By Mansour Baker, SHRM-CP Posted 01 February 2017 | Revised 20 February 2021
Introduction Shared Services are a means to recast overall business strategies to meet the competing demands of cost cutting and downsizing, while promoting shareholder value, quality and improvements in customer service levels.
The initial shared service centers models were focused upon transaction processing functions such as accounts payable, payroll and data entry. Later expanded to a broader concept of an organization wide shared services model aimed at the provision of improved internal and support service levels across the company.
HR shared services are focused on customer satisfaction, efficient service delivery and value creation. What are Shared Services?
A support organization focused on customer satisfaction, efficiency and continuous improvement.
“Commonized” support processes and systems to provide better service to business operations.
Re-designed business processes that emphasize value creation and measurement.
An organizational evolution through which some support processes may be identified as good candidates for outsourcing.
Research shows that reduced operational costs and improved customer service enables HR to become a strategic partner within the organization.
What are NOT Shared Services?
A move to “centralize” internal support processes under one roof, operated by a corporate department.
Re-engineering existing support processes without considering the context of the larger business processes that they support.
Simple cost reduction measures achieved through process consolidation and FTE elimination.
An internal push to have all non-core business processes performed by outside service providers.
Methodologies & Tools
Service Expectations: A shared services organization treats the company’s business units as customers. It is typically structured as a cost center with a yearly negotiated level of service to be provided.
Processing Emphasis: Typically, the shared services organization focuses on processing transactions as efficiently as possible while reducing costs and continually identifying how productivity can be further increased.
Reduction of Process Exceptions: Recognizes that significant productivity gains can be achieved by standardizing a process within the limits of customer requirements.
Process Focus: Shared services focus on company-wide processes and the importance of seamlessly integrating processes between shared services and the business units.
Sourcing Options: Seamless shared services provided with in-sourced, outsourced and co-sourced solutions.
Key Business Drivers
Cost savings and improved efficiency as processes are streamlined and redundancies are eliminated.
Improved service quality as employees has one HR contact within the center with standardized information.
Increased strategic HR role as HR Staff within the organization can focus on performing more strategic tasks.
Benefits of Shared Service:
Financial Returns: The highest measurable return on investment can be achieved in the below selected areas using the right mix of transformation methods.
1. HR Business Service Centers
Can achieve cost reductions due to economies of scale
Operations that are traditionally handled in multiple locations
2. Workflow-Driven Processes
Reduce duplicate and/or redundant manual entry of personnel information
Ensure that processes are initiated
3.Self-Managed Services
Allows information to be accessed by managers, HR and employees
Reduce dependency on the HR function for low value-added activities
Increases employee satisfaction and empowers employees
4.Integrated Transactional Data
Cost /cycle time reduction, productivity improvements such as EDI transactions (Electronic Data Interface)
5. Enhanced Analytical Capabilities
Increase the quality of data analysis by providing the ability to “drill down” and analyze all Human Resource data
Support planned increase of all staff with a position management function
6. Standardized Architecture Technology
Allows integration with other systems internal and external to the organization, reducing the cost of technology, and supporting data warehousing initiatives
7. Reduced Compliance Issues
Statutory reporting capabilities generally delivered with vendor software, reducing the need for custom application development
Exhibit 1: Benefits of Shared Services - Return on Investment
Non-Financial Returns:
1. Cost Saving
Increased standardization and comparability across the operating companies
Significantly increased financial controls
Achieved substantial reduction in inventory through improved supply chain planning
2. Improved Service Quality
Established Business Services Help Desk metrics which became a company standard
New HR infrastructure provided service improvements to employees and managers
Significant improvements in order desk productivity
3. Increase HR Strategic Role
Achieved faster global financial reporting with reduced consolidation effort
Prepared organization infrastructure for continued growth through acquisition
Primary Responsibilities for Implementing Shared Services Reducing transaction & service costs, as well as improved customer service levels.
Cost savings was cited by 45% of the respondents as the primary reason for shared services implementations.
Over half of the respondents cited reasons other than cost savings as their primary implementation driver
Operational flexibility and customer service are also important considerations, inferring that companies want to establish shared services to provide their core businesses the opportunity to focus more on value added activities
Source: IDC Shared Services Market Survey
Exhibit 2: Primary Reasons & Average Ranking
HR Shared Services Delivery Model
Outsourcing The strategic outsourcing of non-core competency functions and/or those that are more efficiently delivered by the third party allows the HR function to improve HR service delivery, while reallocating resources to more value-added activities.
Managers Managers assume key roles in the delivery of human resources (e.g. HR reporting, employee appraisal, learning and development, employee counseling). Manager Self Service enables managers to process basic HR transactions (e.g., award a bonus) and retrieve HR data without the need to involve HR Business Partners or the service center.
Employees Employees assume responsibility for their own personal data, career related issues, and proactively seek necessary information. Employee Self Service enables employees to process basic HR transactions (e.g., change address, enroll in benefits), retrieve personal HR data, and access general HR policy and practice information without the need to involve the service center.
Exhibit 3: HR Shared Services Delivery Model
Centralizing Value-Adding Processes
An HR Shared Service Center can be summarized as a centralized group of HR Staff that focuses on delivering a range of HR services.
The scope of services that these centers perform can incorporate practically all HR plans, programs, and policies dependent upon management’s strategy.
There are two main types of shared service center that are characterized by the populations that they serve, HR Service Centers and Centers of Excellence.
HR Service Centers The primary focus of these shared service centers is the support of the employee needs. These centers usually support the benefits and payroll functions.
Centers of Excellence These shared service centers are usually rolled out after HR Service Centers. They focus on servicing managerial staff. The Center of Excellence might support services such as recruiting, training and compensation.