Improving Efficiency by Leveraging HR Shared Services: Challenges and Success Factors

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1 Improving Efficiency by Leveraging HR Shared Services: Challenges and Success Factors For the past decade, HR functions have improved the efficiency and effectiveness with which they deliver HR services to diverse employee populations. Now, more and more employers are introducing HR shared services organizations. Though making the change has its challenges, shared services is becoming a common goal, particularly among large organizations. In this roundtable discussion, Towers Watson experts discuss the influences of evolving technologies on HR shared services, the challenges posed by workforce demographics and more. DiClaudio: We ve seen a substantial increase in Q the number of organizations using a common HR delivery model one that has a shared services center at its core, handles administration and HR transactions, and is connected to business partners and HR centers of expertise. Among respondents to the recent Towers Watson HR Service Delivery and Technology Survey, approximately 75% said it s their desired operating model. When an organization uses that model, what are the one or two most important things it must get right? Phillips: First, it is really an exciting time to be in A the HR shared services arena. To your point, we are seeing many companies with existing shared services centers expanding their scope of services, and others are starting to implement shared services for their organizations. It is really great to see that this model is no longer just about cost reduction. In the past, HR has said, We have got to reduce costs, so let s create a shared services organization. Today, there is much more focus on efficiency, the quality of services, the enduser experience and alignment with the business strategy. David Barndollar, Senior Consultant, HR Service Delivery Mike DiClaudio, Global Leader, HR Service Delivery (moderator) When organizations start on the shared services journey, the first thing they need to get right is the value proposition. It is really important for HR and business leaders to be clear on what they expect to achieve by implementing the model. Certainly, cost savings is often a key consideration, but it is likely there are other very important goals. Those goals and the strategy for achieving them should be clearly articulated. It is then crucial to take a hard look at the technology requirements. We are seeing a strong push toward shared services portals and mobile applications. Getting the technology components of the overall shared services implementation plan articulated and approved requires a strong business case for change. Kelly Phillips, Senior Consultant, HR Service Delivery We are seeing a strong push toward shared services portals and mobile applications.

2 Finally, it is important to have a clear goal for the level of employee and manager self-service the organization expects to achieve. In the shared services implementations with which I ve been involved recently, our clients have aimed to have 60% to 80% of all employee/hr transactions be self-service, online transactions. This is fairly significant in terms of the change management required, and it has major implications for HR shared services staffing. DiClaudio: David, you re working with a client Q that s implementing Workday, which is a leading cloud-based HR management system with robust self-service capability and usability. The organization is also looking to create a shared services environment. How does the technology platform affect the scope of shared services? A Barndollar: As organizations get more and more into self-service, the roles are changing. In tier zero, there are self-service activities, and tier one is the first level of HR service to employees. Tier-one staff responsibilities are becoming less about transaction processing and more about enabling, including providing advice and guidance, coaching, and ensuring employees and managers have the information and tools they need to do the job on their own. There s more focus on continuous improvement within the shared services environment now. As a result, there s been a shift away from the traditional role of transaction processing. It s now more important than ever to understand metrics and analytics, as well as where the opportunities really are, particularly when the shared services center is trying to achieve those really high tier-zero goals. It s also important to understand what s being driven to tier one and how to shift that volume to tier zero over time. Are the tools and reference materials easy to use? Are they easy to find, so that people can quickly get the information they need when they need it when they have to actually process something? That s one reason a really good portal is critical to success. Organizations that have achieved high rates of selfservice are using great tools. They have a portal or a place for employees to go to seek out information. Employees and managers won t remember the how to training they received, but they ll likely remember that when they need to do something, they can just go to the portal and easily find what they need. The portal is simple to use and intuitive enough for them to get the information they need to complete the task at hand. That s one of the biggest factors separating the organizations that are successful in achieving high percentages of self-service from those that aren t. Good process design is critical. You can t self-service-enable a broken process, so we re seeing resources being directed toward improving process design. DiClaudio: Aside from technology, in what areas Q are organizations applying resources to optimize shared services? Are they making changes in processes or improving training to ensure they re getting the most out of their self-service spend? Barndollar: Good process design is critical. You A can t self-service-enable a broken process, so we re seeing resources being directed toward improving process design. Even processes that were optimized a few years ago can probably benefit from a fresh look, as something has probably changed. DiClaudio: Have employees readily adjusted to Q picking up the phone or sending an to a central repository, rather than walking down the hallway to HR? As workforce demographics shift, is acceptance of self-service increasing? Phillips: It is definitely evolving. Millennials are A the employees who will drive us in that direction. They have grown up with technology, and they are accustomed to accessing information easily from anywhere, via any of their devices, on demand. They do not use their phones to make calls. They use them to find the information they need. Although Millennials are at the forefront of this change, the entire workforce is moving in that direction. It is a huge shift. And it will be difficult for some employers to view their employees as consumers of HR services and to provide a consumer-grade experience. Think about Amazon, where you execute your transaction online. There may be an option to chat virtually with a customer representative, but typically the transaction is done without any personal contact. Can you imagine standard HR transactions working in that manner? It is a big shift and will take time to gain acceptance. Improving Efficiency by Leveraging HR Shared Services: Challenges and Success Factors 2

3 Traditionally, shared services organizations have been staffed with employees who have HR backgrounds. Now we are starting to see organizations hire people with great customer service skills and then train them on the HR aspects of the role. As David mentioned, tier-one roles will be changing as call volumes decrease. Therefore, the shared services teams will need to expand their skill sets to handle more complex cases, even moving into more of a generalist type of role. There is also the prospect of having a virtual workforce on the shared services team. How will we create the necessary team dynamic and provide a high level of customer service when team members are scattered across the globe? So the acceptance of self-service is still evolving. There is a lot of work to be done in this area. DiClaudio: We re seeing this tidal shift, and HR Q is in the middle of it. Maybe we re in the early phases of this shift away from HR shared services being purely transactional and administrative, and toward it being more consultative. And the shift is being driven by employees desire for a consumergrade experience. What are other elements of this evolution? A Barndollar: Different organizations are in different places. In general, call centers are changing as more workers want to contact a service center online rather than pick up the phone. For example, at Towers Watson, 95% or more of contacts made with our tier-one group are via self-service, using the case tool. It s an interesting trend. For HR, it s much easier to respond to case inquiries that come in online than to answer phone calls, as you can t ever be sure how many calls will arrive at the same time. Employees don t seem to mind if the case they submitted online sits in a queue for an hour waiting for someone to open it and respond. But if they have to wait in the phone queue for five minutes to speak with an agent, it s a completely different experience. Online tools enable shared services organizations to have somewhat leaner staffs and still address customer inquiries in a timely manner. Phillips: There is another interesting development regarding this shift to the consumer-grade experience. Traditionally, shared services organizations have been staffed with employees who have HR backgrounds. Now we are starting to see organizations hire people with great customer service skills and then train them on the HR aspects of the role. Behavioral skills traditionally associated with customer service are becoming more important than technical skills. Also, other roles and initiatives are becoming more prominent. David touched on this earlier. For example, customer relationship manager that is now an important role within shared services organizations. Continuous improvement and sixsigma programs were nice to have in the past, but they are quickly becoming must haves because they can boost the efficiency of the shared services organization. Finally, portfolio managers with strong project management backgrounds are being hired to oversee the HR shared services portfolio. As shared services organizations are being asked to take on more and more of the activities traditionally conducted by other parts of the HR organization, the portfolio manager has the ability to manage those transitions efficiently and effectively. DiClaudio: To be effective in light of these Q changes, what will the other parts of the HR function need to do? Phillips: Step one is to ensure that everyone in A HR is on board and embraces the overall strategy and model. For the HR centers of excellence, it is really all about strategy and policy design. They need to have strong partnerships with shared services and be real advocates for the model, because the policies and procedures they are designing are those typically executed by the shared services organization. The HR business partner role is continuing to evolve. As that role becomes more and more strategic, the business partners skill-set requirements will need to change. In the past, they likely handled some transactional activities. But HR business partners will need to step away from transactional activities and trust that the shared services organization will handle those responsibilities for them so that they can drive the business forward. Improving Efficiency by Leveraging HR Shared Services: Challenges and Success Factors 3

4 DiClaudio: So HR will need to build that shared Q sense of accountability and bring clarity to who s responsible for what, and then build trust. It s very easy to overlook the importance of being able to trust colleagues to do the work. Is finding a way to engender trust crucial for a successful transition to shared services? Barndollar: Yes, it is. I d like to make another A point here. I ve worked on many shared services projects, including some in which the rest of HR was involved only at arm s length, if at all. On other projects, all parts of HR were fully engaged. And I think the biggest single success criterion for any shared services initiative is having all parts of HR involved and onboard. The least successful projects have been those done in a vacuum. Think about the Ulrich model a triangle of shared services, business partners and centers of excellence. You can t change the shared services side without affecting one or both of the other two sides. So it s important to have crystal-clear definitions of the scope of services and the roles for each of the sides. For example, everyone needs to know how inquiries that come to a business partner will be redirected to shared services, and how shared services will engage the business partners and centers of excellence as needed. DiClaudio: Would it be fair to say governance is Q really about clearly articulating the interplay among those three sides: the business partners, the HR centers of excellence and the shared services organization? Phillips: Yes. And it is also about how A organizations get things done, both systematically and across the organization. So governance includes decision-making structures, processes and practices. It is really about those roles and accountabilities. The point about roles is an important one. One thing that can make it difficult to implement HR shared services projects is that HR employees often feel threatened. They do not understand what their role will be as the organization moves forward with the new model. Clearly articulating who is responsible for what, how things will be done and how activities will be measured that s what governance is, in a nutshell. Barndollar: In helping clients think about governance, I ve found it varies depending on the nature of the organization and the project. Projects can differ from one another dramatically when it comes to governance. It helps to begin with some basic questions: What are we trying to govern the shared services function or HR as a whole? Depending on who you re working with, you might get a variety of answers to that question. The other variations are dependent on the size and complexity of the organization, and the HR operation. For example, the governance needs of a domestic company with 10,000 employees based in the U.S. are very different from those of a 25,000-employee, complex, global organization with employees and various shared services operations all over the world. DiClaudio: Let s explore that some more. Q We ve seen domestic organizations with fewer than 5,000 employees shy away from using shared services. Approximately two-thirds of companies are in that category. Rather than having shared services centers, they re giving employees direct access to HR generalists. The tipping point seems to be organizations with somewhere between 5,000 and 10,000 employees across multiple geographies. That s the point at which companies begin to have more appetite for using shared services. And that s where a lot of the complexities around not only governance but also regulated processes come into play. What challenges do organizations face as they look to globalize their HR shared services capabilities? Barndollar: That s a good question. In my work A over the past two years, the single biggest trend I ve observed is that of organizations looking to extend the shared services model globally. There s a continuing need to improve efficiency and quality. Many of the companies I work with have the majority of their workforce based in the U.S. They want to know how they can take the success they ve had with shared services in North America and extend that globally. Language differences and regulations are among several of the more obvious factors that make globalizing shared services challenging. Culture is another. But I think the biggest challenge might come from dramatic differences in scale as you go from one country to the next. It s one thing to set up a shared services center for a country where you have 10,000 employees. It s another to do it across, say, the entire Asia Pacific region, where you have 5,000 or 6,000 employees scattered across nine countries with different languages and regulations. Improving Efficiency by Leveraging HR Shared Services: Challenges and Success Factors 4

5 How do you approach that? What s the right balance between having consistent global processes and delivering everything through a central shared services center versus having an HR presence in a specific country? And how much of the shared services model can you effectively extend into remote locations? How will you service those much smaller populations? Phillips: The point about cultural differences is an important one. Often the idea of changing to shared services is met with significantly varied degrees of acceptance. There can be resistance to not only shared services, but also the concept of self-service. When we are designing a shared services organization, it is important to factor in the diverse cultures of the various employee populations. That diversity can pose challenges for getting acceptance of the strategy. For example, you might not be able to introduce some of the technological aspects of the project in particular countries or regions. Because of these challenges, we need to be really innovative and a little bit creative at times shared services isn t a one-size-fits-all concept. how things work within the company in their geography. Even with as much as we know about shared services and HR in general, there s just no way for us to bring that knowledge about the company s local culture to the table. So it s important to get local stakeholders engaged in the project but without letting every single country think it can have things exactly its way. You must balance considering the nuances of each location and complying with local legal requirements on the one hand, with achieving efficiencies through consistency on the other. DiClaudio: Thank you both for an excellent discussion. For our clients and others who want more information on this topic, Towers Watson does some great research annually with our HR Service Delivery and Technology Survey. You can learn more at /hrsdtsurvey. Barndollar: For companies trying to globalize shared services, it s extremely important to have active involvement from stakeholders in each country involved. By that I mean people who really understand About Towers Watson Towers Watson is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. With more than 14,000 associates around the world, we offer consulting, technology and solutions in the areas of benefits, talent management, rewards, and risk and capital management. Copyright 2014 Towers Watson. All rights reserved. TW-NA