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Regional HR Leaders Discuss the Development of HR Service Delivery Models

The Chapman Consulting Group today hosted an HR roundtable discussion for 15 select HR Heads. Regional HR Leaders from high-profile multinationals in the Financial Services, FMCG, IT & Telecommunications, Oil & Gas, Real Estate, Pharmaceutical, Insurance, and Industrial sectors met over lunch at the Singapore Cricket Club to discuss the topic of “Asia Pacific HR Service Delivery Models: What’s Working and What’s Not”.

A) The Evolution of HR Service Delivery Models

Participants at the lunch were able to share their experiences in adopting a number of different decentralised, regionalised, internationalised and hybrid HR service delivery models. In every example, the method of delivery depended on a balancing act of factors. For some, HR was set up largely along the lines of what the business expected; in others the HR function was able to dictate its own strategy, which in turn needed the ‘buy-in’ from the business; and there were some examples of where the HR service model was less pre-designed and was more a simple reflection of the organisation’s size, complexity and stage of development.

The Decentralised HR Function

A few companies that were represented around the table still relied on traditional approaches to HR service delivery. In one case, the organisation had operated in a highly decentralised way for over a century in Asia, and each country continued to operate almost as its own ‘fiefdom’, in which HR practices were lead by their respective HR ‘barons’. The advantages of this system was that the individual countries were left alone to tailor HR systems exactly how they saw fit, and the global headquarters could still exercise control by limiting each country’s access to senior decision-making outside their geography. However the major downside was the lack of opportunity that this model gave to the in-country HR talent, which in turn had slowed down the development and modernisation of HR practices in the company.

Fairly Decentralised, with a Small Regional HR Function

Two of the companies represented around the table exhibited a highly streamlined regional HR function, in which their companies had deliberately kept the corporate HR functions small in order to reflect their decentralised cultures. Value-added HR projects were able to be successfully coordinated regionally by giving HR team members a variety of double-hat responsibilities, and allowing them to leverage the resources of HR specialists at the global HQ level. On the plus side, this allowed them to give autonomy to each country while retaining the power to co-ordinate and compare regional practices. However once again the downside was that HR talent did not have enough of a runway for development, and HR service delivery suffered a ‘bump’ each time a person left the company and exposed the HR team to a large shortfall in resources.

The Larger Regional HR Function

A number of participants represented companies that had a larger regional HR structure, where the company delivered HR services by means of complex matrix reporting structures involving regional specialist heads and HR business partners. In these companies, HR processes are primarily decided at a global level, with the region having a degree of power to ‘push back’ and customise, and with transactional HR processes still remaining part of in-country HR teams. The plus side to this model is that the region has greater control of the consistency of HR delivery, greater mobility of HR talent, greater sharing of ideas between HR practitioners, and the ability to build a more transparent HR ‘brand’ across the region. On the downside, a regional HR team can easily get too large and unwieldy, can force through uniformity of HR service delivery where none is needed, and can draw attention to itself as an exorbitant expense to the company. The HR function in these companies needs to maintain high credibility to justify this corporate investment.

B) The Emergence of the HR Shared Services Model

Almost every participant had experimented in some form with the development of a modern HR Shared Services delivery model within their existing companies. In this model, repetitive and transactional parts of the HR function can be pulled out of mainstream HR roles and instead be given to either an in-house or an outsourced Operational HR team.

The group agreed that the justification and ultimate success of an HR Shared Service model depended on the reason it was started in the first place. For most companies, the reasons were a combination of the following three factors.

1. To Enrich the Role of the HR Business Partner

By relieving the HR Business Partner of their operational burden and allowing them to work closer with the business, most HR Leaders believe that this service model allows HR to drive the business harder. In practice, most companies saw this happen over a longer timeframe rather than simply overnight, as the Business Partner still needed to ‘babysit’ these operational functions until a time that the HR Shared Services team got to grips with what was expected by the business. In one case, some ‘higher touch’ functions such as international assignment management and salary increment management were later given back to the HR Business Partner to ensure that quality was not compromised. It can be hard to guess what will or will not work, so a phased approach is recommended.

2. To Standardise Processes, Improve Metrics, and Mitigate Risks

One HR Leader discussed how the main reason to implement an HR Shared Services delivery model was to mitigate the risk of a country ‘going maverick’ with their HR processes. In their experience, the biggest problems had previously come from the smallest geographies, where in-country HR Heads were either less experienced, less internationalised, or more pre-disposed to doing things ‘their own way’ than in other countries. Standardising processes through a Shared Services model allowed them to prevent contentious decision-making that might otherwise adversely affect their global HR brand.

3. To Create Economies of Scale and Reduce Costs

By bringing all transaction processes under one roof, one of the key arguments in setting up an HR Shared Services delivery model is to cut the costs of unnecessary duplication across the region. In most cases, this can indeed be true, but in more than one example, the businesses were given too much flexibility to opt in or out of various parts of the Shared Services structure, and the result was that the sheer volume of ‘exceptions to the rule’ outweighed the financial benefits of the model. To avoid the risk of this, it is arguably best to implement the simplest of HR Shared Services first, and then gradually scale-up its coverage once each incremental change had been properly bedded down.

When asked about the key to success of any HR Shared Services model, one participant said that it all hinged around ‘discipline’ – the ability to stick with the process and see it through any teething problems until it can be proven to work. Another participant agreed, but stressed that this discipline must in particular lie with the business decision-makers, as without their constant buy-in, the process of implementing such a service delivery model is doomed.

C) The Effect of HR Shared Service Model on Future HR Talent

One of the most interesting side effects of this new business model is its impact on the future development of HR talent. The advent of HR Shared Services has meant that two clear HR career paths will exist within a company — one in the specialist HR/HR operations stream, and the other in HR business partnering.

If this HR Shared Services model is repli
cated across all larger organisations, then it will become increasingly difficult for a young practitioner to gain all-round generalist HR experience early in their career, as these junior cover-all roles will simply no longer exist in larger reputable MNC environments. Participants all agreed that this would be a shame, as most of them agreed that they ‘learnt the ropes’ of HR from just such roles. Some also believe that the credibility of the HR function may be affected because of the compartmentalisation of HR specialisations — for example an HR Business Partner will in future not be able to answer relatively simple enquiries about Compensation & Benefits without first consulting the C&B stream of the Shared Services function.

Could it be possible, however, that this change will in future be seen as evidence of the further professionalisation of the HR function in Asia Pacific? Might they not look back at the ‘golden age’ of the HR generalist function, and view it as the next stage of development from when HR was treated merely as ‘personnel’? After all, we don’t expect the lawyer who gives us advice on writing a will to be the same person who defends us in a libel case. And we respect a general medical practitioner (GP) when they refer us to a specialist rather than try to give advice in areas where they don’t have in-depth experience or training. Unlike many senior HR generalists of today, a lawyer or doctor doesn’t stumble into an HR career — they planned it early and took the appropriate courses at university and graduate school. Shouldn’t the same be said for all HR Leaders of the future?

At The Chapman Consulting Group, we believe that the future HR practitioner is most likely to gain their generalist training at university rather than ‘on the job’ in a multinational company, and if lucky will gain a further overview by being rotated through a variety of functional specialisations early in their career. HR Business Partners will still be seen as a strategic function to the business, but the expectation on them will have changed. No longer will they unreasonably be expected to be the oracle on every facet of HR, but they will become the ‘GP’ of HR, answering enquiries when they can, and funnelling them to the experts within a HR Shared Services set-up when it’s more suitable.

Conclusion

Our advice to HR practitioners early in their career is therefore to make sure they are in a company that allows them to be rotated throughout these specialisations, as people with these backgrounds will stand a better chance of being earmarked for HR leadership positions in the future. The early implementers have produced numerous case studies that show the potential pitfalls of trying the change too much, too quickly, and with too little buy-in from the business. So it now looks likely that HR Shared Services are here to stay. Once implemented correctly, the new HR Shared Service model offers a chance to improve both efficiency and effectiveness of the HR function.

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