The pressure on HR to create value to an organization increases. A business model describes the basis of how an organization creates, delivers and preserves value. Applied to HR, an HR business model describes that basis for the HR domain. In order to ensure that the description a discussion is facilitated, the Business Model Canvas is applied. The Business Model Canvas consists of nine basic building blocks that show the logic of how a company wants to make money. Applied to HR, the HR Business Model Canvas shows how HR deals with its budget and thus demonstrates its added value. The business model is like a blueprint for a (HR) strategy that will be implemented by organisational structures, processes and systems.
- Customer segments: to build an effective business model, a company must identify which customers it tries to serve. Applied to HR, HR is serving the board of directors, management and (future) employees.
- Value Proposition: the collection of products and services a business offers to meet the needs of its customers. Applied to HR, HR offers the deployment of the right people at the right place in the right time.
- Channels: a company can deliver its value proposition to its targeted customers through different channels. Applied to HR, HR is delivering the right people in the right place in the right time through an HR portal, a staff shop, advisor and telephone and (e-)mail.
- Customer Relationship: to ensure the survival and success of any businesses, companies must identify the type of relationship they want to create with their customer segments. Applied to HR, customer relationships are built and maintained through meetings, self-service and personal advice.
- Revenue Streams: the way a company makes income from each customer segment. Applied to HR, HR gets a budget at its disposal to ensure the deployment of the right people at the right place at the right time.
- Key Resources: the resources that are necessary to create value for the customer. Applied to HR, HR has technology, administrators and advisors at its disposal. Also high-potential employees (HiPo) are important. A high-potential employee is an employee who has been identified as having the potential, ability and aspiration for successive positions within a company.
- Key Activities: the most important activities in executing a company’s value proposition. Applied to HR, HR conducts activities related to input, throughput and output of people.
- Partner Network: in order to optimize operations and reduce risks of a business model, organization usually cultivate buyer-supplier relationships so they can focus on their core activity. Applied to HR, key activities can be outsourced or purchased by Business Process Outsourcing, a Shared Service Centre, Interim Services or headhunters. Also relationships with legislators and regulators are important.
- Cost Structure: this describes the most important monetary consequences while operating under different business models. Applied to HR, HR has staffing, technology and office costs.
When writing this blog I was inspired by the Business Model Canvas.
The above resulted in the paper ‘A business administration approach to HRM‘.
Don’t hesitate to comment and give me your feedback, suggestions and ideas are welcome too!