Citation
Windsor, J. (2015), "The centralisation of HR: what is driving this shift?", Strategic HR Review, Vol. 14 No. 1/2. https://doi.org/10.1108/SHR-01-2015-0008
Publisher
:Emerald Group Publishing Limited
The centralisation of HR: what is driving this shift?
Thought leaders share their views on the HR profession and its direction for the future
Article Type: Strategic commentary From: Strategic HR Review, Volume 14, Issue 1/2
Julie Windsor
Julie Windsor is a Managing Director of Talentia Software, London.
Julie Windsor, Managing Director at Talentia Software UK, explores the benefits and considerations of centralising the human resource (HR) function across multiple locations.
The way in which the HR function is managed within many organisations is changing. Increasingly, we are seeing a move towards the adoption of centralisation, and this is no longer strictly limited to multinational companies; more UK companies are now opting for single solutions to streamline HR across multiple locations.
The discussion around centralised services has waged for quite some time, of course. For over a decade, HR shared services has been perceived as a common organisational response to creating more efficient service delivery[1], with the UK Government sharing its strategic vision for shared services[2] in 2011. This had a clear focus on HR, “reducing the need for customised processes which have, from experience, proven to be a significant driver of cost”.
Streamlined processes and heightened efficiency
It is understandable why so much dialogue has surrounded centralisation, given the incumbent benefits that going down this route can bring. A centralised approach will focus on streamlining processes, ensuring greater efficiency and an expanse of potential cost savings. The central location of an organisation’s HR team should result in lower operating costs and the ability to leverage better margins from suppliers. It also enables clear specialist HR personnel to be identified, aiding the team’s scope to deliver better service through the resultant knowledge sharing.
It can also reduce recruitment process costs through a streamlined advertising approach and efficient candidate searching. Dedicated talent modules within human capital management systems are fundamental, allowing companies to look within their existing talent pools for suitable internal candidates when a vacancy arises; this can not only cut recruitment costs, but also help identify internal staff with a strong cultural fit.
The automation of common performance processes also significantly reduces the time that it takes to complete key tasks, including optimising performance management and appraisals. A central approach to appraisals ensures that all employees are assessed in a consistent manner, resulting in the swift identification of high performers and the ability to put incentives in place to aid retention.
Potential pitfalls and legal considerations
As with any new approach, it is crucial to consider the possible drawbacks inherent to centralisation, one of which is that it could appear to be impersonal. The way in which this is internally communicated needs to be carefully managed before implementation, particularly for multinational organisations that will require the benefits and rationale to be clearly relayed.
There are also important legal considerations to bear in mind, including regulations regarding the storage and management of personal data. With heightened privacy concerns, it is common for employees to be concerned about how their data are utilised, so it is vital to be clear about the legalities and to address any external legal restraints that may exist regarding sensitive data. All companies, regardless of sector, should only engage with a supplier that takes clear responsibility for data security and management.
Some businesses may find centralisation more challenging than others – particularly, organisations that have acquired diverse companies. In this instance, a decentralised approach to recruitment may be more advantageous, yet it largely comes down to the culture of the organisation itself, and ensures that it is the right timing for centralisation internally.
The future of HR centralisation
The cost savings in terms of efficiencies, retention and identification of top talent are the primary factors driving companies to move towards centralised HR, and as big data are more frequently embraced, it is likely that the shift is only going to continue. Businesses are increasingly recognising that a centralised approach can result in a wide range of data about the organisations’ biggest asset – its employees – and how to leverage this information fully to move the organisation forward.
Ultimately, at the heart of adopting a centralised approach is the need to ensure that a company’s HR team is able to provide strategic support, moving away from administrative functions to demonstrate value at the Board level. Without a data-focused centralised system in place, achieving this objective is simply not viable for companies operating on a wide scale.
Notes
1. http://www.employment-studies.co.uk/pubs/summary.php?id=368
About the author
Julie Windsor is a Managing Director of Talentia Software UK, a graduate of Cambridge University, Julie started her career in the software industry with a leading financial services company and later moved to a subsidiary of US giant, Control Data, where she was responsible for introducing solutions targeted at HR. Recognising that new developments in software were about to change the face of HR, Julie was part of a team that formed HRM Software, which focused on talent management solutions for major international businesses. As a director and board member of HRM Software, Julie worked with over 50 per cent of the top 100 UK companies and helped to turn it into the market leader in its field. After the merger with Cezanne Software in 2006, Julie was appointed as the Director of Operations for the UK and Benelux and was a member of the board. Following the acquisition of Cezanne Software Holding Limited by Talentia Software in 2013, Julie is a Managing Director of Talentia Software UK and on the board of Talentia Software Holding Limited. Talentia Software is a leading international supplier of HR and finance software solutions, with over 25 years’ experience striving to always deliver the best possible service to customers worldwide. The product range includes Human Capital Management solutions with Talentia HCM, and Corporate Performance Management solutions with Talentia CPM (consolidation, reporting and budgeting). The group supports more than 3600 customers in over 30 countries, ranging from SMEs to large international organisations. Located in the UK, France, Italy, Spain, Portugal and Greece, together with a network of partners across Europe, the USA, South America, Australia, Asia and Africa, Talentia delivers and supports customers globally (http://www.talentia-software.co.uk).