As employee engagement and retention take centerstage post the pandemic, Human Resources (HR) leaders have had to build lean and agile HR operating models by leveraging HR Shared Services (HRSS).
The 2021 Deloitte Global Shared Services and Outsourcing Survey Report shows that 57% of the 600 organizations surveyed utilize HRSS centres. Around 80% of the respondents leverage HRSS for payroll processing, and most continue to grow upstream to include more specialized HR functions.
Read on to understand HRSS models, their challenges, best practices, and benefits.:
What is an HR Shared Services Model?
HR Shared services refers to an operating model in which selected HR activities are centralized and shared among all business units.
Administrative HR activities say payroll or document management, are generally prioritized for delivery through HRSS. HRSS can be insourced, outsourced, or hybrid. Generally, HRSS leverages HR automation for streamlining the delivery of HR functions.
HR Shared Services Strategy
An HRSS strategy begins by setting a clear vision and engaging stakeholders. It can disrupt the current HR function and employee workflows in the short run. Hence, a clear business case and top management buy-in are essential before you build and implement an HRSS model for your enterprise.
How to Build Your Strategy?
- Document Current State: Calculate the AS-IS time and cost-to-serve for your HR function and set measurable improvement goals
- Define Target Operating Model: Based on the expanse of your organization, determine if your HRSS can work through a global, local, or hub model for service delivery
- Develop Service Catalogue: Determine which services are in scope for HRSS and if you can outsource, insource or adopt a hybrid model for these services
- Create Service Level Agreements (SLAs): Set SLAs and escalation mechanisms in agreement with various serviceable business units
- Deploy and Improve: Deploy the necessary teams and technology platforms to deliver the HRSS. Measure improvements against goals and improve incrementally
Challenges in HR Shared Services Model
Major challenges that can impact the growth and development of an organisation even with HRSS Models are-
1. Resistance to Change
You may experience resistance from the management and employees while transitioning to an HRSS model. Top management executives may be wary of the dehumanization and distancing of HR services which could decrease collaboration and engagement.
Employees may resist HRSS, especially outsourced HRSS, as they think it may lead to job cuts, change in responsibilities, or relocation. Their resistance may impede the process documentation and knowledge transition processes indispensable for creating a robust HR shared services centre.
2. Lack of a Complementing Automation Strategy
An HRSS model can realize the expected cost-savings and performance gains only if supported by a robust HR technology and people analytics infrastructure.
Using isolated HR apps without a comprehensive digital strategy or trying to implement robotic process automation (RPA) tools without accounting for inconsistent data formats or varying HR workflows are common reasons for HRSS failures.
Besides, Artificial Intelligence (AI) and Big Data tools must process large volumes of data before they benefit HRSS workflows. The required data is rarely available in a readily accessible format. HRSS teams often spend substantial time and effort finding, cleaning, and restructuring this input data.
3. Different Requirements across Business Units
A centralized HRSS centre may not deliver value to all business units as intended.
For example, a shared payroll process for a global business may struggle to efficiently deliver compliance with local tax and labor laws across all regions. In such cases, some business units may choose to develop alternate workaround solutions that could undermine the adoption of the HRSS model and give rise to a fragmented HR IT infrastructure.
HR Shared Services Examples
Example 1: Employee Query Support
Handling employees’ queries and resolving them within specified SLAs is one of the most common use cases for HRSS.
As per a case study by Boston Consulting Group, a global company with more than 60,000 employees used automated HRSS Helpdesk support to reduce costs by 65%. The company discovered that 80% of employee queries related to four categories. Accordingly, they digitized the HR handbook enabling an online knowledge base for their HRSS team.
Centralizing HR help desk support can help scale up the use of telephony and chat solutions and consolidate support team training efforts. Automated escalation mechanisms and stringent SLAs result in increased employee satisfaction.
Example 2: Employee Data and Document Administration
As per the 2020 Gartner HR Shared Services Head of Function Survey, Shared Service Centers (SSCs) handle 54% of operational HR activities like employee data and document administration. 14% of HR administration is managed by outsourcing partners, while HR teams still govern 32% of these activities.
HR leaders are looking to shift these responsibilities to shared services as they are most suited for the same. It helps HR professionals to focus on more strategic tasks like HR policy design and workforce planning.
HR Shared Services Best Practices
HRSS Models can increase productivity and employee engagement. However, flawed HRSS strategy and lackadaisical execution can disrupt or adversely affect your business. To ensure you can utilise the maximum from the HRSS model, you can trust the following best practices:
1. Continuously Expand the Scope
HRSS can go much beyond owning standardized day-to-day HR activities. You can also streamline and shift other essential HR functions like recruitment, learning, and development to HRSS.
For large organizations, it is also critical to design and develop HRSS to serve all business units across the globe without exception. Progressive companies take a long-term view and look beyond immediate savings in cost as a criterion for implementing HRSS across HR processes and business units.
2. Choose Automation over Outsourcing
Outsourcing HRSS can be efficient and cost-effective. However, robotic process automation (RPA) can help enterprises automate mechanical rule-based activities and achieve higher productivity without shifting the process controls to a third party.
As per Gartner’s research, more than 80% of shared services organizations have implemented robotic process automation technology.
HR Automation also enables your organization to generate centralized clean data suitable for HR analytics. Evolved organizations are also using HRSS for HR analytics requirements.
3. Set Clear Ownership with Service Tiers
There must be clear boundaries between the responsibilities of HR teams, HRSS centres, and outsourcing partners.
World-class organizations use a tiered service structure:
- Information-based: Employees use self-service portals and online knowledge bases for services in the first tier.
- Transaction-based: HRSS teams assist employees and process queries or transactions using available HR tech platforms in the second tier.
- Expertise-based: In the third service tier, HRSS centers forward the service issues that require expertise to HR teams for resolution.
- Strategic: As the service tiers transition to strategic services, they are handled entirely by dedicated HR teams and leaders.
Benefits of HR Shared Services
As per the 2022 HR Shared Services Trends Report by Lace Partners, UK, the top objectives of HR leaders over the next 12 months are the delivery of operational efficiencies (87%) and improving employee experience (84%) through HRSS. A low 18% said that cost-saving was one of their top expected benefits.
Other major benefits are:
1. Improved Employee Experience
Self-service portals and chatbots empower employees to be productive on their terms without wasting time on ad-hoc follow-ups for HR requests. HRSS models work with predefined SLAs that ensure greater transparency and help manage employee expectations about HR services.
Regional shared service centres are well-positioned to align their services with local needs, regulations, and language, resulting in a seamless experience for employees.
2. Increased focus on HR strategy
With a clear division of responsibilities, internal HR team members, gain the bandwidth to shift their focus to strategic business objectives like talent management, employee value proposition (EVP) design, and employer branding. HR business partners (HRBPs) can work with business unit leaders to understand their talent requirements better.
HR departments can dedicate time to innovate and rethink HR processes and policies by working on employee feedback. They can also leverage the business intelligence reports and analytical insights generated by HRSS teams to drive strategic decisions.
3. Enhanced HR Operational Efficiency
HRSS models ensure that HR processes are simplified and standardized, resulting in greater service efficiency. Clearly defined process ownership results in accountability and better governance.
Well-documented processes, shared knowledge, and up-to-date platforms ensure that HR processes comply with workforce regulations across different regions and reduce compliance risk.
4. Cost Savings
HRSS centres save on costs with outsourcing, automation, and process redesign. Outsourcing provides access to large pools of skilled resources across geographies, resulting in large-scale labour arbitrage.
As per a Shared Services report by PwC, 49% of organizations fully realize their cost-saving objectives by implementing shared service models, and 40% achieve them partially.
Automation reduces manual data entry and human process intervention saving on employee costs. HRSS centres can better negotiate with technology and outsourcing vendors by pooling the HR workload and consolidating the requirements.
5. HR IT Excellence
HRSS centres enable the acceleration of the HR IT agenda by consolidating and scaling the HR software applications for enterprise-wide adoption.
Some commonly used service technologies leveraged by HRSS teams include computer telephony integration (CTI), Interactive voice response (IVR) systems, self-service portals, and helpdesk ticketing solutions.
As HRSS cover more HR functions over time, they can leverage unified HR Management systems (HRMS) that set the tone for improved HR IT adoption, even for non-shared services.
6. A Potential Profit Center
If your shared service centre develops skillsets, capabilities, and infrastructure, it can cater to other businesses. It can turn into an independently-managed profit centre for your business.
Final Words
While the HRSS strategy rose to prominence as a cost-saving measure, it has become one of the cornerstones of an agile HR function. The growing scope of HR shared services, increased employee expectations, and the tumultuous HR landscape makes a compelling case for a holistic restructuring of the HR function.