Outsourcing is the way for HR shared services

Today (17 May) marks the start of the International Quality and Productivity Centre’s (IQPC) fifth annual Shared Services Week. It’s hard to believe that we’ve been talking about shared services for five years in a never-ending quest to find the Holy Grail of HR shared services.

Attendees will hear from blue-chip companies offering endless success stories about creating HR shared services. The daunting task, of course, will be deciphering who is telling the truth about their success.

One cannot challenge the theory of creating shared services to add value. Arguments for include: economies of scale, simplification, common processes, automation, shared best practice, knowledge transfer, measurement, management information and, most importantly, a focus on service. The shared service ethos of an efficient and effective service is a sound one.

But how many companies tackling an internal shared services implementation can truly boast that they have created efficient and effective shared services? How many are prepared to be transparent about the costs of setting up shared services, such as capital, implementation, consultancy fees, technology, restructuring and facilities, or the costs associated with the years HR spends trying to implement shared services rather than focusing on adding more strategic value to their businesses? How many internal business cases have actually been delivered?

Many have tried to create shared services themselves; some have succeeded, some have failed, and some have looked elsewhere for help.

While outsourcing HR shared services is still more popular in the US than in Europe, it still has not become the norm in the way that IT outsourcing has done. If a company decides to outsource its IT services, it would be considered common practice – but outsourcing HR administration seems a more emotional, high-risk decision. Why? It is a rules-based, high-volume, repetitive and compliant service that requires a professional and consistent service across any organisation. If policy, employee relations and other company-specific specialists remain, why wouldn’t it make sense to outsource to a company whose core business is HR administration?

My gut feeling is that HR directors are waiting for more examples in the marketplace before committing to HR outsourcing, and maybe the time has come. The 3 May issue of Personnel Today highlighted that the BBC, having tried HR shared services itself, is looking at outsourcing 260 HR administration roles. The NHS has just outsourced financial/business shared services, and is looking at HR and payroll. And early UK adopters such as BAE Systems, Cable & Wireless and BP, continue with integrated HR outsourcing.

Market followers have rarely been shot, but then again, they have rarely gained competitive advantage. Perhaps it’s time for them to decide to be brave, and become an early adopter.

Alan Bailey
HR business process outsourcing

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