Transactional to Transformational HR: The Role of Outsourcing

The responsibilities of many HR professionals are changing from being primarily reactive to helping businesses reach their goals proactively. This includes HR incorporating strategic initiatives for talent management, ongoing workforce planning (as opposed to only a short time), and incorporating technology into the hiring process.   

According to the research thesis in “Forward-Thinking: HR’s Path to Improving Its Worth,” authored by Cornell University’s Christopher Lee, HR can become a strategic business partner and enhance the value of an organization by sharing HR concepts with leaders (Small Business Chron). This includes ensuring the organization’s workforce has the right talent and skills to meet goals more efficiently.  

Keeping up with these changes requires a switch from focusing on transactional HR tasks to transformational HR tasks. Outsourcing makes this transition much easier and more successful.  

What is Transactional HR?  

Transactional HR refers to the daily tasks that keep your company running, often including tedious and repetitive responsibilities. These tasks include day-to-day administrative duties and everything that would be considered an administrative burden. 

Examples of transactional HR activities:  

• Recruiting and hiring 
• Processing new employees, onboarding, and training  
• Workplace policies 
• Handling benefits and compensation 

Transactional HR vs. Transformational HR  

The biggest difference between transactional and transformational HR is aligning HR management and your company’s goals. Closing the gap between HR simply completing transitional tasks and HR being strategic partners is essential to the future of business. 

What is Transformational HR?  

Transformational HR is similar to transactional, only you add more of a strategic approach to HR responsibilities to help the company meet goals and grow.  

Examples of transformational HR activities include:  

• Developing both short-term and long-term HR strategic plans that prepare the company for resolving or meeting future needs. For instance, preparing for future growth that may require new or specific talent.  
• Automating tasks that are repetitive, tedious, and require too much of HR’s time — recent research found that about two-thirds of HR professionals believe automation could save HR between a day and a day and a half every week. 

Moving from Transactional to Transformational HR  

Making the transition from transaction to transformational HR doesn’t need to be complicated. With the following tips, your company can align with HR with a much smoother process.  

Provide HR with Necessary Data  

For HR to align their tasks and preparations with the company’s goal, they need the necessary data. HR is busy with traditional tasks, so adding more work to their workload, like searching for the right information, can make the transition more challenging. Eliminating that challenge makes the transition substantially more effective.  

Increase Transactional Efficiency  

HR needs time to be able to focus on transformational HR. Usually, they spend their days on transactional tasks. Use transactional tools for transformational purposes and use standard tools to gauge employee satisfaction. The insight and information you get from this can be used to strategize a plan to improve employee morale and motivation.  

Gain Expertise  

The sooner you get familiar with HR best practices around strategy and goals, the sooner you gain expertise. Right now, most companies are still limiting their potential to transactional HR tasks, giving your company the unique opportunity to get ahead of them.     

Outsourcing Transactional HR Tasks 

Instead of taking on the challenge of switching to transformational HR in-house, there are more benefits to outsourcing your transactional tasks by partnering with an HR outsourcing company, including increasing transactional efficiency. 

Your alternatives are delegating tasks or hiring another HR representative. One problem with these alternatives is that delegating tasks puts the work on a non-HR employee, distracting them from revenue-generating activities. Outsourcing transactional HR tasks also cost a fraction of the salary and benefits for a new HR employee.  

Another benefit to outsourcing is having access to a team of experts that supplement your team, giving you the expertise you need. Many moving parts can go into such a major switch in HR tasks, so having a team of experts to consult as needed can be crucial.    

Another benefit worth noting is that comprehensive HR outsourcing solutions come with software that integrates payroll, time & attendance, benefits enrollment, and a self-service portal. This gives HR and managers the reports they need to make informed decisions and increases transactional efficiency by reducing manual re-entry of information.  

Transformational HR is the Future  

The benefits far outweigh the challenge of transitioning your company from transactional to transformational, including your company’s growth in the coming years. The truth is, today's businesses' needs have progressed thanks to advancing technology, and consumers have access to a larger pool of similar products and services. This makes the need for transformational HR even greater since it aligns HR and employees with clear and defined business goals. 

According to Minsilo, alignment within your organization is the key difference between low and high-performing companies. Their research found that aligned companies experience revenue growth 58% faster and are 72% more profitable.  

This research, combined with additional benefits to employees — like quick access to data, inspiration to make their own decisions, greater transparency and consistency, and increased HR value — show just how bright the future of transformational HR is for business.