Have HR shared services centres just caught a cold (or Covid-19)?

Blog posts

18 Aug 2020

Peter Reilly, Principal Associate

Other IES blogs have looked at different aspects of home and remote working during the pandemic crisis, in this one I will question whether there will be any fundamental changes to the default HR delivery model in larger, physically dispersed organisations.

For the last twenty years or so the dominant thinking on HR structures has been to obtain economies of scale by creating shared service centres and centres of expertise, concentrating resources to be deployed across wider (and on occasion global) geographies. HR business partners were then deployed to business units or spatially in order to get close to organisational leadership so as to provide strategic advice in the people management sphere.

There have been criticisms of the model over the years and there have been some modifications, but its essence has remained, and its popularity continued. Coaching line managers seems to be the headline ‘in-demand capability for the profession’ according to a recent CIPD survey and this underlines the importance of HR business partners. But will the Covid-19 crisis cause a rethink on the value of HR shared services?

Listening to a Talking Politics podcast on 30^th July, I began to wonder about the concentration of HR staff in service centres far removed as they are from the front line operations they support. The discussion on that programme between professors David Runciman, Helen Thompson and Diane Coyle (in the politics and international studies department at Cambridge University), in part concerned whether Covid-19 would cause a re-appraisal of the view that urban growth, which is thought to be the driving force behind entrepreneurship and innovation, might be on the wane as people and jobs move out of town.

This got me thinking that the notion of bringing people together in service centres might now be seen as sub-optimal. The creation of these structures, it is true, has been driven more by efficiency than a search for innovation, but the Covid-19 challenge to the model is similar to the one confronting urban growth. Why concentrate people in offices (albeit for global firms in cheap locations) when these days technology allows you to spread your workforce across many places? Short term, packing people into offices is certainly not sensible for reasons of virus control, but longer term, will using technology to link people together be the preferred approach?

There are objections to a dispersed workforce (rehearsed by Marissa Mayer the CEO of Yahoo) such as more complicated communication, loss of informal water-cooler interactions and harder collaboration. There might be worries about staff failing to work to common standards if they are not overseen in the office by management or subject to peer pressure.

There are undoubtedly problems and costs of homeworking which I wrote about twenty years ago.[1] Ed Griffin drew attention in his blog to the 30-plus page government guidelines on ‘working safely during Covid-19 in offices and contact centres’ and he reinforced that to do the necessary risk assessments to confirm the safety (in the broadest sense) of home offices is time consuming and complicated, and would be even more so if the question relates to homes in developing countries where many corporate service centres are located.

Nonetheless, three principal advantages to workforce dispersal rather than aggregation immediately struck me:

• You can hire talent wherever it might be rather than just in the location of your service centre. For global companies this has the benefit that you can call on people with the language, cultural and regulatory knowledge and skills needed for the local workforce.
• Dispersal gives you system resilience in that you are not dependent on the integrity of particular sites in terms of power, signal, other utilities, etc. Concerns over this issue was the reason why most companies avoided a single service centre[2].
• And of course, there are office cost savings to be obtained from reduced expenditure on rentals, office equipment, property taxes, security, etc. These costs are shifted to staff.

The Yahoo objections to homeworking are not so relevant to a HR shared services centre because in most organisations the emphasis is on standardisation of process and delivery; innovation is frowned upon unless sanctioned in a change programme. Moreover, modern technology allows the use of remote automated controls and checking of actions. So, staff cannot easily go off piste even if they are working from home in the Alps.

As to the fear that productivity would fall with homeworking, at least in the UK under lockdown the general consensus is that overall work rates and standards have not dropped, though experiences have been quite variable. Anecdotally, organisations have been pleasantly surprised by the employee response to change of workplace.

Finally, over the medium term (5-10 years) much of the transactional work performed in service centres will surely be subject to Robotic Process Automation such that the number of staff employed will drop significantly. The roles which will remain will focus on troubleshooting, complex problem solving and checking that all is in order.

So, it certainly doesn’t seem to be the time for organisations to renew office space on extended leases without a careful thought, depending upon where your service centres are located, the ease of exiting current properties, the viability of home working for employees and the potential for small hubs rather than bigger service centres.