EFFORTS TO introduce the HR shared service concept across US and European organisations are failing, according to recent research
EFFORTS TO introduce the HR shared service concept across US and European organisations are failing, according to recent research.
A study of 10,000 organisations across the US and Europe found that, despite the intended benefits, there was little evidence that outsourcing services or centralising work has significantly reduced costs within or impacted upon the size of HR functions.
Conducted by PricewaterhouseCoopers, the industry-wide Key trends in human capital: a global perspective study reported that the original objectives of shared services included cost reduction, more consistent information and advisory services to employees and management, in turn leading to a more strategic contribution from HR.
“To date in Europe, there is little evidence that these objectives are being realised,” the report states. “Neither is there evidence that the introduction of shared services enables the remaining HR professionals to have greater business impact.”
While the study was conducted between 2001 and 2004, the report acknowledged that ROI on shared services may take a longer to evaluate.
“There is mounting evidence that the introduction of any form of shared service in any function requires measured consideration and a recognition that offloading or outsourcing traditional roles does not automatically catapult those functions into higher levels of influence in any organisation or have a major effect on the cost of operation,”the report found.
The study, which examined a wide variety of human capital issues, also found that HR was still struggling for credibility and influence in Europe, but having more success in the US.
“In fact, in Europe the last 12 months have produced little evidence that the HR function is playing a more significant role in organisational life.”
The study found that the number of European HR directors operating at the most senior levels in companies continued to decline for the third successive year.
Internal moves to create a more strategic overall contribution from HR through business partnerships with line executives had also not demonstrated any consistent progress.
“The key to becoming a credible business partner is to work with the business to build a rigorous measurement framework,” said Debra Eckersley, an Australian partner in performance improvement with PricewaterhouseCoopers.
“It is imperative that any measurement of the human capital of an organisation is linked to the achievement of business results.”
Historically, one of the key ‘enemies’ of HR has been the finance function, she said. However, human capital measurement can provide HR professionals with an opportunity to bridge the gap between HR and finance.
“In our experience, the organisations with the most successful human capital measurement approaches are those where the finance department is heavily involved.
“This is a result of the finance department being a key source of information and having the skills and capabilities to be able to assist with data collection and analysis.”
She added the involvement of finance also results in buy-in from a key stakeholder and guardian of numbers within an organisation – the CFO.
HR professionals should measure performance before, during and after developing people strategies and implementing HR programs, and performance measures should be tailored to the objectives of the HR initiative, she said.
“For example, in assessing the success of a leadership development program one could measure upward feedback, employee opinion, talent turnover, key business productivity measures and measures such as the human capital return on investment.
The Key trends in human capital reportpredicted that “people in organisations will not be regarded as human capital in reality, until and unless their contribution to value can be measured with the same confidence as any other organisational asset.”
The drive towards meaningful human capital measurement was already gaining pace, with the Accounting for People Report in the UK, the Nouvelles Regulations in France, the European Multi-Stakeholder Forum work and pressures arising from Sarbanes-Oxley in the US.
Such developments are strong indications that human capital reporting and measurement will be a standard requirement within years, it said.
“HR practitioners must ensure that they are ready to respond, with systems and thinking in place.”
