiency levels required to meet these standards at each career level and HR role/function; assess every employee to establish a baseline and inform deployment decisions; and develop/track their progress. Identify organization-level gaps that need to be filled using a 6B’s model by hiring, development, performance management, outsourcing, or automation.

2. Reset hiring criteria and standards

Adapt and update all HR job descriptions with specific skill listings and proficiency-level requirements. Use these across sourcing, screening, assessment, and selection steps. Consider formal assessments that evaluate critical traits and cognitive abilities (emotional intelligence, curiosity, logic, numerical reasoning, executive function), and prioritize prior work history where candidates demonstrated and practiced the required skills.

3. Ensure talent management integration

Reinforce the acquisition, development, practice, and demonstrated application of the skills associated with the HR capability model by integrating them as criteria and standards for performance expectations and evaluations, minimum criteria for career mobility and advancement, targets in individual development plans, selection for movement up career paths (and across lattices), and special project assignments.

When building skills at scale (e.g., quickly, efficiently, and in large groups), consider creating capability academies designed to develop and enhance employee skill acquisition and growth. Use a structured approach to job rotations, individual and group coaching and mentoring, and skills-based career mobility that leverage career marketplaces and other skills-based platforms to identify the skills needed to progress. Similarly, a skills-based development approach enables the identification, tracking, and (often AI-enabled) recommendations for individual learning or development resources, programs, or pathways.

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