Four big challenges of a HR Shared Services Transformation (part 1)
So what’s been happening in HR over the past two decades?
The HR function has undergone a transformation of its very service model. And in the course of this transformation, large organizations across all industry sectors have incorporated shared services into their operations; medium-size organizations are now following. Expectations have been high.
But overall, the expected benefits of this transition have not been fully realized. While predicted savings have been impressive, shifting HR away from administrative functions is something else entirely. In fact, the promise of refocusing HR to a customer-centric service organization remains largely unfulfilled.
Demand and expectation for transformation, however, remain high among many organizations, as industry experts talk about the next-generation HR service model. According to the HR Service Delivery and Technology Survey from Towers Watson, 44 percent of all organizations surveyed will change their HR structure in 2012 and 20131. Among the major restructuring themes: Improving operations and moving to shared services.
But uncertainty and ambiguity persist among some potential users. A recently published survey from BCG and WFPMA2 reveals that providing shared services is still an underdeveloped capability in HR—and one that is regarded as having low importance in creating the “people advantage.” The survey takeaway: Many companies, it seems, are either avoiding pursuing shared services or are dissatisfied with the results they deliver.
Interestingly, this mirrors our own experiences as we travel with client companies on their journey to transforming their HR service model and implementing HR shared services. We’ve seen first-hand that independent of factors such as branches, size and location, the key challenges organizations face are quite similar.
But our experiences with a varied client base also provide critical insights into how shared services can help HR organizations transform into more strategic functions that provide maximum value to the business. Here’s the first of four key insights:
A successful transformation into a shared service model depends on building expectations and an appreciation throughout the business. It’s easy to overlook or downplay the need to engage and get colleagues and management onboard with new ideas. Gartner even states that, “…a marketing approach to the creation, development and go-to-market initiative of an SSC [shared services center] is a strategic imperative for any SSC’s success.”3.
Still, at the same time HR has to acknowledge that its reputation is more heavily weighted toward meeting internal HR needs than on achieving or supporting business outcomes. And then there is the real concern that centralizing HR—moving activities away from local teams—could stir fear of losing control and create resistance within the business. Which makes early involvement of management and business leaders in the change process even more important. What’s more, it’s critical to be able to present them with a clear business case which articulates benefits and demands. And lastly—beyond implementation—representatives from the business must be brought into the governance process of HR shared services.
After securing the buy-in of business stakeholders, attention must turn to operating HR shared services as a business itself. This can be a tall order and, indeed, frequently requires a seismic shift in mindset. Challenges to accomplishing this run the gamut but include:
- Implementation of service management disciplines, such as performance measurements based on agreed-upon service levels;
- Account management that truly represents the customer voice; and
- Financial management according to the selected charging model.
Next: The second key insight for HR organizations contemplating or beginning the transition to HR shared services: Consider the entire HR service model
1Towers Watson: Emerging Choices, Enduring Changes – Creating Service Delivery Success in an Era of New Opportunity, 2012 HR Service Delivery and Technology Survey Executive Summary Report
2The Boston Consulting Group and WFPMA: Creating People Advantage 2012 – Mastering HR Challenges in a Two-Speed World, October 2012.
3Gartner: Shared-Service Center: A Marketing Approach to Drive Business Value by Cassio Dreyfuss, Published 11. February 2012.