The world is full of contradictions.
In organisations, one that comes up time and time again is around centralization of certain functions or capabilities. Centralization seems an obvious choice for companies looking for cost efficiencies (especially if said function is centralized in a low cost country) through standardization. Digital HR projects often are often seen as key enablers to this, or centralization is seen as an enabler of digital transformation of HR. However, the feared trade off is the intimate understanding of the specific business unit or location, and the responsiveness (or lack there of).
These fears are valid.
When we identify potential for centralization, we consider the following (and more).
- digital HR strategy – do all the “users” and the proposed central location have access and capabilities with the right collaboration tools to be responsive
- culture – especially working x-country, there will certainly be cultural challenges around ways or working and communicating
- realities of the work – having a process documented is all well and good, but let’s be honest, the real world day-to-day work doesn’t always neatly follow said process. If work scope is really going to be transferred to a central location, don’t assume the documented process paints the full picture
- lift and shift vs fix and shift – time and again we have seen companies take a 2 phased approach: (1)”lift and shift” existing processes, as-is, and move them to the new central team, followed by (2) after all the work scope is moved everywhere, then look at process improvement and standardization. The problem is, with all the chaos of (1), most never get to (2). I know, I know, you’ll be different….
Often overlooked is a hybrid approach. Hybrid structures keep many of the resources physically close to the point of need, but with solid line reporting to centralized functions or teams. The solid line helps drive consistency and helps leverage investments in technology for example. The physical proximity to their internal (or external) customers gives local intimacy and responsiveness. Supporting these are physical centres of excellence for work which is quite specialised, requires more investment that any single location could easily justify and is an evolving field where evolving best practices need to be evaluated for suitability of application to the specific business. The final piece of the hybrid approach is that of administration. Very often, companies are centralizing administrative duties in low cost countries – even though they know they should really be investing in automation, but now’s just not the time, “we’re in a period of really dynamic change at the moment…” The main word of caution here is that most businesses are now permanently in a difficult, fast changing state. The better time will probably never come. Especially if high investments – financially and emotionally – are made over a period of years to establish and stabilize a centralized admin capability. Of course, there’s not one right answer for everyone, but embarking on automation projects, whilst daunting even at the best of times, tend to return far more to a company than purely the results of that project. Broader understanding and capabilities in automation are gained by the company, and it kick-starts a cultural shift in the acceptance of modern, automated solutions by the wider employee population.
As focus on costs continues to sharpen in most companies, embarking on a centralization program may be a great idea.
Of course, it may not.
One thing that is clear in every centralization project we have seen is that the subtleties required to make the desired improvements extend far beyond the 5 page PowerPoint pitch to the board.