3 Potential Main Reasons ‘Why’ Human Resources Shared Services (HRSS) Fail (There are more!)

By Glenn G Jones

GGJ Global Consulting Limited

[email protected]

in collaboration with Barry Joinson and Mark Lindley

A recent piece of research stated that as over 75% of the Fortune 500 companies now have their own HRSS center compared to fifteen years ago.  However, many companies around the world look at HR Shared Services as a ‘thing to do to solve all of the issues they currently have within the HR Function’. They also seek the nirvana of reduced costs, operational excellence in who does what and when, system changes to enable HR data and reporting and lastly, the intention of moving to the Ulrich Model.

Let me start by saying that the last five items above are entirely possible, so where does it all begin to go wrong?

In conjunction with Barry and Mark, we brainstormed what we thought the top three would be and ironically, we had similar and differing views; so here you go:

Due Diligence

On the whole, most companies set themselves up to fail from the beginning as they rush forward to seek the above.  This strategic change is no doubt discussed thoroughly with the CEO and Leadership, and it is an excellent opportunity for HR to promote itself at the top table.  However, the issues arise where real due diligence about the company and the state of HR's processes, procedures, data, operating culture, payroll, internal links to other functions plus external connections to third party companies and company culture is not fully considered.  Furthermore, if things are broken today, implementing a Shared Service solution will not solve this unless those broken items are either addressed beforehand or planned-in as part of the implementation phase. An excellent example of this is where there are local practices that are not documented or process maps that do not exist. 

I had the real pleasure of serving with the Royal Military Police (Reserves) for a short time, and we would often do drills around battlefield simulations.  One thing they always taught us was never to rush into a battle area without first understanding what was in front of us and where the real issues where (extreme example I know but you hopefully get the point).

Mark made a great point around most companies look at Shared Services as a way of saving costs rather than organisational efficiencies – he states that "this approach rarely works unless there is a significant change in business operations or model of the organisations”.

Barry also commented, "costs often rise rather than fall, and I've seen many Shared Services come back in-house as a result!"

Adopting the Ulrich Model

Let me start by saying there is nothing wrong with the Ulrich Model at all; it does work.  However, the main issues centre on how companies implement it.  The whole point of a Shared Service function is to move administration away from the front end of the company to the backend and to enable HR Business Partners (HRBPs) to truly concentrate on STRATEGICALLY PARTNERING (driving the People element of the company strategy forward) with the business.

Where things go wrong are:

1.     The company line manager and colleagues are used to working face-to-face with HR Administrators who can answer their questions on the spot. 

2.    HRBPs fall into the trap of trying to replace HR Administrators and so silently and unknowingly by the HRSS the work either never gets to the Shared Service Centre during inception or the HRBPs do it themselves gradually over a period of time.  Thus, creating a movement back to old ways of working and culture.

3.    The design of systems and processes are not lean and efficient leading to as Barry puts it “handing off of activities within shared services mean Managers waste time chasing the same issues and give up" and "HR design Shared Services to meet their needs, rather than the end-users".

4.    Assumptions are taken around the level of IT literacy of colleagues and their ability to do things themselves instead of the HR Administrator who would have completed it for them previously.

5.    Trust – as Barry put’s it “erodes trust as employees see their information being processed by people they have no access to or no relationship with”.

I wrote a LinkedIn article in January 2019 titled “Has HR gone too far to the right” and what I was talking about then was if HR is the function of the People, should it be a faceless HRSS that colleagues engage with?  The jury is still out on that question as costs always seem to be the winner over employee engagement.   

Barry states “employee ‘problems’ go unnoticed because employees have nobody to talk to and line managers, for all the tea in China, don’t always step up to the people management plate”.

Culture

What was it that Peter Drucker said, 

“Culture eats Strategy for Breakfast!”

How right he was and still is.  Another reason why HRSS fail: 

1.     The rationale for the change is either not supported initially and continually throughout the life of the HRSS at C-Suite Level and Senior Leadership Level (they opt out of the process!)

2.    HRSS rely on quality data at the right time and in the correct format.  Repeat offenders are allowed to get away with bad practices that in turn, enable people to blame the HRSS.

3.    A continuous improvement culture does not exist in the HRSS.  One of the best reasons for setting up an HRSS is to see where things are generally going wrong, e.g. processes, procedures, colleague contacts, automation etc.  If actioned correctly, improvements in colleague service and quality should be incremental.

Conclusion:

By completing the right due diligence at the start of any proposed HRSS and acting and planning accordingly, you understand the Ulrich Model (who does what, when, how and why) and the culture (what do you need to change) will avoid many of the issues that most HRSS see today.  There are of course more to consider, however, get these right and you are off to a great start.  It’s not too late to turn your under-performing HRSS around and if you need help, please reach out to me. Finally, thank you, Barry and Mark, for working with me on this article.

As Roy T Bennett once said, "Do what is right, not what is easy nor what is popular."

Bio

Glenn is a freelance HR consultant and has worked with Tesco, AXA XL, Bank of America, HSBC, Ecolab and Imperial Brands in multi-discipline strategic and operational roles across the world. Before this, he was employed Eversheds LLP, Accenture, Koorb (NZ) and EON as well as numerous other companies. He is working his way to his DBA, becoming a future CEO and evolving his HR consultancy business to ensure that he continually adds value to his clients, now and in the future. Glenn is passionate about coaching, emotional intelligence and company evolution. His book ‘Human Resources Changes The World’ aims to disrupt the function of HR and change the traditional approach to who becomes a CEO.