Executive sponsorship is imperative to ensuring organizational alignment and buy-in to address the significant change brought about by shared services and outsourcing initiatives
Organizations around the world are evolving their Human Resources (HR) service delivery models to address key challenges around capability development, capacity building, compliance and employee engagement. According to KPMG and HfS Research’s October 2013 Global Business Services Market Study, 48 per cent of HR functions are performed from shared services centers (SSCs) and 18 per cent are outsourced. The study also highlighted following characteristics of HR shared services and outsourcing:
- Transaction intensive process such as payroll, benefits administration and employee services have attained high level of maturity
- HR support process such as recruitment administration, compensation services and contact center have also reasonably matured
- HR functions such as mobility planning, compensation & benefits planning and executive recruitments are still retained within business
- “Transition and Transform” is emerging as a dominant model rather than “lift and shift”
- Use of metrics to monitor performance varies across situations
A variety of service delivery models are prevalent in the market today, indicating the absence of any one-size-fits-all approaches. The table below shows comparative features of these models, based on the ownership of services.
Shared services models also differ based on geographic coverage and the nature of services provided/ talent deployed. Some examples include:
Regional SSCs: A leading F&B FMCG company has regional SSCs, which act as international units that manage HR services in a standardized and cost-effective way
- a centre in Ukraine for Central and Eastern Europe
- a center in Brazil for Latin America
- a centre in Philippines for Asia Pacific region
- a center in Ghana for African countries
A leading universal bank has a mature HR SSC in India catering to many global group companies. Processes handled include recruitment and onboarding. International mobility / expatriation administration, payroll, benefits, HR administrative services, L&D administration, MIS & analytics (headcount reports, attrition, recruitment statistics etc.), HR documentation & knowledge management, exit management and tax services for expat employees.
Centers of Excellence
Besides setting up shared services and outsourcing certain HR operations, some companies have also established Centers of Excellence (CoEs) where people with deep functional expertise are recruited to deliver specialized services.
A leading petrochemicals company has a chain of six centers, which offer centralized Finance, HR, IT and other business services to group companies globally. Central HR is a CoE for the entire group acting as an enabler of high value-adding HR management and works closely with HR within various businesses to create a seamless global function. It designs and implements the policies, processes and practices that involve developing people strategies, building a culture that blends the best of their past with new influences for the future and ensuring HR efficiently and effectively delivers on its key processes and activities.
In our experience, the following factors/ enablers are critical to ensure success when considering and/or deploying HR shared services and outsourcing models:
Senior management commitment: Executive sponsorship is imperative to ensuring organizational alignment and buy-in to address the significant change brought about by shared services and outsourcing initiatives.
Communication: Early and elaborate communications planning, accurate and consistent information sharing compliant with the program objectives and continuous engagement are key to take everyone along.
Retained organization: Staff retention programs to avoid knowledge loss, adequate empowerment of project teams and investment in resources for transition management and ongoing governance are critical.
Business orientation: A distinct customer-focused culture, profit-centre orientation and rigorous approach to measure and report performance versus targets, help ensure customer satisfaction.
Technology: Leveraging technology for both delivering and accessing HR services helps realize the full potential of standardization and consolidation while providing greater control. The associated implementation costs and challenges, however, need to be understood and managed.
Risk Management: Implementation of alternate delivery models represents a major organizational change with attendant risks (operational, financial, strategic) that need to be assessed and mitigated.
The existing HR service delivery models will continue to evolve to meet the objectives of improved services and quality in an environment with increasing cost and budget pressures. Increased adoption of employee self-service models and use of HR analytics as a tool for driving greater competitive advantage and differentiation are just some examples of this phenomenon. To benefit from these emerging trends, companies will need to have them continuously on their radar, periodically evaluate re-alignments to current operating models, and drive any requisite changes with appropriate focus on change and risk management.