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Micah Fairchild How to Avoid the 4 Most Common Pitfalls of HR Shared-Services

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 By Micah Fairchild

4 Mistakes Organizations Need To Avoid With HR Shared Services

Depending on the size of your organization, chances are good that at some point you have considered (or will consider) embracing options like the HR outsourcing-esque technology of the HR Shared-Service model. According to recent Gartner analysis, this model is "especially common with large, complex organizations" thanks to the fact that it delivers well on organizations' needs to enhance delivery and decrease costs. But Shared-Services Organizations (SSOs) aren't just for the big companies anymore; and are instead increasingly expanding their reach into middle market organizations. While exact adoption figures are hard to come by, given the benefits touted in recent research it's certainly not difficult to see why more and more companies are taking on this model. For example,

  • CedarCrestone's annual HR survey highlights that up to 25% reduction in administrative headcount can be achieved through shared services;
  • Deloitte's 2011 Global Shared Services Survey discovered that, of organizations deploying shared-services, 85% see increased "level of control" as a benefit of the model; and
  • Gartner's HypeCycle report concludes that shared-service tools can lead to cost reductions of upwards of 30%.

Still, even with these benefits, the shared-service model is nothing to rush into. Unfortunately though, many organizations do just that without having done their due diligence in discovering the shared service pitfalls (and how to avoid them). This article highlights the top 4 shared-services mistakes that companies make, and provides a guide to help you steer clear of them.

HR Shared-Service Mistake # 1: Treating HR Data Exactly Like IT Data

The nature of employee data, especially when it comes to HR compliance and performance reporting, is such that the highest levels of sensitivity are needed. While some vendors might point to IT ticketing functionality as the solution, the reality is that specialized features (specific to Human Resources) are ultimately needed. For example, Employee Relations issues are not the same as IT help desk troubleshooting. Compensation questions are not the same as software installation questions. Indeed, the very nature of HR work means that sensitive information will be transmitted, and as such, a shared-services solution that can handle HR's loaded data is needed.

HR Shared-Service Mistake # 2: Underestimating the Need for Change Management

All organizational changes, regardless of whether driven by software technology or not, will require at least a modicum of change management. However, on the spectrum of change management effort needed for a given project, shared-services tops the charts due to its close connection to accountability, responsibility, and the mixing of roles. Line managers can feel as though they are "doing HR's job" in a shared-service arrangement. Likewise, Human Resource staff can feel lost when it comes to delivering in the new "strategic roles" that the shared-service model brings. As such, a vigilant effort must be made to communicate the changes; provide trainings where necessary; empower all stakeholders involved; and seek feedback throughout the process.

HR Shared Service Mistake # 3: Solely Selecting Shared-Services for Cost Savings

While cost savings are undoubtedly one of the more salient reasons for moving to a shared-services model, falling prey to financial near-sightedness is a danger that companies should avoid at all costs—especially when it comes to Human Resources. Aside from the fact that creating a growth platform, realizing better data visibility, and enhancing controls, are far more beneficial than cost savings alone; focusing too much on costs can lead to decisions that undermine organizational strategy.

HR Shared Service Mistake # 4: Failing to Understand the "Must-Have" Elements

One of the riskiest and unfortunately easiest mistakes to make in choosing an HR Shared-Services model is a failure to understand what functionality is most needed in order for the arrangement to be a success. These are the non-negotiable, "must-haves" for any HR Shared-services.

  • Capability for information access via multiple channels
    Information needs to be able to be accessed from any channel normally used by employees and managers alike. As such, phone, fax, email, text, and chat should be available for communication, and additional channels in the vein of self-service portals should be available for information dissemination (i.e. FAQs, policy updates, etc.).
  • Capability for detailed HR knowledgebase
    Aside from the legal requirements of policy and procedure accessibility, it's a best practice to ensure that rules and regulations be up-to-date and accessible for all shared-service workers through a central HR knowledgebase. While pre-configured content (for policies and compliance) is an option offered by most vendors, it's important to understand that because of the seriousness of rules and regulations, the utmost attention should be paid to this feature. Further, in all likelihood, this will be the most visited and queried aspect of the shared-services agreement given the involvement with HR policies and procedures.
  • Ability to manage paper documents
    Though advances have been made in both the acceptability and accessibility of signed documents, wet signatures and hard copies are still required for many compliance-driven processes. While this will likely not be a requirement (much less a "must-have") forever, until regulatory agencies catch up technologically, the ability to search, retrieve, archive and manage non-electronic documents is critical.
  • Ability to handle outbound processing
    Though the bulk of HR shared-service centers have a singular focus of processing inbound inquiries, one of the quickest ways to achieve ROI with HR shared services is to leverage outbound processing. This allows for proactive and reactive communication efforts, instead of simply waiting for employees to initiate contact. Think about using this function for wellness communications, regulation changes, etc.

Bottom Line for HR Shared Services Technology

The rewards of moving to the HR shared-service model are prominent enough that many organizations are jumping on board without fully analyzing the risks associated with such strategies—looking for short-term gains without weighing the risks. The above mentioned pitfalls are just some of the common mistakes to steer clear of given the organizational impact that shared-services can have. Just as Hackett Group's Stephen Joyce says, "Shared-services are not a tactical solution but [are rather] part of an overall services delivery model built on an HR strategy linked to a business strategy". As such, it is within your best interest to: know what your organization is after; choose HR Shared-services as a long-term strategy if it works for your company; and recognize that even though substantial and often complex problems are a reality for implementing shared services, the pay-off is almost always certain to be great as well. End

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Deloitte's 2011 Global Shared Services Survey discovered that, of organizations deploying shared-services, 85% see increased "level of control" as a benefit of the model."


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