Shared services can support HR’s transactional and strategic responsibilities.
Over the past several years, the shared services concept has become an effective delivery model for countless HR functions around the world. Models of varying shapes and sizes are now commonplace in the US and the UK and are becoming more prevalent in Australia, Canada, the Netherlands and Scandinavian countries. Signs of shared services use are also on the rise in other Western European countries – such as Germany, Switzerland and Belgium – and, to varying degrees, within the developing economies of Eastern Europe, Latin America and Asia.
Organisations are turning to shared services in a drive for consistency, improved quality, consolidation, technology enablement, labour cost savings and business value. The move to shared services also supports the increasingly popular concept that HR can operate more effectively when it is organised and managed according to its two primary responsibilities – transactional and strategic.
In most instances, HR shared service arrangements in developed countries support the business and employees of that single country. However, an increasing number of arrangements have been established to deliver multi-country or regional services. Though finance and IT are typically further ahead than HR in the deployment of shared services, many smaller and geographically dispersed organisations are adopting multifunction shared services (for example, finance, HR and purchasing) to exploit greater economies of scale.
Despite this growth, some organisations have failed to realise the promised cost and service benefits of this approach. In such cases, HR processes have not been simplified, the technology has not worked or has not been implemented properly, and the HR staff has not been able to adopt the skills necessary to meet the new requirements of the organisation.
Perhaps, most important, the retained HR function and HR business partners have failed to increase HR’s value.
Today, shared services have matured to more consistently yield cost savings, enhanced process efficiencies and increased productivity. And though still rare for large-scale global implementations, some shared services have been implemented in significantly different ways – ranging from consolidating or centralising data through streamlining processes to complete outsourcing.
There remains great potential to leverage shared services to deliver better value to the business. At one extreme, shared services can serve as a delivery model for all business units and geographies of an organisation. More typically, it is the model for the business units in one country. But it is also possible for individual components of the shared service model to deliver material improvements in efficiency, quality and customer focus.
It is critical to choose the right configuration and know how far to push the model. Organisations have learned that shared services are not “one size fits all,” and that it is necessary to have a greater understanding of how to evaluate, design and implement the elements of shared services to arrive at the best model for each organisation.
Global drivers of HR change: What’s new and why.
The evolution of shared services as a delivery framework for HR has occurred simultaneously with broader changes within the HR function – in some cases, as a direct result of these broader changes in HR. Below is a brief look at several of the more prevalent global drivers of HR change and their impact on effective shared service models.
Meeting diverse customer requirements: Balancing integration and differentiation.
Every HR customer segment – from leadership to employees to retirees – has unique requirements that can place different, and sometimes contradictory, demands on the HR function. Meeting these distinct and varying needs (particularly across business segments) is critical to success. The flexibility of shared service designs enables the HR function to contribute to both the bottom line and the unique needs of its customers through a careful balance of standardisation and flexibility. Consistency and simplification of policies, programmes and operations will optimise the return on the technology investment and will make HR accessible to all customers. The HR function must be very good at delivering differentiation when it is essential to business success, but ruthless at driving consistency when it is not essential. The challenge is magnified when the customers of the shared services facility are spread across multiple countries.
The HR function must be very good at delivering differentiation when it is essential to business success, but ruthless at driving consistency when it is not essential.
Refocusing: Taking on the strategic partner challenge.
HR functions and their leaders increasingly are being asked to play the role of strategic business partner – decreasing their involvement in HR’s traditional administrative activities and increasing their involvement in decisions and activities that have a greater impact on business success. A primary benefit expected from shared services is that it will free up valuable time and energy of senior HR professionals to focus on business strategic needs.
However, the reality is more complicated. Reshaping the HR workforce into a centralised shared function and a residual business-centric function can present a serious challenge. New sets of skills and competencies must be defined, and talent must be upgraded by training or by purchase in a manner that extends well beyond traditional retraining programmes. If the reskilling is done correctly, it will deliver a win for the organisation and the individuals; if improperly managed, particularly if the HR business partners are not up to strength, it can undermine the benefits of the shared service model.
Delivering globally: Opportunity and challenge.
Many mature multinationals are grappling with the need to deliver on their global business strategies by moving key operations to lower-labour-cost countries, such as China, India or those in Eastern Europe. At the same time, emerging multinational companies are looking for ways to enter the attractive global marketplace and compete effectively. As a consequence, the HR function must redefine its policies and processes to be relevant and deliverable in countries in which these companies have little cultural or operational experience.
Next month: Shared services defined.
Anne-Magriet Schoeman is the Talent/Country Leader at Mercer Consulting (South Africa) Proprietary Limited, www.mercer.com.
This article appeared in the October 2015 issue of HR Future magazine.