Is your HR function equipped for shared services?

by 01 May 2007

In order to be successful, the HR function needs to establish itself as a service function, writes Larry Howard, CIO of Insurance Australia Group

More and more organisations today are adopting structures based upon a model that see “support” services (HR, finance and IT) being delivered through variations of a shared services concept. Whole industries have emerged around the management of IT services under such models, yet the HR function seems to be maturing slowly as a service function under similar models.

HR functions play a pivotal role in the translation of organisational values and beliefs into a suite of competencies and behaviours that should define the essence of an organisation. Driving consistency, in what ultimately becomes the prevailing culture, could seem somewhat at odds with a model that can readily allow business units to exercise discretion over what they buy from a shared services provider. Achieving the right balance is tricky, requiring mature discussion and debate.

Sounds easy, and it can be, if the relationship between the HR function and the business unit is strong, founded upon trust and with clear business outcomes as the shared objective. It also requires some different (perhaps new) skills to maintain strong links between corporate strategy and immediate business imperatives.

Mature, successful organisations are often characterised by a clear understanding of their values across their entire organisation, have well defined approaches to decision-making and a sense of history that helps guide interpretation and discretion that ensures appropriate autonomy while supporting consistent support for the “greater good”.

Younger or less mature organisations, and especially those that are growing quickly, are often tempted to leap to a devolution of autonomy as a way to drive ownership (and results) without a full understanding of the impact of discretionary decisions on the broader organisational objectives. While this may not seem (and it is not) unique to the HR function, the outputs from HR are often less tangible in the short-term and unsuspecting or uninformed managers could look for short-term results that are inconsistent with any over-arching strategy for its people.

The reality is that most operational businesses, or business units, have much higher levels of commercial awareness than the typical HR function. This often results in sub-optimal service definition, poor clarity and transparency of service costs and service outcomes that don’t match the business needs. Who’s at fault? There’s room for improvement on both sides of the partnership. Business managers can help by educating their HR colleagues and HR can help by investing in the development of skills outside their professional boundaries. Now I am sure there are plenty of business savvy HR professionals who already operate on an equal footing; I’m not convinced that they are as pervasive as is required.

So what? I’d suggest that if our daily dealings with the HR function are guided by services and processes that are patchy in specification and performance, then the credibility of the function to deliver on higher-order strategic outcomes will be compromised. (This is not dissimilar to the experience of IT functions – a good service centre or help desk operation builds confidence and can be a critical aspect leading to acceptance in business transformation or improvement initiatives.)

The question of value is one that is ever-present for service functions within an organisation and this has to be more than just low-cost. It’s also not good enough to just ask for what is wanted, there has to be value in that discussion as well. These are some questions that seem difficult to get answers to, in my experience: what can you bring to the table that will make my business better? How do your services differ from those I may be able to get elsewhere? What benchmarks do you have or use to assess your service performance? What scale benefits are you delivering and in what form? What is best practice and how close are you? These all need to be answered in the context of, and with relevance to, the customer’s business, not what the HR function wants to be. If you can address some of those questions, then the next step is to build a suite of services that can be clearly and concisely articulated, costed, agreed and delivered.

Clearly, this is just a quick scratch across the surface of some of the issues that confront HR and business managers as we move ever more quickly into a world of shared services and outsourcing. The good news is that there are people ready and willing to help – you are not alone.

Larry Howard is a member of Human Resources magazine’s editorial board