The tides are shifting on the age-old question for Human Capital Management (HCM): Enterprise Resource Planning (ERP) Suite versus Best-of-Breed (BOB). The 1980’s movement toward a single vendor, single platform ERP system is altering its course toward modern, agile, single function, fully integrated systems. This change is being enabled with the growth of Web 2.0 – the method of software and service delivery via the Internet that is now penetrating all aspects of our work and personal lives.

In their article “Unbundling the Corporation” McKinsey consultants John Hagel and Marc Singer contend that “the forces that fractured the computer industry are bearing down on all industries. In the face of changing interaction costs and the new economics of electronic networks, companies must ask themselves the most basic of all questions: what business are we in?” The movement to outsource non-core functions to reduce ongoing costs and allow the company to focus on their core competencies is being made easier with the drastic cost reductions in communications and technology. Just look at the prices of cell phones and, in particular, netbooks, which now can do more than many desktops!

Because systems integration and human collaboration across space and time have never been easier or cheaper, it is now often more cost-effective to communicate across organizations than within one. Hence, we are seeing the unbundling of the modern organization into separate and discreet functions – either outsourced, offshored or split off into shared services centers – so that each function can focus on what they do best. Hagel and Singer maintain that “activities that companies have always believed to be central to their business will suddenly be offered by new, specialized competitors that can undertake those activities better, faster, and more efficiently.”

This shift is causing the modern organization to un-bundle and then re-bundle their activities and infrastructure into more agile, nimble structures that can change and scale up or down as business needs dictate. So what does all this means for the modern HR organization and for HR technology? HR has long been an organization that has worked across boundaries, and functions such as benefits and payroll have long been outsourced to third-parties. Yet, the un-bundling of HCM will have a much farther reaching impact. Beyond benefits, payroll, and call centers, we are seeing the un-bundling of HR services from RPO (recruitment process outsourcing) to off-boarding and the un-bundling of HR technology from licensed enterprise resource planning (ERP) software to subscription-based software-as-a-service (SaaS).

Adapting from Hagel and Singer’s model to HCM, the modern HR organization needs to focus on three key areas: employee relations, service delivery, and infrastructure and tools (see graphic below). These areas rarely match the company’s formal organizational structure, and each has different goals, different economies, and different competition and cultural underpinnings. HR business processes are typically cross-functional, stretching both horizontally and vertically across the organization; as they cross these different areas of the organization, the goals and expected results inevitably conflict. “Scope, speed, and scale can’t be optimized simultaneously; trade-offs must be made,” according to Hagel and Singer. Thus, it is by un-bundling HR and building dedicated teams to focus on specific areas – either within or outside the organization – that we can achieve the best results. Allow your recruiting partner to battle for the best talent, demand your benefits provider to provide the best-in-class, most flexible programs, and ensure your technology infrastructure is standardized, variable cost, and high scalability.

In this month’s Jeitocast Karen Beaman interviews Steve Parker on how HR Shared Services can help achieve greater efficiencies and effectiveness.  Steve talks about how it’s important to realize that not every high-volume, transaction-based activity is necessarily a good candidate to move into a shared services group.  The most effective use of the HR Shared Services balances three components together to determine what should be transitioned:

1. move non-strategic, non-business unit critical activities that will scale appropriately to Shared Services while making sure the business units can still operate effectively,
2. make sure expertise exists within your Shared Services staff to handle the activities in a cost-effective manner with improved quality,
3. re-engineer or streamline processes before moving them to Shared Servcies to take advantage of process improvement and standardization.

If you can’t standardize a process, you need to give some second thoughts to moving it into an Shared Services group.  Many failures in the delivery of services from the Shared Services function can be tied back to non-standard, one-off processes that cannot be effectively managed by the Shared Services group.

Given today’s economic environment, companies are under pressure to do more with less.  Often this involves standing up a Shared Services function.  But unless care is taken to ensure that the right processes are identified, standardized, optimized, and that the Shared Services staff is adequately trained to handle them, the result can often be more costly and less efficient.

 

 How can HR shared services achieve greater efficiencies and effectiveness [20:50m]: Play Now | Play in Popup | Download

Jeitosa has just completed the preliminary analysis of Global Readiness Survey results. Some of the key findings include:

• Survey participants were asked what top three challenges they encountered in going global in the HR/HRIT function. The majority of respondents indicated cultural differences (53%) as the top external challenge they faced, followed by compliance with data privacy regulations (42%).

The good news is that there are solutions available for these challenges: leadership development, cultural awareness training, change management programs, and global communication plans can help individuals understand and appreciate cultural differences and provide tools and techniques for improving cross-cultural collaboration. Formalized strategies for dealing with data privacy challenges, particularly in dealing with the European Data Privacy Directive, can be developed and include approaches such as Safe Harbor, Model Contracts, and Corporate Binding Rules.

• The top internal challenges companies are facing in going global fall into two major categories: lack of technology and systems to support global initiatives (51%) and lack of experienced and culturally adept resources to work effectively in a global environment – both a lack of global leadership (47%) and a lack of sufficient other global resources (45%). Going global is a relatively new initiative for many companies, so it is not surprising that many would still be immature in these areas.

Solutions to these challenges are readily available, but organizations need to step up and realize that building a global infrastructure with global systems and global people takes effort, resources, budget, and time. More and more vendors are globalizing their product and service offerings making it now possible to source a global solution for HR systems. With the increased mobility and globalization of the workforce, it is also now possible to find experienced resources who understand first-hand the issues and challenges in designing and deploying a global solution.

• Working globally, companies are also experiencing some successes. By far, the greatest success they are finding is in developing and appreciating global diversity (68%). While this is a challenge for some, it is also a success for others. Generally, the more familiar one culture is with another, the greater the understanding and acceptance of the differences that exist.

You can download a copy of the preliminary research report by clicking here. The participate in the survey and receive a free, personalized copy of the full report, benchmarking your organization to others who have taken the survey, please click here.

• 50-65% of CEO’s and executives feel that talent management is at the top of their list of concerns; yet 2/3 of employers have no plans in place to do anything about it.
• Long-term planning for talent management does not make sense; because of the dynamic nature of business, and the rapidly changing competencies (knowledge, skills, abilities, aptitudes, etc.) required to meet today’s needs and those in the short to mid-term. Who knows what competencies will be required 10 years out — when most employer business plans only extend 1-5 years out?

An interesting conundrum to say the least. How do we reconcile this paradox of being strategic partners supporting the business long-term goals but without the crystal ball to see into the future? Please share your thoughts on how you’re resolving this dilemma.

Thanks, Paul, for pointing this out to all of us!

Few would argue that we live in a global world. Yet, exactly what we mean by “global” varies widely depending on whom you are talking to and what you are talking about. Globalization can mean simply that a company has offices outside their home country and sells their products and services in other countries. There may be little communication or sharing across these offices, but the company is operating globally nonetheless. On the other hand, globalization can mean that a company offers one global service or product to the world, and each of the country offices serve as conduits to the local market. And, of course, global can also mean anything along the continuum between these two extremes.

Likewise, few would argue against the assertion that the world is becoming increasingly more global. Yet there is a growing awareness of greater instability and uncertainty in the world than ever before. The current financial crises with subprime interests rates in the U.S., the political instability in the Middle East and Asia, the growing imbalances between the rich and poor, and global warming are some of the factors affecting our world and causing some retrenchment – some people might even say breakdown – in globalization.

According to Pankaj Ghemawat, global strategist, Harvard professor, speaker, and author, too many people are spouting off about the flattening of the world, the death of distance and the disappearance of differences across countries. These rantings are what Ghemawat calls “globaloney” – the illusion of a borderless, flat world and hence the tendency to overestimate the extent of and process of globalization. The fact is that most economic activity – including direct investment, tourism, and communication – happens locally, not internationally. In addition, the differences across countries and cultures are larger than many people realize. Ghemawat goes on to explain that in our “semi-globalized” world, one-size-fits-all strategies don’t stand a chance. Instead, companies must expect cross-border differences and be able to reconcile the discrepancies in a way that makes sense for them based on their culture, business goals, and current state of international development.

The problem is that globalization isn’t easy – in fact it’s downright complicated. Cross-border integration, various languages, multi-cultural communication, diverse people, organizations, and business practices make understanding and managing the process of globalization a difficult task – difficult, but not insurmountable. To be successful we have to think about globalization as a process – a journey to a final destination of complete cross-border integration that we may never reach, or not reach within this century. So the questions we should be asking ourselves is how global should we be? What are the important areas of the HR function to make global and what areas should be left local or regional? How do we reconcile the seemingly paradoxical differences across countries and businesses?

Ghemawat offers an approach he calls the AAA Triangle which focuses on strategies optimized for adaptation (adjusting to differences), aggregation (overcoming differences), and arbitrage (exploiting differences). The three A’s represent three distinct types of global strategy that companies can pursue. Adaptation seeks to improve performance by maximizing the company’s local presence. Aggregation is a way for companies to expand beyond their home country, delivering economies of scale by emphasizing regional and global operations; this involves standardizing product and service offerings and grouping together development and production processes. Finally, Arbitrage is the exploitation of differences between national and regional markets, often by shifting separate parts of the operations in different places, for example, call centers in India, manufacturing plants in China, and research and development offices in Poland.

What is your company’s global strategy? What are you doing in HR to support it?