USA 
United Kingdom
Transactional HR is a necessity. It focuses on the traditional heart of the HR function, be it setting up standardized payroll processes so each employee gets paid on time, or processing formal complaints and grievances. Think Toby Flenderson from ‘The Office.’ Always there, rarely glamorous, and often delivering bad news about what is or isn’t allowed.
As HR has increased in aspiration and matured in its value to the organization, the industry has pushed to a more transformational approach. In a bid to ditch the perception of administrators, the foremost HR leaders seek to increase their connection with workers, transform company cultures, and take a more strategic and consultative approach to people problem-solving.
The transactional portion will always be a part of HR, but for people leaders who wish to improve employee engagement, satisfaction, and productivity, shifting to transformational HR is the best way to add meaningful value to the business.
Transactional HR versus transformational HR
First, let’s break down the differences between the two. Lisa Sanchez, Vice President, Employee Experience and Engagement (HR), ArtCenter College of Design, offers a simple way to think of each approach.
“Transactional HR is focused on how you do something, like posting jobs to recruit, and on what you do, like the mechanics of processing new hire paperwork or transacting the law,” she begins. “It can appear sterile or rigid. Transactional HR is seen as the department of “no” versus being solution-based.”
Conversely, transformational HR looks at the why. “It’s focused on the impact of the work,” explains Sanchez. “It’s being keenly aware of the business and being a strategic partner. is setting practices for sound business decisions. Transformational HR is being intentional about diversity, impacting organizational culture, or providing someone with employment to advance their career or feed their family.”
Pay and promotions | Worker confidence drops as unease grows
This requires a consultative approach, seeking to provide solutions to the business across workforce planning, reorganization, and people strategy, among other areas. “It’s understanding the value of employee experiences and engagements. It’s being people-centered and concerned about the “human” while also protecting the business,” concludes Sanchez.
Joseph Dicianno, Director of Talent Management and Organizational Development, UPMC, takes a similar viewpoint, highlighting the level of commitment involved. “Transactional approaches are about doing your job, meeting an expectation, and that’s it. A transformational approach is about giving additional discretionary effort and doing more than what is the bare minimum expectation.”
This, argues Dicianno, has a marked impact on the employee. “Someone who is transactionally satisfied feels a certain way about their experience and may or may not act differently as a result,” he says. “Someone who is engaged in a transformational way acts differently as a result.”
Employees who are engaged on a transformational level are more likely to show up, support their colleagues, and bring positivity into the workplace. Dicianno offers the analogy of two sports fans attending a live event. One fan simply watches the game and goes home with a neutral presence. The other fan cheers on their team, rallies their fellow fans, and tidies up after themselves. “One of them is about just being there (transactional) and the other is about being there AND doing things to make the experience better (transformational),” he explains.
Upgrading from transactional to transformational employee engagement
Shifting the approach to employee engagement from purely transactional to transformational is not an easy task. It goes against historic expectations for HR departments and therefore requires HR leaders to take a risk and back their new approach with clear communication.
“You never want to come in as a bulldozer, so you have to be willing to take risks,” explains Sanchez. “I'm very comfortable having uncomfortable conversations.” Having joined ArtCenter College of Design nine years ago, Sanchez’s journey to transform employee experience began with changing perceptions and revamping the image of HR.
“Firstly, I needed to move my office out of these small cramped quarters and into a proper office,” she says. “I worked on the communication coming out of my department. Our written messages were long and sometimes a lot of legalese. We weren't hitting the mark in terms of who we were as a department. We needed to create a brand identity within our larger brand.”
The transformational approach is also made clear by the HR team at UPMC. “We’ve been distinguishing between satisfaction (transactional) and engagement (transformational) in this way for many years,” explains Dicianno.
“Every time we present engagement data or are developing leaders on engagement, we talk about this distinction. It exists in our resources, communications, and even on every single results report with engagement scores that turn into action plans.”
Transformational HR will look different to each organization. Meaningful engagement with employees and connecting HR decision-making to business strategy will depend on the current state of people practices.
In the case of ArtCenter College of Design, Sanchez had to start from scratch, embedding HR and employee engagement strategy in each area of the employee experience, alongside working at the business level.
“Crucially, I asked leaders to write a business case for their recommendations so that we can create some structure, really establishing my department as a strategic business partner. This means we can help folks reorganize, run staffing strategies, and work through difficult people experiences.”
The results have been positive. Rather than being perceived as the company nay-sayers – all too common under transactional HR - Sanchez and the HR department have seen the benefits of shifting to a transformational approach.
“Most of the time you hear the bad news about your HR department than the good news,” she explains. “But, for example, we ramped up our wellness programs, and through pulse surveys, we heard that people thrived when experiencing these programs.”
The time for basic, administrative transactions has passed. HR now must base itself on a transformational approach to employee engagement if it is to best serve employees and leaders alike.
Are you Lisa Sanchez or Joseph Dicianno, or are you a Toby Flenderson?
