HR Centers of Excellence: A Guide for HR Leaders
HR Business Partners and HR Centers of Excellence have a common goal: to align HR strategy with business objectives. Now is the time to move towards a more integrated, agile, and consultative approach. That’s how they will drive business success in the future together.
HR leaders have a lot going on at the moment. They’re tackling work redesign around skills, labor market tensions, and the rise of AI and machine learning. On top of that, compliance demands, evolving technology, shifting rewards and benefits, and operational challenges are making it hard for them to identify potential stumbling blocks.
In recent years, specialized HR Centers of Excellence (CoEs) have been transforming traditional HR roles into strategic, value-driven functions. They provide the essential tools, data, and frameworks that empower HR Business Partners (HRBPs) to blend people strategies with broader business objectives. In other words, creating synergy between HRBPs and CoEs is key to modern HR management.
Contents
What is the HR Center of Excellence (HR CoE)?
HR Center of Excellence model
Benefits of implementing an HR CoE
HR CoE examples
Best practices for implementing HR CoEs
How HR Business Partners and CoEs can work together
What is the HR Center of Excellence (HR CoE)?
An HR Center of Excellence (HR CoE) is a specialized team within an organization’s HR department focused on developing and implementing best practices, strategies, and tools in specific areas of HR expertise, such as compensation and benefits or learning and development. It ensures that HR activities are efficient, effective, and aligned with the organization’s goals.
For example, an HR CoE might conduct market research to design competitive compensation packages, develop leadership training programs, implement performance appraisal systems, and utilize data analytics to monitor HR metrics. By doing so, it helps drive organizational success through improved HR practices and strategic initiatives.
Key features of an HR CoE include deep expertise, innovation, collaboration, scalability, and a focus on continuous improvement. It aims to optimize HR processes, promote diversity and inclusion, enhance employee engagement, and leverage HR technologies like HR Information Systems (HRIS) and talent management software.
Illustrative example
A multinational company might establish an HR Center of Excellence to standardize its talent management processes across different regions. The CoE would develop a global talent acquisition strategy, implement a standardized performance management system, and provide guidance on best practices for employee engagement and development.
HR Center of Excellence model
The HR Center of Excellence (HR CoE) is a critical component of the HR Business Partner model, together with HR Business Partners, HR Shared Services, and HR leadership.
Reporting structure
Typically, CoEs report directly to the Chief Human Resources Officer (CHRO) or the Talent Management function within HR. This direct reporting ensures that CoEs align with the organization’s strategic goals and effectively implement HR initiatives.
Total Rewards and Talent Management are the most prominent COEs, with 89% and 80% reporting directly to the CHRO, respectively. Other COEs, such as Talent Acquisition, Learning and Development, and DE&I, also frequently report to the CHRO, further emphasizing the importance of centralized oversight for these critical areas.
HRBPs work closely with CoEs, acting as intermediaries between business units and HR to ensure that HR strategies are well-executed and meet business needs.
Setup
Organizations can structure their HR Centers of Excellence (HR CoEs) in various ways depending on their size, complexity, and strategic goals. There are two common approaches:
Description
A single HR CoE encompasses multiple functions, such as Employee Experience (EX), Learning and Development (L&D), Recruiting, and others. Each function operates as a specialized unit within the broader HR CoE.
Organizations establish separate CoEs for different HR functions, such as an EX CoE, an L&D CoE, a Recruiting CoE, etc. Each CoE operates independently but collaborates with other CoEs as needed.
Advantages
– Centralized management and coordination
– Easier alignment of HR strategies and initiatives
– Streamlined communication and decision-making processes
– Specialized focus allows for deeper expertise and innovation
– Greater flexibility in addressing specific functional challenges
– Easier to scale specific CoEs as organizational needs evolve
Challenges
– May require more complex governance structures to manage and oversee the various specialized units within the CoE effectively
– Potential for resource constraints if not adequately staffed
– Requires robust coordination mechanisms to ensure alignment across CoEs
– Potential for siloed operations if not managed effectively
For example, a large multinational corporation may have multiple specialized HR CoEs to address its diverse and complex needs. In contrast, a smaller organization might opt for a single HR CoE that integrates multiple functions under one umbrella to maintain efficiency and cohesion.
The changing role of HR CoEs
The role of HR CoEs is evolving to meet modern business challenges. Traditionally, CoEs worked somewhat separately from daily business operations. Now, there is a shift towards making CoEs more agile and integrated with business units.
The original Ulrich HR Business Partner model, introduced by Dave Ulrich in 1996, consisted of three key elements:
- HRBPs, who worked closely with business leaders to align HR strategies with organizational goals
- CoEs, responsible for specialized HR functions such as talent acquisition, learning and development, and compensation
- Shared Service Centers, which handled transactional HR tasks like payroll and benefits administration.
As the HR landscape and business needs evolve, the role of Centers of Excellence (CoEs) in HR is also changing.
HR CoEs are becoming smaller, expert teams that support HR Business Partners in a more flexible and dynamic way.
Modern HR CoEs focus on practical solutions that directly impact business performance. They emphasize data and analytics, strategic workforce planning, and diversity and inclusion, aiming to enable rapid organizational transformation and effective, personalized HR services. This shift reflects a broader trend towards agile, data-driven, and employee-focused HR models.
This change helps CoEs respond better to complex and uncertain business environments. They can continue to add value and drive organizational success in an effective and efficient way.
Benefits of implementing an HR CoE
If implemented well, HR CoEs bring notable benefits to organizations.
- Efficiency and effectiveness in HR processes: HR Centers of Excellence enhance efficiency by centralizing expertise, standardizing processes, and leveraging advanced technology to streamline operations and reduce costs.
- Innovation and best practices: CoEs are often at the forefront of implementing HR innovations and best practices, driving continuous improvement and ensuring the organization stays competitive.
- Improved decision-making: With access to specialized knowledge and data analytics, HR CoEs can provide more informed and strategic decision-making support to business leaders.
- Enhanced talent management: CoEs focus on strategic talent acquisition, development, and retention initiatives, ensuring the organization attracts and retains top talent.
- Scalability: CoEs develop scalable solutions that can be adapted across various parts of the organization, ensuring consistency and flexibility in HR operations.
- Employee experience: By implementing best practices in employee engagement, learning and development, and performance management, CoEs help create a positive and productive work environment.
- Strategic alignment: CoEs ensure that HR strategies are closely aligned with the overall business objectives, contributing to the achievement of organizational goals.
- Cost savings: By streamlining HR processes and utilizing advanced technologies, CoEs can reduce administrative costs and improve the overall cost-effectiveness of HR operations.
- Risk management: CoEs help mitigate risks by ensuring compliance with legal and regulatory requirements and by implementing standardized policies and procedures.
- Agility and responsiveness: CoEs enhance the HR function’s ability to quickly adapt to changes in the business environment, ensuring the organization remains agile and responsive to market dynamics.
HR CoE examples
Let’s take a closer look at what HR CoEs do within specific HR domains. As mentioned above, these can either be multiple functions under a single CoE or multiple specialized CoEs.
Employee Experience (EX) CoE
This CoE focuses on understanding and improving the employee journey by collecting and analyzing employee feedback and integrating these insights into business operations. It centralizes employee listening efforts, develops an EX vision and roadmap, manages core EX programs like engagement pulses and exit interviews, and ensures data privacy.
The EX CoE also collaborates with different departments to create an employee-centric culture to improve overall employee satisfaction and productivity.
Recruiting CoE
The recruiting Center of Excellence specializes in creating and maintaining effective hiring processes to attract top talent. This includes establishing clear recruitment goals, developing and implementing best practices for hiring, and ensuring consistency in recruitment processes.
Other important activities are eliminating bias, introducing inclusive practices in hiring, and continuously improving the recruitment process through regular feedback and performance metrics. It also standardizes hiring practices and integrates new recruiting technologies to enhance efficiency and effectiveness.
Learning and Development (L&D) CoE
The L&D CoE concentrates on employee training and professional development. It designs and implements training programs, develops leadership development initiatives, and manages learning management systems (LMS).
The CoE works to align training programs with organizational goals, ensuring that employees have the necessary skills and knowledge to perform their roles effectively. The CoE also evaluates the effectiveness of training programs through regular assessments and feedback and continuously updates and improves learning strategies.
Compensation and Benefits CoE
The role of the compensation and benefits CoE is to manage the development and implementation of competitive compensation packages and benefits programs. This CoE conducts research to benchmark salaries, designs incentive programs, and ensures that compensation practices comply with legal requirements and industry standards.
It also focuses on creating benefits programs that boost employee wellbeing and satisfaction, such as health insurance, retirement plans, and wellness initiatives. The CoE regularly reviews and adjusts compensation strategies to attract and retain top talent.
Talent Management CoE
The talent management CoE oversees the development and implementation of strategies to manage and develop talent within the organization. This includes succession planning, performance management, and career development initiatives.
This CoE identifies key talent within the organization, creates development plans to nurture this talent, and ensures that performance management systems are effective and aligned with organizational goals. It also focuses on creating a culture of continuous feedback and improvement to drive employee performance and engagement.
Best practices for implementing HR CoEs
If you’re considering implementing an HR CoE or improving the operation of your existing one, it’s essential to follow best practices to drive HR effectiveness and, ultimately, organizational success. Here are some key best practices to guide you:
- Rethink your HR operating model: Assess the current state of your HR operating model and determine how HR CoEs will fit into its future version. Consider the alignment of CoEs with overall business objectives and the integration with existing HR functions.
- Engage leaders to get their support: Clearly communicate the vision and purpose of the HR CoE to all stakeholders to gain buy-in and support. Involve key stakeholders early in the process to build commitment and address any concerns. Leadership support is crucial for the successful implementation and sustainability of the CoE.
- Secure adequate resources: Ensure sufficient funding and resources to support the CoE’s activities and initiatives. Invest in the right HR technologies and tools to enable efficient and effective operations. Proper resourcing includes financial investment, skilled personnel, and technological infrastructure.
- Create a structured implementation plan: Develop a detailed implementation plan that includes role changes, upskilling of CoE HR employees, clear milestones, timelines, and transitions. A structured plan helps in managing the change effectively and allows for smooth execution of CoE initiatives.
- Measure the success: Establish key performance indicators (KPIs) that align with organizational goals to measure the CoE’s impact. This can be, for example, cost savings or revenue growth attributed to CoE activities, such as reduced turnover costs or increased sales from better-trained employees. Regularly track and report on these metrics to assess the effectiveness of the CoE and make data-driven improvements.
- Focus on continuous improvement: Commit to continuously improving CoE processes and practices. Regularly review and refine CoE activities based on feedback and performance data. Encourage innovation and adaptability to stay ahead of industry trends and organizational needs.
- Promote collaboration and integration: Ensure that the CoE collaborates effectively with other HR functions and business units. Foster a culture of teamwork and integration to leverage the full potential of specialized expertise. Clear communication and collaborative efforts are essential for achieving integrated HR solutions.
- Develop expertise and specialization: Hire or develop employees with specialized skills and knowledge relevant to the CoE’s focus area. Continuous learning and professional development are key to maintaining high levels of expertise within the CoE.
- Standardize processes and practices: Establish standardized processes and best practices for all key activities within the CoE, such as talent acquisition, employee onboarding, performance management, and training program development. Document these standards to ensure consistency and scalability across the organization. Standardization helps in upholding quality and efficiency in CoE operations.
- Communicate value and impact: Regularly communicate the CoE’s value and impact on the organization. Highlight success stories, improvements, and contributions to business objectives. Effective communication reinforces the CoE’s importance and helps maintain organizational support.
How HR Business Partners and CoEs can work together
The success of HR CoEs heavily relies on their collaboration with HRBPs. This ensures that HR initiatives are aligned with business needs and can be implemented smoothly. In the HR Operating Model Report by Talent Strategy Group, 56% of companies reported that HRBPs and CoEs work well together, leveraging CoE expertise in talent management, total rewards, and people analytics.
In successful partnerships, HRBPs focus on strategic advising, while CoEs handle specialized tasks; this reduces conflicts and clarifies roles. Collaboration ensures that HR initiatives are effectively implemented, supporting overall organizational goals and improving employee satisfaction.
However, 44% of companies still struggle with the HRBP-CoE relationships. To strengthen this collaboration, several strategies can be employed:
- Strategic collaboration: HRBPs and CoEs should align on business objectives. HRBPs ensure that initiatives developed by CoEs meet the specific needs of their business units. This alignment helps in driving organizational goals more effectively.
- Expert resource utilization: CoEs provide specialized knowledge and resources, supporting HRBPs in implementing best practices and advanced HR solutions within their units. This enables HRBPs to leverage the expertise of CoEs for better talent management and development.
- Feedback loops: HRBPs relay frontline feedback to CoEs, enabling continuous improvement of HR policies and programs based on real-world applications and employee response. This feedback loop ensures that HR strategies are practical and effective.
- Joint problem-solving: Together, HRBPs and CoEs address complex HR issues by combining strategic insights from HRBPs with technical expertise from CoEs to find effective solutions. This collaboration fosters innovation and problem-solving within HR functions.
- Role clarity and responsibility: Clearly defining the roles and responsibilities of HRBPs and CoEs can reduce conflicts and enhance collaboration. Ensuring that each party understands their duties helps in the smooth execution of HR strategies.
- Shared goals and metrics: Establishing shared goals and performance metrics for HRBPs and CoEs can foster a sense of teamwork. When both entities are accountable for the same outcomes, collaboration becomes a natural part of their workflow.
- Regular communication and meetings: Facilitating regular meetings and communication between HRBPs and CoEs can ensure that both teams are on the same page. This practice helps in aligning strategies, discussing challenges, and planning joint initiatives.
Key takeaway
Centers of Excellence play a crucial role in the HR operating model by providing specialized expertise and driving strategic HR initiatives. By leveraging in-depth knowledge of specific HR functions, best practices, and advanced technologies, CoEs ensure consistent and high-quality HR operations across the organization.
Collaboration between COEs and HR Business Partners (HRBPs) is essential for the success of the HR function. Effective collaboration ensures that HRBPs can focus on strategic initiatives, with high-performing teams 9.5 times more likely to be seen as strategic partners by business leaders.
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