Report summary: HR Shared Services and the Realignment of HR

A study supported by the IES HR Network

Shared services is an increasingly common organisational response to creating more efficient service delivery. Costs can be reduced through the economies of scale from centralisation of services. Increased customer focus can lead to better quality outcomes. Technology can offer various routes to user friendly delivery (eg call centres, intranets, etc.). Choices, though, have to be made on the nature of the shared services operation and on the relationship between HR and line managers and employees.

What are HR shared services?

The key dimension of HR shared service is that the activities involved are available to a number of parties. They are common services. Moreover, the customer defines the level of the service and decides which services to take up. A shared services model presupposes central provision.

A variety of activities can be covered in shared services. These include principally administrative tasks (eg payroll changes, relocation services, recruitment administration, benefits administration, company car provision, pensions administration, etc.), but also frequently include providing information and advice, or consultancy and high level professional support.

Why shared services?

Based on IES research on some fifteen organisations, there seem to be three principal drivers to the introduction of HR shared service. These are:

cost
quality
organisational change.

Organisations feel that shared services can reduce costs by three main means:

by cutting staff numbers, through achieving economies of scale
by reducing accommodation charges, through exiting some offices/using cheaper accommodation
by greater efficiency in what is done and how it is done, through streamlining and simplifying services, and doing them to a consistent, accurate standard. Combining purchasing decisions also offers savings through economies of scale.

Quality can, it is thought, be improved through shared services, both in itself and by HR being more customer focused. This is achieved by:

being more professional
achieving greater consistency and accuracy
being more aware of internal and external best practice
using better processes to complete work
delivering on time and to budget.
discovering what the customer wants rather than deciding what suits the service supplier
becoming more accessible by operating user-friendly services (longer opening hours or easier means of contact)
improving the supply of information to customers, both on process and content
giving better quality support in line with customer needs.

There were four sorts of organisational drivers to setting up HR shared services:

to be part of a wider business change introducing the concept of ‘professional’ or functional services
to achieve a greater degree of structural flexibility to respond to business change
to improve organisational learning across organisational boundaries
to allow HR to reposition itself as more strategic; to reduce involvement in administrative trivia.

In most of the circumstances we looked at, technology was usually a facilitator of change rather than a driver in itself. However, some shared service models would not have been possible a few years ago. Technical innovation in communications has enabled far reaching change to take place. Developments include using:

an organisational intranet to provide information on HR policies and procedures
PIN number based access to personal information
sophisticated telephony such as IVR (interactive voice response) to offer callers a choice of options to key into from a voice menu, or distributed call systems allowing callers to be routed to remote locations
document management systems, eg allowing paper to be scanned so as to feed electronic files, to transfer material electronically, and to permit multiple access by HR staff
workflow systems that guide and prompt the user as to the next steps to be taken
standard forms on the intranet that can be electronically completed and despatched.

Benefits of shared services

As one might expect, the benefits tend to be those sought by organisations when they introduced their new structures, namely:

lower and more transparent costs
more efficient resourcing; better career development for HR staff
better quality services
higher customer satisfaction ratings, through an improved match between customer expectations and service
a more integrated ‘total solution’ approach to problems
a more selective and strategic contribution from HR
improved cross-group learning, partly through having a common information base, accessible to all
better management information, provided more consistently across the organisation as a whole
better service specification (eg via SLAs) and performance monitoring
facilitation of corporate investment in computing and communications infrastructure by arguing the case on a collective basis.

Issues creating HR shared services

Some problems have already been encountered, but the issues to be faced are more likely to be medium term in nature and more to do with getting the benefits out of shared services without creating other difficulties.

Short-term or transition issues include:

recognising that HR has a number of different customers to be convinced and, in particular, that senior management has to support the concept in theory and practice.
understanding that there may be a need for large-scale capital investment to get the right technological infrastructure.
being careful to determine the best design and choice of operator: in-house or outsourced (in whole or in part).
being wary of IT delivery times, cautious of whether the kit will be fully operational on time and to specification.
neglecting the importance of the knowledge and experience of incumbent administrators in staffing new positions, and undervaluing their work.
understanding that by stripping out operational tasks, business-facing HR managers may have lost their raison d’être and found it difficult to concentrate on strategy and change management.
recognising that boundary management problems may occur if the service is heavily segmented, eg where does policy formation end and implementation begin?
anticipating communication difficulties, especially where there are numerous discrete activities, each organisationally separate.
guarding against a lack of effective accountability. HR Managers may be responsible for personnel services, but have no control over the work if it is done in a shared service centre.

Issues for the longer term include:

ensuring HR makes a strategic contribution in deed as well as words.
aligning HR with the business, whilst at the same time performing the role of ‘employee champion’ that gives HR its distinctive value.
determining whether efficient use of resources should be more important than fulfilling customer needs, or vice versa.
devolving work to line managers successfully, not dumping unwanted tasks upon them or asking them to perform activities without training or support.
avoiding the risk of de-skilling some administrative jobs to the point where they become extremely tedious to perform.
recognising difficulties with career development if lower graded staff do not build the expertise that allows them to fill more senior positions later.
ensuring that personnel staff are very reliant on being kept well informed of what is happening on the ground.
deciding to whom resources should be allocated, especially in a project organisation.
avoiding the risk that project based staff are ill-attuned to business needs, giving generic rather than specific advice and not seeing the work through to a real conclusion.
recognising the risk of giving too much emphasis to selling products and insufficient attention to the content.
avoiding the complete loss of face to face contact that produces a depersonalised service.