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"HR departments are now being asked to do more with less.
To meet this challenge head on, forward-thinking executives are thinking out of the box to
transform their fundamental approach to operations. They are adopting progressive approaches
including self-service, shared services, and business process outsourcing to gain efficiency,
lower costs, and increase service quality on a global scale."
HR Shared Services: A Fresh Look
HR Shared Services
is also known as :
Human Resources Shared Services
Efficacy of Shared Services
Basic HR Processes
Shared Services Agreement
Personnel Management Shared Services
Shared Services Implementation,
Shared Services Centers,
Traits of HR Shared Services,
Shared Services Technology,
Delivery Model for Human Resources,
Global Shared Services,
Advantages of Shared Services Over Outsourcing,
Shared Services Organization,
HR Administrative Processes,
Shared Services Platform,
New Trends in Shared Services,
HR Call Center Function,
HR Shared Services Implementations,
HR Practice Leader,
Shared Services Approach,
Shared Services Management,
HCM Software Platform,
Shared IT Services.
There is nothing like a recession to demonstrate the efficacy of shared services as a
delivery model for human resources (HR) administrative processes. Organizations
experienced with HR shared services find the model efficiently handles day-to-day
administrative transactions, including delicate issues such as the paperwork aspects
of layoffs, thus freeing staff to focus on the myriad morale and other talent-related
issues caused by economic downturn.
At Henkel of America Inc., for instance, HR shared services was essential before the
recession, and it is even more so now, says Thomas DuFore, senior vice president
of HR. The Rocky Hill, Conn.-based company that includes Dial Corp. is the North
American operation of Henkel AG & Co. KGaA, in Düsseldorf, Germany, which
makes products for home care and personal grooming in addition to consumer and
industrial adhesives and sealants.
"Shared services provides the platform for a uniform response to restructuring
efforts, and it performs the administrative functions," DuFore says. "This
allows the HR generalists and the management teams to focus on the relationships
with the workforce and to ensure our actions reflect our corporate values."
When BusinessWeek Research Services (BWRS) first studied HR shared services
about two years ago, it concluded that this model gives companies a competitive
advantage by cutting administrative costs, reducing transaction errors and creating
greater employee satisfaction with basic HR processes while freeing HR staff to
concentrate on strategic human capital management (HCM) activities (see Figure 1,
"The Traits of HR Shared Services"). In the current economic milieu, the payoff from
shared services only continues to grow.
"One of the big impacts of people being laid off is to make sure you are taking care
of the people left behind, dealing with any survivor mentality," says Stephen Joyce,
HR practice leader at Atlanta-based strategic advisory firm The Hackett Group.
"You want to know who your top talent is so you can reach out to assure them,"
he says. Through the shared services and business partner model, adds Joyce,
"you can allow the business partners to take care of the organization and think
about the organizational issues."
The Traits of HR Shared Services
HR shared services varies based on company specific
circumstances. However, certain
common elements are usually present:
- Companywide consistent policies and
processes from which standardized,
automated transaction processing can be
- A central knowledgebase
- Some use—often extensive—of employee and
manager self-service applications from a Web
- Most often, but not always, a single HCM
- A call center, internal or outsourced, for
fielding queries and handling other tasks by
phone, e-mail and chat
- The use of outsourcing where it makes sense
Cornerstone for Strategic HR
For decades, the administration of compensation, benefits and other personnel
matters consumed HR and essentially defined its role. Now, thanks to various
IT tools including networks, HCM software and the Web, HR processes can be
standardized, centralized and automated through a shared services model. This
model protects HR professionals from the onerous administrative tasks that can
divert them from HCM issues associated with surviving a recession, such as:
- Intelligent employee downsizing strategies
- Talent management strategies to motivate smaller workforces
- Learning strategies to build the competencies of remaining staff members
Based on in-depth interviews with HR executives nearly two years ago, BWRS
concluded the shared services model is most effective when it is part of a broad
HCM strategy. It does not by itself accomplish strategic HR, but it is the cornerstone
of a foundation on which strategic HR can be built. Specifically, the HR executives
saw shared services as one of three building blocks for transforming their function;
the other two were centers of expertise and business partnering. "A lot of people
talk about shared services only as an administrative center, but if you don't consider
all three building blocks you're missing the point," one executive told BWRS during
"Especially in difficult times, organizations need to be conscious of their
spending on HR administration."
- Eric Lesser
IBM Global Business Services
Savings Mostly from HR Staff Reduction
Cost efficiencies are the driving force behind the business cases for HR shared
services. According to research conducted in 2008 by The Hackett Group, more than
60 percent of shared services operations saved 20 percent or more in costs, with
one-third reporting savings of greater than 40 percent.
"Especially in difficult times, organizations need to be conscious of their spending
on HR administration," says Eric Lesser, an associate partner at business
consultancy IBM Global Business Services who has been involved in several HR
shared services implementations. "Shared services allows them to develop
economies of scale and reduce costs associated with transaction processing and
employee services, two areas that are often plagued by multiple processes and
Viewed another way, "world-class" HR organizations—which Hackett defines as the
top quartile, in both efficiency and effectiveness, of 125 companies benchmarked—
spent 8 percent less on HR per employee on average
than other companies in the study. (World-class HR
organizations rely on shared services 65 percent more
often than typical companies, according to Hackett.)
The gap between the two groups has actually shrunk
since 2006, when the world-class group spent 13
percent less (see Figure 2, "HR Spending Still Lower at
World-Class Companies"). However, this difference is
mainly attributable to increased spending by world-class
companies on internal talent management. In 2009,
Hackett expects the gap to widen once again.
The cost savings derived from shared services mostly
come from reduced HR staffing. In 2008, Hackett found
that world-class HR organizations had 20 percent fewer
full-time HR staff per 1,000 employees than others in the
benchmark study. This gap has widened since 2006, when
it was 15 percent (see Figure 3, "HR Staffing Reduced at
"HR staffing at typical companies increased by nearly 3
percent from 2006 to 2008, while world-class companies
saw staffing decrease by just over 3 percent," The Hackett
Group's Joyce says. World-class companies have done a
much better job than others of reducing labor in transactional areas, largely through
better technology leverage. Outsourcing also plays a role, as does the reduction of
complexity through fewer benefits plans, systems and suppliers, he says.
Focus on the Remaining Workers
As important as the savings are, the bigger challenge HR faces during an economic
downturn is to develop strategies for nurturing, reassuring, motivating, developing
and reallocating the talent that remains. These more strategic goals need to be
accomplished at a time when HR organizations themselves are being downsized.
Clearly, remaining HR personnel need to be freed from administrative tasks to best
respond to these more high-touch areas.
"Shared services centers help to free up more strategic HR personnel to focus on key
issues around workforce redeployment, training, leadership development, employee
morale, etc., that are strategically important, especially in difficult times," IBM Global
Business Services' Lesser says.
Without a central point for employee queries, for instance, HR personnel would
spend most of their time answering the same types of employee questions and never
have time for more strategic work. "In today's economy, organizations must be prepared
to address strategic workforce issues or risk having a decimated workforce
when the [economy] returns," Lesser says.
Because a shared services platform collects companywide consistent data in a central
locale, the model can provide the information sources needed to help decide and design
various talent strategies. "Too often, HR professionals spend more time collecting
data than analyzing it. Shared services can make it easier to
access data in one place," Lesser says. "Shared services can also provide
workforce analytics support to HR executives and line managers in situations
where [there are] limited analytic resources across the organization."
"Without shared services our ability to deliver timely, cost-efficient services
during this recession would be compromised."
- Thomas DuFore
Henkel of America Inc.
The Experience at Henkel
Henkel of America has used HR shared services for several
years for more than 8,000 workers. Among the services
covered are payroll, data management, compensation,
staffing, relocation and training, and the model makes
extensive use of employee and manager self-service. The
company outsources the HR call center function, which
is located in Louisville, Ky. Other functions are operated
virtually by shared services employees in several locations
on a common HCM software platform—the same platform
used globally by the entire company. Because Henkel considers
the platform and data management mission critical,
it retains both in-house.
According to DuFore, the shared services model was essential
for the downsizing efforts Henkel faced because it
provides the platform and data for processing the information in a consistent way.
"Without shared services our ability to deliver timely, costefficient
services during this recession would be compromised," he says. "Shared services
has provided leadership in developing standard and consistently applied
approaches and has been responsible for many of the administrative details."
Henkel of America has been in a mode of continuous workforce reduction for about three
years; the recession has only accelerated it. The company has continued to downsize and
eliminate open HR positions, yet it has also kept employee satisfaction high.
As a result of the successes enjoyed by the North American operation, Henkel's parent
company is studying the shared services approach as a model for more than
55,000 employees worldwide. "We are using this downturn as an opportunity to
take a further look at how we can enhance the HR services we offer our business
partners and to sharpen our processes," DuFore says. "We are also exploring
further offshoring to our administrative service center in Manila."
"Those that have invested in HR shared services, even if they are at different
points in the journey, are much better off than those that haven't."
- Stephen Joyce
The Hackett Group
In the time since BWRS first studied HR shared services the model has only become
more effective at cutting costs and freeing HR professionals to concentrate on strategic
HCM goals. During the current economic downturn this two-pronged benefit has
become even more compelling.
In fact, many of the HR organizations that had only partially completed their shared
services rollout when the economy began its decline have accelerated their efforts,
knowing the cost savings and process efficiencies that would result.
"If they have a shared services organization in place and they have not completed
the transition, this gives them the opportunity to accelerate during the downturn.
We've seen some employers who have decided to accelerate their efforts," The
Hackett Group's Joyce says. "Those that have invested in HR shared services,
even if they are at different points in the journey, are much better off than
those that haven't."