With HR striving to be more strategic and organisations under pressure to keep costs down, the explosion of popularity in shared services models over the past decade should come as no surprise.
Three-quarters of the Fortune 500 companies currently use some form of shared services model, which is also gaining in popularity in the UK public sector, where large bodies need to do more with less at times of austerity.
The basic idea behind a shared services centre is to provide the corporate services required across an organisation from a centralised unit. For HR, shared services models often mean dealing with routine HR administration in one place, ranging from payroll to training and recruitment.
HR magazine wanted to put the practice under the microscope, so we gathered a panel of experts to debate the future of HR shared services, in a dinner debate supported by Perceptive Software, a provider of process and content management technology.
Why shared services?
When it comes to why our HR directors chose shared services, the answers were similar: to achieve cost savings; improve the quality of service provision; consolidate; and free up time for the more strategic side of things.
Valerie Hughes-D’Aeth joined outsourcing services company Amey five years ago and was struck by the dispersed nature of service provision, with five business divisions and five HR teams all doing things in slightly different ways. “I thought we could bring them together to save costs but, more importantly, to improve service to the business,” she said.
Five years on and costs have been reduced by about 30%, and service levels have gone up. “Before, we used to hear that things would disappear into the HR ether and never come out, but now we track closely,” said Hughes-D’Aeth. The query-handling team agrees to close 85% of enquiries immediately and the rest within a maximum of three days. Amey monitors things stringently, reporting every month.
Amey is a fast-growth organisation and acquisitions are a common occurrence. The shared services model helps support this. “If we hadn’t had the HR shared services centre set up, we would not have been flexible enough to adapt to that growth,” said Hughes-D’Aeth. “It’s been very important for us to have that slick HR shared services model in place.”
Perhaps surprisingly for a multinational, Vodafone only began exploring shared services for HR two years ago. Before then, the focus was on managing local businesses and getting the quality right, explained Bernd Flossbach.
But, since then, the telecoms giant has moved fast, integrating multiple functions into one shared services centre. The move has already achieved 20% cost savings, but Flossbach was adamant that quality comes first. “Our focus was not on reducing headcount, but on making sure we are still delivering the quality we need in our local markets,” he said.
At InterContinental Hotels Group (IHG), shared services centres are set up in-house and across four regions (the Americas, Europe, Asia-Pacific and China). Each is slightly different, but not for long – Faye Frater revealed IHG is moving to a standard global model in June. But ensuring consistency is vital. “Our brands are bought to life by our people, so having a consistent approach to how they are hired and developed is really helpful,” said Frater. “HR is about enabling us to deliver our employment brand consistently worldwide.”
There is also the expectation that moving to shared services will help drive productivity, which is certainly how Frater sees it working for IHG. “So much of our activity in HR today is manual – it’s not very sophisticated and it’s grown organically,” she explained. “We are leapfrogging to a really great system and process. That should free up a significant amount of time within our HR team to get to the higher value-add HR activity that they simply don’t have the capacity to get to today.”
It will also give time back to general managers, who Frater estimated currently spend about half their time on back-office HR activity, rather than on guest experience. “We can free up time to focus on the core purpose of the organisation, which is to deliver great hotels that guests love,” she said.
The danger of shared services
The shared services model can bring many positives, but it’s not all plain sailing. In the world of customer service, for example, poor off-shore provision has led to some companies bringing their call centres back in-house.
Could this be the case for HR as well? Daniel Kasmir, at financial services technology provider FNZ, thinks so. “[Shared services] dehumanises the HR function,” he argued. “You have people one step away from what needs to be going on – are we really delivering that fantastically from 4,000 miles away? And there seems to be a lot of people who like to have HR close at hand. There are tremendous gains to be had from automated processes and lower costs, but there are tremendous disadvantages in depersonalising what goes on; you have to be really careful.”
FNZ may have a tech-literate, mainly Gen Y workforce, but Kasmir said having people to talk to is still a big deal for his staff. “When we experimented and took [elements of HR] off-shore, where it was cheaper, the pushback was more than I had expected,” he added.
For the NHS, migrating services comes up against ideological barriers. “There’s a great fear from staff representatives and unions about anything that takes people away from the heart of public sector values,” said Brighton and Sussex University Hospitals NHS Trust’s Graham White. “We have to make sure we are working closely with the unions to see that migration can work for all parties. You need to do it in stages to retain confidence, not rip the heart out of HR. It’s a migration, and if you’re moving your HR service, it must still be measured and it must still deliver. You can take 90% of activity out of an HR service without removing its heart. It’s about how you structure what’s left and how you establish from the beginning how it’s going to work.”
Getting implementation right
It’s important not to forget that any move to a shared services model is a big change-management activity, and should be communicated as such. “It has to be led by a desire to improve,” said Perceptive Software’s Tim Hood, who also stressed the importance of getting buy-in from all areas of the business. “If one function leads, that is where the challenge comes,” he said. “Everyone has to be pulling in the same direction.”
The most successful projects he’s seen had a few things in common: clear objectives, a clear roadmap, and everyone working together. He also advised a shutdown period prior to implementation: “If you’re constantly looking at change, you never really see results and can’t measure where you are on the journey, which is key to delivering results back to the business.”
Frater will be making use of a shutdown period, which she has termed a “no fly zone” for HR. “For the months leading up to implementation, we won’t be able to offer steady support because we have to concentrate on getting this right,” she said. “There’s a real onus for HR to role-model what great change management looks like.”
For Deloitte’s John Baddeley, who has supported many clients through HR shared services transformations, the most important success factor is executive sponsorship, and making sure the best people are working on it. “Often organisations don’t put their best people on the implementation, because the firm wants business-as-usual services,” he said. “It should be the opposite. You’re building your organisation for the future. You need your best people involved in that.”
At Vodafone, engagement in local markets was vital. After all, said Flossbach, any problems and it will be the local HRDs shouldering the blame. “It was important for us to work with the local markets and get their perspective on the best approach and what really mattered to them,” he added.
Communication can make all the difference. At Amey, using actors to perform skits on the day in the life of a manager and employee before and after implementing shared services helped simplify things, while IHG has invested time in telling a “clear story” about what is going to be different.
Hughes-D’Aeth stressed the importance of feeling like one team: “It can’t be ‘them’ and ‘us’. Everybody in the function sinks or swims together. If you can’t get the basics right in the shared services centre, however much OD or fancy coaching you do, it won’t work.”
Watch the rest of the debate here: