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HR shared services
Understand the principles of shared services, how they work, and the benefits they can
bring to an organisation
Introduction
Organisations use shared services as a way of organising their HR activities, typically
concentrating administrative activities into a centralised 'hub'. The shared service model
can help businesses reduce costs, avoid duplication of effort, and allow a greater focus on
HR strategy. Often shared services are seen as supporting strategic business partners
and centres of expertise in HR.
This factsheet outlines how shared services work and the benefits of introducing them in
an organisation. It takes a closer look at the typical tier structures and provides guidance
on planning and implementing shared services across an organisation. It also highlights
factors to consider for ongoing shared services management.
The different HR shared services models can be defined by their ‘sourcing’ (resourced
internally – ‘in-sourced’, or resourced externally – ‘outsourced’), and ‘shoring’ design
(whether they are located ‘on-shore’ or ‘off-shore’).
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Within organisations there are also options around whether the service is provided to
multiple business units and, for multinational organisations, how many countries are
within the scope of the services provided. HR shared services are mainly found in large
organisations.
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expertise and /or any spare capacity within their own service.
Some organisations using HR shared services to drive value might also include more
strategic services such as workforce planning. The increasingly important role of people
analytics could also see a greater role for shared service teams who have extensive access
to HR data.
Structure
Tier 0 is typically a HR portal/intranet where employees and line managers can ‘self-
serve’.
Tier 1 is a contact centre where employees and managers can access the services
provided via email or telephone.
Tier 2 would have teams typically aligned to specialisms such as recruitment,
performance management, payroll and benefits, administration etc.
Some organisations have a Tier 3 ‘process owner’ with overall responsibility for a
particular process area and can be a final point of escalation. In organisations that
have chosen to outsource their shared services, the Tier 3 ‘process owner’ will
typically be internal and the model will include people focused on vendor
management.
Introducing shared services is often just one element of a wider change to the way that
HR operates and is structured. One driving force is the ‘three-legged model’ developed by
US business academic Dave Ulrich, based on the deployment of higher-level strategic
‘business partners’ and centres of expertise in HR, backed up by shared services for more
routine duties. See more in our factsheet on business partnering.
Technology
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The decision to implement shared services is often as part of a wider restructure of HR.
It’s often accompanied by adopting new technology which typically enables self-service by
employees and managers, and centralised or integrated HR systems that hold HR data.
Governance
The shared service is typically measured using service level agreements (SLAs),
particularly when the service is outsourced to a third party. SLAs are defined and agreed
measures, reported regularly, to ensure that the service quality of service remains at the
level required. These are often embedded into a contract with penalties applied if the
SLAs are not met.
Explore options for the structure. Establish the model best suited to the
organisation. Multinational organisations, for example, need to decide whether the
shared service is most effectively delivered through a number of centres based on
business groups and /or regions or through one global shared service.
Specify the scale of capital and the nature of the resources required to get the
right technology and organisational infrastructure in place, taking care not to
underestimate.
Leadership sponsorship is vital for managing the change that will affect the rest of
the organisation as well as for those moving into the shared services.
Project teams with the required capabilities to design, deliver and run the shared
services. Ensure there’s broad agreement about the role, scope and accountability
of the centre and the resources required for delivery. Process owners and business
partners are critical to success.
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Clarify the role, responsibilities and accountabilities of the HR shared service
between administrative and more value added services.
Piloting and phasing the transfer of activities can help to keep up the momentum
for change, minimise disruption to the business and identify early problems. This is
also a key opportunity to validate existing data before transferring to the new
system.
Recruitment and training. The skill set required will depend on the range and level
of roles in the centre, for example customer service and call handling are often seen
as the minimum requirement for routine administration. Where the centre provides
more specialist services, sound HR knowledge is clearly also essential.
Gaining support for the HR shared service, especially from line managers and
people professionals. HR teams will have to change their view of employees
and line managers, treating them both as ‘customers’ of the services delivered.
Ongoing knowledge development. The service quality will be directly related to the
quality of the information input from the rest of the organisation. It’s likely that there
will be unexpected demands for information or clarification, so setting in place
channels for ongoing communication and training are important.
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elsewhere in the organisation. For many, HR shared services is emerging as a new
area of specialism.
Skill requirements. Skills needed for the new roles must be clearly defined.
Traditional HR skills will be supplemented by the need for project management,
contracting skills and an aptitude for customer service, which may not previously
have been in the domain of people professionals.
Job design. It's important to maintain a level of skill and variety in the design of the
jobs in the shared services, particularly if people working in the service centre have
previously undertaken a wide range of tasks. Read more in our job design factsheet.
Maintaining close relationships with the business. Shared service delivery can
result in fewer opportunities for face-to-face contact and more remote relationships
with the business. It’s critical that opportunities for fostering close relations with the
business are built into the wider HR plan.
Further reading
Books and reports
HOLLY, N. (2010) HR models: lessons from best practice. Henley: Henley Business School.
REILLY, P, and WILLIAM, T. (2017) How to get best value from HR: the shared services
option. London: Routledge.
Journal articles
HOWCROFT, D. and RICHARDSON, H. (2012) The back office goes global: exploring
connections and contradictions in shared service centres. Work, Employment and Society.
Vol 26, No 1, February. pp111-127.
MEIJERINK, J., BONDAROUK, T. and LOOISE, J.K. (2013) Value creation through HR shared
services: towards a conceptual framework. Personnel Review. Vol 42, No 2. pp154-175.
PAREKH, R. and BREEN, D. (2018) The HR challenges of shared service centres. People
Management (online). 25 June.
© Copyright Chartered Institute of Personnel and Development 2021, 151 The Broadway, London SW19 1JQ, UK
Incorporated by Royal Charter, Registered Charity no. 1079797 123 Page 6 of 7
ULRICH, D. and GROCHOWSKI, J. (2012) From shared services to professional services.
Strategic HR Review. Vol 11, No 3. pp136-142.
CIPD members can use our online journals to find articles from over 300 journal titles
relevant to HR.
Members and People Management subscribers can see articles on the People
Management website.
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