MULTI-CHANNEL ACCESS
Employees should be able to interact with the HR function through the most convenient method, be it the telephone, a meeting, the Web or even SMS. The answer should be consistent, even though the delivery method differs. This calls for a clear integration strategy where the tech- September/October 2003 . Scope Limited Large
Risk Low High
Reward Lower Higher
Functional One process HR ¨C complete Back-office (payroll or process, Finance, HR and benefits) recruitment, procurement admin, payroll, reward Economic Cost center Profit center Spin off model
System Status quo National Single core model (many systems) sytsems Global system Location Virtual Centralized Green field model
Delivery Support line HR Support Support
model employees employees, managers and suppliers
Coverage Single company Single group Multi group
Provision Internal Mixed BPO
Figure 3. Models of Shared Service.

nologies and people need to talk to each other (see Figure 6).

TRANSACTION ENGINE
In the first instance, shared service is about administrative efficiency. This requires a strong transaction engine that automates much of the administrative burden. The transaction engine should be able to handle complex company rules and be easily configured to add or take off new divisions and even whole businesses. The application should handle legal and administrative requirements out of the box. In a European context, much of HR administration involves legal compliance.56 The transaction applications should help, rather than hinder compliance. Issues of performance, scale and stability are fundamental.
Without a sound transaction solution, shared service will simply expose system weaknesses to the whole organization.
Figure 4. Organisations with Multiple Business and HR Functions. Source: Mercer54
Maximum consistency
. standardized across business units
. integrated/same platform
. consistent processes
. shared staff
. single outsourcing contract (for Business Process Outsourcing Some consistency
. standardization encouraged across business units
. integrated/same platform
. consistent processes
. duplicate and fragmented staff
. separate cotracts, or single contract with multiple serivce level agreements No consistency . autonomous business units
. separate platforms
. inconsistent processes
. duplicate and fragmented staff
. multiple different ervice level agreements . complex vendor management
Ability to leverage the sharing of resources
Low High
Ability to leverage outsourcing
Low High
Service Centre (Inclusive Technology Centre)
Internet Intrament e-mail forms
Case Workers
Expertise Centres
% of HR Tasks 100% 66% 28% 5% 1% Inquiries
. Employees
. Management
. HR Professionals
Self Service
Tier 0
E-HR Portal
IVR
Kiosks
Tier 1
Service
Agents
Tier 2
Subject
Matter
Experts
Contact Centre
Tier 3
Policy Experts
Process Content Owners
Effective & Efficient HR Service Delivery
through Shared Services Centre . . .
¡°Resource¡± optmisation through use of self-service and cell centre support tools
Figure 5.
Source: Arinso International

INTERACTIONTOOLS
Service centers that provide customer support focus on creating a solution where every call or access is monitored, problems escalated and service levels measured. They also analyze patterns and frequencies to identify areas of potential or emerging concern. These tools can be applied to HR shared service, too. Telephony systems can pass caller information to HR systems, enabling the HR agents to recognize the employee before they even pick up the phone. Even basic call center management software can help predict staffing requirements and monitor service levels. Scripting tools allow firstlevel support to offer a more consistent service at a lower skill level. Most organizations have invested in these technologies for customer service and leverage them for HR.

POLICYMANAGEMENTTOOLS
Many HR queries relate to policy. Providing clear policies and guidelines helps both the employees and the HR agents. It creates clarity and consistency, and reduces the number of queries and escalations.
Don¡¯t underestimate the challenges of maintaining a policy solution. There are a number of specialist HR policy management tools, but it is well worth considering how to integrate HR policy management into the corporate document, policy management and portal platform.

EMPLOYEE ANDMANAGER
SELF-SERVICE
Providing simple-to-use Web access to HR data reduces the cost of providing HR service. The hard benefits of self-service are relatively well documented, so I won¡¯t dwell on them here.57 It is important to position employee self-service (ESS) and manager self-service (MSS) as part of the shared service strategy, but they are not the only channel. Sluys notes that at one major customer, ESS was the predominant channel for HR administrative enquiries, but that the telephone was the predominant channel for payroll enquiries.

BILLING AND COSTING
If the shared service model involves charging back the cost of services ¡ª a profit center model ¡ª an organization needs to be able to bill for services and accurately measure service delivery. An organization may wish to leverage existing investment in enterprise resource planning (ERP) systems for this. Implementing a separate costing and billing application just for the HR shared service center is probably an expensive route.

TECHNOLOGY ISTHE EASY PART
As a technology vendor it is tempting to talk about the central role technology plays in shared service, but technology is the easy part. Human resources systems have been around for many years, and are proven. Call center and case management tools are also well established. Employee self-service has existed in many organizations for over five years.59 Assuming a sound technical infrastructure and an HR system that can cope with the legal and September/October 2003 . administrative challenges, technology should be relatively straightforward.
In today¡¯s economy, assess the financial viability of the vendor carefully and align the HR shared service with IT shared service to avoid building an HR island. The greatest technology challenge is interfaces.
The more processes that run in one application, the less your cost of interfacing will be. For every ¡°best of breed¡± application, beware of the mongrel interface!

EUROPE AND SHARED SERVICE60
According to Aust et al., ¡°In the United States the shared service center (SSC) is an established business model with 16 of the top 20 Fortune 500 companies adopting the practice. In Europe it is estimated that 50 percent of multinationals are either already using SSCs or planning to do so.61 Shared service has been a great success in the U.S. The homogeneous language and legal system allow significant economies of scale. Downsizing and redundancy are far cheaper and socially acceptable than in Europe. Multinationals should not underestimate the complexity and differences between European countries.
There is often a business case for shared service on a pan-European basis, so it is vital to avoid dropping in an American business case and expecting it to work. United States assumptions need to be tested against local labor laws and organizational realities.

WORKS COUNCILS AND EMPLOYEE REPRESENTATION
Typically, and this varies from country to country, employees have a much stronger say in reorganizations and disposals than in the U.S.: in Germany this is known as Mitbestimmung (deciding together).
In the space of this article it is not possible to provide an explanation of European labor regulations and the industrial relations framework. But the key points to be aware of are:
1. The union movement, although somewhat weaker than in the past, is still strong, especially in traditional industries in continental Europe.
2. Supervisory boards in Germany consist of 50 percent employee representatives. (The supervisory board is the highest level of corporate governance and approves major decisions made by the executive board.) Many other continental countries have similar models.
3. Much stronger state involvement in corporate redundancy actions.62 The works councils need to be involved early, and any headcount reductions will need careful justification and negotiation.63 I¡¯ll rely on a rather lengthy quote from the European Foundation for the Improvement of Living and Working Conditions to illustrate the issues of a significant organizational change:
BETRIEBS.NDERUNG, or substantial alteration to the establishment, is a64... concept that relates to an instance of codetermination within the works constitution (Works Constitution Act && 111 ff.). It covers major decisions on the closure, reduction of operations or relocation of the establishment or of important parts of it, amalgamation with other establishments, fundamental changes in the establishment¡¯s organization, objectives or equipment, and the introduction of radically different work methods and production processes. Rationalization programmes and the introduction of new technologies are examples falling under this heading. The assumption is, for the cases listed, that the changes may result in serious disadvantages for the workforce or for large sections of it.
Consequently, in establishments regularly employing more than 20 employees eligible to take part in works council elections, the works council must be given prompt and full information on any such proposed changes. In practice, substantial alterations to the establishment constitute the main area of use of the participation, information and co-determination rights of the works council in economic matters, and entitle the works council to a reconcilement of interests and a ¡°social plan. ¡° In France for instance, ¡°Companies with a workforce of 50 employees or more are required to develop a redundancy programme (plan social) when they intend to make redundant more than nine employees within a 30-day period. A redundancy program is a series of measures designed to avoid redundancies or curtail their number and to facilitate the redeployment of those made redundant.¡±
The UK labor market is considerably more flexible than the German or French markets, but there is still a significantly stronger set of worker rights than in the U.S. Any ROI study will need to take into account the cost of redundancy programs and other labor law-related matters. The more early negotiations and discussions that begin with works councils and other representative bodies, the better.
It sounds obvious but Europe is not one country, but a number of countries.
Most administration law differs greatly
from country to country. Although European Directives have gradually begun to harmonize legislation, there are considerable country level variations. (Data protection is an example of this, where there is a Directive, but differing national interpretations thereof.)
There is little correlation between country size and administrative complexity.
A relatively small country, Belgium has an equivalent compliance burden to France, for instance. The centralization benefit needs to be assessed carefully against the cost of redundancy and the political fallout.
The Mercer report goes on to note, ¡°Whilst the various national cultures, languages, and legal frameworks across Europe mean that set-up issues are more complex than in the U.S., the business case is nevertheless very strong. Many companies continue to duplicate HR activities across Europe and overlook opportunities to standardize policy and practice.
Specifically, the high salaries and workforces employed by multinationals in Europe enable economies of scale that deliver substantial ROI, and the consistency that is being introduced by the EU regulations means that centres of expertise are an effective option for ensuring consistency and quality of service across Europe.¡±
It is in the interest of global HR directors to better understand the complex nature of HR in Europe. At the risk of oversimplification, there are a number key areas to grasp:
1. The burden of legal compliance is typically greater than in the U.S.
2. Employee representation is more powerful.
3. Governments are much more likely to intervene.
4. The cost of redundancy is significantly higher.
5. What works in one European country will not necessarily work in another. A significant number of senior HR professionals in Germany have trained as lawyers, such is the complexity of legislation and its impact on HR processes.
However, successes at PWC, Gillette, IBM, Du Pont, Ericsson and others prove that shared services work in Europe. It is more

THE DISADVANTAGES AND RISKS OF SHARED SERVICE
Shared service is here to stay and is proven at many organizations. Nevertheless, it is important to understand the risks and disadvantages of shared service. Reilly notes a number of disadvantages of shared service.
1. Neglecting the importance of the knowledge and experience of those who performed administrative roles in the past and the loss of personal relationships based on knowledge and culture,
2. The risk of deskilling some administrative jobs to the point of tedium.
3. Asking too much of the business facing HR managers in concentrating on strategy and change management,
4. Potential difficulties for career development because of overspecialization,
5. Boundary management issues ¡ª where does policy end and implementation begin,
6. Communication difficulties,
7. Absence of accountability, since HR managers in the business have no control of the quality of service delivered by the shared service center,
8. Lack of local knowledge, especially in heavily centralized shared service,
9. Loss of face-to-face contact, and
10. Large-scale capital investment. It is interesting to note that technology is not seen as an inhibiting factor and that, like most large-scale projects, change and people management issues dominate.
The management of change is the single greatest risk.
According to Machin and Williamson, ¡°While HR professionals see themselves as guardians of change management and are happy to oversee the implementation of such programs within the organization, they may be unwilling to embrace change themselves.¡±68 Factors to be considered to minimize loss of knowledge and overspecialization include job rotation and regular training. The challenges that organizations face in deploying shared service apply equally to HR.

CONCLUSIONS
The HR supermarket is here and it isn¡¯t going away. Human Resources functions that act in denial are likely to go the way of the green grocer who didn¡¯t adapt to the supermarket. Successful HR departments must balance low cost, high accuracy administrative delivery with high-end valueadded service. Whether they own the supermarket, or bring it in from elsewhere, they will need to deliver administration convenience at rock bottom prices. Only then will the funding and the respect exist to build strategic, valued services. Organizations need to decide what parts of HR are ¡°supermarket¡± materials and what are not. As with the supermarket, the consumer will play a decisive role.