Shared Services as a Change Model

To Change Or Not To Change

Why Do We always Go SouthPeople in general tend to resist change. Shaped by experience and habit, momentum tends to keep them on the same path forward. Even when change is required, the path charted is usually linear. Planned and incremental change is the preferred route forward. Organizations, which are essentially a collection of people, are no different. Perpetuation of the status quo, reinforced through a groupthink mentality or historical practices, is a strong counter balance for an organization’s appetite for change.

So what’s wrong with resisting change? Nothing; except that change is inevitable, so time spent avoiding or resisting is futile. Internal sector changes including the significant growth in the number of non-profits/charities (NP) competing for a slice of the funding pie as well as the shift in government focus to download service delivery are pushing NPs towards both structural and operational changes. Higher levels of public scrutiny and media reporting are also putting pressure on NP leaders to change how they manage their internal resources that support their service delivery efforts.

The recent news of Board resignations at Lifeline Syria is a prime example of this wave of change. The article highlights some of the common Human Resources (HR) challenges facing NPs. The challenges were deemed to be of little or no significance by the leadership team until too late resulting in a breakdown of Board and workplace effectiveness which in turn negatively impacted employee morale and turnover. Most of these outcomes could have been eliminated through stronger HR expertise and Board governance practices.

The article does not infer malicious intent, but rather illustrates the current and future operational risks and costs associated with a diminished view of the value of HR expertise. NP leaders understand the value of auditing the management of their financial resources as Boards regularly require audited financial statements. Unfortunately, most do not recognize the value of auditing the management of their HR assets.

It’s About the Money

Most NPs will admit that a primary leadership focus is securing programming funds, not implementing HR infrastructure or acquiring in-house HR expertise. A frequent comment is “…we don’t have the budget to hire a HR person”. This is faulty logic. Not having the funds to do something does not mean it should not get done. Because you may not have sufficient money to pay your income tax is not a reason not to pay.

The same logic applies to this HR dilemma in NPs – the various forms of risk (e.g. operational, reputational, compliance, legal) don’t go away because they are not formally or proactively addressed. Quite the contrary, overtime they become bigger liabilities. Besides, employee related expenses typically represents the largest operating expenditures in NPs (typically 60%-80%) so from a Board governance vantage, there should be proportionate leadership efforts focused on getting the best value from that spend.

Nothing is Free

Or put another way: you get what you pay for. So, for example, downloading a free job description template for use is not free if the documented job duties don’t align with Pay Equity requirements and your organization receives a call from Review Services; non-compliance is costly. It’s not free if documented job accountabilities and responsibilities don’t reflect current state experiential and educational job requirements and explicitly state reporting relationships and decision making protocols. Job descriptions support your recruitment, compensation and skills development decisions – all of these HR activities have costs associated with them. Adequacy of job documentation is also commonly cited in wrongful dismissal cases; legal support is costly. Simply having access to something – for free – has no value. Knowing what to do with it is the value add piece. From a risk management vantage the logic for HR expertise is clear: pay now…or pay much more later.

Disruptive Innovation

Some disruptive innovation is needed in how NPs choose to address their HR needs. The linear change management approach – of waiting till you have sufficient funds to access the necessary HR expertise — is not practical if you want to scale the social impact of your mission or at the very least minimize future liabilities. The funding dependency logic in this case is a limiting belief. Managed risk taking is always a better option than complacency.

Some workplace compliance requirements (Health and Safety, Employment Standards) are required regardless of total number of employees. Others scale according to your employee base (Accessibility for Ontarians with Disability Act, Pay Equity Act) and have effective dates that, over time, can be very costly to address. The point being, the decision to access HR expertise should not be premised solely on affordability. It should also consider your Board’s appetite for taking risk (operational, fiduciary, reputation) –assuming they are fully aware of the risk associated with their role and related expectations. If tolerances are low along these risk dimensions, then waiting for the funds to hire a HR resource is not practical solution.

It makes little sense, however, to have a full time HR resource on staff for small/medium size NPs. The volume of work is simply not there to justify payroll costs. However, getting Board members or a friend of a friend with an HR background to do the requisite work is not a sustainable solution – never mind the liabilities and employee relations outcomes associated with these approaches.  While each NP may not have sufficient funds to access HR expertise on demand, this solution is easily achieved through shared service models.

Shared Service Models

These models offer cost effective ways to manage the full spectrum of HR risks across NP cohorts (i.e. similar mandate, program, size, location). For example, NPs in the children’s treatment space with overlapping programs could work collaboratively to develop common job descriptions to support collective recruitment efforts or ensure wage grids are similar to minimize employee poaching.  Also, NPs that use artistic work as a core element of their service delivery could collaborate on HR policy development or workplace compliance efforts.

There are some downsides, however, if a cohort of NPs decides to allocate an internal resource to the remaining cohort members to address the spectrum of HR needs at each of the NPs. This approach entails multiple levels of risk.

  • From the HR employee vantage, it creates additional work demand to know the operational nuances of all cohort members as a basis for effective HR service delivery; it’s tough to be everything to everybody all the time.
  • There are political risks – what do you do if your boss asks you to do something for your organization but you deem the issue at a cohort member organization as a higher HR priority?
  • There are financial risks – who pays for time spent supporting audit efforts at a cohort member organization?
  • There are legal risks – HR employees deal with confidential matters, how will that be managed across the cohort?
  • There are talent risks – how do you deal with a potential reality of the HR employee wanting to work with another cohort member?

Clearly, the benefits of a shared HR resource do not outweigh the cost-savings of this approach. The solution would be to have an external resource dedicated to serving the HR needs of all cohort members. This addresses the cost issue – as this can be shared across the NP cohort. But more importantly, it ensures that the above mentioned risk factors are out of play.

Managed Change

The journey of 1000 miles begins with 1 step as the saying goes. Similarly, momentum for changing entrenched attitudes and behaviours can begin with small steps. Within this context, NP leaders should use their financial audit cycle as a reminder to focus similar efforts on auditing the management of their human resource assets. An even bolder move would be to connect with an HR professional before the next Board meeting to advise you on: i) what you don’t know – because not knowing is not a good defense; ii) what you need to know – because awareness precedes change; and iii) what you may need to do to manage your organization’s HR risks.

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By Dave Nanderam, Managing Partner, ASSOCIUM Consultants. Through our collaborative approaches, innovative HR products and customized advisory solutions we impact four leadership priorities: managing risk, driving productivity, strengthening talent capabilities and supporting your bottom line. Let’s connect to find out how ASSOCIUM Consultants can help your organization.