Big bang change: re-engineering HR - human resources - Cover Story

HR Magazine, June, 1994 by Stephenie Overman

At American Express, HR increased its value by becoming consultative rather than administrative, automated rather than paper driven and lean rather than layered.

The human resource department at American Express "has become a key lever in the company's organizational change effort," begins a mock Fortune magazine article set several years in the future and written by a group of American Express employees.

The article quotes a senior manager who explains that "our core human resource processes are not simply administrative systems, they are key enablers of our nimble response to change. We have to move people, improve people's skills, and tune the management systems to support the right results and the right behaviors. Five years ago, these processes were barriers; now they are essentials."

But how does a corporation go about moving beyond the barriers of the present to the future described in the article? Timid steps won't work. The entire company, including the human resource function, is being re-engineered, says Glenn J. Kaufman, vice president of organizational development for American Express.

The ongoing process has been a way to "pull over a billion dollars out of the company's cost base" by radically simplifying processes, Kaufman says. For the human resource department, specifically, it is a way to better meet the needs of line managers.

Line managers surveyed by the company had said they were moderately satisfied with human resource services, according to Kaufman, but the HR professionals felt they needed to aim higher. A hard look at the function found redundant services and high costs, along with requests from line managers for new, value,added services. At the same time, HR employees were looking for ways to increase satisfaction with their own jobs.

BIG BANG

What does it mean to re-engineer? In the tradition of Michael Hammer and James Champy, authors of Reengineering the Corporation, Kaufman defines re-engineering as "a radical redesigning of business processes. 'Radical' and 'business' are the operative words."

Business because human resource processes are not just the job of HR, but are real business processes like any other area of management. And radical because, although in the past American Express has used continuous process improvement to get incremental enhancements, Kaufman says that this time, "we are striving for a new design, a new paradigm of how human resources will operate." That means a different set of roles and a different way of looking at the organization.

A year into the re-engineering effort, "we haven't made the big bang yet in human resources," Kaufman acknowledges, but he and Pamela Barrows, director of quality leadership, can clearly see the direction in which they are headed.

"We are no longer functionally organized, we are organized by process," Kaufman explains. "Before you might have seen several training functions, with duplicate training courses. In the new world, one training process is deployed across the entire company. People involved in the process are taking a more holistic approach, which allows us to take advantage of economies of scale and look at best practices. Each process has an owner, who is responsible for its success."

Training has already begun to cut costs and, in some cases, shorten cycle time by reducing the redundancy, Kaufman says. "Now we say 'let's leverage the best practices across the whole company' so we don't have, for example, several training functions."

Barrows describes the new organizational structure as a matrix that cuts across all the businesses. "We're moving away from silo-based human resource units," he says.

Silos, also called chimneys, slice the company up vertically, drawing lines between marketing, operations, production and human resources. Working in a silo, an employee may never get a real sense of how his/her work fits into the entire process and may be duplicating steps taken in other silos. Organizing work by process, on the other hand, cuts across the company horizontally, allowing the many areas to interact more efficiently.

With new structures come new reporting relationships. "If you do a good job of re-engineering, you change the way work flows. You change the way jobs are structured and the way people come together, "says Kaufman. "The company will be culturally different as a result of re-engineering."

So far, the changes have not resulted in cutting back jobs, according to Kaufman, who notes that "not all re-engineering winds up in a loss of head count. If your end goal is to reduce head count, I would caution you: How do you convene a group of people to design something radical that may not include them?"

SERVICE A PRIORITY

When American Express conducted its survey on the importance of various HR services to line operations, it found that while the HR department was doing a lot of work effectively, some of that work wasn't a priority to line managers. On the other hand, work that was most critical to managers wasn't being given sufficient attention. HR professionals there knew that if they didn't provide a world-class level of service and economy, line managers, their internal customers, could go outside to get it.