HR Shared Services: Everything You Need to Know
An HR shared services model can help HR departments deliver their services to employees in a faster, more effective way. It presents an opportunity to separate the operational from the strategic so each part of the department can be most effective in providing a positive employee experience. Let’s have a closer look at HR shared services, its benefits and challenges, as well as HR shared services best practices.
What are HR shared services?
HR Shared Services is a centralized hub of HR administrative and operational duties that are characterized by employee self-service and automation through leveraging technology, and multi-tiered levels of service and service responses. This allows organizations to provide standard HR services in the most efficient way. The different tiers in an HR Shared Services provide common services such as:
- Employee data management
- Benefit and leave administration
- Relocation services (international and domestic)
- Recruiting operations
- Learning services
- Reporting and analytics
- and the HR service center.
HR shared services is a part of a multi-tiered HR service delivery model. It enables the other parts of the HR department to focus on strategic initiatives.
Benefits of HR shared services
Implementing HR shared services has multiple benefits for your organization, including:
- HR becomes more strategic. The division of responsibilities frees up the more experienced HR professionals to focus on strategy. This provides more opportunities to measure HR’s performance through Human Capital metrics that align its success to the organization achieving its strategic objectives. This is critical for HR to be a true business partner by contributing to the development of the business strategy. It ensures organizational business strategy has a strong focus on people management and a positive employee experience.
- Consistency and compliance. HR matters are always handled in the same, consistent way, which helps ensure that you’re compliant with rules and regulations. This leads to a better employee experience and to mitigation of risks within the organization.
- Operational excellence. By assigning clear responsibilities for administrative processes, organizations can reach operational excellence. This happens through streamlined processes and optimized workflows. On top of providing a better HR service, operational excellence also results in an improved employee experience and efficiency.
- Improved employee experience. Employees get their issues resolved and find relevant information quickly and conveniently. This has a positive impact on their digital, as well as their overall employee experience. Employees have grown to expect all systems to be engaging, to be easy to navigate, and to satisfy their needs and expectations. This includes systems they interact with at their jobs. If there is a gap between expectation and experience, this leads to employee frustration.
- Cost reduction. HR shared services can help organizations cut costs in several ways. For example, you need less experienced HR professionals to handle transactional HR services, which results in lower labor costs. What’s more, the efficiency achieved through streamlining and simplifying services also helps reduce costs.
Challenges of HR shared services
While HR shared services can help human resources achieve operational excellence and enable the department to become more strategic, putting it into action is not always straightforward. There are several challenges organizations face.
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- A lack of a digital roadmap for the majority of organizations. An increase in automation requires a clear digital agenda and roadmap for Human Resources to implement technology that will create efficiencies and drive a better employee experience. Example technologies include simple tools such as live chat, virtual agents such as ServiceNow, and live chat, but also more advanced applications such as Robotic Process Automation (RPA) and HR analytics and reporting tools. However, many organizations implement digital tools on an ad hoc basis, rather than with a coherent HR digital transformation plan in place.
- Creating urgency for investments in shared services and/ or HR technology. It is difficult to clarify the business impact of HR shared services. That’s why organizational leaders might not immediately understand its benefits and why they should prioritize it. With this in mind, you need to work on clearly defining the value shared services add to the business.
- One size doesn’t fit all. HR shared services unfortunately may not be the right solution for every business unit. There are instances where HR shared services will benefit and complement a business unit, yet for another unit, it may be a hindrance. It is, therefore, critical to conduct a cost-benefit analysis to determine the value it brings to which business units, the overall organization, and the cost. An example would be working together with a designated global upskilling partner that is very effective in building skills for the common areas of business but may lack upskilling capabilities in highly specialized areas of the business.
- Knowledge transition. When transitioning to an HR shared services model, it is necessary to ensure proper documentation of processes and activities from SMEs to new employees working in the HR shared services center. This is a project. There is the need to manage the time it would take to document and transfer the knowledge as well as apply the knowledge so the HR shared service achieves a satisfactory level of efficiency.
- Collaborating within the HR team and across the organization can suffer. There might be a disconnect between the different parts of the HR team, namely between the shared services and other, more strategic, or specialized parts of the team. That’s why managers have to put conscious effort into strengthening the team mentality. Likewise, having an HR shared service center does not negate the need to continually interact and engage with employees. Therefore, it is important to continually build relationships and engage with key stakeholders in the business unit. Good systems support successful businesses, but it is through strong relationships, systems become efficient to meet the needs of internal customers.
HR shared services maturity model
Adapted from Scott Madden’s Shared Services Maturity Curve, this model shows how HR shared services matures with time and how it advances from establishing the foundation through improved automation and analytics capabilities to continuous expansion and improvement.
HR shared services best practices
Based on the HR shared services maturity model, how can your HR department maintain and lead an innovative and value-adding HR shared service center?
Transform is the first part of HR shared services maturity. This is where most of the current organizations are at. Activities include:
- Determine which activities will fall under HR shared services. If it involves a high volume of transactional or administrative work, the activity may be HR shared service center eligible. In addition, you would also consider HR tasks that have a strong potential for standardization because they are repeatable and straightforward. As we’ve mentioned above, typical HR services activities include payroll, benefits administration, recruiting operations, as well as organizational and employee data management, and some activities in learning & development.
- Define roles and responsibilities. You need to determine who will be responsible for what within your HR shared services team. For example, which employees will be responsible for which employee services? This is especially important if you’re setting up HR shared services within an international company, which will centralize employee services across multiple locations.
- Choose the right technology to support you and your workforce. HR shared service tools should enable your organization to provide services effectively and efficiently. Some functionalities that you should look out for when choosing an HR technology vendor include:
- policy and knowledge management
- incident routing
- SLA monitoring
- employee self-service.
Furthermore, take into consideration that these tools usually manage sensitive employee data, for example, medical or contact information. That’s why you need to look for HR solutions that offer high levels of data security. Ideally, you’d implement a cloud-based, mobile-friendly solution right from the start. It should also integrate with your core HRIS.
Maximize its capabilities
At the next stage of maturity, HR Shared Services should be able to:
- Offer new or expanded services. The scope of services offered within the HR shared services organization is growing. This may include expanding services to other geographic locations. According to ScottMadden, “global business services (GBS) is a popular option for mature shared services organizations to gain additional benefits through global management and integration. GBS organizations typically include higher-value activities and, by nature, are delivered to a global customer base.” In this case, your customers are your employees, of course.
- Expand on automation capabilities. Since processes handled by HR shared services are repeatable and standardized, they have a high potential to be automated. Think about which processes need little to no human involvement and implement automation. Examples of HR automation are:
- Pre-employment assessments
- Automated email flows
- Automatically generating official PDF documents when onboarding new hires
- Removing access to applications when offboarding an employee
- Expense claims
- Maximize the use of reporting and analytics. HR has been gaining a reputation for using metrics to measure, report and monitor HR programs and initiatives. This is useful and will continue to be. However, in recent years, there has been a stronger emphasis on analytics which goes beyond measuring, monitoring, and reporting to predicting, prescribing, and diagnosing. That’s why utilizing different types of HR analytics is becoming increasingly important:
- Predictive analytics uses existing and historical HR data to predict future outcomes.
- Prescriptive analytics offers possible actions organizations can take in light of the data and trends that emerge from predictive analytics.
- Diagnostic analytics indicates the source of the problem, so it can be targeted directly and addressed accordingly.
- Integrate social media. The most progressive organizations know their social media presence is key to engaging with their customers and employees. The most strategic HR departments are not only using LinkedIn to promote their organization and attract talent, but they are also using other social media platforms. According to Jobvite’s Recruiter Nation survey, 87% of recruiters use LinkedIn, but only slightly more than half use Facebook. Conversely, candidates are very likely to use Facebook to check job openings. In fact, 67% of job seekers who used social media to find their most recent position used Facebook.
Mature HR shared service centers are making extensive use of automation and analytics, and they’re tirelessly working on refining their workflows.
- Process automation. Popularized as Robotic Process Automation, process automation allows one to tie together different HR services in a fully automated way. Examples include scheduling automatic reminders in case someone hasn’t activated their account. This prevents spam and leads to more targeted communication. Other examples include creating flows between HR processes. If a candidate is found to lack a critical skill but is still hired, this can prompt the learning system to recommend this skill to the candidate for training. These integrations between systems are the results of powerful and value-adding automation.
- Continuous improvement. Collect feedback from your employees about your HR shared service center and look for ways how you can enhance your workflows. You can do this through regular surveys. Also, consider the changing needs of the organization, for example, when an organization is growing fast or is changing its policies. Be responsive, and in so doing, you will develop a culture of continuous improvement.
- Create a digital roadmap. A key challenge in modern-day shared service departments is a lack of a coherent digital strategy. By implementing a technology roadmap and an ambitious and clear goal (e.g., “Any process and activity that can be automated, will be automated”), the shared service center transforms from an administrative steward into a lean and cutting-edge technology center.
- Invest in the continuous development of employees working in HR shared services. A common difficulty is a lack of development prospects for employees working in shared services. In other words, having a clear digital roadmap and vision enables an organization to provide a clearer image of the roles needed in the future. This includes automation and other technology roles, but also agile project management, data entry roles. Providing ongoing training to your HR shared service employees will help your organization ensure continuous efficiency as complexity increases.
Over to you
Organizations and HR departments should always strive to provide employee services in an efficient, as well as cost-effective way. HR transformation into HR shared services can be an excellent way to not only elevate your employee experience but also allow for a bigger focus on the HR strategy aligned with business needs and goals.
However, before investing in HR shared services, leaders must consider the challenges and preemptively take actions to overcome them. Investments in HR shared services are long-term investments. Therefore, to continuously benefit from an efficient HR shared services model, organizations require visionary leadership, must be willing to continue investing in leveraging technology, and developing the competencies of the HR shared services employees.