Introduction

Shared services is a growing phenomenon for support functions, eg. finance, IT etc., but it is particularly prevalent in HR.

Many leading UK companies have adopted a shared services model in HR, eg. Royal Bank Of Scotland, IBM, BOC, Standard Chartered Bank, BP Amoco, LloydsTSB etc.

The shared services model

Shared services means different things to different companies. Almost every company will implement it's own variation of the concept. Consequently, a common definition is hard to find. However, two themes recur through most company's HR shared service provision. These are;

1. Service is offered from a common point.
2. Customers specify the level and nature of the service or, as David Ulrich puts it, 'user is the chooser'. (This theme effectively distinguishes shared services from more traditional models of centralisation).

Consequently, routine, administrative or 'transactional' tasks such as payroll, core training, administration, volume recruitment etc., are provided from the shared services centre. This centre may also offer advice to line managers on day to day people management issues, eg. employment law and good management practice.

In some, more advanced, models, experts may be available to advise or support on specialist areas such as assessment and diversity, whilst others models may also offer consultancy, or project management, support.

What is clear is that, operationally, there are many variations on the shared services model.

Companies who embark on the shared services model also tend to have two other groups of HR professional;

1. A small, usually centrally based, group focusing on high level strategy, policy and governance.
   
2. A larger group of HR professionals who 'face into' the business. Freed of day to day administration, these professionals use 'best practice' HR techniques and methods to support business managers on issues such as organisation change and improving business performance. These professionals are variously described as business partners, relationship or account managers.
   

The business case

Research has identified three possible sets of rationale for introducing shared services in HR. They are;

1. Reducing cost: By pooling 'administrative' activity, economies of scale can be achieved. In reality, cost is saved through headcount reductions, reducing premises costs, centralising purchasing arrangements etc.
   
2. Service levels: Bringing activity under a single management structure enables a more consistent service to be delivered. In some instances, this may also mean a higher standard of service or even, (in more sophisticated models), clearly differentiated levels of service.
   
3. Organisation change: The final rationale identified involved a general desire to 'professionalise' HR, ie. enabling HR to be more responsive, spread best practice and, freed of day to day administration, enabling it to become more strategic.
   
   

Finally, whilst technology, eg. intranets, was seldom cited as a rationale for change, it was seen as a major enabler.

This movement has led to the possibility of HR becoming a profit centre, with business managers/units actually buying the service. Going further, in some organisations, this has paved the way for full scale outsourcing of the shared service to third party providers.

Typical difficulties

Although the model has undoubted advantages, it is not without it's problems;

1. Line Managers: Whilst directors 'sign off' the business case for shared services, operationally many line managers fail to be convinced. Selling the financial benefits, or stating that HR will become more strategic and 'add more value', does not overcome the fact that the face to face, local support line managers enjoyed from HR has been removed. Compounding matters, some HR executives have spoken of 'getting rid' of transactional activities. But many line managers either don't understand what value HR could add, or simply do not want anything else other than transactional support.
   
2. HR Staff: HR professionals are often even more resistant than line managers. Some may see themselves becoming de-skilled and 'put in a call centre', doing mundane jobs with little opportunities for career progression. Similarly, business partners experience the tension that develops as a result of the expectation that they should 'add value', but not really understanding what this means or how to do it. Often, they are caught between senior HR executives who expect added value and line manager clients who want a simple, administrative service delivered locally.
   
3. Remoteness: Transferring into the shared service, transactional part of HR reminds many HR professionals why they joined HR - to provide a personalised, face to face service. The new environment fails to provide this motivation. Similarly, despite best efforts, the geographical remoteness creates difficulties of keeping abreast of on-going issues, e.g. disciplinary problems. Knowledge transfer and management becomes a real issue both within the shared service operation itself, and between the operation and business partners.
   
4. Technology: Shared service operations require proper investment in technology and IT. Without this, the entire operation is at risk. Perversely, if the investment is made, it often compounds the depersonalised nature of the service.
   
5. Overselling: Not unusual in corporate life, but many organisations could be accused of overselling the benefits of the change. This is compounded by selling the wrong benefits to the wrong group, eg. cost savings to line managers when their real concerns are about quality of service.
   
6. Configuration: In the new, demarcated structure, certain HR issues inevitably fall 'between the cracks'. Care is required to ensure that there is absolute clarity of responsibility between the shared service and business partners.
   
   

From these difficulties it is apparent that, in the pursuit of cost saving and standardisation, it is too easy to forget that employees and line managers are customers. Focus is given to the 'service centre', whilst business partners, who have a major role to play in making the overall transition to a shared services model a success, are left with little direction or support.

This synopsis has drawn on the following source material;

1. IES Report 368, HR Shared Services and the Realignment of HR
   (Copies can be obtained from Grantham Book Services on 01476 541080)
   
   
2. Numerous articles published in People Management, including;
   
   'Called in to question'
   Peter Reilly & Jane Pickard (6/7/00)
   
   'The package to India'
   Anat Arkin (24/1/02)
   
   'Central preservation'
   Alf Turner (2/3/00)
   
   'A sellout strategy'
   Jane Pickard (23/11/00)
   
   

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