Shared services is not a new concept to human resources professionals. While there is no hard data that indicates how many companies employee a HR shared service approach, we know it exists and is being used. We also know not all companies use a shared services approach.
Why or why not?
Before discussing the pros and cons of HR shared services, it’s important to define what it is and how it functions. Basically, a shared services approach to human resources is about centralizing services across different parts of the business. It:
- Cuts down on redundant employees
- Reduces cost
- Improves productivity
- Increases customer satisfaction
To further explain the definition, here is an example of an HR shared services approach.
Imagine a large company with some 200,000+ employees spread across 6 different subsidiaries. Instead of each subsidiary having an HR department of its own, under a shared services model the HR department serves as HR for every individual entity that falls under the overall business umbrella.
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Just a few years ago, this concept was a bit more abstract and difficult to master, but as technology has continued to evolve in sophistication it has gotten easier for companies to move toward a shared services model.
Pros of HR Shared Services
It consolidates HR tasks and software.
This directly impacts redundancy. When companies merge or consolidate different entities under one overall company umbrella, redundancy will exist. In a shared services approach, most companies will find places where changes should be made to reduce overlap. The same can be said about technology being used among these once-separate departments. This will create higher efficiency and will save costs.
An HRSS approach typically yields Higher Overall Efficiency.
A growing company, for instance, must have an HR team that goes with it. If not, most will see a drop in efficiency. Under a shared services strategy, tasks that warrant such an action can be transferred to people within the HR hierarchy that can take over such duties. One example would include payroll processing. This frees up other HR professionals on the team to focus much more attention on people and talent pool development.
Strategy becomes more of a focus for HR.
Speaking of strategy, an HR shared services approach allows for companies to focus on other areas including talent management, recruitment and retention. All these processes are of significant importance to the company’s growth strategy.
In addition, HR can focus on developing an intelligent talent pool and a better workforce to help build a better business and increase positive business outcomes.
Consistency becomes key.
Consistency positively impacts the overall business as it allows for processes to be undertaken in the same way each time. This is important especially when considering the importance of compliance.
See Related: Compliance Challenges
The employee experience is positively impacted.
Using an HRSS strategy usually leads to faster service. That means employee requests are filled more quickly and employee questions are answered correctly. This type of service means employees have positive interactions with HR. Fostering positive interactions between employees and HR supports a better employee experience across the organization.
Cons of HR Shared Services
One-size does not fit all.
Again, a shared services approach is all about consistency. In other words, processes are completed the same way for every part of the business. The reality is one process may be productive for several entities under a company umbrella, but not all. That means shared services can negatively impact one part of the business while helping another.
It can also hurt the overall business. For those entities not being served, they more often than not will find a workaround. Those usually turn out to be detrimental to the company as a whole.
The technology doesn’t always meet the centralization criteria.
Many organizations decide to use a shared services approach, but do so without realizing: not all technology functions in a way that supports centralization. If the technology and infrastructure isn’t up to par, it often gets bogged down and causes the system to be inefficient. It could also negatively impact company growth and development in that it slows much of this progress down.
Some HR responsibilities are shifted to non-administrative employees.
When companies begin to centralize human resources, often times some of the responsibilities get shifted to non-HR or non-administrative employees. That puts more work on these employees, employees who are ill-equipped to handle HR-related work. It also means these particular employees are splitting their normal responsibilities along with HR responsibilities. This can very easily negatively impact the business.
The cost savings don’t always materialize.
If the overriding objective is cost savings then the intended effort will likely not pan out. Take recruiting for instance. If a company decides to centralize its recruitment function by using a specific vendor, it may work for some parts of the company but not all. Where this becomes a problem is if one part of the company is hiring a specialized position. The preferred recruitment vendor may not have the best means to reach that specific niche. The result is an increased time-to-fill, lower quality candidates and a potential delay in work.
A shared services approach to human resources is not good for everyone. It’s not bad for everyone either. Applying this approach requires some real thought into what company leadership is trying to accomplish. If the plan is to centralize the services offered by HR in a company with similar subsidiaries and/or entities, an HR shared services approach would likely work. If the company deals with different niche or specialized workforces, an HR shared services approach may not work.
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In any case, company leadership and human resources have a responsibility to their employees and their companies to find the most strategic, efficient, and cost-effective way to function. A shared services strategy can be that strategy if careful consideration is given to the realities that exist for each and every business under a company’s umbrella.