For many years now, both private and public sector organizations have been dealing with the challenge of how best to improve corporate performance. HR has not escaped this scrutiny. The very same businesses that have spent recent years cost cutting, restructuring and streamlining, are putting the pressure on the HR 'overhead' to prove that it is not just a cost centre but a function that provides added value through alignment to business needs and aspirations. The traditional, transaction-based HR service must, however, still be delivered. Understanding how to combine a renewed strategic focus with effective delivery of transactional and administrative services is the key to HR's next generation of service delivery models. The authors' work with HR functions includes an established set of service design criteria and an approach that differentiates between a successful implementation and what can be a costly backward step that only serves to alienate the business. They show how any prospective HR transformation should consider five fundamental issues in the service design phase to align the HR approach to the business strategy.