![Since about 1975, a number of fundamental changes are developing with respect
to the firm. Due to TQM, processes are increasingly better specified and standar-
dized, increasing the number of processes eligible for either sharing across multiple
value chains or for outsourcing. In the exploitation of knowledge uncodified, perso-
nal knowledge has become at least or even more important as is the exploitation of
codified knowledge (Arrow, 1996; Jensen, 1998). The costs of information and com-
munication are declining as is the speed of communication increasing to real time
and the capacity of information channels is virtual unlimited (Jorgenson, 2001).
Since 1995, we witness the rise of information goods and with that a change in the
nature of resources to be exploited by firms and traditional tangible goods are
subject to meditation. The new resources, information, images, and knowledge
which can be exploited without being embedded in discrete physical goods have a
semipublic nature and require new business models, for example, the multiplier
profit model, to achieve highest levels of efficiency. That is, basically all the assump-
tions underlying the M-form and even the MBE are disappearing, in speed, kind,
and degree dependent from business to business and from industry to industry. As
was felt by managers since about 1990, the old M-form limited the capabilities of
the firm in view of the changing nature of the assets and in view of the new oppor-
tunities for organization design offered by the declining costs of information.
A strong intuition existed to do away with the M-form, but the M-form having
become an institution itself through reification due to its initial success induces a
number of resistances to be overcome by identities, attributed and acknowledged
roles, management accounting and reporting standards, expectations of investors,
lack of sufficient managers, and staff experts who were capable to work with alter-
native organization forms (the issue of organization capital intensity (Arrow,
1974)), lack of clear concepts on how to deploy information technology, etc. So a
tension was growing between what the changing nature of assets implied by require-
ments and new options, and the M-from as unconsciousness routine in business.
At the end of the eighties, Michael Porter analyzed why in that period
the Japanese economy and the German economy were more competitive as the US
economy. From that study Porter concluded: “Many American companies have
embraced a form of decentralization that involves autonomous business units
and limited information flows both vertically and horizontally. … [successful]
Companies practice a form of decentralization that involves much greater informa-
tion flows among multiple units in the company as well as with suppliers and custo-
mers” (Porter & Wayland, 1992). In the same publication, it was stated that
intangible assets, especially human capital, information capital, and organization
thus capital, are more important in the economic system of a firm to create value
and for the market value of the firm as are tangible assets (Arrow, 1996; Kaplan &
Norton, 1992). There was a plea for the network-type organization, with free flows
of knowledge, people, and information across business lines and IT organized as an
enabling infrastructure (Nolan & Croson, 1995). However, the functional fields of
management control and management accounting did not move, they clung to the
M-form and these functions did not offer solutions to turn the economically sound
intuitions of executives and entrepreneurs into operational practices to answer the
Shared Service Centers 9](https://image.slidesharecdn.com/25654462-250521232631-147ac350/85/Shared-Services-As-A-New-Organizational-Form-Tanya-Bondarouk-28-320.jpg)
![But an element in the attraction of shared services was its positioning as part
of a wider reform of HR structures. Lentz (1996) talked, for example, of finding in
his study of shared services that the successful organizations managed to integrate
the competitive features of customer focus and flexibility with the equally competitive
features of economies of scale.
This “hybrid model” shifts the idea from shared services being directly customer
responsive to a situation where it is the “embedded” parts of HR that meet custo-
mer needs (Ulrich, 2007); shared services becomes simply an administrative function
that should be as efficient as possible.
The consequence was that the introduction of shared services was very
quickly seen to be primarily about a way of cutting costs rather than delivering
customer value. As a Deloitte study pointed out (2005) a large majority of orga-
nizations surveyed introduced shared services and transformed their function to
save money. Farndale and Pauuwe’s (2008) survey in the Netherlands put the
cost as the main goal and benefit of HR shared services, and besides a quality
driver, there were also other efficiency imperatives involved, especially the stan-
dardization of HR processes. Our report for the CIPD (Reilly, Tamkin, &
Broughton, 2007, p. 14) came to the same conclusion: “The decision to introduce
shared services seemed in most [case study] organisations to be driven primarily
by cost, efficiency and headcount considerations.” Research on HR trans-
formation for global companies (Reilly & Williams, 2012) reported that standar-
dization was a key component and wrapped up together with automation and
consolidation.
Pooled experience
Enhanced lateral
career progression
Cross-organizational
synergies
Lean, flat
organization
Recognition of
administrative
activities
Dissemination
of good practice
Business
units
maintain
control of
decisions
Recognition
of local
priorities
Responsive
to client
needs
Common
systems &
support
Consistent
standards &
control
Economies
of scale
Critical
mass of
skills
Shared Services
Central overhead
cost
Less responsive
to business unit
needs
More remote
Higher costs
Variable
standards
Different control
environments
Duplication of
effort
Centralized
Decentralized
Figure 1: The benefits and disbenefits of different organizational models.
Source: Adapted from PWC by Bramson (2005).
20 Peter Reilly](https://image.slidesharecdn.com/25654462-250521232631-147ac350/85/Shared-Services-As-A-New-Organizational-Form-Tanya-Bondarouk-39-320.jpg)
![activities” was the top challenge for business partners, with the tension between
corporate and business unit needs a close second. The report’s case studies illu-
strated these points with one HR team member saying: “we have replaced one set
of silos [based on business units] with another [based on HR functions].”
Those restructuring HR believe that there should be a clear separation between
shared services centers concentrating on administration and transactional tasks
and information provision via a call center, the business partner focusing on
strategy, the centers of expertise on policy development and high level advice,
and the corporate center on HR strategy and governance. If there are consultants
they may provide project support in concert with either the business partners
or centers of expertise and if there are operational HR advisers they may
source their work from shared services, business partners or directly from line
management.
However, the picture that emerges is that the principal downside to three-legged
stool model comes from the very segmentation of the service into discrete operating
parts that made it attractive in the first place.
Ulrich explicitly identified the risk of role confusion in his seminal (1995, p. 16)
article on shared services:
Mixing Service Centers and Centers of Excellence may result in confusion since both have dif-
ferent purposes and require different organizational arrangements to operate.
The challenge is that this division of labor produces fragmentation that hinders
the integration of HR activities and leads to poor customer service. There are lots
of boundaries between activities that need to be managed and role accountabilities
to be defined. As Cooke found in his case study of an multinational company
(2006, p. 217):
A(nother) consequence of the removal of the local HR office has been the lack of clarity of
ownership of problems that may occur in HR services. This is true for employees and man-
agers alike.
As further evidence, survey results reported by Sparrow, Hird, Hesketh, and
Cooper (2010) indicate that the vast majority of their respondents felt their struc-
tures needed “further refinement” and 41% need to deliver “joined up” services.
Depending on the range of their activities, shared service centers can and
do have interface issues with all their functional colleagues. This can lead to the
following difficulties:
▪ Who is accountable to the business unit customer? Business partners as they
front the function to the customer? But they are supposed to avoid getting
involved in administrative or operational activities. So is shared services responsi-
ble for its actions directly to the customer?
▪ How well do centers of expertise take account of the administration of policy
and practice change that shared services will be asked to deliver? For example,
are the payroll implications of reward modernization properly considered at an
early enough stage?
Managing Boundaries Better 27](https://image.slidesharecdn.com/25654462-250521232631-147ac350/85/Shared-Services-As-A-New-Organizational-Form-Tanya-Bondarouk-46-320.jpg)
Shared Services As A New Organizational Form Tanya Bondarouk
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- 6. SHARED SERVICES AS A NEW ORGANIZATIONAL FORM
- 7. ADVANCED SERIES IN MANAGEMENT Previous Volumes: Relational Practices, Participative Organizing EDS. CHRIS STEYAERT AND BART VAN LOOY Autopoiesis in Organization Theory and Practice EDS. RODRIGO MAGALHAES AND RON SANCHEZ Organizations as Learning Systems “Living Composition” as an Enabling Infrastructure ED. MARJATTA MAULA Complex Systems and Evolutionary Perspectives on Organizations: The Application of Complexity Theory to Organizations ED. EVE MITLETON-KELLY Managing Imaginary Organizations: A New Perspective on Business EDS. BO HEDBERG, PHILIPPE BAUMARD AND A. YAKHLEF Systems Perspectives on Resources, Capabilities and Management Processes EDS. JOHN MORECROFT, RON SANCHEZ AND AIMÉ HEENE Tracks and Frames: The Economy of Symbolic Forms in Organizations ED. K. SKOLDBERG Electronic HRM in Theory and Practice EDS. T. BONDAROUK, H. RUËL AND J.C. LOOISE Commercial Diplomacy and International Business: A Conceptual and Empirical Exploration ED. H. RUËL (Dis)honesty in Management: Manifestations and Consequences EDS. TIIA VISSAK AND MAAJA VADI Social Media in Strategic Management EDS. MIGUEL R. OLIVAS-LUJÁN AND TANYA BONDAROUK Social Media in Human Resources Management EDS. TANYA BONDAROUK AND MIGUEL R. OLIVAS-LUJÁN
- 8. SHARED SERVICES AS A NEW ORGANIZATIONAL FORM EDITED BY TANYA BONDAROUK School of Management and Governance, University of Twente, Enschede, The Netherlands United Kingdom North America Japan India Malaysia China
- 9. Emerald Group Publishing Limited Howard House, Wagon Lane, Bingley BD16 1WA, UK First edition 2014 Copyright r 2014 Emerald Group Publishing Limited Reprints and permission service Contact: [email protected] No part of this book may be reproduced, stored in a retrieval system, transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without either the prior written permission of the publisher or a licence permitting restricted copying issued in the UK by The Copyright Licensing Agency and in the USA by The Copyright Clearance Center. Any opinions expressed in the chapters are those of the authors. Whilst Emerald makes every effort to ensure the quality and accuracy of its content, Emerald makes no representation implied or otherwise, as to the chapters’ suitability and application and disclaims any warranties, express or implied, to their use. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN: 978-1-78350-535-7 ISSN: 1877-6361 (Series) Certificate Number 1985 ISO 14001 ISOQAR certified Management System, awarded to Emerald for adherence to Environmental standard ISO 14001:2004.
- 10. Contents List of Contributors vii Shared Services: New Opportunities for Research and Practice ix 1. Shared Service Centers: From Cost Savings to New Ways of Value Creation and Business Administration J. Strikwerda 1 2. Managing Boundaries Better: The Key to More Effective HR Shared Services Peter Reilly 17 3. Shared Services — Standardization, Formalization, and Control: A Structured Literature Review Tanya Bondarouk and Christina-Maria Friebe 39 4. What Is Shared Services? Joseph Soalheira and Greg Timbrell 67 5. Governance and Control of Shared Service Centers Reinald Minnaar 85 6. Structuring Shared Services: Realizing SSC Benefits Through End-Users’ Usage of an HR Portal Jeroen Meijerink, Joost ten Kattelaar and Michel Ehrenhard 105 7. A Knowledge Management Perspective to Shared Service Centers: A Case Study of a Finance SSC Ian Herbert and Will Seal 133
- 11. 8. Value Creation by Transactional Shared Service Centers: Mapping Capabilities Marco Maatman and Tanya Bondarouk 153 9. Interorganizational Shared Services: Creating Value across Organizational Boundaries Paul C. van Fenema, Bianca Keers and Henk Zijm 175 vi Contents
- 12. List of Contributors Tanya Bondarouk University of Twente, Enschede, The Netherlands Michel Ehrenhard University of Twente, Enschede, The Netherlands Christina-Maria Friebe University of Twente, Enschede, The Netherlands Ian Herbert The Centre for Global Sourcing and Services, Loughborough University, Loughborough, UK Bianca Keers Royal Netherlands Navy, Julianadorp, The Netherlands Marco Maatman University of Twente and Atos, Enschede, The Netherlands Jeroen Meijerink University of Twente, Enschede, The Netherlands Reinald Minnaar Radboud University Nijmegen, Nijmegen, The Netherlands Peter Reilly Institute for Employment Studies, London, UK Will Seal Loughborough University, Loughborough, UK Joseph Soalheira Queensland University of Technology, Brisbane, Queensland, Australia J. Strikwerda Universiteit van Amsterdam, Amsterdam, The Netherlands
- 13. Joost ten Kattelaar University of Twente, Enschede, The Netherlands Greg Timbrell Queensland University of Technology, Brisbane, Queensland, Australia Paul C. van Fenema Netherlands Defence Academy, Breda, The Netherlands Henk Zijm University of Twente, Enschede, The Netherlands viii List of Contributors
- 14. Shared Services: New Opportunities for Research and Practice Some argue that the term “Shared Services” was introduced in 1980s (Davis, 2005) although it was only in the 1990s that the research arenas in different disciplines welcomed this concept into their scholarly investigations. Today, organizations are increasingly introducing shared services and establishing Shared Service Centers (SSCs), for transactional (administrative) or for transformational (organizational change) purposes. Their popularity presupposes a combination of efficiency gains and increased service quality, without having to relinquish control of the organiza- tional and technical arrangements. Whether transactional or transformational shared services are established, the belief is that they should be able to maximize the advantages of both centralized and decentralized delivery of business functions (Bondarouk, 2011; Maatman, Bondarouk, & Looise, 2010; Meijerink & Bondarouk, 2013). Standardization, labor division, efficiency, control, coordination, centralization, resource bundling … : are we reinventing the wheel? Have organizations finally resolved the century-old dilemma of how to create standardized procedures using shared processes and technologies that can deliver faster, more efficient, and sustainable quality services? This volume was inspired by the above, and some other more specific, questions, such as what structural arrangements are required between shared services providers and organizations to secure the success of both? Further, which business processes can and/or should be shared, how does one get the best value from sharing services, and who are the stakeholders? Since the 2000s, researchers have been devoting increasing attention to examin- ing shared services, and findings have accumulated about their purposes and the implementation processes (e.g., Janssen & Joha, 2006; Quinn, Cooke, & Kris, 2000; Reilly & Williams, 2003). Major investments are involved and are justified on the expectation that sharing services will improve business quality and contribute to its organizational effectiveness by freeing decentralized professionals from administra- tive burdens and thereby allowing them to undertake critical strategic management activities (Strikwerda, 2010). Shared services are seen as a way of implementing business strategies, policies and practices, often through the use of information technology based channels, from a
- 15. single location that houses targeted activities for a selected domain of an organiza- tion. SSCs are often associated with “insourcing” corporate activities: creating a new business unit to provide services to a range of in-house clients (Cooke, 2006; Davis, 2005). The ethos behind the service concept is that clients decide which services they would like to receive from the center, rather than the business function within the organization deciding on which services it will deliver. Shared services are thus designed to deliver services of the highest value at the lowest cost to internal or “pseudo-external” clients (Reilly, 2000; Reilly & Williams, 2003). Although the authors of the chapters in this volume offer various definitions of shared services (see the overview and extended discussion by Joseph Soalheira and Greg Timbrell later in this volume), it is convenient to outline from the start the essential meaning of shared services. In so doing, I follow the research tradition of viewing shared services as involving the bundling of resources and intellectual capital (Maatman et al., 2010; Meijerink, Bondarouk, & Looise, 2013). From this perspec- tive, shared services play a key role in the (re-)design of the organizational model for the delivery of targeted business processes and therefore for the outcomes of the tar- geted business function as a whole. It has been suggested that to achieve an inclusive understanding of shared services one should integrate: (1) the distinctive features of the shared services; (2) the service provider that offers these shared services matched to the specific types of end-users; and (3) an intra-organizational business arrange- ment, that is the formal structure that defines the responsibilities and delegation of tasks within a business function (Bondarouk, Maatman, & Meijerink, 2010; Dibbern, Goles, Hirschheim, & Jayatilaka, 2004). That is, a Shared Services Model should include a collection of shared services whose characteristics are determined by the customers, provided within an intra-organizational business arrangement, to a specific set of end-users, by a semi-autonomous or autonomous business unit (the service provider) on the basis of agreed conditions. The chapters that follow move beyond debating the relevance of shared services toward more systematic research into the structure and governance, knowledge man- agement and dynamic capabilities, enactment and institutionalization, plus new value creation by Shared Services Models. Somewhat simplistically, all contributions reflect a one-dimensional input output line: that is, studies focus on the nature of a shared services provider, the characteristics of the shared services model including its composition, structures and service types, and the value created for customers, end-users and organizations as a whole. After accumulating knowledge for almost three decades on the business life of shared services, authors from a range of scho- larly traditions here revive the discussion as to what constitutes shared services, what do these models bring to the business, and what conditions are necessary for their success. There are five main theoretical priorities that shape the content: conceptualizing shared services for different types of business processes; business strategy and shared services; shared services and performance; pluralism in organizing shared services; and usage and governance of shared services in different types of organizations. Thus, the opening chapter in this volume by J. Strikwerda challenges scholars by re-conceptualizing Shared Service Centers in terms of the changing nature of the x Introduction
- 16. firm and offers practitioners an instrument to define more efficient change processes. The chapter by Peter Reilly offers a discussion about the potential for service frag- mentation. It argues that shared services within a single business function (particularly within Human Resource Management) should be appropriately connected to the rest of this function in order to offer customers an integrated service “to avoid the structure’s division of labour inducing incoherence.” The chapter by Reinald Minnaar explores the governance and control aspects of the intra-firm relationships of a Shared Service Center, and concludes that the decision to implement an SSC entails choosing a management control structure and then a governance structure for the transactional relationships between the SSC and its cus- tomers. The chapter by Tanya Bondarouk and Christina-Maria Friebe investigates the structural dimensions of shared services reported in the literature, and observes that although centralization has been one of the most discussed dimensions, there is still no consensus as to whether the models should be centralized or decentralized. Further, standardization and formalization are generally seen as very important, along with a need for customization. Since the 1990s, the literature has been advancing a number of benefits that are expected to flow from the introduction of shared services in organizations: an integrated “total solution” approach to problems through the re-centralization of the business function (the one-stop shop); a more selective and strategic contribution by freeing staff from the burdens of administration, enabling them to undertake critical management activities; greater efficiency and professional service provision through simplifying services and providing a single point of contact for clients; cost- effectiveness; more efficient resourcing through economies of scales in staffing; improved cross-group learning and the sharing of good practices through a shared information base; better information management provided more consistently across the organization as a whole; improved career development for staff; greater custo- mer satisfaction through better service specification; greater transparency of cost of services and easier monitoring of budgets (Schulman, Lusk, Dunleavy, & Harmer, 1999). Several chapters in this volume discuss the intended and realized benefits of shared services from a range of theoretical perspectives. The chapter by Paul C. van Fenema, Bianca Keers, and Henk Zijm explores how inter-organizational shared services can be positioned in value chains, distinguishing vertical, horizontal, and hybrid variants. The chapter by Ian Herbert and Will Seal shows how SSCs, as a hybrid organizational form, can help in redefining core versus non-core activities within a firm and thus play a role in the creation of form-specific dynamic capabil- ities. The contribution by Marco Maatman and Tanya Bondarouk promotes the value of the mapping approach to connecting Shared Services Providers, based on the operational and dynamic capabilities of a transactional Shared Service Center. This chapter shows that, if mapped constructively, the dynamic capabilities enable the transformation of service delivery throughout the organization and increase the function’s strategic contribution. Further, the operational capabilities enable an SSC to provide day-to-day services and take care of individual end-users and support the business. Introduction xi
- 17. Jeroen Meijerink, Joost ten Kattelaar, and Michel Ehrenhard in their contribution argue that “a popular argument in existing studies is that the benefit of shared ser- vices follows from the design of the organizational structure” of the Shared Service Center. They continue that many studies overlook the fact that shared services, as with many organizational innovations, are often used differently than envisaged by executives and their designers, and that therefore a new research perspective focus- ing on the way end-users and customers inscribe and enact shared services is worthwhile. Overall, the chapters that make up this volume reveal some of the major concep- tual and methodological tensions, paradoxes, and doubts that the research and prac- tice of Shared Service Mode face given the changing nature of firms. Hopefully, it suggests the way forward to the next phase of research and development in Shared Service Mode. The key issues presented in this book lead us to conclude that this research is now moving toward crystallizing its theoretical backgrounds and broadening its methodological approaches. We believe that this book provides executives and managers with a better under- standing of the applications and uses of Shared Service Mode; suggestions on ways to create benefits beyond cost savings; insights into specific control and governance structures; and possible solutions to the risks observed in the introduction of Shared Service Mode. Tanya Bondarouk Editor References Bondarouk, T. (2011). A framework for the comparative analysis of HR shared services models. In T. Bondarouk, H. Ruël, & J. C. Looise (Eds.), Electronic HRM in theory and practice (pp. 83 104). Advanced Series in Management. Bingley, UK: Emerald Group Publishing Limited. Bondarouk, T., Maatman, M., & Meijerink, J. (2010, May). Human resource shared services: Business models and value creation. Results of a qualitative benchmark study. Research report into the value creation by HRM SSMs. University of Twente, The Netherlands. Cooke, F. L. (2006). Modeling an HR shared services center: Experience of an MNC in the United Kingdom. Human Resource Management, 45(2), 211 227. Davis, T. R. V. (2005). Integrating shared services with the strategy and operations of MNEs. Journal of General Management, 31(2), 1 17. Dibbern, J., Goles, T., Hirschheim, R., & Jayatilaka, B. (2004). Information systems outsour- cing: A survey and analysis of the literature. The Data Base for Advances in Information Systems, 35(4), 6 102. Janssen, M., & Joha, A. (2006). Motives for establishing shared service centers in public administrations. International Journal of Information Management, 26(2), 102 115. Maatman, M., Bondarouk, T., & Looise, J. C. (2010). Conceptualizing the capabilities and value creation of HRM shared service models. Human Resource Management Review, 20(4), 327 339. xii Introduction
- 18. Meijerink, J., & Bondarouk, T. (2013). Exploring the central characteristics of HR shared services: Evidence from a critical case study in the Netherlands. The International Journal of HRM, 24(3), 487 513. Meijerink, J., Bondarouk, T., & Looise, J. C. (2013). Value creation through HR shared services: Towards a conceptual framework. Personnel Review, 42(1), 83 104. Quinn, B., Cooke, R., & Kris, A. (2000). Shared services: Mining for corporate gold. Harlow: Pearson Education Limited. Reilly, P. (2000). HR shared services and the realignment of HR. Brighton: Institute for Employment Studies. ISBN:978-1-85184-298-8 Reilly, P., & Williams, T. (2003). How to get best value from HR: The shared services option. Aldershot: Gower Publishing Limited. Schulman, D. S., Lusk, J. S., Dunleavy, J. R., & Harmer, M. J. (1999). Shared services: Adding value to the business units. New York, NY: Wiley. Strikwerda, J. (2010). Shared service centers II: Van kostenbesparing naar waardecreatie. Assen Den Haag: Van Gorcum Stichting Management Studies. Introduction xiii
- 20. Chapter 1 Shared Service Centers: From Cost Savings to New Ways of Value Creation and Business Administration J. Strikwerda Abstract Purpose — The reason of this chapter is to clarify at a conceptual level the phenom- enon of shared service centers. The aim of the chapter is to enable managers make better decisions when applying the concept of shared service centers. Design/method/approach — This is a conceptual chapter, in which the phenomenon of shared service centers is being rewritten, from an initial cost efficiency level, into a constituting building block in the new nature of the firm. Findings — The findings of this chapter are that especially the combination of financial shared service centers and IT shared service centers are an instrument to organize information outside the structure of the internal organization of the firm, as implied by the changing nature of the firm. Also shared service centers are enablers for new business models, especially those based on human capital. Practical implications — Executives and managers that have a better conceptual understanding of the application of shared service centers will create more benefits beyond costs savings. Originality/value — This is the first chapter in which shared service center is recon- ceptualized in terms of the changing nature of the firm. With that it is also one of the first chapter describing the changing nature of the firm in operational terms. The value of the chapter is that it will help executives to define more efficient Shared Services as a New Organizational Form Advanced Series in Management, Volume 13, 1 15 Copyright r 2014 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1877-6361/doi:10.1108/S1877-636120140000013000
- 21. change processes. A second value of the chapter is that it opens new avenues of empirical and conceptual research for academia. Keywords: Shared service centers; financial shared service centers; ICT-SSC; nature of the firm; intangible assets; business administration; cost savings; organization of information; organization theory; organization design; M-form Introduction At the end of the eighties in the 20th century, the first appearances of what would be called shared service centers demonstrated themselves in a number of US companies. One of the first was a shared service centers of the US Army that among others processed travel expenses. In the nineties, there was a slow growth, be it poorly documented, on the application of shared service centers, in many cases these were about ICT services, and for HR transactions. Financial shared service centers also made their appearance, but the growth of Financial Shared Service Center (FSSC) would demonstrate itself after 2000. Today virtual no multinational company or other large organization, and even government organization, can be identified which does not operate one or multiple SSCs. This is remarkable because the concept of shared service center was no part of traditional theories for organization design. Even more, the introduction of the concept of the shared service center is a fundamental digress from the so successful M-form. Therefore, the phenomenon of the SSC raises a number of questions. A first question is what distinguishes an SSC from a staff department? A second question is by what theory it can be explained that introducing an SSC in an existing M-form will produce a more efficient organization? A third question is how the concept of the SSC is consistent with the need of decentralization of decision making and entrepreneurship, especially in the information economy? A fourth question is whether SSCs are consistent with new business models and especially with the changing nature of the firm, due to the salience of intangible assets? To develop answers to these and other questions will help practitioners in better decision making and in managing the introduction of SSCs where appropriate and to achieve sought for efficiency of the organization. Also good theories will help those involved to cope with change, develop new understanding and skills to be able to work produc- tively in a context with SSCs. A better understanding of the phenomenon of SSCs by academics will produce better research, new insights in theories for organization design and will improve teaching on organization design and organization forms. The questions reflect the scope and objectives of this chapter. To achieve this in the section “What Are Shared Service Centers and What Not?,” the phenomenon of shared service centers will be described by definition, objectives, results, and demar- cation. The section “Shared Service Centers and Organization Theory” will provide an explanation of the shared service centers in terms of organization theory. 2 J. Strikwerda
- 22. The section “SSCs and the Changing Nature of the Firm” will be a reflection of the phenomenon of SSCs in terms of the changing nature of the firm. In the section “Closing,” an explanation of the phenomenon of SSCs will be presented in terms of the changing nature of the firm, leading among others to the conclusion that the name shared service centers is blocking our view on what shared service centers really are about; Herbert Simon’s insight that in the design of the internal organiza- tion the organization of information is the first parameter, no longer structure is. The closing section provides a number of views with respect to the implications of the gained insight with respect to practice, research, and education. What Are Shared Service Centers and What Not? A shared service center can be defined as an accountable entity in the internal organization of a firm or institution, tasked to deliver specialized services to opera- tional units (business units, divisions) on basis of a service-level agreement Service Level Agreement (SLA) against set transfer prices (Strikwerda, 2010). These ser- vices usually are about ICT services, HR transactions and HR support, finance and accounting, purchasing, facilities, but also examples exist of shared service centers providing manufacturing services, logistic services, medical services, etc. Typical statutory support for the executive board, legal counsel, management development, business development and strategy, and corporate control are consistently not allo- cated in a shared service center. Typical examples of shared service centers in the Netherlands are the SSC Finance of Philips Electronics (organized distributed on a number of places in the world), the back-office SSC of Randstad, the functional SSCs of the chemical multinational DSM, the CDC organization of the Dutch Defense organization, and SSCs for HR and ICT in the Dutch government. Empirical research for achieved cost savings is wanting. First, because little research on cost savings is done. Second, because of measurement problems and a lack of good quality information within firms. The measurement of the initial costs of the processes to be organized in an SSC should be in the situation in which those processes are still organized within the business units or divisions. Often these costs are not known and target setting and measurement starts at the start of the SSC as a result of which costs remaining in the business units are not taken into account. The research available suggests that US firms achieve costs savings on financial SSCs typically between 40% and 70% within two years, but European firms between 25% and 50% (Bangemann, 2005). Respondents report benefits other than cost savings from SSCs: achievement of synergies (e.g., in purchasing, increased purchasing power), improved use of knowledge of various kinds, higher level of quality of services, higher degree of transparency in the organization, strategic flexibility of the firm, and an improved position on the labor market for support function because better career prospects can be offered (Strikwerda, 2010). Shared service centers are to be distinguished from corporate or central staff departments. The distinction between those two is summarized in Table 1. Shared Service Centers 3
- 23. The definition provided suggests the existence of SLAs between a shared service center and a business unit or division, based on a set transfer price. The reality is more complicated, dependent on factors like the role of services provided in the customer value proposition, dynamics in the customer value proposition, whether costs of services are volume sensitive or not, and whether volumes of products or services are volatile or not. Also the nature of the SLA and the system of cost charge out may depend on the phase of development of the shared service center, the professionalism of the business units as “purchasers” of services and the level or conceptualization of the shared service center by headquarters (whether an SSC mainly is perceived as an instrument for cost savings or whether it is deployed in the context of a corporate strategy). Shared Service Centers and Organization Theory The concept of the shared service center violates the concept of the M-form (the multidivision or multibusiness organization) within which this concept is being Table 1: Defining differences between shared service centers and central staff departments (Strikwerda, 2010). Shared service center Central staff department Customer oriented, customer is BU Oriented toward the HQ, to the Executive Board Delivering service is core business Service to BUs is subordinate to defining policies and implementation of policies Provided services are based on requirements of the BUs Services are based on corporate policies Cost coverage/allocation of budgets is based on demand Cost coverage/allocation of budgets is based on corporate objectives and HQ budgets Operational culture Staff culture Costs per unit of service are calculated and managed SL Blind cost center; cost per unit of service are not calculated, reported nor managed Services are based on an SAL and on basis of documented processes Services are based on procedures and functional authorities Located where conditions, labor market, cyber infrastructure, are most optimal for the operation Located at site of HQ Accountability is primarily for the quality of services and costs Accountability of primarily for policy formulation and the cost budget of the department 4 J. Strikwerda
- 24. applied. In the M-form, the manager of a business unit or a division has a bottom- line responsibility to achieve an assigned strategic and financial performance in an assigned market segment or business, and to that end this manager has hierarchi- cal control over all the resources needed to accomplish the assigned objectives, including management accounting, HR, ICT, except some reserved powers with respect to, for example, corporate legal affairs, accounting standards, and such (Strikwerda, 2003a). It has been reported that the M-form is the most successful organization form of the 20th century in terms of its contribution to the growth of our economy (Williamson, 1985, p. 279). Also the M-form is the default organization form at the level of internal governance in textbooks for management accounting, management control, organization design, etc. Why then is there such a large-scale abandonment of the successful M-form? As so often in business, intuition precedes explaining or legitimizing theory, but not necessarily a more fundamental theory. A first level for a theoretical explana- tion of shared service centers can be found in the phenomenon of convex curves for marginal costs and average costs as a function of quantity of output (Brickley, Smith, & Zimmerman, 2001, p. 111). For a long time, it is a well-known phenom- enon that the different parts or activities in a value chain of a business have differ- ent cost curves (marginal costs, average costs) resulting in different minimum efficient scales for each of those activities (Figure 1). In case the value chains of a multibusiness firm have similar subprocesses which can be alternatively applied in each of those value chains (e.g., IT) and have a minimum efficient scale which is larger than the minimum scale of the complete value chain (the subprocesses A1 A3 in Figure 1), the firm has an opportunity to increase the efficiency of the organization of the firm as a whole by sharing the sub- process A across the three divisions, provided this can be done subadditive, that is that the costs of the additional required coordination are offset by the gains in efficiency. Within the traditional theory of organization design, the sharing of the similar process A across the three businesses would be organized by creating a central department. This however might be detrimental to the focus on assigned markets by the business units and impair the scope of accountability of the management of the business unit. The success of the M-form can be explained in multiple ways: one simplified explanation is that the M-form combines a best focus on markets with lowest costs of organization, being the sum of costs of coordination and costs of duplication of (support) functions (curve C in Figure 2). (The M-form does have a corporate headquarters with multiple staff departments creating an added value to each of the businesses (Chandler, 1996; Goold, Campbell, & Alexander, 1994)). By reducing the costs of duplication of functions by creating centralized depart- ments, the curve for the total costs of organization would be the curve B B’ in Figure 2, favoring the functional organization. However, this curve does not reflect the benefits of market orientation. What the concept of shared service cen- ters does, as is reflected in its name, is not creating a functional organization, but Shared Service Centers 5
- 25. Figure 2: The relation between type of organization form and total costs of organization. Figure 1: The value chains of a multidivision firm, which each division having the same minimum efficient scale, but within each of the value chains the constituent sub-activities having different minimum efficient scales. 6 J. Strikwerda
- 26. maintaining the scope of accountability of the manager of the business unit, while modifying the scope of control over resources. The manager of a business unit decides which services to procure from the shared service center or not and vice versa, and the shared service center is funded from the budget of the business unit, not from a central, corporate budget. It is assumed that business managers can articulate adequately and efficiently their demand for services to be provided by a shared service center, including a business case. This should result in a most efficient allocation of resources within the firm; a shared service center in theory is a step in decentralizing decision making for resource allocation, not centralizing. In theory, the manager of a business unit is a perfect principal to the shared ser- vice center because he knows precisely (based on Total Quality Management (TQM) techniques) his processes and is able to write in an efficient way complete contracts with the shared service center, also because in the period (1990 2000), the costs of coordination declined due to the capital deepening of ICT (Varian, Farrell, & Shapiro, 2004). As a result, the curve of the total costs of organization changes from C to C’ thus maintaining the M-form with its focus on the market. A number of case studies reveal that in a majority of cases (but for this survey-type quantitative research is lacking), the true concept and underlying micro- economic theory is not understood (Strikwerda, 2003b). The underlying microeco- nomic theory of the shared service center implies that, at least in those situations, in which a strong relation exists between the nature of the services rendered by a shared service center and the customer value proposition and a high variability or volatility exists for the latter, the bottom-up resource allocation process (Bower, 1986), which is so typical for the administration of the M-form, is adapted to an economic model of the firm exploiting synergies through shared service centers (Strikwerda, 2010, p. 194). Because in the theory of organization design, the resource allocation process is not a design parameter, whereas it should be (Bower, 2003; Bower & Gilbert, 2005; Kaplan & Norton, 2008), in many cases, but not all, the introduction of the concept of shared service center created problems resulting in not achieving the potential efficiencies implied by the concept as explained. As to be explained by March’s concept of belief conservation (March, 1994) in many cases, management and others involved, including management consultants, applied the concept of the shared service center, without acknowledging that this implied a departure from the M-form, but instead mentally and conceptually clung to the familiar M-form and all its rituals, identities, rules, and processes: assigning SSCs the status of division (e.g., in the case of the ING Bank, which now has been repaired), having the manager of an SSC report to all division managers simulta- neously without executive involvement, sticking to the resource process as typical for the M-form. Like in the early days of the M-form, in many cases, a corrupted concept of the SSC was applied; in some cases, executives managing the costs of divisions not up-front in direct relation with the division managers, but through the backdoor of the SSC, thus eroding the confidence of members of the organization in the concept of the SSC. Shared Service Centers 7
- 27. SSCs and the Changing Nature of the Firm The question to be asked is whether the concept of the shared service center is intended to increase the efficiency of the M-form or whether the concept of the SSC reflects a more fundamental change in the nature of the firm. An organization (form) is efficient if there is no available alternative that is universally preferred in terms of the goals and preferences of the people involved (Milgrom & Roberts, 1992, p. 22). The M-form is one of a limited set of organization forms applied in the 20th cen- tury (Grandori & Kogut, 2002; Williamson, 1985). This limited set of organization forms constitutes one of the complexity-reducing institutions in the 20th century as needed for efficient relations between actors in the economy in a context of high costs of information and a limited capacity to process information (North, 1991). However, these organization forms not necessarily would produce the technically highest level of efficiency, whereas neoclassical economics requires the technical possible highest level of efficiency and thus wants to reduce the role of complexity- reducing institutions. The M-form developed within the specific institutional arrangement labeled by Chandler as the Modern Business Enterprise (MBE) (Chandler, 1977). Chandler focused on the M-form as being typical for the MBE, Zingales rightfully deepened the concept in terms of the nature of its assets, the limits of the MBE, the role of knowledge, and some other parameters which provide a more accurate description of the nature of the firm compared to the original description of the nature of the firm as provided by Coase and the MBE as provided by Chandler (Arrow, 1996; Chandler, 1977; Coase, 1937; Zingales, 2000). The MBE was shaped by at the end of the 19th century by the then new corporate laws, property laws, and labor laws in the various western jurisdictions. These three laws in their turn were based on tangible assets and on patent law as the only form of intangible assets. The latter reflected the acknowledgment and salience of the exploitation of codified knowledge. Tacit, uncodifiable knowledge as held by trained workers in some way was acknowledged but labor, including the knowledge carried by trained workers, both in neoclassical economic theory and in the three constitu- tive laws was defined to be a bought commodity by the firm; it is no part of the firm. Through idiosyncratic work methods and standards, and an immobile labor market, in most cases workers carrying tacit knowledge could not turn this asset into an economic bargaining power. The methods for industrial engineering, based on the concept of scientific management, aimed for codifying all knowledge and making it a property of the corporation. With that the M-form, in Chandlers definition so typical for the MBE, was based on tangible assets and knowledge codified in those assets, which were not or only costly interchangeable to be used across multiple products and or markets. The synergies to be achieved in the M-form were limited to finance, management development, R&D, and dependent on the nature of the indus- try, to a number of components or subsystems. Also, the M-form was based on high costs of information, high costs of communication, a low speed of communication, and a limited capacity of communication channels (Stinchcombe, 1990). 8 J. Strikwerda
- 28. Since about 1975, a number of fundamental changes are developing with respect to the firm. Due to TQM, processes are increasingly better specified and standar- dized, increasing the number of processes eligible for either sharing across multiple value chains or for outsourcing. In the exploitation of knowledge uncodified, perso- nal knowledge has become at least or even more important as is the exploitation of codified knowledge (Arrow, 1996; Jensen, 1998). The costs of information and com- munication are declining as is the speed of communication increasing to real time and the capacity of information channels is virtual unlimited (Jorgenson, 2001). Since 1995, we witness the rise of information goods and with that a change in the nature of resources to be exploited by firms and traditional tangible goods are subject to meditation. The new resources, information, images, and knowledge which can be exploited without being embedded in discrete physical goods have a semipublic nature and require new business models, for example, the multiplier profit model, to achieve highest levels of efficiency. That is, basically all the assump- tions underlying the M-form and even the MBE are disappearing, in speed, kind, and degree dependent from business to business and from industry to industry. As was felt by managers since about 1990, the old M-form limited the capabilities of the firm in view of the changing nature of the assets and in view of the new oppor- tunities for organization design offered by the declining costs of information. A strong intuition existed to do away with the M-form, but the M-form having become an institution itself through reification due to its initial success induces a number of resistances to be overcome by identities, attributed and acknowledged roles, management accounting and reporting standards, expectations of investors, lack of sufficient managers, and staff experts who were capable to work with alter- native organization forms (the issue of organization capital intensity (Arrow, 1974)), lack of clear concepts on how to deploy information technology, etc. So a tension was growing between what the changing nature of assets implied by require- ments and new options, and the M-from as unconsciousness routine in business. At the end of the eighties, Michael Porter analyzed why in that period the Japanese economy and the German economy were more competitive as the US economy. From that study Porter concluded: “Many American companies have embraced a form of decentralization that involves autonomous business units and limited information flows both vertically and horizontally. … [successful] Companies practice a form of decentralization that involves much greater informa- tion flows among multiple units in the company as well as with suppliers and custo- mers” (Porter & Wayland, 1992). In the same publication, it was stated that intangible assets, especially human capital, information capital, and organization thus capital, are more important in the economic system of a firm to create value and for the market value of the firm as are tangible assets (Arrow, 1996; Kaplan & Norton, 1992). There was a plea for the network-type organization, with free flows of knowledge, people, and information across business lines and IT organized as an enabling infrastructure (Nolan & Croson, 1995). However, the functional fields of management control and management accounting did not move, they clung to the M-form and these functions did not offer solutions to turn the economically sound intuitions of executives and entrepreneurs into operational practices to answer the Shared Service Centers 9
- 29. changing nature of the assets. As a result, the M-form is still the dominant reference for the internal organization. The concept of the shared service center could be orga- nized within the concept of the M-form because the concept of the SSC fits into the existing system of costs centers and transfer prices, apart from the fact that the achieved cost savings legitimized the concept. In this approach, the purpose of the SSC remained limited to cost savings. The quoted article by Porter and Wayland implies that firms, to have a higher level of efficiency in view of the changing fundamentals of the economy, organize their information disembedded from the structure of the internal organization, in stark contrast with the old organization principles and the existing practice in IT governance. This message went unnoticed in the main stream of management books, but not for a few leading companies. Also Herbert Simon’s message that in the design of the internal organization of the firm no longer structure is the first design parameter, but the organization of information and the factoring of decision making went unnoticed in mainstream management books. An example of a firm that picked up Porter’s message is IBM, which in the nineties started deliberately to eliminate the internal and vertical information asymmetry by deploying shared ser- vice centers for finance and IT services (Campbell & Strikwerda, 2013; Strikwerda, 2008; Strikwerda & Stoelhorst, 2009). IBM deliberately used the declining costs of information to create one global transaction recording system and one global gen- eral ledger in which transactions are recorded with multiple attributes, allowing IBM to report the performance simultaneously on multiple dimensions. By elimi- nating the internal information asymmetry, the cooperation between knowledge workers is facilitated (under the guidance of the IBM values) and responsiveness to market dynamics is improved, while providing a safe climate for its workers. In this example of IBM, we see that based on considerations of strategy and awareness of the increasing role of personal knowledge, the concepts of the SSC are being used to organize information disembedded from the traditional internal structure of this multinational company, while maintaining that traditional structure for reasons of legal organization (countries) and resource configuration (the traditional product divisions). The through SSC’s disembedded organized information however allows to solve problems which could not be solved in the traditional M-form: defining the (corporate) customer as the first profit center (as opposed to the BU being the first profit center) as a prerequisite for customer synergies, and making cross BU’s and SSC’s processes the first dimension for resource allocation and planning of investments (Kaplan & Norton, 2004, 2008) to answer Porter’s 1992 call to prioritize investments in intangible assets. To this needs to be added that both the capital markets and executives themselves acknowledged that in the traditional M-form, but also due to the phenomenon of financial perfor- mance management, the agency costs became more of an issue between the execu- tive board and the management of the divisions than between the investors and the executive board. To reduce those agency costs, both the ownership of information and the organization of information needed to be redefined, without impairing the accountability of business managers. The latter was conceptually facilitated by applying Anthony’s distinction between financial control, business control, and 10 J. Strikwerda
- 30. process control (Anthony & Govindarajan, 1995). These three components of management control tended to be organized in the same department within divi- sions. Process control being the recording of transactions, the general ledger and maintaining protection of assets is not typically business sensitive and therefore can be organized within a financial SSC (which therefore includes increasingly HR transactions). Business control is about issues like resource allocation and e.g. cost difference analysis and therefore typical is business sensitive. Business control needs to be organized to be within a division (although, for example, KLM has organized the controllers for business control in an SSC for reasons of professionalism, which then are on secondment to the businesses). Financial control is closely related to the statutory duties and responsibilities of the executive board and is thus organized as a corporate control department, although some of its routines (not policy making) also may be organized in the financial SSCs. A third factor is that the costs of IT systems, which were driven by lack of semantic data standardization and by a lack of standardization of software, whereas in most cases such standardization does not conflict with product differentiation, needed to be brought down. These three factors pushed the deployment of especially the combination of finan- cial shared service centers and IT shared service centers and in their wake HR-SSCs. The underlying force is to create a higher level of transparency, a higher level of con- trol, and to enable new business models, especially those based on personal, uncodi- fied knowledge, and business models based on the exploitation of information as a resource (Johnson, Christensen, & Kagermann, 2008). In actual business cases, the weight of any of those three motives for deploying SSCs will differ. The larger pic- ture however is that the combination of corporate account management (the custo- mer is the first profit center), the priority of customer value proposition based processes over traditional departments, and shared service organizations constitute the transformation of the M-form toward the platform organization with its three constitutive elements, a guiding system, tools, and its platform (Kanter, 2009). Implied in that is an almost unnoticed ongoing change in the fundamentals of busi- ness administration which is summarized in Table 2. By reading the phenomenon of the SSCs in the context of the changing nature of the firm and the subsequent changing nature of business administration (Table 2), the concept of the SSC both can be understood as an expression of this changing nature as well as a practical instrument of change enabling firms to manage a tran- sition toward new economic models for their firm in the context of institutions (accounting rules, lagging concepts of organization design) which are lagging the developments in the economy. The concept of SSCs enables the transition toward the new natured firm by disentangling operational and support processes and placing generic processes in what is to be called the platform of the firm. Especially the combination of financial shared service centers and IT shared service center operationalizes the second row in Table 2. Because shared service centers are process based and also the process inter- face between operational units and SSCs need to be specified, the concept of the SSC is, together with TQM and process reengineering, a force to elaborate processes as cause-and-effect relations, thus contributing to the dimension in the third row in Shared Service Centers 11
- 31. Table 1. Because the combination of financial shared service centers and IT-SSCs enable to organize the information outside the structure of the internal organization, SSCs provide the technological possibilities to reduce information asymmetry, but still a constitutional decision by the executive board is needed to allow all members of an organization access to all information. Because SSCs reduce the scope of resources of the traditional unit manager, the traditional unit manager is forced to manage more through nonhierarchical relations and on basis of content, thus weak- ening the power and the concept of the traditional unit manager. This opens up opportunities for those workers whose motivation is more based on contribution, the last row in Table 2. Because SSCs, as a more decentralized system for resource Table 2: A summary of the ongoing changes in business administration (Strikwerda, 2012). 20th century instruments Issues 21st century instruments Programming by indoctrination of selected individuals and through organization culture in general Indoctrination text limits information processing capacity of the organization, culture assumes lifetime employment and strong identification Programming is through codification of mission and values in the objective function of the explicit formulated and communicated business model Structure with information organized partitioned within structure to influence thinking (focus) of organization members Structure assumed high costs of information and communication and tangible assets, impedes team work Organization of information disembedded from structure, elimination of information asymmetry (Herbert Simon) Budget-driven bottom-up resource allocation process Budget gaming, satisfying behavior, structure limits strategic development, frustrates synergies Allocation on basis of validated cause-and- effect relations, mobilization of intangible resources Power is based on information asymmetry Internal agency costs no longer are accepted Power is basis on the capacity of sensing, sense making, creativity to achieve goals Selection of position- oriented managers, because of motivation based on control over resources Experts, creative (knowledge) workers pursue an as large as possible personal market, require resource mobilization Modern workers are contribution oriented, as acknowledged contribution is their source of motivation 12 J. Strikwerda
- 32. allocation, emphasized further horizontal self-coordination over imposed, hierarchal coordination, mission and value become more critical to avoid parochial decision making and serving interests of individual departments. Closing The phenomenon of shared service centers can be experienced and conceptualized in multiple ways, dependent on the interests and the viewpoint of the observer or practitioner. Interests may be narrow or broad, viewpoints may be egocentric, paro- chial, conventional, or more future oriented and community oriented. The task of academia is to provide practitioners and students with insights and an understand- ing that will help them to create and operate efficient organizations in the context of a society that for its well-being depends on efficient organizations. What an efficient organization is or will be is in constant flux as a result of technological developments, changing relative prices, changing customer preferences, changing self-images of individuals and groups, cultural changes, political changes, etc. It is a natural tendency to describe, explain, and organize a new phenomenon, in this case the shared service center, in terms of traditional organization theories and practices. But in that way we are suffering the horseless carriage syndrome. To change, to innovate, to renew our organizations first and for all is to rethink and to review our concepts. In a first research on shared service centers, it was observed that in cases in which executives decided for a shared service center from an operational, cost sav- ings only and perspective on basis of the traditional M-form concept, implementa- tion turned out to be a process full of obstruction and halfhearted solutions. In cases in which the executive viewed the introduction from a broader strategic per- spective at industry level and understood the fundamental nature of introducing the SSC, an implementation would not necessarily be faster, but more steadfast, better conditioned by the executive board and less prone to obstruction or other mishaps (Strikwerda, 2003b). As has been explained in this chapter, the phenomenon of SSCs needs to be taken by academics to ask questions with respect to organization theory, to unearth forgotten assumptions, to identify new design parameters, to review our concepts and their limitations and to identify new possibilities. This will result in a better understanding and thus in improved changes processes, more pleasant organiza- tional climates for managers and workers, less efforts wasted, and more efficient organizations and happiness. References Anthony, R. N., & Govindarajan, V. (1995). Management control systems (8th ed.). Chicago, IL: Irwin. Arrow, K. J. (1974). The limits of organization. New York, NY: Norton. Shared Service Centers 13
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- 34. Stinchcombe, A. L. (1990). Information and organizations. Berkeley, CA: University of California Press. Strikwerda, J. (2003a). An entrepreneurial model of corporate governance: Devolving powers to subsidiary boards. Corporate Governance: An International Review, 3(2), 38 57. Strikwerda, J. (2003b). Shared service centers: Van kostenbesparing naar waardecreatie. Assen — Den Haag: Van Gorcum — Stichting Management Studies. Strikwerda, J. (2008). Van unitmanagement naar multidimensionale organisaties. Assen — Den Haag: Van Gorcum — Stichting Management Studies. Strikwerda, J. (2010). Shared service centers II: Van kostenbesparing naar waardecreatie. Assen — Den Haag: Van Gorcum — Stichting Management Studies. Strikwerda, J. (2012). Organization design in the 21st century: From structure follows strategy to process follows proposition. iTunes Store. Strikwerda, J., & Stoelhorst, J. W. (2009). The emergence and evolution of the multidimen- sional organization. California Management Review, 51(4), 11 31. Varian, H. R., Farrell, J., & Shapiro, C. (2004). The economics of information technology: An introduction. Cambridge, New York: Cambridge University Press. Williamson, O. E. (1985). The economic institutions of capitalism. New York, NY: The Free Press. Zingales, L. (2000). In search of new foundations. Chicago, IL: University of Chicago – Graduate School of Business. Shared Service Centers 15
- 36. Chapter 2 Managing Boundaries Better: The Key to More Effective HR Shared Services Peter Reilly Abstract Purpose — This chapter seeks to optimize HR shared services performance by high- lighting the potential for service fragmentation that can arise out of in the so-called Ulrich (structure or service delivery) model. Design/methodology/approach — The evidence used in this chapter principally comes from the author’s own work, especially research for the UK’s Chartered Institute of Personnel and Development (CIPD), and draws upon academic litera- ture where possible. Findings — This chapter argues that HR directors should guard against three sets of fragmentation risks. Firstly, HR shared services should be properly connected to the rest of HR to offer customers an integrated service to avoid the structure’s division of labor inducing incoherence. Second, to guard against this risk, HR directors should exercise care in outsourcing/offshoring beyond individual, discrete services because contractually or spatially separating services risks exacerbating this tendency to fragmentation. Outsourcing/offshoring may focus too much on cost savings and insufficiently on quality. So, third, HR should argue for the distinctive- ness of its activities and fight commoditization that is also implied in the creation of cross-functional shared service centers. Research limitations/implications — The arguments in this chapter could be better supported by academic research. In-depth case studies of management decision making and shared services operation would help support or challenge the chapter’s conclusion, as could quantitative evidence on the benefits/disbenefits of outsourcing/offshoring/cross-functional shared services centers. Shared Services as a New Organizational Form Advanced Series in Management, Volume 13, 17 38 Copyright r 2014 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1877-6361/doi:10.1108/S1877-636120140000013002
- 37. Practical implications — We have highlighted a number of reported problems with HR shared services operation, besides the three principal risks noted above, but we have suggested possible solutions that could be adopted by practitioners. Originality/value — HR managers may find this chapter helpful in designing new HR structures or in assessing the effectiveness of shared services that goes beyond the typical key performance indicator measures. Keywords: Shared services; outsourcing/offshoring; structure; functional transfor- mation; centralization; standardization Introduction The purpose of this chapter is to consider the link between shared services and the function to which it relates. We will primarily look at the HR function from this perspective. HR has a number of common features with other corporate functions, but as we will argue in this chapter it has some distinctive features which impact both service delivery and customer experience. Our contention is that shared services cannot be judged as effective independently from the “main” function, as we believe it is intimately involved in common service provision, whatever organiza- tional model has been used. This is because shared services and other parts of HR (or other “support” functions) have the same customers. From their stand point, it matters not what labeling is given to support activities; they are all of a piece. You hear customers say, “HR did this,” “HR did that,” not “I had a good experience with shared services but a poor interaction with the HR center of expertise.” Most customers are not that sophisticated or informed. Again, while other functions face the same challenge, HR can be particularly damaged by poor service integration. So from the premise that HR supports executive and line management, employees and (to a degree) pensioners and that we should largely judge its effectiveness through their experience, we think there ought to be an integrative relationship between the various HR organizational entities. Moreover, from a business performance perspective if you agree that it is the bundling together of HR work that drives people management and leads to superior organizational outcomes (Huselid, Jackson, & Schuler, 1997), then considering the contribution of different parts of HR in aggregate rather than separately is the best route to organizational success. Given this chapter’s aims, we will look at the development of HR shared services, the forms it has taken, and challenges faced, before concluding with suggestions for improvement. This then is a practitioner view of the world that seeks to optimize the HR shared services model. In the space available we are not able to discuss whether it is the “right” model for organizations; we accept that it is now a common feature of many organizations, but we do believe it is not an easy construct to manage successfully, precisely because of its interaction with the function as a whole. 18 Peter Reilly
- 38. We will use evidence from academic research where it is available, but the bulk of the evidence will come from organizational insights developed since 1998 when the author’s interest in the topic first arose. What Do the Original HR Shared Services Models Tell Us about Intended Design? If we start by considering the function’s aims in HR transformation they were very much around how HR could become more strategic in its organizational contribu- tion and how it could add more value. It was argued that the point about Human Resources compared with old style Personnel was that the former was attuned to the business and raising its performance; the latter was regarded as too employee welfare focused or simply an administrative processing unit. Of course, this was a gross over simplification of the past and completely ignored the role of Personnel in industrial relations or work done with sociotechnical systems. Nevertheless, it tuned into the HRM movement’s emphasis on management and employees’ common objective in raising business performance. HR’s repositioning also had academic support: for example, Tyson and Fell talked of the shift from a “clerk of the works” to “strategic architect” role (1986) and Storey offered the distinction of HR as “handmaidens” and advisers to the business to the more interventionist regulators or change agents (1992). The question then became how in practice could this repositioning be effected. The principal route advocated and chosen was to restructure the function by changing the way it delivered services. As with so much of the inspiration to HR transformation we start with the ideas of Dave Ulrich. He might not have invented the service delivery model that bears his name (Hird, Marsh, & Sparrow, 2009), but the three-legged stool of business partners, centers of expertise, and shared services had an appeal because it separated out transformational activities that could be performed by business partners and HR experts from the transactional tasks under- taken by shared service centers. Business partners and HR experts would as a consequence be able to concentrate on a strategic contribution to the business not distracted by operational and administrative duties. Turning specifically to shared services, Ulrich’s writing from the mid 1990s introduced many in HR to possibility of shared services for their function. (Shared services had arrived in Finance and IT from the late 1980s.) His views were very plain: shared services were not centralized services but common to all with the customer defining the nature of service provision: “the user is the chooser” as he so graphically reported (1995). Others followed the same line. McWilliams (1996) distinguished between centralized standardization and customer optimization in shared services. It was thought that shared services could obtain the efficiency bene- fits from economies of scale but be sufficiently customer attuned to seize the sort of advantages found in decentralized models. The PWC figure (Figure 1) clearly cap- tures this point. Managing Boundaries Better 19
- 39. But an element in the attraction of shared services was its positioning as part of a wider reform of HR structures. Lentz (1996) talked, for example, of finding in his study of shared services that the successful organizations managed to integrate the competitive features of customer focus and flexibility with the equally competitive features of economies of scale. This “hybrid model” shifts the idea from shared services being directly customer responsive to a situation where it is the “embedded” parts of HR that meet custo- mer needs (Ulrich, 2007); shared services becomes simply an administrative function that should be as efficient as possible. The consequence was that the introduction of shared services was very quickly seen to be primarily about a way of cutting costs rather than delivering customer value. As a Deloitte study pointed out (2005) a large majority of orga- nizations surveyed introduced shared services and transformed their function to save money. Farndale and Pauuwe’s (2008) survey in the Netherlands put the cost as the main goal and benefit of HR shared services, and besides a quality driver, there were also other efficiency imperatives involved, especially the stan- dardization of HR processes. Our report for the CIPD (Reilly, Tamkin, & Broughton, 2007, p. 14) came to the same conclusion: “The decision to introduce shared services seemed in most [case study] organisations to be driven primarily by cost, efficiency and headcount considerations.” Research on HR trans- formation for global companies (Reilly & Williams, 2012) reported that standar- dization was a key component and wrapped up together with automation and consolidation. Pooled experience Enhanced lateral career progression Cross-organizational synergies Lean, flat organization Recognition of administrative activities Dissemination of good practice Business units maintain control of decisions Recognition of local priorities Responsive to client needs Common systems & support Consistent standards & control Economies of scale Critical mass of skills Shared Services Central overhead cost Less responsive to business unit needs More remote Higher costs Variable standards Different control environments Duplication of effort Centralized Decentralized Figure 1: The benefits and disbenefits of different organizational models. Source: Adapted from PWC by Bramson (2005). 20 Peter Reilly
- 40. If expense was in the forefront of corporate thinking regarding shared services it is not surprising that the next step was to explore ways of further cost elimination and that often meant considering other routes to managing shared services. Enter cross-functional sharing, joint ventures, spin-offs, outsourcing, offshoring, etc.: all designed to get a better bang for the corporate buck. Figure 2 indicates the options. An early change was to consider HR alongside other corporate functions as can- didates for back office integration. Using a common IT platform and telephony allowed better service integration, resource sharing, and customer handling under a client-centric philosophy. IBM’s late 1990s model, for example, covered HR, IT, Finance, procurement, and facilities management with the one phone number and a single management structure. This meant that HR shared services was not always run by the HR function. The head of HR shared services operations at Powergen, for example, from its inception in 1993 reported to the services division director, with a dotted line to the HR director. The HR function was a customer, managed through a Service Level Agreement, rather than colleagues from the same team. Even more remote from “core” HR were functional shared service operations that were part of separate companies. This is a model that is often found in Germany. Evonik, a Ruhr-based industrial group formed out of several mergers, exemplifies this point. Its HR shared services operation reported not to the HR director but into a Services GmbH. This sort of separation between shared services and the rest of the HR function may also arise after a merger or acquisition and before any form of organizational integration. Another way chosen to save money was to offshore the shared services to fewer, lower cost locations but retain organizational control. This started with near shor- ing, as with the creation of IBM’s shared service center in Hungary and DuPont’s European operations in North West Spain. Companies organizing themselves with more of a global perspective went further setting up shared services on a regional basis across the world. Thus SAP has shared service centers in Prague, Singapore, and Philadelphia. Shell has them in Manila, Krakow, and Kuala Lumpur. The next “logical” step was to outsource shared services. Using Ulrich again, he has argued that outsourcing will become the most appropriate means of delivering Integrated service provider In-house cost centre Income generating business unit Wholly owned subsidiary Outsourced to third party partial complete onshore or offshore Figure 2: Different HR service provision options. Managing Boundaries Better 21
- 41. the sorts of activities undertaken in shared services centers because “collaborative work across boundaries … will characterize the organizations of the future” (2007). Many outsourcing deals have been done to transfer shared services outside the organization, such as done by BP, Centrica, Procter and Gamble, and Unilever. Sometimes this action is taken before a shared services operation has been intern- ally created; alternatively, there is outsourcing of an existing shared service center. The case of BT shows the progressive move toward outsourcing. It separated its shared services operation from the main HR function, before making it an internal profit (rather than cost) center. BT together with Accenture then established a com- pletely discrete joint venture company expected to run as an independent business called e-peopleserve. Ultimately, BT settled on straight outsourcing in a long-term deal with Accenture. Finally on the spectrum of distancing shared services from organizational “home” is agreeing with the external provider to offshore internal services. IT and Finance led the way toward this form of offshoring. Companies have been able to access a large pool of skilled, English speaking workers and advanced telecom/net- working infrastructures especially in India early on and then further afield in Asia. HR has not really followed suit, though Lloyds TSB did transfer its HR helpline to Xansa (which was subsequently acquired by Steria) and part of Xansa’s HR pro- cesses were offshored to India. The sort of developments we have discussed above, with the exception of offshor- ing, has been seen in the public sector as well as the private sector. Internally created and outsourced shared service centers have been launched. For example, in the UK, of the government departments with some sort of shared services operation, one can find services provided internally for that department (e.g., the Ministry of Defence); a shared service center operating for several departments or agencies (e.g., the Department for Work and Pensions); and outsourced provision as at the Department for Transport HR where shared services are run by arvato. There have also been moves toward even bolder cross-organizational partnerships in the United Kingdom (e.g., in local government where there are examples of independent coun- cils creating shared back offices), the creation of third-party companies jointly owned by the parties (e.g., “South West One” a joint venture between IBM, Police, and local authorities). There are similar trends in the Netherlands where there are examples of individual organizational shared service centers (e.g., Gemeente Amsterdam) and more complex, across more distinct organizational units or bodies, shared service centers as in the Dutch Civil Service (Meijerink & Reilly, 2010) and in progress across Leiden, Leiderdorp, Zoeterwoude, and Oegstgeest. What Has Been the Result for HR Shared Services Operations? What is the evidence of success of these developments? In fact, it has proved hard to show benefits. Much of what we have to go on to judge effectiveness is merely based on assertion or at best perception. Part of the problem has been that organi- zations have not sufficiently frequently defined their base position such that one 22 Peter Reilly
- 42. can be certain of improvement (or regression) through restructuring. Another issue is that it has been difficult to establish what the consequences would have been if a different route had been taken: there are no controlled trials! Supporters of HR shared services have claimed that the cost reductions sought have indeed been delivered. Consultants talk of typical cuts of the order of 30% in HR expenditure with, say Booz Allen (2000) putting the savings in the 20 50% range. Furthermore, The Hackett Group (2007) reported that more than 60% of all companies with HR shared services operations have achieved cost reductions of 21 80% and a PWC Saratoga study demonstrated that shared services can deliver significant administrative savings given that administrative costs per employee can be cut by two-thirds in organizations that are efficiently run (PricewaterhouseCoopers, 2006a). Ask users of shared services and they claim similar savings. In the CIPD research (op cit) 87% of respondents believed they had reduced costs. There are specific organizational examples one can also use to back up the consultants’ claims, some reported in consultancy publicity literature. However, these assertions and “facts” are hard to verify as shared services have often been introduced along with other structural change and, more importantly, with processual and technological improvements. Another PWC report for the NHS (NHS Confederation, 2010) using its consultancy experience calculates that isolating the benefit of shared services is not a very precise science and may deliver less than simplification and standardization, as shown in Figure 3. Indeed, some organiza- tions have suggested that they have benefited more through having common procurement of services than having a shared services operation. What makes weigh- ing up these arguments especially difficult is that the creation of shared services may have facilitated common procurement, standardized processes and E-HR. And this is the problem with corporate exemplars of shared service centers — precisely separating out the shared services effects from other parts of the change process. BOC’s 1999 calculation is typical of a form of assessment that through time-based activity analysis of actual hours spent on different tasks shows HR Shared Services Standardization Simplification Complexity of barriers Benefits 20% 35 –50% 20 –35% Figure 3: Efficiency gains through different means. Source: NHS Confederation (2010). Managing Boundaries Better 23
- 43. apparently becoming more strategic through functional transformation, but as a result of both structural and technological improvements (Figure 4). The redirection of resources in HR away from administration and toward strat- egy is a well supported by organizations and according to the CIPD survey partially achieved. See Table 1. However, it is important to note that there were no significant differences in the distribution of time spent on each HR activity between HR functions that had restructured compared with those that had not. Interestingly, when considering the future balance of time, HR functions that have fully restructured intend to spend more time on strategic activities and less time on administrative and operational Original HR 10% 30% 60% After Shared Services Strategy Advice & delivery Admin After Self-service 20% 60% 20% Figure 4: An example of HR’s shift in activity toward strategic work. Table 1: HR’s changing time distribution. HR function time spent Activity area/date 2003 2007 Strategic 12% 23% Operational 39% 41% Administrative 50% 36% Source: Reilly et al. (2007). Table 2: Changing activity within HR over time. Activity/focus % time % time 1995 2004 Maintaining records 15 13 Auditing/controlling 12 13 HR services provider 31 32 Practice development 19 18 Strategic business partnering 22 23 Source: Lawler et al. (2006). 24 Peter Reilly
- 44. activities than those partially restructured; the latter in turn having different inten- tions on time distribution, to the same degree, to those who have not restructured. Is this a case of the “wish being the father to the thought,” that is, greater sensitivity to time rebalancing on the part of organizations undergoing restructuring or an anticipation of progress that will be made? Again what academic research there is confirms caution in confirming these sorts of results. For example, as shown in Table 2, Lawler, Boudreau, and Mohrman (2006) found no association between outsourcing, e-HR and structural change and HR becoming more strategic, albeit that the dates of analysis and location base are both different. Though HR might have the idea that by removing noncore activities, it would move up the value chain, this research found no empirical support for this happen- ing in practice. Nor has the freeing up of HR’s time seen a switch of resources into higher value added work (Reilly et al., 2007; Weatherly, 2005). More recently, the Society for Human Resources Management (2010) reported that only 19% of a survey of 200 organizations with HR shared services saw greater strategic function- ing of HR through its introduction. Moreover, a 2007 customer survey (reported in PricewaterhouseCoopers, 2008) is typical of doubts expressed about how effective at the higher end of their role HR has become. “Their HR contact” was rated on a scale of 1 6 as 2.8 on effectiveness in challenging and influencing thinking on key business issues and 2.9 in driving people change within their organization; that is, the “contact” was judged to be “not consistently effective.” Another advantage of HR transformation has been to improve the ratio of HR staff member to total workforce. Many organizations through the economies of scale benefits of shared services have aimed to move the ratio to 1 100, “the rule of thumb” in the United States (Russell & Harrop, 2005), and even higher toward the top quintile performance allegedly, a ratio of 1:173 as reported by The Cedar Group also in 2005 (www.thecedargroup.com). However, PWC surveys of (PricewaterhouseCoopers, 2006b & 2008) do not indi- cate any striking shift in the ratios of HR staff to total workforce (though more in the United Kingdom than elsewhere in Europe) or in costs, not least because lower graded administrative staff have been replaced by more expensive business partners and experts. As to customer service reaction, again organizations are positive about the impact of shared services. About 70% of the 2007 CIPD survey of HR managers (op cit) thought that after the introduction of shared services HR now delivered improved and more responsive services, and was better positioned, more credible and spending more time on strategic issues. Farndale and Pauuwe’s survey (op cit) in the Netherlands reported similarly positive quality gains. McLean and Company’s 2013 survey on the implementation of HR shared ser- vices came to similar conclusions (Figure 5). One reason for greater customer satisfaction is that HR’s output may be of a higher quality (there are fewer errors, outputs are faster and delivered in a more timely manner), yet these changes may again be the result of process improvement not through structural consolidation. Managing Boundaries Better 25
- 45. Critics of shared services like Seddon (2003) contend that shared service is neither better for customers nor for the bottom line. He argues that shared services often end up costing more than intended because it disrupts the “service flow.” He thinks that economies of scale benefits are exaggerated and the effects of moving the work to central or distant locations generate waste (in lean terms) and delays through increased handoffs, rework, and duplication. One of his specific points is that “failure demand” as opposed to “value demand” often occurs when call centers are introduced because customers make repeated calls to get the answer they expect, need, or want. (A point illustrated by E.ON in our CIPD research, Reilly et al., 2007.) This was subsequently called “avoidable contact” by the UK government in a drive to improve Civil Service efficiency. Notwithstanding the positive points made earlier, criticisms are heard from shared services’ users and HR practitioners and these appeared in the CIPD survey (Reilly et al., 2007). Problems reported included: ▪ boundary management (56%) ▪ service gaps (41%) ▪ poor communication (36%) and learning (19%) ▪ failing to recognize differing customer needs and expectations (35%) ▪ expected savings not achieved (26%) (Percentages are taken from the 2007 CIPD survey excluding problems relating to the HR workforce itself — the subject of a separate essay!) Interestingly, the difficulty of separating out and removing transactional work was the principal problem for centers of expertise reported in the survey, followed by communication with the rest of the function. “Getting drawn into the ‘wrong’ Figure 5: Customer reaction to HR shared services. Source: McLean and Company (2013). 26 Peter Reilly
- 46. activities” was the top challenge for business partners, with the tension between corporate and business unit needs a close second. The report’s case studies illu- strated these points with one HR team member saying: “we have replaced one set of silos [based on business units] with another [based on HR functions].” Those restructuring HR believe that there should be a clear separation between shared services centers concentrating on administration and transactional tasks and information provision via a call center, the business partner focusing on strategy, the centers of expertise on policy development and high level advice, and the corporate center on HR strategy and governance. If there are consultants they may provide project support in concert with either the business partners or centers of expertise and if there are operational HR advisers they may source their work from shared services, business partners or directly from line management. However, the picture that emerges is that the principal downside to three-legged stool model comes from the very segmentation of the service into discrete operating parts that made it attractive in the first place. Ulrich explicitly identified the risk of role confusion in his seminal (1995, p. 16) article on shared services: Mixing Service Centers and Centers of Excellence may result in confusion since both have dif- ferent purposes and require different organizational arrangements to operate. The challenge is that this division of labor produces fragmentation that hinders the integration of HR activities and leads to poor customer service. There are lots of boundaries between activities that need to be managed and role accountabilities to be defined. As Cooke found in his case study of an multinational company (2006, p. 217): A(nother) consequence of the removal of the local HR office has been the lack of clarity of ownership of problems that may occur in HR services. This is true for employees and man- agers alike. As further evidence, survey results reported by Sparrow, Hird, Hesketh, and Cooper (2010) indicate that the vast majority of their respondents felt their struc- tures needed “further refinement” and 41% need to deliver “joined up” services. Depending on the range of their activities, shared service centers can and do have interface issues with all their functional colleagues. This can lead to the following difficulties: ▪ Who is accountable to the business unit customer? Business partners as they front the function to the customer? But they are supposed to avoid getting involved in administrative or operational activities. So is shared services responsi- ble for its actions directly to the customer? ▪ How well do centers of expertise take account of the administration of policy and practice change that shared services will be asked to deliver? For example, are the payroll implications of reward modernization properly considered at an early enough stage? Managing Boundaries Better 27
- 47. ▪ How effective is the escalation of difficult “cases” from a call center to business part- ner or expert? For example, experts have complained that the call center is not screening out the simple, basic questions sufficiently but are escalating them further. ▪ Cost conscious HR might automate or transfer tasks to line managers, but do they feel “dumped on” without the time or the skills to do things they believe should be done in HR shared services? These issues are not marginal but fundamental to HR’s success. As every practi- tioner will tell you getting “the basics” right is essential. As one American HR man- ager graphically put it: “Administration … doesn’t get you anything but a black eye if you screw it up” (quoted in Eisenstat, 1996). Improving administrative performance and extricating business partners and experts from unnecessary transactional work does not mean that HR administration is unimportant. Yet getting administration wrong will deny HR access to the “higher value added” activities. If boundaries are not properly managed, gaps in the HR service can appear. One of the commonest is who delivers operational support to line managers. Business partners are not supposed to be involved in fire fighting nor are policy experts. They, together, with the shared service center may not be resourced or skilled to do this work. Or there may be duplication. If an issue passes through a number of hands before being dealt with, there is the danger that the response is suboptimal — slow, inconsistent, and incomplete. Following on from the above point, communication, downward and across HR, can be ineffective. This is a perennial problem, but harder if the boundaries between parts of the function are too rigidly drawn. In particular, the informal transfer of knowledge may not occur and feedback loops may fail. Poor communication leads to poor learning. If problems that arise in one part of the HR service are not com- municated to others in the team then the service will suffer. Business partners may not keep other members of the HR community aware of emerging issues. The shared services center may not pass on feedback on individual cases or patterns of difficulty picked up via the helpline. Staff in shared service centers may become detached from the business. They provide services to it but either indirectly through an IT interface not a human one or remotely. So they lack the feel of what is going on in the business and suffer a lack of commitment to it. They do not always know what is happening on the ground and are very reliant on being kept well informed; which brings us back to communication. There may be a lack of clarity in the respective roles of the HR team exacerbat- ing these problems. These may have to do with reporting relationships: who owns problems, where does the knowledge sit? It may be because the terms of reference of the roles have not been spelt out (a particular complication with business part- ners). There may be deliberate overlap to ensure a boundary is properly covered. This can lead to tensions in the HR team. These can be worsened if one part blames another part of the service chain when problems arise, especially when criti- cized by the line. For example, business partners, rather than taking accountability for the performance of the function, might disown the shared services center if there 28 Peter Reilly
- 48. is a service failure. From the customer’s perspective, they want somebody to be accountable. Even though they no longer directly own the resources, business part- ners have to be seen to be supporting those providing the services. From a customer point of view, the consequence is that HR service delivery pro- cess can seem complicated and remote. Customers often resent the loss of their “own” integrated HR operation and the need to deal with multiple HR services. Instead of walking down the corridor to your friendly, neighborhood HR team you have to phone some distant office that may not be in your own country. Where in the past, there was a one stop shop where all HR matters (transactional, informational, advisory, or strategic) could be dealt with by a single team, whom the customer got to know well, now different units have to be approached for different things. The net result can be that to the customer it seems as if the right hand does not know what the left hand is doing. So far from offering an integrated service, HR delivers a fragmented one. Rather than following good practice in customer service where the complexity of service delivery is managed behind the scenes, the customer is presented with all the various interrelationships to sort out themselves. How Can We Do Better? If there is a single way HR shared services can improve its performance then it is through better integration with the rest of the HR function. This is the route to better service customer because it provides a more coherent offering and because each part of HR holds the others to the task in hand. As Cooke (2006, p. 222) put it: The intertwined nature of HR activities and the intangible role of the HR should not be divided simplistically, as they are the core threads that form the HR fabric of the firm. For this model to work, some links are needed to create a seamless HR function. However, there are, as we described above, many different contexts within which this improvement would have to take place. Our view is that structurally detaching shared services from the rest of HR (e.g., through introducing cross-functional shared services or having reporting lines that bypass the HR director) or spatially separating shared services (through off- shoring) or simply outsourcing shared services risks exacerbating the fragmentation of the service delivery model, creating too many separate silos of activity. This risk already exists even where shared service centers are physically proximate and struc- turally integrated. The threat is intrinsic to the original model since it deliberately seeks to split HR work into distinct categories of work, but introducing further forms of separation potentially makes matters worse. Moreover, many of these options (outsourcing, offshoring, and cross-functional sharing of services) mistakenly treat HR as if it is just another service function. Hewitt’s shared services study (2007) persuasively makes the point that such an idea is simplistic. It argued that there are many differences in HR work compared with that undertaken by IT and Finance, namely the personal and complex nature of Managing Boundaries Better 29
- 49. many of the interactions between service users and providers. Moreover, service volumes are much lower for HR than these other functions, making economies of scale less easy to achieve. This is especially true for contact centers where additional language costs may have to be factored in. HR work is also less rule bound than say Finance and IT; there are not always “right” answers, decisions can easily be contested. Culture and context can make a big difference to how HR approaches a problem and how customers react. And the more organizations worry about employee engagement, the more the application of HR policies will have to flex with individual circumstances. This puts a premium on interpretation and judgment skills for the HR community, especially if line managers have become more competent people managers. The more sophisticated the manager the more sophisticated the HR service will have to be. As Professor John Purcell has argued much of HR’s work is becoming more bespoke, especially advisory activity, despite attempts to standardize policies and practices (quoted in Chartered Institute of Personnel and Development, 2006). Dr. Vickie Cuplin (Director of Research at Ashridge Business School) agrees that the drive to process simplification fails to take account of human complexity: when dealing with people one has to recognize their variety and idiosyncrasy (talk to the HR Directors’ Business Summit, Birmingham, February 4, 2014). The automation of simple processes and manager/employee self-service, moreover, remove a lot of mundane tasks from work schedules, leaving the high value added activities to be undertaken by HR. When HR is treated like any other commodity in say business process outsour- cing (BPO) or when HR is combined with other “service” functions into a joint shared service center, this denies these functional peculiarities or assumes that they can be minimized through clever IT solutions or greater process standardization. Again such a view sees the issue to be one of efficiency only, whereas we believe the pressure will be to deliver quality as much as cost in supporting 21st century man- agers and staff. In fact, offshoring (especially outsourced offshoring) has not grown as might have been expected or as predicted by some consultancy firms. The same is true of HR outsourcing: there are some big name deals and a lot of selective outsourcing of discrete processes (like occupational health advisory services, pensions, or training delivery), but no evidence of widespread BPO. The evidence is harder to assess with cross-functional shared services, but our sense is that it also happens only to a limited extent. If outsourcing, offshoring, and cross-functional integration are not the solutions to the problems described earlier, how can we ameliorate them in other ways? We will address this question primarily through looking at what internal shared services can do to connect better with the rest of HR. Blur the Model — Structure and Roles One obvious solution to fragmentation is to blur the distinctions between roles and structures. To illustrate what we mean you could allow contact center staff to do 30 Peter Reilly
- 50. more than deal with calls or pass them on if they are too complex. Instead, you could allow contact center staff to follow up issues raised. There are risks in this approach — that staff get dragged away from what are perceived to be their primary duties — but equally customers (and HR colleagues) do get aggravated by rigidity of the existing model: our alternative puts the customer need first. Rather than permitting such an approach on an occasional basis (for developmental or learning reasons) you could build it into the service delivery model. It worked well at a financial services company we researched where staff rotated between call handling, individual case management, and research on longer term issues arising from the calls received. Clearly such a way of doing things has an impact on staff selection for roles, implying that you would need more experienced and capable people to multi-task in this manner. Some organizations (in functions outside HR) have used so-called triage systems (adapting it from its origins in medical management) in contact cen- ters to weed out the unimportant calls and escalate the serious cases quickly. Counter intuitively, this implies putting some of the best people on the front line. Plug Service Gaps To meet gaps in the service delivery model and the “polo problem” (Reilly & Williams, 2006) where operational support disappears down the hole in the middle between HR units, some organizations have made adjustments to the “pure” model. They have given a casework role to the shared service center. Time can be spent dealing with individual issues brought by line managers or employees but probably over the telephone. This is an easy adjustment to the model but can still mean a remote and ad hoc service. It does not provide a personalized or regular source of advice and guidance to line managers. So some organizations have introduced “delivery” units or HR delivery managers. These provide much more direct opera- tional support. Often in this structure there are “mobile advisors” to meet managers face to face where the case is particularly complex or serious, and where help over the phone is insufficient. Clarify Accountability Given what we said earlier about unclear roles, defining accountabilities is impera- tive. Some organizations have formalized this through RACI models where accountabilities are formally specified. Figure 6 gives an example of how one HR function has used this approach. Choosing where to vest the principal accountabilities says a lot about the HR service delivery model — how customer needs will be met: primarily through the busi- ness partner or split between business partners and the shared service center? Who will call the shots in the new service delivery model? Shell, for example, gave the principal policy ownership to “process holders” in centers of expertise with clear accountability for delivery including for activities undertaken by the shared services operation. Other Managing Boundaries Better 31
- 51. organizations (e.g., SAB) make the business partner the accountable officer. The main point to make is that it is known which role holds ultimate accountability and ambigu- ities between the parties removed as much as possible. Moreover, using decision-making models such as this helps with defining accountabilities in sufficient detail that performance can measured against specifica- tion. Illustrating this point, SAP monitors how well the RACI “rules” are applied — whether accountability and responsibility, in particular, are being accepted. Especially where deviances are identifiable through actions reflected in data input (e.g., incorrect bonus sign-offs) these can be tracked and remedial action taken. Review Processes and Measure Performance Customers can get a better service if HR is faster, more consistent and accurate in what it does and more aware of good practice internally and externally. This means: ▪ improving connections between activities so that processes work better for users ▪ removing unnecessary tasks, especially those that duplicate activity or involve HR as a “postbox” ▪ reducing the number of process handoffs ▪ simplifying tasks ▪ measuring performance to check that standards are being met Technology has facilitated much of this change through automation or manager self-service or employee self-service. Organizations have also sought a change in attitude from HR so that it becomes more consumer than producer driven. Creating SLAs and monitoring against performance metrics has reinforced this mindset shift. Some organizations have applied process improvement methods like Lean or Six Sigma to optimize processes by removing “waste” and reducing error rates. Activity Business needs assessment HR budget planning HR budget management Work prioritisation Policy design Policy implementation Service delivery Risk/compliance management HR communications HR staff management & development HR resource deployment HR IT strategy HR Director HR Executive Team Centre of Expertise Operational HR Figure 6: An example of a RACI model. Source: Reilly and Williams (2012). 32 Peter Reilly
- 52. All of this change is laudable as long as HR realizes that these processes usually owned by shared services offer only one part of delivering value to custo- mers. Sending out recruitment offer letters quickly and accurately is important. However, the right people need to be recruited in the first place for the process to be successful. The failing in some organizations is that all that is measured is process efficiency. This is partly because measuring strategic contribution, quality of expert advice, or change management inputs is much harder to do, but it is also because the oversight of the activity is structurally segmented: shared services may get its part done well but is not responsible for the rest of the process. As practitioners know, the requirement to get the basics right precedes any ambi- tion to be more strategic, but it is not sufficient on its own to transform HR. It can remove noise in the system, get customers on-side, hopefully release time and resources and legitimize HR’s desire for influence and impact, but further steps are needed. These involve defining where HR’s extra added value will come from and how it will be delivered. This contribution requires its own set of metrics, linked to the more transformational assessments. Functional Leadership Against this background we require HR leadership to shape the change direction and deliver against its goals. We need a coherent vision of where the function is headed, rooted in an analysis of its current strengths and weaknesses, aligned with the business model and cognizant of customer preferences. The vision needs to bal- ance cost and quality, and give due attention to the capability to deliver against this promise. Besides the vision, though, we need leadership to successfully transform the function. As we have suggested above, this requires a lot of skill, navigating between the different interest groups and squaring the efficiency versus effectiveness circle. It also has to get into the “weeds” of new structures, roles, reporting lines, job descriptions, etc. This suggests, as would be true of all good change programs, that leadership is not just at the top of the organizational tree, it has to be found throughout the function. So leaders at all levels must carry the vision with them and implement it with drive and sensitivity. How does HR appear to be meeting these requirements? There are obviously many examples of real leadership from HR directors or within the function. If one was being critical, however, the challenges in this area seem to come from: ▪ HR directors looking to manage the relationships more with their senior collea- gues than involving themselves in functional matters. ▪ Relying too much on consultants for the design of the new model such that the leadership insufficiently understands what it has bought. Again this is particu- larly true when design is a standard product not adapted to the specific organiza- tion’s needs. At worst, this might mean that the HR director is buying the wrong Managing Boundaries Better 33
- 53. product or, marginally better, does not understand how it should be implemented and chooses to ignore the detail. ▪ Not appreciating technological opportunities or risks, over reliant on the views of those who may has a vested interest. ▪ Managing expectations of customers in the speed with which cost and quality benefits are realized (see Farndale & Pauuwe, 2008). ▪ A lack of engagement of the middle layer of HR managers who feel more “done unto” than “doing the change.” This is especially true of situations where exter- nal consultants are hired. ▪ Not trying to win the hearts and minds of the whole function. This may be because HR leaders are too remote from colleagues or from fears about upsetting them; it is just easier to present a fait accompli of change. ▪ Making assumptions about the capability (as well as willingness) of the HR team to deliver change and operate the service delivery model as intended. None of these challenges is insurmountable: though change is not easy these sorts of obstacles can be overcome by clarity, persistence, and engagement. We sug- gest that part of the leadership focus should be on pulling the function together and orienting its actions to delivering business value and satisfying customer needs. Working through these requirements with staff is vital, but not just at high, purpose level, in the detail too — what are their jobs about, why do they exist, how will they relate to customers and other colleagues. The HR leader should be spelling out these necessities in the context of the functional vision. They should be bringing on board middle-level managers and team leaders, explaining and convincing them and their staff of the rationale behind the model. Knowledge, Skills, and Experience Enhancement Informal communication can be vital in building organizational bridges and improved relationships that will link the different parts of HR together. This might mean encouraging visits between teams so that personal relationships grow and building “communities of practice.” More formal actions might include job rotation for short spells (e.g., absence cover) or longer assignments. Organizations have suc- cessfully encouraged those in the centers of expertise to experience time in the call center to get a better appreciation of the types of enquiries received. This helps them understand the context of referrals in the escalation ladder. Joint project work is another good way to encourage breadth of thinking such as including experts, business partners, and administrative staff in policy development so that all the angles (direction of travel, customer reaction, and implementation issues) are covered. Knowledge of what others in the team do can foster understanding of functional interconnectedness. Gaps can be tackled through formal classroom style training (internally or externally provided) or informal knowledge sharing sessions to discuss how to deal with nonstandard or new problems. RBS used “lunch and learn” 34 Peter Reilly
- 54. sessions on specific topics. An electronic “chat room” for HR staff was a helpful feature at Telewest Communications that allowed questions to be posted and answers received where people were uncertain on company policy (Incomes Data Services, 2001). Sheep dip style training can be used to at least in part to remedy collective skill deficiencies. Thus a lack of commercial awareness or customer facing skills can responded can be dealt with through some group training. Colocation Some take the view that, while technologically possible to deliver services from a number of physical centers, this defeats a large part of the logic of having shared services. Without colocation optimum resourcing is likely to be difficult. More importantly for our argument on functional integration, colocation helps develop an esprit de corps that should generate common and improved service standards. Learning, knowledge sharing, and better communications can also be facilitated. Conclusion Rereading Ulrich’s article from 1995 one is struck by the fact that while the emerging HR model he was describing with HR shared services at its heart did indeed distinguish between functional roles, and transactional from transforma- tional activities. He was clear that HR needed teamwork and a process not a struc- tural focus to deliver customer value. He acknowledged the risks of internal functional boundaries and noted the problems they caused, but in his mind they could be dealt with through teams working to a common purpose. In the nearly 20 years since publication, Ulrich’s ideas on role, content, and structure have become pervasive. However, we would argue that with respect to shared services that they have been corrupted. He was clear that shared ser- vices were not centralized services because they were to be defined by the cus- tomer and the process map he created started with defining user requirements (by the HR business partner) and delivering results to them (by HR shared services). What we have largely seen instead is a cost focus in the setting up of HR shared services to save money for HR, not an objective to deliver customer value or benefit the customer (albeit only indirectly in reducing organizational costs by a fraction). This does not contradict in three ways the evidence presented earlier of customer appreciation of better service delivery. Firstly, improved customer service, it could be argued, was a by-product not the driver of the launch of shared services: cost was that driver. Second, was it structural change that led to better service or processual improvement that could have happened without service consolidation? Third, have customers really appreciated the release of time and resource that HR transformation has promised either because HR has failed to make that strategic Managing Boundaries Better 35
- 55. Random documents with unrelated content Scribd suggests to you:
- 56. I HUMAN' NATURE ON THE HALF- SHELL. AM up here in River Falls, Wisconsin, and patiently waiting for the snow-banks to wilt away and gentle spring to come again. Gentle spring, as I go to press, hath not yet loomed up. Nothing in fact hath loomed up, as yet, save the great Dakota boom. Everybody, from the servant girl with the symphony in smut on her face and the boundless waste of freckles athwart her nose, up to the normal school graduate, with enough knowledge to start a grist mill for the gods, has "a claim" in the promised land, the great wild goose orchard and tadpole aquarium of the new Northwest. The honest farmer deserts his farm, around which clusters a thousand memories of the past, and buckling on his web feet, he flees to the frog ponds of the great northern watershed, to make a "tree claim," and be happy. Such is life. We battle on bravely for years, cutting out white-oak grubs, and squashing army worms on a shingle, in order that we may dwell beneath our own vine and plum tree, and then we sell and take wings toward a wild, unknown country, where land is dirt cheap, where the wicked cease from troubling and the weary are at rest. That is where we get left, if I may be allowed an Americanism, or whatever it is. We are never at rest. The more we emigrate the more worthless, unsatisfied and trifling we become. I have seen the same family go through Laramie City six times because they knew not of contentment. The first time they went west in a Pullman car "for their health." The husband rashly told a sad-eyed man that he lied, and in a little while the sun was obscured by loose teeth and hair. The ground was torn up and vegetation was killed where the discussion was held.
- 57. T Then the family went home to Toledo. They went in a day coach and said a Pullman car was full of malaria and death. Their relatives made sport of them and lifted up their yawp and yawped at them insomuch that the yawpness thereof was as the town caucus for might. Then the tourists on the following spring packed up two pillows, and a pink comforter, and a change of raiment, and gat them onto the emigrant train and journeyed into the land which is called Arizona, where the tarantula climbeth up on the innerside of the pantaloon and tickleth the limb of the pilgrim as he journeyeth, and behold he getteth in his work, and the leg of that man is greater than it was aforetime, even like unto the leg of a piano. A FRIGID ROUTE. HERE'S no doubt but that the Fort Collins route to the North Park, is a good, practicable route, but the only man who has started out over it this spring fetched up in the New Jerusalem. The trouble with that line of travel is, that the temperature is too short. The summer on the Fort Collins route is noted mainly for its brevity. It lasts about as long as an ordinary eclipse of the sun. The man who undertook to go over the road this spring on snow shoes, with a load consisting of ten cents' worth of fine cut tobacco, has not been heard from yet at either end of the line, and he is supposed to have perished, or else he is still in search of an open polar sea. It is hoped that dog days will bring him to the surface, but if the winter comes on as early this fall as there are grave reasons to fear, a man couldn't get over the divide in the short space of time which will intervene between Decoration day and Christmas. We hate to discourage people who have an idea of going over the Fort Collins road to North Park, but would suggest that preparations be made in advance for about five hundred St. Bernard dogs and a
- 58. large supply of arctic whisky, to be placed on file where it can be got at without a moment's delay.
- 59. T TOO CONTIGUOUS. HERE is a firm on Coyote creek, in New Jersey, that would like to advertise in The Boomerang, and the members of the firm are evidently good square men, although they are not large. They lack about four feet in stature of being large enough to come within the range of our vision. They have got more pure gall to the superficial foot than anybody we ever heard of. It seems that the house has a lot of vermifuge to feed plants, and a bedbug tonic that it wants to bring before the public, and it wants us to devote a quarter of a column every day to the merits of these bug and worm discouragers, and then take our pay out of tickets in the drawing of a brindle dog next spring. We might as well come right out end state that we are not publishing this paper for our health, nor because we like to loll around in luxury all day in the voluptuous office of the staff. We have mercenary motives, and we can't work off wheezy parlor organs and patent corn plasters and threshing machines very well. We desire the scads. We can use them in our business, and we are gathering them in just as fast as we can. At the present time we are pretty well supplied with rectangular churns and stem-winding mouse traps. We do not need them, It takes too much time to hypothecate them. In closing, we will add, that New Jersey people will not be charged much more for advertising space than Wyoming people. We have made special rates so that we can give the patrons of the East almost as good terms as our home advertisers.
- 61. I THE AMENDE HONORABLE. T is rather interesting to watch the manner by which old customs have been slightly changed and handed down from age to age. Peculiarities of old traditions still linger among us, and are forked over to posterity like a wappy-jawed teapot or a long-time mortgage.. No one can explain it, but the fact still remains patent that some of the oddities of our ancestors continue to appear from time to time, clothed in the changing costumes of the prevailing fashion. Along with these choice antiquities, and carrying the nut-brown flavor of the dead and relentless years, comes the amende honorable. From the original amende in which the offender appeared in public clothed only in a cotton-flannel shirt, and with a rope about his neck as an evidence a formal recantation, down to this day when (sometimes) the pale editor, in a stickful of type, admits that "his informant was in error," the amende honorable has marched along with the easy tread of time. The blue-eyed moulder of public opinion, with one suspender hanging down at his side, and writing on a sheet of news-copy paper, has a more extensive costume, perhaps, than the old-time offender who bowed in the dust in the midst of the great populace, and with a halter under his ear admitted his offense, but he does not feel any more cheerful over it. I have been called upon several times to make the amende honorable, and I admit that it is not an occasion of mirth and merriment. People who come into the editorial office to invest in a retraction are generally very healthy, and have a stiff, reserved manner that no cheerfulness of hospitality can soften.. I remember of an accident of this kind which occurred last summer in my office, while I was writing something scathing. A large map with an air of profound perspiration about him, and a plaid flannel shirt, stepped into the middle of the room, and breathed in
- 62. the air that I was not using. He said he would give me four minutes in which to retract, and pulled out a watch by which to ascertain the exact time. I asked him if he would not allow me a moment or two to go over to the telegraph office and to wire my parents of my awful death. He said I could walk out of that door when I walked over his dead body. Then I waited a long time, until he told me my time was up, and asked what I was waiting for. I told him I was waiting for him to die,
- 63. so that I could walk over his dead body. How could I walk over a corpse until life was extinct? He stood and looked at me first in astonishment, afterward in pity. Finally tears welled up in his eyes, and plowed their way down his brown and grimy face. Then he said that I need not fear him. "You are safe," said he. "A youth who is so patient and so cheerful as you are—who would wait for a healthy man to die so that you could meander over his pulseless remnants, ought not to die a violent death. A soft-eyed seraph like you, who is no more conversant with the ways of this world than that, ought to be put in a glass vial of alcohol and preserved. I came up here to kill you and throw you into the rain-water barrel, but now that I know what a patient disposition you have, I shudder to think of the crime I was about to commit."
- 64. J JOAQUIN AND JUNIATA. OAQUIN MILLER has just published a new book called "The Shadows of Shasta." It is based on the Hiawatha, Blue Juniata romance, which the average poet seems competent to yank loose from the history of the sore-eyed savage at all times. Whenever a dead-beat poet strikes bedrock and don't have shekels enough to buy a bowl of soup, he writes an inspired ode to the unfettered horse-thief of the west. It is all right so far as we know. If the poet will wear out the smoke-tanned child of the forest writing poetry about him, and then if the child of the forest will rise up in his death struggle and mash the never-dying soul out of the white-livered poet, everything will be O.K., and we will pay the funeral expenses. If it could be so arranged that the poet and the bright Alfarita bug-eater and the bilious wild-eyed bard of the backwoods could be shut up in a corral for six weeks together, with nothing to eat but each other, it would be a big thing for humanity. We said once that we wouldn't dictate to this administration, but let it flicker along alone. We just throw out the above as a suggestion, however, hoping that it will not be ignored.
- 65. S SOME VAGUE THOUGHTS. PRING, gentle, touchful, tuneful, breezeful, soothful spring is here. It has not been here more than twenty minutes, and my arctics stand where I can reach them in case it should change its mind. The bobolink sits on the basswood vines, and the thrush in the gooseberry tree is as melodious as a hired man. The robin is building his nest—or rather her nest, I should say, perhaps—in the boughs of the old willow that was last year busted by thunder—I beg your pardon—by lightning, I should say. The speckled calf dines teat-a- teat with his mother, and strawberries are like a baldheaded man's brow—they come high, but we can't get along without them. I never was more tickled to meet gentle spring than I am now. It stirs up my drug-soaked remains, and warms the genial current of life considerably. I frolicked around in the grass this afternoon and filled my pockets full of 1000-legged worms, and other little mementoes of the season. The little hare-foot boy now comes forth and walks with a cautious tread at first, like a blind horse; but toward the golden autumn the backs of his feet will look like a warty toad, and there will be big cracks in them, and one toe will be wrapped up in part of a bed quilt, and he will show it with pride to crowded houses. Last night I lay awake for several hours thinking about Mr. Sherrod and how long we had been separated, and I was wondering how many weary days would have to elapse before we would again look into each other's eyes and hold each other by the hand, when the loud and violent concussion of a revolver shot near West Main street and Cascade avenue rent the sable robe of night. I rose and lit the gas to see if I had been hit. Then I examined my pockets to see if I had been robbed of my led pencil and season pass. I found that I had not.
- 66. This morning I learned that a young doctor, who had been watching his own house from a distance during the evening, had discovered that, taking advantage of the husband's absence, a blonde dry goods clerk had called to see the crooked but lonely wife. The doctor waited until the young man had been in the house long enough to get pretty well acquainted, and then he went in himself to see that the youth was making himself perfectly comfortable. There was a wild dash toward the window, made by a blonde man with his pantaloons in his hand, the spatter of a bullet in the wall over the young man's head and then all was still for a moment save the low sob of a woman with her head covered up by the bed clothes. Then the two men clinched and the doctor injected the barrel of a thirty-two self-cocker up the bridge of the young man's nose, knocked him under the wash stand, yanked him out by the hem of his garment and jarred him into the coal bucket, kicked him up on a corner bracket and then swept the quivering ruins into the street with a stub-broom. He then lit the chandelier and told his sobbing wife that she wasn't just the temperament for him and he was afraid that their paths might diverge. He didn't care much for company and society while she seemed to yearn for such things constantly. He came right out and admitted that he was of a nervous temperament and quick tempered. He loved her, but he had such an irritable, fiery disposition that he guessed he would have to excuse her; so he escorted her out to the gate and told her where the best hotel was, came in, drove out the cat, blew out the light and retired. Some men seem almost like brutes in their treatment of their wives. They come home at some eccentric hour of the night, and because they have to sleep on the lounge, they get mad and try to shoot holes in the lambrequins, and look at their wives in a harsh, rude tone of voice. I tell you it's tough.
- 68. Y THE YOUMORIST. ou are an youmorist, are you not?" queried a long-billed pelican addressing a thoughtful, mental athlete, on the Milwaukee & St. Paul road the other day. "Yes, sir," said the sorrowful man, brushing away a tear. "I am an youmorist. I am not very much so, but still I can see that I am drifting that way. And yet I was once joyous and happy as you are. Only a few years ago, before I was exposed to this malady, I was as blithe as a speckled yearling, and recked not of aught—nor anything else, either. Now my whole life is blasted. I do not dare to eat pie or preserves, and no one tells funny stories when I am near. They regard me as a professional, and when I get in sight the 'scrub nine' close up and wait for me to entertain the crowd and waddle around the ring." "What do you mean by that?" murmured the purple-nosed interrogation point. "Mean? Why, I mean that whether I'm drawing a salary or not, I'm expected to be the 'life of the party.' I don't want to be the life of the party. I want to let some one else be the life of the party. I want to get up the reputation of being as cross as a bear with a sore head. I want people to watch their children for fear I'll swallow them. I want to take my low-cut-evening-dress smile and put it in the bureau drawer, and tell the world I've got a cancer in my stomach, and the heaves and hypochondria, and a malignant case of leprosy." "Do you mean to say that you do not feel facetious all the time, and that you get weary of being an youmorist?" "Yes, hungry interlocutor. Yes, low-browed student, yes. I am not always tickled. Did you ever have a large, angry, and abnormally protuberent boil somewhere on your person where it seemed to be in the way? Did you ever have such a boil as a traveling companion,
- 69. and then get introduced to people as an youmorist? You have not? Well, then, you do not know all there is of suffering in this sorrow- streaked world. When wealthy people die why don't they endow a cast-iron castle with a draw-bridge to it and call it the youmorists' retreat? Why don't they do some good with their money instead of fooling it away on those who are comparatively happy?" "But how did you come to git to be an youmorist?" "Well, I don't know. I blame my parents some. They might have prevented it if they'd taken it in time, but they didn't. They let it run on till it got established, and now its no use to go to the Hot Springs or to the mountains, or have an operation performed. You let a man get the name of being an youmorist and he doesn't dare to register at the hotels, and he has to travel anonymously, and mark his clothes with his wife's name, or the public will lynch him if he doesn't say something youmorous. "Where is your boy to-night?" continued the gloomy humorist. "Do you know where he is? Is he at home under your watchful eye, or is he away somewhere nailing the handles on his first little joke? Parent, beware. Teach your boy to beware. Watch him night and day, or all at once, when he is beyond your jurisdiction, he will grow pale. He will have a far-away look in his eye, and the bright, rosy lad will have become the flatchested, joyless youmorist. "It's hard to speak unkindly of our parents, but mingled with my own remorse I shall always murmur to myself, and ask over and over, why did not my parents rescue me while they could? Why did they allow my chubby little feet to waddle down to the dangerous ground on which the sad-eyed youmorist must forever stand? "Partner, do not forget what I have said to-day. 'Whether your child be a son or daughter, it matters not. Discourage the first sign of approaching humor. It is easier to bust the backbone of the first little, tender jokelet that sticks its head through the virgin soil, than it is to allow the slimy folds of your son's youmorous lecture to be wrapped about you, and to bring your gray hairs with sorrow to the grave."
- 71. I MY CABINET. HAVE made a small collection of wild, western things during the past seven years, and have put them together, hoping some day, when I get feeble, to travel with the aggregation and erect a large monument of kopecks for my executors, administrators and assigns forever. Beginning with the skull of old Hi-lo-Jack-and-the-game, a Sioux brave, the collection takes in my wonderful bird, known as the Walk- up-the-creek, and another vara avis, with carnivorous bill and web feet, which has astonished everyone except the taxidermist and myself. An old grizzly bear hunter—who has plowed corn all his life and don't know a coyote from a Maverick steer—looked at it last fall and pronounced it a "kingfisher," said he had killed one like it a year ago. Then I knew that he was a pilgrim and a stranger, and that he had bought his buckskin coat and bead-trimmed moccasins at Niagara Falls, for the bird is constructed of an eagle's head, a canvas back duck's bust and feet, with the balance sage hen and baled hay. Last fall I desired to add to my rare collection a large hornet's nest. I had an embalmed tarantula and her porcelain-lined nest, and I desired to add to these the gray and airy home of the hornet. I procured one of the large size after cold weather and hung it in my cabinet by a string. I forgot about it until this spring. When warm weather came, something reminded me of it. I think it was a hornet. He jogged my memory in some way and called my attention to it. Memory is not located where I thought it was. It seemed as though whenever he touched me he awakened a memory—a warm memory with a red place all around it. Then some more hornets came and began to rake up old personalities. I remember that one of them lit on my upper lip. He thought it was a rosebud. When he went away it looked like a gladiola bulb. I wrapped a wet sheet around it to take out the
- 72. warmth and reduce the swelling so that I could go through the folding doors and tell my wife about it. Hornets lit ah over me and walked around on my person. I did not dare to scrape them off because they are so sensitive. You have to be very guarded in your conduct toward a hornet. I remember once while I was watching the busy little hornet gathering honey and June bugs from the bosom of a rose, years ago, I stirred him up with a club, more as a practical joke than anything else, and he came and lit in my sunny hair—that was when I wore my own hair and he walked around through my gleaming tresses quite awhile, making tracks as large as a watermelon all over my head. If he hadn't run out of tracks my head would have looked like a load of summer squashes. I remember I had to thump my head against the smoke-house in order to smash him, and I had to comb him out with a fine comb, and wear a waste-paper basket two weeks for a hat. Much has been said of the hornet, but he has an odd, quaint way after all, that is forever new.
- 73. W HEALTH FOOD. HILE trying to reconstruct a telescoped spine and put some new copper rivets in the lumbar vertebrae, this spring, I have had occasion to thoroughly investigate the subject of so-called health food, such as gruels, beef tea inundations, toasts, oat meal mush, bran mash, soups, condition powders, graham gem, ground feed, pepsin, laudable mush, and other hen feed usually poked into the invalid who is too weak to defend himself. Of course it stands to reason that the reluctant and fluttering spirit may not be won back to earth, and joy once more beam in the leaden eye unless due care be taken relative to the food by means of which nature may be made to assert herself. I do not care to say to the world through the columns of the Free Press, that we may woo from eternity the trembling life with pie. Welsh rabbit and other wild game will not do at first. But I think I am speaking the sentiments of a large and emaciated constituency when I say, that there is getting to be a strong feeling against oat meal submerged in milk and in favor of strawberry short cake. I almost ate myself into an early grave in April by flying into the face of Providence and demoralizing old Gastric with oat meal. I ate oat meal two weeks, and at the end of that time my friends were telegraphed for, but before it was too late, I threw off the shackles that bound me. With a desperation born of a terrible apprehension, I rose and shook off the fatal oat meal habit and began to eat beefsteak. At first life hung trembling in the balance and there was no change in the quotations of beef, but later on there was a slight, delicate bloom on the wan cheek, and range cattle that had barely escaped a long, severe winter on the plains, began to apprehend a new danger and to seek the secluded canyons of the inaccessible mountains.
- 74. A I often thought while I was eating health food and waiting for death, how the doctor and other invited guests at the post mortem would start back in amazement to find the remnants of an eminent man filled with bran! Through all the painful hours of the long, long night and the eventless day, while the mad throng rushed onward like a great river toward eternity's ocean, this thought was uppermost in my mind. I tried to get the physician to promise that he would not expose me, and show the world what a hollow mockery I had been, and how I had deceived my best friends. I told him the whole truth, and asked him to spare my family the humiliation of knowing that though I might have led a blameless life, my sunny exterior was only a thin covering for bran and shorts and middlings, cracked wheat and pearl barley. I dreamed last night of being in a large city where the streets were paved with dry toast, and the buildings were roofed with toast, and the soil was bran and oat meal, and the water was beef tea and gruel. All at once it came over me that I had solved the great mystery of death, and had been consigned to a place of eternal punishment. The thought was horrible! A million eternities in a city built of dry toast and oat meal! A home for never-ending cycles of ages, where the principal hotel and the post-office building and the opera house were all built of toast, and the fire department squirted gruel at the devouring element forever! It was only a dream, but it has made me more thoughtful, and people notice that I am not so giddy as I was. A NEW POET. NEW and dazzling literary star has risen above the horizon, and is just about to shoot athwart the starry vault of poesy. How wisely are all things ordered, and how promptly does the new star begin to beam, upon the decline of the old.
- 75. Hardly had the sweet singer of Michigan commenced to wane and to flicker, when, rising above the western hills, the glad light of the rising star is seen, and adown the canyons and gulches of the Rocky mountains comes the melodious cadences of the poet of the Greeley Eye. Couched in the rough terms of the west; robed in the untutored language of the Michael Angelo slang of the miner and the cowboy, the poet at first twitters a little on a bough far up the canyon, gradually waking the echoes, until the song is taken up and handed back by every rock and crag along the rugged ramparts of the mighty mountain barrier. Listen to the opening stanza of "The Dying Cowboy and the Preacher:" ``So, old gospel shark, they tell me I must die; ``That the wheels of life's wagon have rolled into their last rut, ``Well, I will "pass in my checks" without a whimper or a cry, ``And die as I have lived—"a hard nut."= This is no time-worn simile, no hackneyed illustration or bald- headed decrepit comparison, but a new, fresh illustration that appeals to the western character, and lifts the very soul out of the kinks, as it were. "Wheels of life's wagon have rolled into their last rut." Ah! how true to nature and yet how grand. How broad and sweeping. How melodious and yet how real. Hone but the true poet would have thought to compare the close of life to the sudden and unfortunate chuck of the off hind wheel of a lumber wagon into a rut. In fancy we can see it all. We hear the low, sad kerplunk of the wheel, the loud burst of earnest, logical profanity, and then all is still. How and then the swish of a mule's tail through the air, or the sigh of the rawhide as it shimmers and hurtles through the silent air, and then a calm falls upon the scene. Anon, the driver bangs the
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