Why is HR Shared Services "Different"?

In every multi-process Business Process Outsourcing (BPO) or Shared Service Centre (SSC) project I have ever worked on, HR always gets the reputation for “being different”. And while every function’s process is unique, I do believe that HR has some attributes and challenges that do indeed make it different. Here are my arguments.

1. Standards

HR is the one process that does not have globally recognised standards. Finance has GAPP accounting. Procurement has rules and strict structures to ensure governance and industry standards. Even call centres have more standards than HR, especially in the areas of service metrics and workflow. HR for some reason has never been able to achieve a globally agreed standard on nearly anything. Countries have different rules (pay, leave, benefit), organisations want to be different in areas like recruitment so they can attract the best, and even in core areas like employee records, what data is collected, updated and reported on varies by country, company or even department. This lack of standards makes it more complicated for HR to be transitioned to an SSC as the typical starting point is that each of the businesses or countries moving work to the centre is doing it differently. In Finance an invoice is an invoice – no matter what country or company you work for, whereas in HR even the definition of what an employee is can vary widely – even inside business units or across a company.

2. Leadership For years, HR has heard the coaching on how to “get a seat at the table”, as in many organisations the CHRO is still working on getting that position. In some companies the head of HR still reports into the CFO. Unfortunately, HR has more challenges when it comes to providing strong leadership for major transformation than other functions. Deloitte did a recent white paper on some of the skill gaps within the HR function, with business acumen and leadership topping the list [editor's note: SSON's Global 2016 industry survey found the same]. Obviously, this is not true of all CHRO’s but in my experience, the heads of HR find it difficult to make strong, direct leadership decisions required to create a successful SSC. There are several contributing factors to this perceived leadership challenge: -

The desire to have consensus – good leaders work towards trying to achieve consensus among their leadership team when driving a significant change, but if an agreement is not reached a decision has to be made. HR has struggled with this for many reasons. First, due to the lack of standards, country differences, statutory and legal requirements it can be challenging (not to mention brave) to make a decision when faced with members of your team saying “we can’t do that in my country because...”. If the leaders force a decision to move specific types of work to an SSC, it is not too difficult for non-committed members of the team to determine how to create enough “fear and doubt”. And this can cause the CHRO to either not make decisions or to take so long to make a decision the project grinds to halt.

Organisation design – in many global organisations there is a matrix structure. The most powerful dimension of the matrix might be division or country; rarely is it functions , and normally the global CHRO does not have direct reporting leadership over the in-country or divisional HR staff. This means that even if the CHRO wanted to make a decision regarding what work would move to an SSC, odds are that the individual country (or division) heads of HR will be either promoting (or not) that change with the head of the country or division.

These two attributes can create a challenging leadership environment for which to build and exploit an HR SSC.

3. Technology

HR historically has had a lack of investment in technology to help make it more efficient and effective. In some cases, the core HRIS technology is so old or so unique that it is a real challenge to move work to the SSC. Even if an investment was recently made to put in a new cloud-based solution, such as Workday or Dayforce, was it implemented in a globally standard manner? Can the HRIS team manage the impact of the quarterly or bi-yearly upgrades for the processes inside (and outside) of the SSC? Is the organisation a good user of employee and manager self-service? Is there a history of an HR call centre with a knowledge database and ticket management system? Do you know how many HR queries happen per year or month so you know how to scale and size the technology (and other resources)?

These and other questions regarding HR technology need addressing before HR can successful migrate work to an SSC. HR traditionally has not had the right foundation of technology to move work efficiently and therefore the cost of transition can be more significant as compared to other processes.

So, what can HR do about these three areas specifically (and there are others!) to achieve the opportunities and benefits obtained by other functions through a successful implementation of an SSC?

First, the design of the HR SSC needs to be pragmatic and realistic in light of the “as is” environment. Determining what processes go into the SSC and which remain with other parts of the HR organisation is critical. Once the processes are identified, they have to be re-engineered to a level of consistency across all countries or divisions. The best practice is to change the work as it is moved into the SSC. Second, be realistic regarding the level of investment in technology required to make the SSC efficient and effective. The business case for the HR SSC needs to reflect the degree of investment required to provide the right customer service; otherwise the transformation will fail. The technology investments should include a knowledge database and call centre technology. Third, ensure that the commitment and leadership for the change are aligned and in agreement before starting. Not just the CHRO leadership but also the individual leaders within the matrix that will have to change and support the initiative.

An SSC, whether captive or outsourced, can significantly improve the efficiency and effectiveness of the HR processes. It can be the change agent to move HR to the next level. But you need to get the basics right, or it will be just another "initiative".