Highlights
“The creation of Shared Services strategies in the Human Resources function, emphasizing Employee Self Service and the judicious use of Outsourcing, is the critical first step in transforming service delivery”. George LeVan-Skyworks Solutions “HR should not be defined by what it does, but by what it delivers – results that enrich the organization’s value to customers, investors and employees.” - Dave Ulrich “Quite simply, the “new” model improves the ratio of human assets deployed to work on core, strategic activities tied to advancing the business in lieu of activities that can effectively be accomplished via technology and well-managed employee call centers.”
“A transformation of HR operations shifts the focus from a traditionally reactive and administrative function to one that is tightly connected to the business.
The effect of this strategy is significant in making it possible for businesses to respond to market and human capital changes more rapidly.”
“With advances in HR technology, HR staffs are no longer required to serve as information provider, gatekeeper or data entry clerk as has traditionally been the case.”
Implementing a Shared Services model, common and flexible policies and programs, and consolidated technology across the corporation enhances the efficiency and credibility of the HR function-Mellon research.

Executive Summary
Human Resource executives face a growing challenge from business leaders: enable the organization to achieve excellence by developing strategies to attract, develop and retain human capital.
While this challenge has been discussed and debated for many years, major organizations are demonstrating that it is possible to successfully rise to the challenge.
The delivery of Human Resource (HR) services is at the core of achieving organizational excellence through human capital. This paper reviews practical and proven approaches to transforming the function to one where HR professionals, particularly those tied closely to divisions and business units, gain the capacity and competency required to proactively drive strategic business objectives.
Though reducing cost is clearly one motivator to transform HR, far more compelling is the interest in generating value for the organization. The demand for HR to create value is also not new; however few companies have reached their full potential in this regard. Our emphasis of a new model for HR delivery and more importantly, the roadmap to implementing such a model – provides a path to meeting the demand for value creation.
The model enables transactional and nonstrategic activities, which are widely recognized as the predominant focus of most HR professionals today, to move to a shared services organization that provides personalized care for employees leveraging key technology tools.
Business-based HR leaders are thereby empowered to grow business partnering, change management, workforce development and organizational effectiveness capabilities and truly support organizational excellence.

Why Change?
Management of human capital is a critical lever to achieve strategic business objectives such as managing costs and enabling top-line revenue growth. The current rate of economic, competitive, and political change demands cost flexibility in all Selling, General and Administrative (SG&A) functions. The mandate for the Human Resources function is to work better, faster and cheaper.
HR professionals are expected to deliver more advanced and differentiated human capital skill-sets, create and maintain high performing workgroups, offer technology platforms with increased functionality and direct access to information and partner with business leaders to align people strategies with business goals to achieve corporate initiatives. Dave Ulrich, a leading scholar in human resources, recently wrote:
The competitive forces that managers face today and will continue to confront in the future demand organizational excellence. The efforts to achieve such excellence – through a focus on learning, quality, teamwork and organizations get things done and how they treat their people. Those are fundamental HR issues. To state it plainly: achieving organizational excellence must be the work of HR.
The question for senior managers, then, is not ‘should we do away with HR?’ but ‘what should we do with HR?’ The answer is: create an entirely new role and agenda for the field that focuses not on traditional HR activities such as staffing and compensation, but on outcomes. HR should not be defined by what it does but by what it delivers – results that enrich the organization’s value to customers, investors and employees.

What is HR Shared Services and Why is it Important?
Only through a focused approach to HR Shared Services can companies accomplish the imperatives demanded of the Human Resource leader. HR Shared Services enable companies to meet the expectations of their stockholders while preserving, or more likely increasing, service quality to their employee population. Today’s organizations can no longer maintain the status quo in HR service delivery.
A transformation of HR’s operations shifts the focus from a traditionally reactive and administrative function to one that is tightly connected to the business. The effect of this transformation is significant in making it possible for businesses to respond to market and human capital changes more rapidly.

A New Model is Imperative
As Dave Ulrich and our experience with many complex companies suggest, the traditional model of delivering HR service does not align with the evolving demand to achieve organizational excellence. As HR organizations work to shift focus and activities, a number of concepts have been presented by various consulting organizations and academics alike. A common theme, however, has emerged towards decreasing the size of the HR function while moving transactional activities “out” and deploying fewer human assets to perform these activities by outsourcing, leveraging technology and creating common approaches, processes and practices. The combination of technology tools such as employee and manager Direct Access (sometimes referred to as self-service) and outsourcing provider capabilities enables HR’s shift of attention and skills to more strategic roles. We see this transformation visually through a simple graphic as shown in Illustration 1. Text Box: Text Box: Illustration 1

Over the years, a variety of models have
been designed, considered and even implemented in an effort to achieve the transformation represented above.
Perhaps most recognizable to HR executives is the seemingly constant swing between centralized and decentralized models. In the past, organizations found that the benefits of common systems, consistent standards and control, and economies of scale associated with fully centralized HR service delivery were less responsive, not flexible and often failed to meet the needs of business units. At the other end of the spectrum, however, the gain in flexibility to meet unique business unit requirements related to decentralized service delivery carries higher cost, duplication of effort, and variable standards.
Many organizations that have experienced the swing between centralized and decentralized operations are familiar with the results. Of particular note is the sense of employees that the company lacks a common culture or brand. Instead, the heavily decentralized organizations find that business units create duplicate and contradictory HR practices, policies, processes and procedures. These differences across the company are not business requisites, but rather the result of history, individual preferences and experiences. Shifting HR’s focus enables focus directly on the customer needs that include creating a company brand identity through leveraging economies of scale.
To realize the benefits of both models, companies are shifting to a shared service approach that enables streamlining of processes across multiple units or locations while maintaining customer focus. As demonstrated through Illustration 2, the pairing of the best of purely centralized and decentralized models through a shared services approach – that significantly leverages technology – is proving to be quite a successful approach to achieving the new requirements for HR. This approach to HR shared services that combines enabling technology (to be discussed later) becomes the critical lever empowering human resource leaders to support their businesses as required to advance the enterprise’s strategic objectives. Quite simply, the “new” model improves the ratio of human assets deployed to work on core, strategic activities tied to advancing the business in lieu of activities that can effectively be accomplished via technology and well- managed employee care call centers.
It is imperative to understand that, unlike past centralized models, the shared approach described here does not move control to corporate or a central entity but rather creates a centrally managed organization that serves employees and business-based HR professionals as customers. As a result, new roles for the traditional “corporate” HR are created just as the roles of business-based HR change.

Text Box: Illustration 2
Source: Shared Services: Adding Value to the Business Units, by PwC – Don Schulman et al
The HR shared services model has been employed by many of the nation’s leading companies to increase quality, improve service, and reduce processing cycle times as well as expense. Various HR shared services models are found at IBM, Royal Bank of Scotland, Lockheed Martin, Warner Lambert, Hewlett- Packard, Sears and Boeing.
Clearly the concept of Shared Services is not new to HR and other functions such as finance, procurement and marketing.
So what’s different today? The answer is a combination of advanced technology and increased understanding of the total change required of HR’s role to make a Shared Services model effective. By managing the supply chain of employee interactions and transactions effectively, complex companies are able to eliminate waste and process variability. Using approaches such as “Lean Thinking” and “Six Sigma”, processes are better aligned to enable the HR shared services model that has – up until only a few years ago – not been possible.

HR is Becoming More Efficient, But What About Effectiveness? Changing the delivery model alone may improve the efficiency of HR, but for an effective transformation, HR roles must also shift – in most cases quite drastically. In a shared service environment, nonstrategic HR activities and specialized HR expertise are removed from the business unit.
The proper division of responsibility across the spectrum of Transactional to HR Expertise to Business Partner is Text Box: Illustration 2
Source: Shared Services: Adding Value to the Business Units, by PwC – Don Schulman et al

critical. The range of activities from
Transactional, to HR Expertise to Business Partners is vast. In our experiences to date, the majority of field- based HR staff have focused on the Transactional activities, leaving little to no time available for partnering with the business or bringing depth of expertise around strategic human capital issues like employee development. Shifting Transactional and Expertise activities that can take advantage of economies of scale to technology and shared service organizations enables the field-based HR staff to truly focus on those activities at the Business Partner end of the spectrum. The division of activity is best represented through Illustration 3 below.
At a more detailed level, HR roles can be defined as follows: Corporate HR
. Guides the development and implementation of HR Strategy
. Ensures customer satisfaction of entire HR function
. Manages executive facilitation and coaching

Shared Service:
Centers of Excellence
. Exhibits World Class functional expertise and gathers better practices to provide advice and counsel to business units
. Leverages knowledge resources across the organization
. Develops programs to business unit specifications
. Provides business units quick responses to escalated issues