All about HR Shared Services: Benefits and best practices for large companies

Josh Bersin, an HR industry expert, has termed this the “Experience age”. In a recent blog, Bersin argues, “We can no longer think of HR as a function that creates programs’ that people adopt and use. We have to design and deliver ‘experiences’, just like we do for customers.”  

When it comes to HR shared services (HRSS), this means designing a service built with employee experience – rather than cost savings or process efficiency – front of mind. But for many large companies, that can be easier said than done. 

In this article, we’ll explore: 

What HR shared services are - and how they differ from outsourcing and centralisation 

The benefits of HR shared services for large companies 

Why creating effective HR shared services is challenging for today’s businesses

Best practices for implementing an HR shared services model in your organization

What are HR shared services?

In an HR shared services model, administrative HR activities (such as recruitment, payroll, absences or learning and development procurement) are handled by a centralized, internal hub within the organization. This HR hub acts as an internal service provider, with the employees, line managers and senior management as their “customers.” 

HR shared services are typically structured as a series of “tiers”: 

• Tier 0 are self-service queries. These are managed by the employees themselves, using a centralized HR portal. 
• Tier 1 queries are handled by an internal customer service center, usually via email or phone.
• Tier 2 queries and tasks are more complex, and are likely to be assigned to HR specialists (for instance, recruitment, performance management, payroll, or benefits.) These might also move out of the HR shared services system and be handled by an HR center of excellence. 

Some organizations also have a Tier 3 level, which is the final stage of escalation for an HR issue, query or task. This might also be a strategic or policy-level HR decision. Tier 3-level work might also involve offering HR consultancy or business partnership to the organization.

Differences between HR shared services, outsourcing and centralization

Some sources use the terms shared services, outsourcing and centralization interchangeably. However, they aren’t really the same. Unlike outsourcing, the staff manning an HR shared services center are employees of the organization itself, not a contractor. 

Shared services are also a different concept from simply centralizing the HR functions of different business units into a single head office department. Shared services centers act as a kind of “business within the business”, providing a service to the business units. The focus is on service excellence, rather than cost cutting or centralized control. 

How HR Shared Services fit into the overall HR structure 

The concept of HR shared services originated with Dave Ulrich’s Business Partner model, also known as the “three-legged stool” model: 

In this model, HR service is divided into three pillars: 

3. Strategic business partners are internal HR consultants who act at the senior level, usually partnering with business unit leadership to provide HR expertise and alignment at a strategic level.

The benefits of HR shared services

Moving to an HR shared services model can have major benefits, especially for larger organizations. Recent research by Deloitte has shown that: 

• Nearly 80% of organizations that implemented HR shared services increased the standardization and efficiency of their HR processes; 
• 88% noted a reduced cost; 
• Nearly two-thirds saw an increase in the business value of their HR function. 

Bonus: Want more data-driven insights? Take a look at 15 HR statistics from 2022 to enhance employee experience in 2023.

The most common benefits of implementing HR shared services are:

1. Making HR processes more efficient

In particular, today’s HR shared services centers usually implement standardization and automation of routine HR tasks, freeing up HR professionals to spend more time on valuable or complex projects. Economies of scale also reduce the overall cost of the HR service.

2. Empowering employees and line managers

In this so-called “Experience age”, shifting to a HR shared services model improves the employee experience by enabling employees to sort out many of their own HR issues through a self-service platform, instead of waiting to hear back from the HR team.

3. Providing higher quality of service

By moving the priority of the entire HR service towards a “customer-centric” shared services model, the quality of service provided by the HR team becomes more timely, more accurate, and less admin-heavy for employees.

4. Boosting the business value of HR.

As the Deloitte survey found, 58% of the organizations implementing a shared services model improved their overall business strategy and plans – even those who didn’t expect this as an outcome for the transition to shared services. In part, this is because the HR team has more time for high-value, transformational tasks and business partnership when they’re not snowed under with repetitive and routine tasks. In part, it’s because a centralized and digitally-enabled shared services center can provide invaluable analytics and insights into HR strategy and workforce management.

5. Supporting the transformation of the HR function.

Moving to an HR shared services approach can act as a stepping stone to outsourcing routine HR tasks to an external provider. The process of standardizing HR processes and policies to adapt to an HRSS model makes the move to outsourcing that much easier.

The CIPD also notes that HRSS implementation can also open up business opportunities: “Organizations sometimes actively seek to become a shared service provider for other organizations, using their shared services expertise and/or any spare capacity within their own service.”

The challenges of HR shared services

Transitioning to a shared service model isn’t easy. It can present serious issues for both the organization as a whole, and on the HR team in particular.

HR Shared Services: Issues for HR teams

1. Maintaining employee-role fit

Courtney Jackson, a partner at ScottMadden, a management consulting firm, warns companies against applying a “lift and shift approach” when transitioning from a traditional HR function to a shared services model. The skills that your HR team have built up may not always fit well in their new roles.

2. Retaining and engaging existing HR staff

Without careful planning, the shift from HR team to HRSS can trigger significant turnover within the HR function. For example, HR staff may worry that they no longer have a career path available within the HRSS. They may also feel cut off from their former colleagues and from the overall company culture.

3. Creating rewarding roles

It can be tricky to create varied and interesting roles for HR staff during a move to a shared services model. Because of the aim to standardize and automate the tasks involved in HR, HR staff may find themselves handling the same tasks day in, day out – particularly problematic if they have previously worked as HR generalists.

HR Shared Services: Challenges for large companies

1.Maintaining the human touch

Shifting to a centralized shared services model can be challenging for a “high-touch” function like HR. The challenge is to retain a human and approachable face for employees, while still reducing the administrative burden and repetitive tasks being handled by the HR team.

2. Integrating multiple data sources

As with any form of centralization, the successful implementation of HR shared services depends on creating a single, reliable source of truth when it comes to employee data. For large organizations, in particular, this can present a huge technical challenge, making it difficult to create a user-friendly self-service HR portal.

Listen to Josh Bersin and Applaud CTO Duncan Casemore discuss the current state of the HR technology landscape in our webinar below:

3. Maintaining a close relationship between HR and the organization

With fewer interactions between HR and employees, relations can become increasingly distant without measures in place to maintain alignment and communication.

4. Providing a high-quality digital experience

Today’s employees expect a consumer-grade user experience from their work tools, which can be a challenge when it comes to an HR portal, because of the complexity and number of data sources involved, as well as serious issues around confidentiality and data governance.

HR Shared Services: Best Practices

So, how can organizations get the best out of an HR shared services model, and avoid the pitfalls? 

One way to start may be to think in terms of iterations. The Academy to Innovate HR (AIHR) proposes a maturity model for HRSS, based on Scott Madden’s shared services maturity curve. 

Within this framework, organizations should begin with an initial transformation focusing on efficiency and cost reduction, before moving on to prioritizing service levels and analytics. Finally, they should work to continuously improve the HRSS based on both the changing needs of the organization and the feedback received from the HRSS staff and other employees and stakeholders.

Addressing the needs of the existing HR team

Gary Critchley, the Head of Business Services and Information at M&S, recommends that “If you want to create the right culture in your shared services center, you need to put people first. At M&S, we have developed a culture of freedom and accountability. Team members are rotated across activities and given space to innovate. The overall culture is progressive and positive based on a ‘win, learn and change’ philosophy.” 

When it comes to the challenges of transforming an existing HR team (or teams) into a shared services center, best practices include: 

• Conducting competencies assessments to encourage employee-role fit.
• Thinking mindfully about job design, or including job rotations, to keep the work interesting. 
• Creating and communicating clear career tracks for HR professionals within the HRSS. 
• Provide job training to ensure staff can meet changing business needs while also providing opportunities for professional development.

Bringing strategic value to the organization

Josh Bersin advises that today’s organizations need to base any HR transformation around the employee experience, rather than the processes being transformed. In a recent report, HR Transformation in the Experience Age, Bersin makes the case that previously, HR transformations were based on a push model: “A consultant-led team designed the change, and we trained and communicated to employees to execute the change across the enterprise.” Today, he recommends taking a “pull” approach, in which employees are closely involved in co-designing solutions that meet their needs.

In terms of HR shared services implementation, best practices include: 

• Surveying employees to uncover which tasks would be best automated, and which should remain in the hands of HR centers of excellence. 
• Identifying relevant metrics to track the HRSS performance that measure employee experience and engagement levels, not just cost and efficiency.
• Applying design thinking and UX processes to develop a user-friendly self-service interface. 
• Embracing advanced technologies, such as chatbots and robotic process automation, to continuously increase the HRSS efficiency. 
• Using digital technologies to provide personalisation and rapidly escalate complex HR queries to appropriate subject matter experts. 
• Ensuring that it’s quick and easy for employees to get in touch with a “real human” if they need to, to avoid dehumanizing the HR service. 
• Maintaining a continuous improvement mindset to keep delivering outstanding customer service to employees and managers.

Are HR shared services right for your organization?

Not every organization needs an HR shared services center. For some companies, a centralized HR function – or even an offshore outsourcing model – will provide greater efficiency or cost savings. However, as the Deloitte survey shows, the majority of today’s large companies will find that moving to an HRSS model will increase the value of their HR function and support their ongoing digital transformation. 

That said, a great HRSS depends on an outstanding self-service HR portal, to provide front-line support and cut down on repetitive admin tasks. Want to see how Applaud’s HR platform can help you unlock the power of self-service HR for your business? Click here to request a demo.

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