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Steps to Shared Services Success
The secret of shared services is to always talk to the customer about service, but to always think about process. Implementing shared services in HR is especially challenging, where processes are often subjective because the function focuses more on people than hard-and-fast widgets.
Compared with black-and-white functions such as finance and IT, human resources is a little on the gray side. That is, in the world of business processes, HR is often a little less "business" and a little more "people" -- which can make it difficult to standardize and centralize processes. As a result, the implementation of HR shared services -- the internal consolidation of activities to reduce costs, improve performance and/or transform the way a function delivers value -- can be very challenging. Indeed, for every transactional HR process in, say, payroll or time accounting, there's often a more consultative process -- such as recruiting or compensation planning -- at the other end of the continuum. Add it up, and some aspiring HR shared services centers are missing the mark, reporting savings and service levels that are well below expectations. But just because it's hard doesn't mean it's not worth doing. Lots of HR organizations have reached the happy place in shared services. It comes down to four basic tenets: Get clear about the goals and manage expectations; develop a process orientation; develop a strong and tenacious customer view; and run shared services as a business. Shared Services 101 For more than 30 years, the shared-service model has helped organizations deliver administrative functions more effectively and efficiently to the business units they support. Shared-services organizations generally centralize specialty capabilities, and they provide services in a more process-oriented and businesslike manner. In IT, for example, instead of each business unit managing its own suite of applications, a shared-services model might centralize application management from across the enterprise all in a single unit. In finance, likewise, shared services could combine all of accounts payable processing, eliminating the scads of paper flying around the organization. HR, meanwhile, as the newest kid on the shared-services block, can use the model to deliver everything from benefits administration and payroll processing to compensation management. Already, some organizations have great success stories to tell. According to a Business Intelligence management report, for example, Standard Chartered Bank has reported multimillion-dollar savings from HR shared services, while Scotiabank has seen improved customer service. A shared-services center is like a business within a business -- and needs to be managed as such. In other words, for shared services to be successful and sustainable, the underlying business processes must be "industrialized." That means determining the scope of the shared-services organization; the details of service delivery; the design of the customer experience; the enabling technology; how performance will be managed; and the governance structure for managing expectations and the resulting perceptions. Keys to success When navigating HR's inherent challenges and building an effective shared-services center, consider these four principles: 1. Get clear about the goals, and manage expectations. Shared services is commonly used as one part of a broader effort to transform HR -- and rightly so. However, a shared-services center in itself is not transformation; it is but one tactic in a transformation strategy. Confusing the two can lead to problematic expectations. When employees hear the word "transformation," for example, they may think their HR services will suddenly get better. But even though shared services may enable you to cut a paycheck for less, unless you specifically change something in the delivery of the service, your internal customer will never know the difference. In other words, it's key to be clear about what you're trying to achieve with shared services -- and then communicate that to the organization and manage the expectations. If the goal is to reduce costs, then don't tout service improvements. If the goal is to improve service through automation, keep in mind that improvements such as self-service portals will be perceived by some as less intimate and less convenient than talking to Sally down the hall. Therefore, it's critical to educate the organization about the goal of shared services and how to use the new structure. In fact, there is a direct correlation between employees' view of HR and how much the HR organization manages that perception. If you teach employees that there are more effective ways to operate, then they are more likely to see the value. Consider the banking industry. With ATMs and online banking, we customers have been converted to the banks' data entry clerks -- and we're happy to do it. Likewise, when you're doing HR shared services right, educating the organization about the value of the new structure and how to use it, then you'll spend less time "pushing" services to your customers and more time managing their desire to "pull" it from you. You might even have trouble keeping up with the demand. An important part of determining goals and managing expectations is defining the scope of HR shared services. And due to the "fuzziness" of some HR processes, compared with the more cut-and-dry nature of, say, IT or procurement, defining scope may be a lot more work than expected. Take the process of employee-performance management. If a line manager is effective at managing employee performance, then HR may simply administer the process. But for other managers, HR may need to play "Dr. Phil," helping managers communicate the hard messages to subordinates -- in which case HR has a much bigger role. The lack of definition around some HR processes is normal. Just be aware that as an organization moves into shared services, HR leaders may need to define and standardize processes more than they used to. 2. Develop a process orientation. We have used the words "process" and "service" a lot so far, but they are not interchangeable. The service is the output that the customer values, while the process is the collection of activities to produce that output. The secret of shared services is to always talk to the customer about service, but to always think about process. This is especially critical in HR, because most of the services, which may appear discrete to the customer, are highly integrated at the process level. Consider this real-life example. Jill Employee contacts the service center to report that her paycheck is wrong. She is not sure why, but the amount looks different. From a service perspective, we have failed Jill. But unless HR professionals understand the processes behind the service, they will never figure this one out for sure. Think about some of the inputs that could impact Jill's paycheck -- such as the time she booked, changes in compensation levels, a tax change or a benefits change that affected a deduction. If the paycheck "error" is actually a new tax rate, then it's really not an error at all. However, HR shared services, working from a process and service perspective, should proactively alert customers to upcoming changes. Having a process orientation means knowing what is going on across all processes. The devil is in the details. For example, consider cultural and regulatory differences. Even if a shared-services implementation is domestic, are there differences from one state to the next or one region to the next? How do these differences affect processes in the shared-services center? A process orientation is critical for a well-functioning shared-services center, but it simply is not as intuitive in HR as it is in finance or IT, where practitioners at their core are trained process engineers. As HR leaders move into shared services, they need to recognize this reality, accommodate for it on the implementation team and maintain the orientation throughout the design and implementation process. 3. Develop a strong and tenacious customer view. It's also important to think about how process translates to service for the customer. In fact, every decision becomes easier if an organization is ruthless in applying a customer perspective. An operational environment might be simplified with shared services, but a slick-running shared-services center that people have trouble using is not a success story. Avoid this pitfall by looking at everything from the customer perspective -- even if the organization has to scale back the scope because of budget or time. Consider the customer interface. Unlike finance, where reporting formats and protocols are generally well defined, there is no such standard in HR. In fact, in multiregional and multinational environments, HR shared-services centers must consider geographical factors including culture, language, and legal and regulatory variances. Therefore, designing the customer interface becomes art and science. The science is making sure regulatory compliance is met (if the words "data privacy" don't make your heart beat a little quicker, look into it), and the art is dealing with the cultural aspects of how people like their companies to interact with them. Another complexity: the multigenerational workforce. For one segment of the population, an elegant self-service capability will provide credibility as a leading edge employer. For another employee, it may be so intimidating that they won't even try it out. Again, this underscores the need to educate the organization about HR shared services and prepare employees for the new service model. 4. Run it like a business. Finally, a successful shared-services center operates like a business, not a staff function. Put time into governance, and don't be too proud to learn. For example, reach out to internal customers to continually monitor and manage expectations, troll for new service opportunities and resolve service issues. Relish these learning moments and develop a culture of continuous improvement. In addition, just as a business evolves in its processes and services, so does a shared-services organization. Anyone building a shared-services center should expect to go through a few stages of maturation. Success doesn't happen overnight. A key indicator of maturation is the degree to which sophisticated measurements are established. These measures should track throughput and output, be evaluated against objectives and be widely published within both the shared services unit and the customer community. Implementing shared services in any function is hard. It involves change, moving people into new roles and establishing new service models for internal customers. And shared services can be especially challenging in HR, where processes are often subjective because the function focuses more on people than hard-and-fast widgets. There is an opportunity in HR, though, and it is one that should at least be considered. The lack of such centers could even place an organization at a disadvantage if its competitors pursue such a structure. Keep in mind that many organizations call themselves "shared-services centers," but they are really just big, consolidated departments. It's critical to approach shared services with the right strategies and tactics. For HR, there will naturally be more art than science, but the science is important too. With the right combination, an HR shared-services unit can deliver a strong value proposition to the business. Mark Trepanier is managing director of Human Resources Advisory services for EquaTerra, an outsourcing consultancy based in Houston. February 22, 2010 Copyright 2010© LRP Publications |
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© Copyright 2012 LRP Publications. All rights reserved.
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