Popular HR operating models 

Human resources teams have the potential to achieve incredible outcomes, from empowering their people’s career growth and fostering engagement to helping companies scale effectively and meet their strategic objectives. By aligning HR processes with business priorities, HR teams can drive innovation, improve people’s experiences, and contribute to overall organizational success.

Modern HR teams can use flexible HR operating models to bring clarity and efficiency to their processes and structures. An HR operating model acts as a blueprint, defining how HR teams deliver services, support their people, and meet business goals.

In this article, we’ll break down what an HR operating model is, explore the most popular frameworks, and guide you on how to select and implement the right model for your organization. Whether you’re building your HR strategy from the ground up or looking to optimize an existing one, this guide will provide the insights you need to ensure your HR operating model drives measurable impact.

What are HR operating models and why do they matter?

HR operating models outline an HR team’s structure, roles, and processes to measure performance and team satisfaction, streamline decision-making, and support an organization’s ability to scale. It helps organizations answer questions like:

• Who determines HR strategies, local teams, or the corporate head office?
• What are the procedures for approving and implementing new HR tools and software?
• Who reviews and approves team member requests like pay raises?
• How does the HR team handle compliance requirements across different regions?
• What processes are in place to ensure consistent communication and collaboration between HR and other departments?

Types of HR operating models

Let’s take a closer look at a few of the most common HR operating models.

Functional model

A functional HR operating model organizes around HR functions or specific areas of focus, such as compensation, training, and recruiting. Each department or unit claims expertise for its focus and acts as a centralized hub for related tasks.

Key characteristics:

• Specialization: Teams manage specialized HR processes with greater levels of knowledge and skill
• Efficiency: The functional model allows for efficient resource use since activities of similar types are centralized within specific departments
• Clarity of responsibilities: Dividing responsibilities into distinct functions provides team members with clear role expectations

Limitations:

• Limited flexibility: Increased specialization can limit an HR team’s ability to respond to changing organizational needs or emerging HR trends
• Workflow silos: HR teams risk creating silos in which departments work in isolation rather than coordinating with other HR activities
• Lack of alignment with business goals: Specialized HR units may become disconnected from broader organizational goals and needs

Business partner model or Ulrich model 

The business partner model (also called the Ulrich model) is a popular framework for improving HR efficiency. It’s common with large, customer-facing organizations and is organized around:

• More strategic roles for HR departments
• A closer relationship between HR and the business as a whole
• A “three-legged stool” organization, with different parts of HR taking on specific roles:
  • Business partners acting as strategic liaisons between HR and the business to align priorities
  • Shared services, which provide HR solutions and services to improve team member experience
  • Centers of excellence, where HR professionals specialize in specific HR domains and design policies and practices based on business goals

Key characteristics:

• Strategic partnerships: HR operates as a strategic partner to management, offering advice to teams and supporting growth
• Efficiency: This model aims for consistency and standardization of services to drive efficiency and quality

Limitations:

• Lack of agility: The business partner model has been popular for decades, but teams using it have struggled to cope with the changing needs of their organizations. It lacks the agility to respond to the rapid demands of businesses implementing the latest technologies.
• Struggles to stay up-to-date: Most HR business partners don’t have the bandwidth to keep up with the latest developments in HR since they take on many day-to-day administrative tasks.
• “Us” vs. “them” culture: HR business partners may start to identify more with the business side of their work and lose their sense of themselves as part of the HR team, which can lead to an “us vs. them” divide within the department.

McKinsey has proposed an adapted version of the HR business partner (or Ulrich) model called Ulrich+. In this newer framework, business partners take over execution responsibilities from the centers of excellence (CoEs). The model implements a digital backbone for scaled-down CoEs which improves flexibility in how departments respond to issues.

Front-back model

The front-back delivery model has split functions between front- and back-office HR. Front-office HR handles the direct interaction with business leaders and employee relations, while back-office HR manages operational and administrative tasks. 

Here’s a breakdown of front and back office functions:

Front office:

• Business-facing roles interact directly with business leaders and team members and align HR policies and programs with their needs
• HR business partners work closely with line managers and department heads to provide strategic advice and drive HR initiatives to support business objectives
• The front office also handles employee engagement and relations, including initiatives to improve company culture and handling people relations

Back office:

• Back-office HR handles operational, administrative, and transactional functions, including payroll management, benefits administration, data management, and compliance
• Similarly to the business partner model, the back office has CoEs to manage specialties like compensation, learning and development, or talent acquisition
• The back office may have a shared services center in larger organizations, which handles routine HR activities and team member inquiries with the help of technology and standardized processes

Key characteristics:

• Efficiency: Front and back offices work together to ensure HR services are running efficiently while each managing their own specialized functions.
• Strategic alignment: The separation of strategic and operational roles allows for more focused attention on each area.
• Agility: The front office’s ability to act as a flexible partner for the business allows for easier adaptation of HR strategies. Meanwhile, the back office can maintain stable processes.

Limitations:

• Potential lack of effective communication: Since the front and back offices have their own responsibilities and processes, they may lack effective communication
• Issues balancing strategic and operational demands: Different areas of expertise may cause difficulty balancing strategic initiatives with operational efficiency

Hub-and-spoke model

In the hub-and-spoke model, each “spoke” is responsible for localized HR issues. The centralized HR team at the “hub” manages resources and optimizes the teams at the “spokes” by providing direction, policies, and strategic services.

Key characteristics:

• Centralized HR hub: A core HR team handles strategic initiatives, policy creation, and overall governance, ensuring consistency and alignment with organizational goals
• Specialized spokes: Regional or business-unit-level HR teams (the spokes) manage day-to-day HR activities, tailoring solutions to meet local or departmental needs
• Collaborative approach: The hub provides expertise and resources, while the spokes deliver contextually relevant execution, fostering a balance of standardization and adaptability
• Data-driven decision-making: The hub often serves as a central repository for HR data, enabling insights into workforce trends and ensuring a unified analytics approach
• Efficient resource allocation: Shared services or centralized systems reduce redundancy and promote cost efficiency, allowing HR professionals to focus on value-added tasks

Limitations:

• Coordination challenges: Miscommunication or delays between the hub and spokes can lead to inefficiencies or inconsistencies in execution
• Risk of centralization bias: If the hub exerts too much control, local HR teams may feel disconnected or unable to address unique challenges effectively
• Complexity in governance: Establishing clear roles, responsibilities, and decision-making authority across the hub and spokes can be time-intensive and prone to friction
• Scalability concerns: As organizations grow, maintaining seamless integration between the hub and spoke operations may require frequent process adjustments.
• Technology dependency: The model often relies on advanced HR systems, which can pose challenges for less tech-enabled organizations

Federated model

The federated model is a decentralized HR operating model. While teams may share some strategies, technology, and services, individual HR units work independently under minimal corporate HR coordination. This model is often used to increase autonomy for different business units or regions.

Key characteristics:

• Decentralized execution: Local HR teams have nearly full autonomy to implement and adapt strategies to fit their specific needs.
• Cross-functional and cross-regional collaboration: Companies using this model often encourage collaboration across teams or regions, such as working on specific projects together or sharing best practices. Increased autonomy provides a greater sense of project ownership, which encourages team members to seek support from other units as needed.

Limitations:

• Fragmentation: If local units pull away from central policies or if the model lacks clarity for roles and responsibilities, the organization may experience a fragmented HR system
• Slower implementation: Strategies and initiatives have to work across federations rather than being implemented from the top down (or from the center out to different branches)

Machine-powered model

The machine-powered model is another more recent framework proposed by McKinsey. It utilizes the power of technology, with algorithms to select talent, assess the root causes of issues like attrition, and determine individual development needs.

Key characteristics:

• AI-powered decision-making: Deep analytics and machine learning help HR teams make more informed decisions and find better outcomes
• Increased bandwidth for HR team members: With tech handling repetitive tasks and elements of data analysis, HR professionals find themselves free to work more closely with their people, offering advice and career guidance

Limitations:

• The risk of becoming less people-centric: HR professionals may find themselves distanced from day-to-day data that helps them understand their team
• Potentially difficult implementation: This model is often used in companies with large numbers of digital natives on their teams; teams with fewer digital natives spend additional time reskilling their workforce

Elements of HR operating models

Successful HR operating models include:

1. Organized department structure: Many HR operating models are organized around specialties like recruitment, training, compensation management, and learning and development. The structure is shaped by the company’s size, the complexity of its operations, and its strategic priorities. In larger organizations, HR models may also include regional or global teams to address location-specific needs while maintaining centralized oversight.
2. Clear roles and responsibilities: HR operating models clearly define the roles and responsibilities of the HR department and individual team members. For example, one team might focus on compliance and legal policies, while another handles culture-building initiatives or employee relations.
3. Standardized procedures: Effective HR teams need clear processes and systems laying out how to deliver services, including payroll, training, performance management, and benefits administration. Set procedures enable standardized and optimized workflows as well as efficient resource planning.
4. Performance metrics: An HR operating model functions best when continuously monitored and evaluated. Tracking HR metrics like employee turnover, time-to-hire, absenteeism, and pay equity can help measure the success of the model. Regular evaluations help HR teams identify areas for improvement, fine-tune strategies, and align operations with overall goals.
5. Effective tech solutions: HR tech plays a central role in modern operating models. Integrating tools like HRIS (human resources information systems), performance management software, and automated payroll systems into the operating model helps HR teams scale operations, improve accuracy, and provide data-driven insights. 
6. Alignment with business goals: A strong HR operating model doesn’t function in isolation—it’s designed to align with the organization’s broader objectives. Whether the goal is improving employee retention, building a strong company culture, or scaling operations, the HR model must be adaptable to meet changing business needs.

Considerations for choosing the right HR operating model for your organization

An operating model that fits your organization’s needs will help improve performance and build a strong company culture. Here are a few elements to consider when choosing an HR operating model: 

• Organizational culture: A great team considers an organization’s existing culture when choosing a framework. And, the right HR operating model can also help shape a strong company culture. Choosing a model that helps foster a positive environment will help you balance the needs of the business with those of your people.
• Scalability: As organizations grow, their HR needs evolve. Choosing an HR operating model that can scale with the company ensures that processes and resources remain effective as teams expand or enter new markets. For example, a federated model that allows local HR teams to address regional needs might be necessary for larger, global organizations.
• Business goals and strategy alignment: The chosen HR model should align closely with the organization’s broader goals. For instance, if the company aims to attract top talent globally, a model that supports localized recruitment efforts might be ideal. Similarly, if reducing costs is a priority, a leaner, more centralized model could be a better fit.

Organizations can evaluate these considerations to select an HR operating model that addresses current needs while adapting to future challenges. Since there isn’t a one-size-fits-all solution, many businesses blend elements from various models to create a tailored framework that aligns with their strategic objectives, workforce structure, and organizational goals.

With continuous innovations in technology and changing workplace dynamics, organizations can regularly review and adjust their HR operating models, ensuring they remain aligned with business strategies, technological advancements, and the evolving expectations of their workforce. Embracing adaptability and continuous improvement helps HR manage dispersed, diverse teams while maintaining a strong, connected culture. 

HR operating models FAQs

What is an example of an HR operating model? 

One example of an HR operating model is the functional model. This framework organizes HR team members or units around “functions” or specialties such as recruitment or learning and development. Other models include HR business partners, the front-back delivery model, and the hub-and-spoke model.

What is an operating model in HR?

An operating model is a framework used in human resources to organize processes and responsibilities. HR operating models help HR determine how they will deliver services and support their people.

What is an agile HR operating model? 

Agile HR operating models will offer increased adaptability, focus on the team member experience, and augment HR’s capabilities with new technologies and data analysis. They prioritize iterative processes, cross-functional teamwork, and continuous improvement to adapt to evolving business needs and workforce expectations.