SSOs Reduce HR Process Costs, Research Shows

Shared Services Organizations can help HR organizations reduce process costs by up to 80 percent, while generating similar improvements in internal customer satisfaction, productivity and quality, according to the 2006 Enterprise Book of Numbers research released by the Atlanta-based Hackett Group, a strategic advisory firm, on Jan. 30.

In their approach to SSOs, Hackett found that many HR organizations go beyond simple centralization by taking more of a business-oriented and customer-centric approach, with a focus on standardization, simplification and consolidation.

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Spending 13 percent less ($1,614 versus $1,864) per employee and operating with 15 percent fewer staff (11.5 FTEs per 1,000 versus 13.5), Hackett found that companies employing SSOs were benefiting from them.

"When it comes to reducing process costs, SSOs are clearly a time-proven technique… The best HR SSOs view themselves as more than just back office support. They operate as businesses in their own right, positioning themselves as preferred suppliers to their internal customers. Through this approach, world-class HR SSOs generate exceptional benefits," said Hackett HR Practice Leader Stephen Joyce.

Sixty percent of companies with HR SSOs had been able to achieve cost reductions of 21 to 80 percent, while showing comparable improvements in internal client satisfaction, HR staff productivity and overall quality.

Hackett found that HR SSOs often use service-level agreements to monitor performance measures and targets. In addition, they provide organizations with 40 hours per year or training, more than double than non-SSO organizations, with fewer managers and less than half of the job grades of typical companies. SSOs are also known to use a much less complex overall IT architecture, using a single ERP/HRMS.

The primary motivation behind companies moving their HR to SSOs is the cost savings associated with centralization, from a reduction of redundancies, elimination of parallel training as well as the ability to potentially reuse work products, like IT software code.

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