How to Build an HR Operating Model: A 2025 Guide for HR

Most organizations need an HR operating model to align their people strategies with organizational goals. It outlines how HR services and functions are organized to support employees and drive success.

However, building it can be challenging, especially for those unfamiliar with its components or implementation process. In this article, we explore the key steps to building a human resources operating model, its types, and its importance. But first, what is it exactly?

What is an HR operating model?

An HR operating model is a framework that describes how an organization's HR function is organized and delivers its services. The goal is to align strategies and operations with the organization's business objectives.

For example, if a company plans to expand globally, its model may need to include international recruitment, global labor law compliance, and cross-cultural training for the workforce.

Furthermore, an effective model has the following:

• Clear roles and responsibilities within HR and across teams.

• Standard processes for HR tasks like talent acquisition and onboarding.

• A data-driven approach to track metrics and guide decisions.

• Regular updates to keep up with business needs and industry trends.

• Focus on improving employee experience and growth.

• Strong communication and teamwork between HR and other teams.

• HR activities aligned with the organization’s goals.

• Use of HR technology to improve efficiency and streamline HR operations.

Having a data-backed HR operating model is achievable with the right HR tools. Salary.com’s Compensation Software allows you to support your HR strategies, especially if you want to make informed pay decisions, with its comprehensive pay data and analytics features.

Why is an HR operating model important?

Organizations with the right HR operating model can achieve greater success. Here are key reasons why it is important:

Boost business success and adaptability

Adaptability is key to long-term success, according to a 2020 study. A strong human resources operating model supports this by managing talent, simplifying processes, and promoting a flexible work environment. This allows the organization to quickly adjust to changes and improve performance and decision-making.

Increase HR efficiency and effectiveness

An effective HR operating model removes inefficiencies, letting HR focus on key tasks like talent development and employee engagement. This leads to better business outcomes, including improved employee performance and satisfaction.

Match HR strategies with business goals

The human resources operating model aligns HR practices with the organization’s goals, building the right workforce and culture for success.

In the Ulrich model, HR plays four key roles—strategic partner, change agent, administrative expert, and employee champion—to support business goals and boost performance.

The benefits mentioned above are possible with the right tool. If your organization needs a reliable source for compensation data, Compensation Software helps you track, manage, and analyze data effectively, which ensures your HR model supports competitive pay practices and aligns with business goals.

Types of HR operating models

Before creating a human resources operating model for your organization, take a look at these types or examples to get inspiration.

• Business partner model

  The HR business partner model was developed by Dave Ulrich and focuses on transforming HR from a traditional administrative function into a strategic partner. The business model divides HR into four key roles:

  1. Strategic Partner: Aligning HR strategies with business goals.

  2. Change Agent: Helping the organization manage change.

  3. Employee Champion: Advocating for employee needs and concerns.

  4. Administrative Expert: Improving HR efficiency and processes.

• Ulrich+

  The Ulrich+ model builds on the classic Ulrich model by giving HR business partners more responsibility and expertise. Centers of excellence (CoEs) become smaller teams of experts, supported by global services and digital tools. This model helps solve problems in the original Ulrich model, where HR partners struggle to keep up and CoEs slow down change.

• Machine-powered

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  The machine-powered model uses technology, automation, and AI to manage HR processes, automating tasks like recruitment, payroll, and employee benefits. This increases efficiency and reduces manual work, so HR teams can focus on strategic initiatives while technology handles routine tasks.

• EX-driven

  This model helps CHROs gain a competitive edge by focusing on key "moments that matter" in Employee Experience (EX). HR, IT, and operations collaborate on processes like onboarding. A strong EX helps HR bridge silos and fix fragmented data, while companies rely on top talent with specific skills.

  For organizations that embrace this model, it's important to prioritize employee engagement and improve processes that improve the employee experience. Compensation Software's Merit Modeling helps HR align pay with performance, ensuring top talent is paid right and consistently.

• Leader-led

  In the leader-led model, CHROs transfer HR responsibilities, such as hiring and budgets, to line managers, who receive HR tools and support. It also involves eliminating unnecessary HR policies. Companies with many white-collar workers and a focus on research and development often use this approach to give line managers more control over people's decisions.

• Agile

  This model uses fewer HR business partners to advise top management, while CoE professionals focus on data, analytics, and workforce planning. Extra resources support cross-functional projects. CHROs believe HR must speed up to match the business side’s pace and avoid slowing transformation. Companies in rapid growth or change often use this model.

Key steps in developing an HR operating model

Since each organization is unique, it's important to know how to design a model that works for your business. Here are the key steps:

1. Step 1: Set business goals

   Before creating the model, it's important to define the company’s business goals. This ensures HR supports the company’s overall objectives, like boosting employee engagement, increasing productivity, or driving change.

   Things to consider:

   • Understand the company’s mission and long-term plans.

   • Identify the expected outcomes from HR, such as hiring, retention, or development.

   • Align HR activities with the company’s goals to support business success.

   If your HR and business strategy focuses on pay transparency, address it before creating your model to ensure clear, consistent practices. Compensation Software helps by providing accurate market pricing and aligning your job titles and descriptions with market data.

2. Step 2: Analyze the workforce

   Understanding the current workforce and how it supports business goals is key. A workforce analysis identifies strengths, gaps, and areas for improvement by examining skills, experience, turnover, and trends. It also helps HR focus on important initiatives and ensure the workforce is prepared for future needs.

   For example, after calculating turnover and finding it high among entry-level employees, HR professionals might focus on onboarding and engagement to retain them longer and design the human resources operating model to focus on retention strategies.

3. Step 3: Decide on and create the HR model

   After analyzing business goals and workforce needs, the next step is to pick the best HR operating model.

   Options include the centralized HR operating model, business partner model, Ulrich+, machine-powered model, functional HR operating model, or agile HR operating models, depending on the company's needs.

   So, a company focusing on employee experience may choose the EX-driven model to improve onboarding, while a fast-growing company may prefer the agile model to keep up with changes.

4. Step 4: Implement the model and seek improvements

   Once designed, it's time to put it into action. This involves launching the new HR structure, processes, and systems, along with clear talent management strategies to help employees and managers adjust.

   Afterward, it’s important to monitor how well the model works and make improvements based on feedback from employees and managers.

There's no one-size-fits-all solution when it comes to building a human resources operating model. Always remember that your model should align with your organization's objectives and workforce needs. It's also best for the HR department to customize the approach to fit the unique needs of your business.