As companies seek to enhance the delivery of their HR services and decrease their operational costs, more and more firms are adopting the HR shared-services model. Broadly defined as a model in which administrative HR services across different business units are consolidated into a single, service-delivering HR unit, the HR shared-services model promises a wide range of benefits, including reduced transaction costs, higher HR operational flexibility, enterprise-wide talent management, better support for organizational changes, and greater overall efficiency and effectiveness.
But, while many organizations that adopt HR shared services see clear performance improvements, just as many companies have difficulty realizing optimal gains, managing to achieve only marginal improvements and cost reductions. To fully realize the potential of shared services, it can be helpful to look at the following shared-services best practices:
Differentiating shared services
To maximize the potential of shared services, companies need to do more than implement a generic model with undifferentiated organization and staff tasked with handling any kind of HR service request. Instead, top-performing HR organizations make the following distinct units within HR responsible for delivering different services:
- Employee interaction center—Serves as a single point of contact for company employees and managers and is staffed by generalists with a broad HR knowledge base.
- Transaction back office—Encompasses services like payroll, benefits and pension administration, employee data management, and employee relocation.
- Center of expertise—Responsible for strategic planning activities like recruiting and workforce planning, training, and compensation or benefits planning.
This division of responsibilities allows for the highest possible specialization of resources, helps optimize service levels, and takes advantage of economies of scale.
Choosing the right location
Although the potential for cost savings is significant, most companies tend not to move shared services to offshore locations because of the complex logistics and potential risks involved. However, there are other alternatives worth considering which can still have a positive effect on the bottom-line. US-based companies, for example, can consider outsourcing from a high-cost location (the West or East Coast) to a lower-cost location (the South or the Midwest), in order to achieve cost benefits while reducing the risks inherent in moving vital business processes out of the country.
Standardizing shared-services process
For large, complex companies, implementing globally coordinated shared services with standardized delivery can offer significant value. Naturally, increased efficiency and economies of scale are among the primary benefits, but the advantages go far beyond those: with fully standardized and coordinated shared services, companies can pursue a holistic talent-management approach, with one unique set of talent and workforce data available on an enterprise-wide level. Global shared services can also facilitate complex mergers and acquisitions that may span multiple regions or countries in which a single company operates.
Establishing transparent governance processes
The success of shared services depends on effective governance. Top-performing organizations implement transparent operations in order to allow proper executive oversight and data visibility for tracking and measuring processes. With transparent governance, all company stakeholders, from finance to HR business partners, can use specified metrics to capture and communicate key data on areas including performance against targets, project status and progress, service levels, and future plans. The most important goal is to keep governance processes clear and simple, so that there are no additional administrative burdens.
Maximizing self-service adoption
If there is one shared-services best practice that every company should be sure to adopt, it’s the adoption of a self-service interface. As a typical company of 10,000 employees generates over 200,000 employee requests every year, it’s easy to see that handling as many requests as possible through a self-service portal—a website that enables users to perform high-value transactions and access key information and business processes—will result in great gains in efficiency. Cost reductions can be significant as well, because self-service transactions are approximately 80% less expensive than manual transactions. This means that a company able to address 60% of its requests with self-service functionality could cut transaction costs nearly in half.
Leveraging new technologies appropriately
Advanced technologies and systems are transforming HR processes, and it is essential that companies leverage these correctly to successfully adopt a shared-services model. Top-performing companies optimize their employee interaction centers by combining customer relationship management (CRM) technology with human capital management (HCM) technology, thus streamlining information and order management and enabling companies to process employee inquiries more efficiently.
Likewise, integrating HCM software and enterprise software solutions facilitates strategic planning and decision-making by providing a single set of essential employee and talent data. It can also help reduce compliance-related and other enterprise risks through automated process controls and up-to-date employee certification information.