Category Archives: shared services

Overview of HR Shared Services – Part 2 of 2

Part I is located here

Shared Services Functions

The shared services framework by definition requires the sharing of resources, expertise and infrastructure.image

The functions that could be done from a shared services center may include:

HR Administration

The focus is on the various administrative work required of HR.

Transactions may include interview arrangement, training course scheduling, benefits management, and performance review processing. Organizations with standardization in processes and policies coupled with an automation strategy can reduce manual transactions.

Employee Queries

Ad hoc employee requests take up a significant portion of an HR professional’s time. Business group managers want HR to respond and provide service to the organization. However, HR can provide value on strategic level but, provide administrative and first-line response in a different manner.

Vendor Management

Whether an HR organization has a centralized shared service function most already outsource certain aspects of services. This may be benefits administrators, payroll processors or recruiting agencies. A central management team may be more effective rather than having each respective functions negotiation contracts, management of services and performance indicators.

Data Transactions

All HR functions require access and use of relevant HR data. Whereas ad hoc requests or silo data reporting slows down an organization’s ability tap into organization HR metrics and indicators. Ideally, HR functions can leverage on a single data platform.

Location Strategy: Global Service Centers

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Americas

The Americas region, particularly in the US, have the most established and leads in the use of shared services models. Advanced technology, common language, standardized policies make it easier to migrate towards a shared services platform.

Latin America

Depending on the size of the organization and growth strategy in Latin America countries, differences in culture and language may present challenge to shared services.

EMEA

Advancement in shared services has been slowed due to the region’s cumbersome regulatory and data-protection environment. HR technology platforms are beginning to allow pan-Europe approaches to payroll and recruitment administration.

APAC
China

For many US MNCs, China presents the biggest market share potential for growth. Employee headcount has grown to critical mass and shared services may be viable to increasing HR operational efficiency. However, often the decision to implementing shared services remains with headquarters.

China is in its infancy stages of developing shared services organizations. But, as companies grow, they invest in setting up infrastructure for shared services.

Initially, China shared services teams focus on Greater China (China, Hong Kong and Taiwan). As teams have more experience, many companies are moving their Southeast Asia organizations under the China umbrella.

India

As the global leader in business process outsourcing, India has developed core expertise in managing services for large multinational corporate clients. This may include benefits management, payroll processing, employee records and HR reporting.

However, talent shortages, IT infrastructure hurdles and lack regional language fluency have limited India as a location of choice for shared services center.

Transformation Challenges

The decision to roll out a shared services infrastructure should not be taken lightly. Setting up shared services will have dramatic impact on how an HR organization delivers its services to the organization. And, such a model will impact employee job function and skills abilities needed within a shared service team.

A clear decision and direction set for by head of HR will help set the stage. Items to address:

Why make any changes?

  • What are the business and HR imperatives driving the change?
  • How will the organization gain with this change?

Define what is changing

  • What stays the same?
  • What changes?
  • What are the desired results?

Roles and Capabilities

  • Define and train for skills needed for new roles in shared service center
  • Develop new skills for those front-line HR professional remaining in the business partner role

Employee Feelings/Emotions

  • Helping employees through the change process

Conclusion

Business is growing in sheer size and complexity, from R&D, engineering to technology manufacturing. Expectation of HR service delivery is unprecedented. HR is required to evaluate its own service delivery strategy to meet this demand.

A shared service model allows HR to deliver excellence in both the tactical and strategic aspects. However, neither of which can be accomplished well if kept under existing conditions simply by adding more HR headcount. A strategic assessment of HR structure can go a long way in optimizing HR for both in terms of services and business partnership.

References

“New Era for HR Shared Services,” Business Week Research Services, September 2007 http://mediakit.businessweek.com/Products/Research_Services/White_Papers

“Finding your place on the HR shared services continuum,” Mercer, 2008 http://www.mmc.com/knowledgecenter/Finding_your_place_on_HR_shared_services.pdf

“Beyond Centralization: Driving High Performance Through Fully Realized Shared Services,” Accenture, 2007 http://www.accenture.com/us-en/pages/insight-beyond-centralization-fully-realized-shared-services.aspx

IQPC 9th Annual Shared Services & Outsourcing for HR – HR Transformation Summit. May 4-5, 2011 http://www.ssohr.com/Event.aspx?id=442780

Overview of HR Shared Services – Part 1 of 2

The topic on shared services while not new to me but, attending the 9th Annual Asian Shared Services & Outsourcing for HR Conference May 4-5, 2011 Kuala Lumpur, Malaysia, gave me new insights in the the current state of HR transformation.  I’ve summarized key learning and added my own ideas in this blog post.

Objective of Shared Servicesclip_image002

A key purpose of shared services is to take advantage of economies of scale and cost-savings by combining common HR functions. This often involved centralizing back-office functions from multiple HR groups under a single shared service team.

Centralized shared-services function requires a standardize processes approach and ultimately allowing front-line HR to focus on strategic and business partner work.

Shared Services Continuum

Shared services may have different meaning to different organizations. However, they generally fall within 4 approaches.clip_image004

Centralization

At a basic level, organization pull together “back-office” administration under one roof in a single location, managed as a single team. Efficiency gain is derived from the elimination of the work that was previously done in multiple groups and locations. Processes and business workflow should be reengineered for optimal results. However, in most cases, work is simply relocated to a new location but, workflow is reconstructed in much the same manner as before the centralization. The idea is to not create disruption to existing service model and customer satisfaction.

Shared Services

Where centralization doesn’t go far enough, a shared service model takes advantage of economies of scale and process reengineering to optimize HR service delivery. High performing shared services organizations focus on customer service delivery by developing service level agreements (SLA), with performance metric score-cards. Cost is managed. A true shared service model looks at end-to-end processes globally.

Off Shoring

Companies are increasing their presence in the global marketplace. The consequence for HR is delivering global policies relevant to the new market, weaving in corporate policies with local practices. Companies gain by leveraging the consistency of a shared service model globally in disparate locations.

Out-Sourcing

Companies with matured shared services framework may look for furthering means of cost-reduction and labor arbitrage. Some have turned to third-party service providers to manage the organization’s transactional tasks on a fee-for-service basis. Companies may outsource a specific function such as payroll or staffing. Other organizations may implement a strategy of outsourcing the entire shared services function. Only the strategic and business partnering function remains in-house.

The approach a company takes depend on the business strategy and HR organization circumstances unique to each company. There is no right or wrong solution but making the most appropriate decision to delivering HR services to employees.

Foundation for Shared Services

After a company evaluates and determines there is benefit of a shared service function, it moves towards the design stage. Designing shared services requires consistent processes and a standardized HRMS.

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Process Reengineering

Creating shared services capabilities require process reengineering, the process by which HR organizations thoroughly evaluate, assess and align HR policies. Global consistency is a strict requirement. Only critical country exceptions are allowed, typically for legal purposes. Allowing for business process exceptions, continuing to do things they used to be, creating process excursions, erodes the benefit of shared services.

HRMS

The second element is creating a global HRMS platform. A common infrastructure allows for the “sharing” of business processes, service delivery and knowledge-base across the globe. The shared service center maintains all data related to the entire employee life-cycle.

Companies also rely on “employee self-service” to reduce reliance on in-person contact with HR for basic queries and administrative services. Self-service is built on the premise of consistent policies which applies to employees globally. Moving HR to the intranet is an accepted practice.

Change Management

Managing expectations is essential in developing a shared service program. Employee will want to maintain the same level of direct one-to-one contact which they are accustomed. Another task is convincing the management teams the value of offloading tactical work and while line managers will want to see higher strategic work delivered by HR.

Finally, the HR team will need to be retrained on skills to perform in a shared service center. Front-line HR will need to develop strategic consulting skills to work with business units.

Any change will require executive sponsor such as the CEO and CHRO.

Managing Culture Shift

A careful assessment of the organization and HR culture will determine the level of adaptation needed for a shared services model.

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Direct HR involvement at all levels; low use of technology Leverages on technology; direct HR involvement in strategic capacity
Talk to HR rep in person Same level of contact for all employee levels Online Transactions
Utilizes employee/manager portals
HR is the frontline for employee engagement Line manager is the frontline for employee engagement
HR provides all HR services Transactional work is delivered by a shared service team

Next Month

In part II of the blog, I’ll cover the types of functions that would typically be housed in a shared services organization.  We’ll discuss location strategy to the service hub.  Finally, having a change management strategy is critical to implementing an HR shared services.

Part II is located here