Peter Reilly is director of HR research and consultancy the Institute for Employment Studies
He joined the institute in 1995 as a senior research fellow after a 16-year career with Shell, where his work included an investigation of the changing nature of the employer/employee relationship and its impact on Shell in the UK, set in the context of likely internal business developments and external social and economic changes.
Before he joined Shell he was a senior research Officer at the British Institute of Management where he wrote reports on profit sharing, employee participation practices and trends in British industry. At the Institute for Employment Studieshe leads the work on reward, also contributing significantly to HR planning and labour market projects.
Spot the benefit
As originally conceived, shared services is about bringing together dispersed activities into a single organisational structure for the benefit of ‘customers’, or staff. In this model, according to HR business partner guru Dave Ulrich, ‘the user is chooser’.
Cost reduction is an important driver, but not the only one. Savings principally come from cutting jobs, but accommodation charges can also be reduced and corporate buying power increased. A second driver is the ability to provide higher service quality through simplified, standardised processes based on best practice norms.
A variety of activities can be undertaken in a shared services centre, especially administrative tasks (such as payroll and employee record changes), but also the provision of information via an intranet and advice via a contact centre. Some organisations may also include case-work or consultancy support. Sometimes, but not always, shared services are introduced as part of a wider HR reconfiguration, creating centres of expertise and business partners.
According to a 2007 survey, conducted by the Institute for Employment Studies for CIPD, the top five benefits of shared services are:
- repositioning HR
- improving credibility of function
- HR becoming more strategic[?]
- improvement in service quality
- more responsive customer service.
Two things are striking about this list. Cost reduction, though an important driver for change, is not always achieved, perhaps because process standardisation and reform or systems improvement have not happened as they should have done.
Second, shared services are seen by HR as part of a transformation in its role towards becoming a strategic, rather than administrative/operational, contributor. This is because shared services (together with automated and self-service processes) should reduce the time spent on administration, leaving the HR function to focus on higher value-added activities.
Moving to a shared services model is not without obstacles, however, and the CIPD survey lists the top five challenges as:
- boundary disputes
- gaps in service provision
- communication difficulties within HR
- customer complaints over service
- objections within HR.
The nub of the problem is, how well do shared services operate with other elements of the HR model? If roles aren’t clearly defined activities may fall through the cracks.
For example, is the business partner accountable for the whole HR service or is the shared service centre separately accountable for its part?
Another common difficultly with contact centres is who owns the caller’s case. Is it shared services, where the call is logged, or the centre of expertise to which difficult problems are escalated? Moreover, how does one address line managers’ complaints that a one-stop-shop service has been replaced by multiple contact points, the nature of which is unclear to the customer?
Overcoming these obstacles requires sensitivity to customer needs and the ability to see problems from their perspective. This might mean building in more operational support to the line or differentiating the service delivery model to meet specific business unit requirements. Greater attention has to be given to HR role descriptions, especially how they interact with different departments.
With this in mind, below are the 10 big questions to consider when designing a shared services model.
- Do you carry out all the shared services activities yourself or do you outsource all or some for third parties to do on your behalf?
- If you outsource, what sort of contractual arrangement do you seek – transactional, partnership or co-sourced?
- If you retain the shared services work, how do you structure the activity – integrated into the rest of the company or separated as a subsidiary?
- Do you want your shared services to make a profit from selling its wares, either internally or externally?
- Do you link with any other organisation to share costs and expertise?
- To what extent are you going to devolve personnel activities, previously done by HR, to line managers? This will affect the nature of the work of your shared services centre.
- What part will technology play in your shared services set-up? Will it be limited to using a corporate intranet or will employees and/or their managers self-serve?
- Will you co-locate your shared services activities or disperse them geographically or in line with your organisational structure?
- How will you go about setting the numbers to be employed in your HR operation? Will you use a methodology such as activity analysis?
- What approach will you take to designing the roles in your operation? Will you aim for maximum flexibility and aim for all-rounders, will you prefer to create specialist positions or will you opt for a mixture of the two, depending upon the post?
Bear these questions in mind when contemplating the move and those strategic advantages could be within your grasp.
Case study: Sally Campbell, director of HR and workforce, Cheshire HR Service
Cheshire HR Service (NHS) is a rare example of successful cross-organisational service provision. It was formed in the first half of 2007 by combining elements of the HR activities of three sovereign NHS trusts (East Cheshire NHS Trust, Central and Eastern Cheshire PCT and Western Cheshire PCT).
Described as a service level agreement (SLA) partnership arrangement, the service is provided by East Cheshire NHS Trust and provides Cheshire HR services to the three trusts through clear SLA arrangements.
Its activities are overseen by a complex governance structure and each trust has its own monitoring arrangements to consider the partnership’s performance against objectives, key performance indicators and budget. An HR strategy committee with CEOs, Directors of Finance and HR provides overall direction.
Cheshire HR Service provides the following shared services:
- HR administration (including recruitment services, management information, records management)
- learning and development
- employee benefits and support service
- occupational health and counselling
- payroll – now outsourced but centrally overseen.
In addition, there is a small business management team that oversees the partnership’s business arrangements and facilitates the infrastructure of meetings, performance, finance and technology.
There are also business partner teams for each of the trusts that cover strategic development, employee relations, policy development, workforce planning, diversity and employee engagement.
A review of its first year of operation revealed:
- a more ‘committed relationship’ between HR and the organisation
- increased internal benchmarking and an associated questioning approach to service delivery.
- improved networking and support within HR
- a more commercial and cost aware attitude to service provision among HR staff
- better career opportunities and access to training.
There is still room for improvement, however. Areas to be developed in the next year include improving IT synergy between the trusts, avoiding a steady increase in demand from some customers, while making others more aware of the service delivery model and developing an induction programme for new entrants to HR, so that they understand the model’s features.
The key thing to learn from Cheshire HR service is that there is no ‘one size fits all’ model for successful shared services implementation.
Shared services is bad for your career
Andy Cook, managing director of Marshall James employee relations consultancy
“Shared service in HR is a bad thing for HR careers. Many organisations have followed the Ulrich model and created an HR structure that makes it difficult for those below director-level to gain and use a broad mix of HR skills.
“No one can argue with the principle that HR needs to prove its worth and to add value. But simply using the term business partner and then taking away all the HR levers from that person is not the way to do it.
“If you took a traditional HR generalist, that person would have been involved in recruitment, training, reward, employee relations, organisational design, talent management and so on. Not only would that person have sight across all these areas, but would also get the chance to gain the experience and skills in order to develop and progress, building relationships with line managers along the way.
“In today’s world, the business partner is expected to work far more strategically and in so doing, loses the responsibility for the delivery of all the essential parts of HR that bring being strategic to life. Also, if the business partner is to rely on specialists in areas such as recruitment, employee relations and compensation and benefits, how can that business partner hope to gain the skills and experience in those areas to enable them to be able to make it to director level?
“Even more significant is that entry-level HR people are now being recruited into a call-centre type operation where they will gain little or no experience of dealing with issues face-to-face.
“There is no question that we are facing a skills shortage in some key HR disciplines, as anyone will tell you who has tried to recruit lately. The profession has gone too far along the route of listening to academics who, in some cases, have no real-world experience of running an HR department. We need to re-address the balance and senior HR directors in the UK need to take the responsibility for making sure their teams are able to develop their skills in as broad a way as possible so there are actually good, rounded professionals to take over their jobs.”