Four Big Challenges of a HR Shared-Services Transformation (Part 3)
ransitioning to shared services can help HR organizations transform into more strategic functions that provide maximum value to the business. Part 1 of this post discussed the first of four key insights into this process (Think business), the importance of successfully building expectations and an appreciation for shared services with stakeholders throughout the business. Part 2 (Consider the entire HR service model) covered the need to consider the entire service model when implementing shared services.
Part 3 covers the third insight:
Today’s business environment is becoming increasingly global. In response, HR also needs to become global to meet new business demands. But what does “going global” mean for HR shared services? As usual, there is no one-size-fits-all answer, because specific solutions need to be aligned with the organizational structure and culture. As result, the shared services model looks different for multinationals with a high degree of decentralization; global organizations with highly centralized practices; international companies with moderately centralized operations; and transnationals that are some combination of these.
In line with the trend of organizations becoming more global and centralizing practices, our involvement in shared service center projects shows a distinct move away from decentralized HR shared services initiatives to regional centers and global hub & spoke models. Aberdeen also states that “…global models are on the horizon.” Key drivers include increased flexibility toward a global workforce and organizational growth; reduced complexity and greater consistency; achieved economies of scale; and higher return on investment for technology acquisition.
However, a global approach does not necessarily mean the implementation of global shared service centers but can stead involve the alignment of shared service center activities at different levels of the organization. Only a few companies have actually implemented global HR shared service centers. The complexity of operations in multiple countries and the challenge of meeting diverse requirements with respect to local cultures, regulations, and languages are key hindrances.
As a result, organizations are opting more and more for a hub &spoke model, consisting of service centers at different levels operating as one organization. This construct for global, regional and local satellite centers balances the global standardization objectives of driving efficiency and reducing the total cost of ownership with being responsive to local requirements. This certainly must be evaluated carefully if there is a business case and if yes, what services will be provided where. Whereas a globally standardized approach toward employee data management, training design and development; HR reporting and analytics; and HR IT maintenance and support may make sense, specific payroll and recruiting activities may stay at the local level.
For those who think about implementing a global hub &spoke model, there are some important considerations:
- The decision to develop global and regional instead of country-specific shared services depends on the size of the employee base and where employees are located.
- Those operating in smaller countries may opt to consolidate into regional locations accompanied by local satellite centers. These are represented by virtual workers with a deep knowledge of country-specific rules and regulations. Typically, their services are limited to those which cannot be managed by regional or global colleagues.
- In countries with a large number of employees, it may make more sense to set up country-specific service centers. Research bears this out, too. In fact, the Aberdeen Group recently concluded that, “…Adopting HR shared services is a valid, strategic option for delivering quality employee service for any organization with geographically-dispersed workers in multiple locations.”
Key success factors for the implementation of a global shared service model include the following:
- A hybrid service model that fits the organizational structure and takes into account local specifics, such as numbers of employees served, languages, cultural differences and legal requirements.
- A global governance structure representing key stakeholders, including business representatives at the different levels of the organization to gain continual buy-in.
- Established customer boards to stay connected with the business units served.
- A globally standardized process and policy framework with clear differentiation between what can be managed centrally and what needs to be localized.
- A global channel strategy and management to enable end users to quickly and easily connect with the right point of contact and access HR information.
- Multicultural awareness and sensitivity of the HR shared service model leadership team and staff.
- A centrally-governed HR knowledge base and knowledge forums to steer working together and learning from each other around the globe.
- Globally integrated and managed HR technology, from channel management to case management and HR management systems.
Globalization is a critical factor in HR today. Consequently, organizations need to carefully choose their own HR shared services model, taking into account their unique reality. The key challenge is balance: successfully undertaking global standardization efforts while meeting local demands and responsibilities.
Next: The fourth and final key insight for HR organizations contemplating or beginning the transition to HR shared services: Manage the HR shared services talent
 The typology of different organizational types has been defined by Christopher Bartlett and Sumantra Ghoshal.