The Impact of Culture on HR
The Impact of Culture on HR
When HR directors share their shared services war stories, one will invariably refer to the unwavering support he gets from his CEO. "Ooh," the others sigh with envy. "CEO support. If we had that, we'd have it made." Well, not necessarily. It's been our experience at Southern Company that while CEO support certainly contributes to the success of a shared services project, an adroit understanding of – and synchronization with – the organization's culture is the real bellwether of long-term success.
What Is Culture?
Culture is how things "really work" within your organization. Though not discussed in the Employee Handbook, it is the set of behaviors that are rewarded or punished in a hundred different ways. Are decisions made quickly by action-oriented managers or slowly "shopped" for consensus? Are procedures really adhered to, or are business leaders more situational in their decision making? Are leaders paternalistic, looking after their employees like cherished family members? How well do employees accept change? Which is the stronger driver: numbers or values?
As there are many kinds of culture, there are many levels of cultural intensity. Organizations with a strong culture:
1. Leverage their culture as a source of business success.
2. Impose greater rewards and punishments for compliance or non-compliance.
Organizations with a weak culture:
1. Tolerate non-conforming behavior better.
2. Dole out weaker benefits and sanctions to those adhering or not adhering to the culture.
Stronger cultures can cross the line and be quite explicit, making it part of their employer brand. Southwest Airlines is very clear about creating a "fun" environment. In earlier days, IBM was known as the prototypical corporate environment that expected conformance on many levels.
How Culture Sets the Borders
Implementing a shared services function in any organization instantly and unavoidably raises cultural conflicts. It takes work that was done according to the cultural values of the business unit(s), and moves it to an organization run with different cultural drivers. For most call centers, these include a focus on procedures, efficiency, accuracy, role clarity, metrics, and continual improvement. The difference between these cultural markers and the culture of the wider organization generally indicates the size of the cultural divide.
What are the implications of cultural conflict between a shared services unit and the organization it supports? That depends, as discussed earlier, on the size of the cultural divide and the strength of the larger organization's culture. If the culture is strong and the difference is great, we needn't look any farther than the day's headlines to show us the extent of conflict that can erupt from a clash in cultures.
While a shared services initiative can move corporate culture incrementally, it cannot, by itself, change it – and certainly not overnight. Culture does not yield instantly to data, reason, or even market pressures. It changes only slowly. And at the same time, a shared services function cannot succeed by simply adopting the culture of the larger organization, where it would sacrifice the efficiency and technological orientation at its core. Rather, effective shared services organizations must become savvy and adroit in spanning the cultural divide.
HR Shared Services at Southern Company
Shared services actually has a long history at Southern. As far back as the 1950's Southern consolidated the dispatching of its operating companies' power plants. At about the same time, we began operating our transmission lines (the high power lines that carry power from the plants to your neighborhood) as an integrated system. Over the years, customer billing, plant engineering, and parts of finance were brought together into Southern Company Services, Inc., which now employs 3,100 of Southern's 25,000 workers.
Southern Company consolidated most of its business units' HR departments in 1995. It was a logical step that came one year after IT went through a similar process. The biggest change in the 1995 HR reorganization was the consolidation and outsourcing of benefits administration. It allowed us to reduce HR administrative support in the field substantially. It also introduced to us the elusive new HR consultant role we call "HR Business Reps." Why elusive? Because few HR VP's will claim that their field people have fully attained the strategic partnership role they aspire to. More on that later.
Having operated under this model for ten years, and with the accountants asking, "but what have you done for us lately?" HR is digging deeper and extending its shared services operation further. We are taking more "transactional HR" out of the field (job evaluations, absence management, etc.) and combining it with some of the back office functions of corporate (vendor management., onboarding, etc.) to staff an in-house service center. By the time we are finished, we will have taken HR down from about 320 employees to 280, with an anticipated improvement in customer satisfaction. This falls well shy of the more dramatic reductions other companies have attained, though it will have kept our budget at or below US$52m from 1995 to 2008 despite ongoing wage escalation. Along the way, Southern HR has learned a good deal about operating a shared services business within a strong organizational culture.
Southern Company Culture
Like many traditional utilities, Southern Company has a strong culture owing to a very stable business model and cherished internal traditions. Some of its attributes are:
- Strong ethical values
- Paternalistic leadership
- Consensus decision-making
- Continuity valued more than change
- Business unit autonomy
Artifacts of this kind of culture are gradual career growth, a "family" environment, low turnover, and a high average age and tenure. Most employees still remember, wistfully, the days when local HR employees would fill out employee and retiree claim forms, organize company barbecues, and gift wrap service awards. That such days are past does not mean they are not missed. And in the struggle to bring Southern Company to accept – if not embrace – shared services, we have learned a few lessons that we are applying to our current phase.
Southern's Lessons Learned
Be realistic and concrete. This sounds so simple, but it can make all the difference. Consultants, and perhaps your colleagues, will tell stories about the transformational power of shared services. Shared services can, indeed, transform an HR department, resulting in greater efficiency, increased strategic focus, and improved service to employees. It cannot, however, transform a traditional, paternalistic culture into a workplace of "instant messaging" Generation-Y techno-geeks.
Accordingly, set goals that resonate in the larger culture, using clear, quantifiable terms. Examples:
- Before-and-after customer satisfaction surveys.
- A straightforward business case projection with firm savings targets over time.
- Clear partnership agreements with explicit service delivery commitments.
Accountabilities that are concrete in this way generate far more comfort in executives' minds than promises of a new culture that may hold little appeal to senior officers. This is how culture differences can be bridged, rather than clashed.
Similarly, in communicating about shared services to employees, understand what is important to them. General promises of "easier access" risk misinterpretation in a way that "one number for all your needs" cannot. What are employees complaining about? Chances are if you can fix that, you can get them to overcome cultural biases and win them over.
Choose people who know the culture. Depending on the strength of the organization's culture, a key competency for leaders in shared services HR may be cultural acuity. At Southern, we have found that good HR people may be able to develop an award-winning HR program. Actually getting it implemented, though, requires someone who knows "how things really work around here." Thus, even "centers of excellence" may require leaders and practitioners who understand the larger organization's culture. Doing so will help avoid conflicts on issues such as:
- How much self service will various levels of management tolerate?
- Will supervisors accept employee relations advice over the phone?
- Can job evaluations be commoditized or are they critical HR interventions?
- Is line management participation critical to their accepting new HR "products"?
- What is the acceptance level for HR complexity vs. simplicity?
These are the kind of battleground issues that HR must be attuned to. Note that getting this right will also demonstrate the kind of sensitivity that leads to trust. And trust leads to a willingness by management to involve HR in more critical business and talent issues.
Personalize the impersonal. Who among us would not prefer to do business with people we know and like? Is shopping at a local boutique not more pleasurable than doing battle at the corporate, big-box mega-store? For that reason, anything you can do to personalize an HR call center will pay dividends in bridging cultures. The greatest opportunity is during start-up, when time can be taken to develop a "road show" of traveling reps visiting the employees who will be their future customers. Even later, finding ways to help call reps establish rapport with employees takes the edge off impersonal transactions and builds trust with employees. The cultural point here is that we are not inclined to trust people who are very different from us. Establishing common ground reduces these differences and resulting conflict.
Beat the challenge of co-location. Most HR shared services delivery models include internal consultants (generalists) located within the business units they support. The common complaint among HR directors is that these employees, over time, "go native", pursuing HR agendas that make the business unit feel good, but do not do not adequately challenge or add value to the business.
Some HR directors simply deed over management of these employees to the business unit, declare victory, and go back to worrying about executive comp. Over time, Southern has learned ways to improve the effectiveness of co-located generalists:
- Select only top-tier HR talent with excellent business and consulting skills. Avoid the temptation to keep B- players from legacy departments.
- Ensure that generalists understand the culture as well as the business. It should be a critical selection criterion.
- Be stingy. Only deploy generalists at levels in the organization that generate business strategy. Assigning an "HR strategic business partner" to a tactical business unit gives the HR person little to do other than transactional, tactical HR work.
- Move consultants around frequently enough that they consider themselves HR employees rather than business unit employees. This practice develops both your staff and your customers.
HR shared services is clearly the delivery model of choice in large organizations. It provides opportunities for better service to employees and supervisors, greater focus on strategic workforce issues, and lower cost. Achieving success in shared services, though, requires careful attention to the cultural differences between the shared services unit and the larger organization. If HR can create cultural success as well as business case success, that much-desired CEO support is bound to follow.
About the Author
Human Resources Strategy Director
Howard Winkler is Human Resources Strategy Director for Southern Company, one of the largest investor-owned electric utilities in the U.S. Mr. Winkler directs work on metrics, workforce planning, attrition, labor cost, and employer branding. He is also responsible for HR Finance. In previous roles at Southern Company, Mr. Winkler was responsible for staffing and recruiting. Before joining Southern Company, Mr. Winkler served at one of its subsidiaries, Georgia Power, as HR Services Manager, responsible for staffing, benefits administration, HR IT, and HR field offices throughout Georgia.
Mr. Winkler has recently joined the Editorial Board of Shared Services News.