Insourcing, Outsourcing? How about Self-sourcing?

In creating one of the world’s largest HR shared-services centers in 2002, Standard Chartered Bank sourced HR for more than 40,000 employees—to itself. Standard Chartered’s story is a twist for HRO Today. Sure, HRO growth comes from North American corporate and public sector clients, but it also comes from international companies with rapidly evolving HR shared-services centers such as Standard Chartered Bank.

by Jay Whitehead

If Standard Chartered PLC’s HR shared service center (SSC) effort were a movie, HR’s COO Luis Rojas tells me that the script would boil down to a simple formula: 40,000 employees in more than 50 countries using one online language (English) for a box-office payoff of 25 percent savings within 18 months.

Yet Rojas is quick to point out that while the storyline has been successful so far, it still has no ending.“We are still filming” he says. “A shared-services center is not an end in itself; it is a means to transforming the whole function of HR, to make it more strategic. The SSC drives cost efficiencies, risk management and standardization.”

To Rojas and the bank, cost savings matter. But one thing means even more to Tim Miller, the bank’s chief HR officer. Miller—a director who reports to CEO Mervyn Davies—wants and needs HR to be a strategic asset of the bank, not just an administrative utility. Miller spearheaded the move to HR shared services in 2001, and Rojas credits Miller’s vision for the transformation of the firm’s HR function.

“The SSC has changed the conversations HR staff can have with the business,” Rojas tells me. “HR is no longer dominated by one-way administrative requests. HR now contributes daily to operational effectiveness, profitability, and expansion by recruiting, retaining, engaging, and motivating this extremely diverse global workforce.”

Certainly, Standard Chartered Bank’s HR SSC has allowed the function to keep up with its fast-track growth, which mirrors the “Asian Tiger” markets in which the bank participates—Hong Kong, China, Japan, India, Singapore, and Malaysia. In the first half of this year, the Group generated more operating profit before tax than all of 2002. Ranked 21st by market capitalization among all companies listed on the London Stock Exchange, the London-based bank generated $3.2 billion in revenues and $1.33 billion in operating profit before tax in the first six months of 2005, with strong performance from both wholesale and consumer business.

While the bank’s sizable growth has only come recently, Wikipedia traces its evolution back 150 years ago. Standard Chartered came together from two banks—the Chartered Bank of India, Australia, and China, which formed in Mumbai and Shanghai in 1853, and the Standard Bank of British South Africa, which opened for business in Port Elizabeth, South Africa in 1863. In the early 1900s, it was the first foreign bank licensed to operate in New York. In the 1980s, the bank survived a hostile takeover attempt from Lloyd’s Bank. In the 1990s, it continued to expand its network in Asia and Africa.

It was in 2001 that top management started to make the decision to go with an HR shared-services function. Rojas was not in HR at the time. From inside the bank’s business, he saw the transformation start to take place. But it was after one fateful day in September, 2001 that gave Rojas the exposure at the highest levels and demonstrate his execution skills under immense pressure.

WHERE WERE YOU ON 9/11?
Just like any other work day, September 11, 2001 found Rojas, then a head product manager for the Americas, U.K., and Europe, headed for the bank’s New York City operations center. The address: 7 World Trade Center, which housed Mayor Rudolph Giuliani’s ill-fated control center and the third building to collapse after terrorist planes turned New York City skyscrapers to rubble. As the horror of that day unfolded, Rojas recalled finding himself overwhelmed with concern about employee safety. (Fortunately, the bank lost no one in the tragedy.)

When he went to bed that night, the impact of the terrorist act still had not sunken in. As he prepared for going to work the next morning, the reality of the day hit him. “My wife saw me in the kitchen. When I said ‘I am going to the office,’ her face changed. She said ‘You have no office’.”

Overwhelmed by a desire to help, he jumped into action and was chosen to lead the command center to rebuild and relocate the bank’s New York operations. The bank and its staff had emerged intact, but Rojas, like everyone around the tragedy that day, was affected personally. “We had friends from my kids’ school that didn’t make it,” he remembers.

“The experience changed me for the rest of my life,” Rojas admits with emotion. “It made me a better manager, more able to understand and relate. My personal habits changed. In the past, I would always fly overnight and try to sleep on the plane. Now if my schedule allows, I fly during the day to reflect about what is important strategically. The best ideas don’t come at midnight in an airplane.”

As a proven performer under pressure, Rojas was a natural choice to head the mission-critical HR SSC, which was already underway. “Here is what 9/11 changed for me,” Rojas reflects. “You always think about disaster recovery, but I now understand the real importance of that as the COO of HR. The world has changed. We have threats. We have severe weather storms, like the hurricanes in Florida. We have earthquakes in Pakistan. It brought more rigor to my preparation. The event did not change my thoughts about the strategic direction for the SSC. However, it certainly changed my views on what we must do today, now.”

SUCCESS: THE DOG THAT CAUGHT THE CAR

Both Miller and Rojas are very clear about where Standard Chartered would be today if it hadn’t adopted an HR shared service center: less able to grow, with an overly costly and underpowered capability to service an expanding and increasingly demanding workforce. With the success of the SSC, however, have come challenges that Rojas candidly acknowledges will continue into the future.

Today, he explains, “instead of taking instructions and being reactive, the HRRMs on a local level are aligned to the business. That means they need to understand much more about the business and the strategy.”

To meet the needs for increased understanding of operations and strategy both within HR and throughout the workforce, the bank’s online learning management system, powered by Saba, has become a highly used and critical training tool. The training is taking place in all the countries. In addition, Chennai is not just a call center. The company has also recruited HR talent from outside to fill gaps.

According to Rojas, another challenge is a market-driven shift in HR to focus on retention to complement its recruitment. When the bank held less dominant positions in certain markets, recruiting was the big focus. “But a drawback of leading the way in our markets and also for being known for strong people development practices is that the competition is predictable. Standard Chartered’s employees are now even more attractive and as a result, Standard Chartered will continue to invest in their development and retention,” Rojas notes.

As a result, Rojas says, HR strategies now center on retention and employee engagement. “We work with the Gallup people on a Q12 survey, which measures engagement, which has proven to have a strong correlation with a company’s financial performance,” he says. “This year, we got 96-percent voluntary participation (in the survey,) and as a result we expect to be able to execute programs that will improve engagement by hitting the exact areas of concern identified by employees themselves.”

DOLLARS TO DONUTS
Like any strong manager in a similar internal, customer-facing position, Rojas thinks a lot about the employee experience in using the bank’s SSC. Employees now have all important data at their fingertips and a toll-free hotline to the call center in Chennai. On the local level, there are individual HRRMs who provide higher-level services. And the economies have made room to invest in the engagement survey and in StrengthsFinder, a tool that allows employees to understand their talents. “Through StrengthsFinder, I understand I am an ‘achiever’ and ‘arranger,’ which makes this job just right for me,” he says. “I have also become a big fan of the book “Good to Great,” which has shaped my views of the employee experience.”

He admits that his most challenging internal customer, however, is the senior manager. “Senior managers need decision-support tools and analytics. As the HR function grows in capability, the businesses look to us more, and yesterday’s success is tomorrow’s mediocrity. Quite rightly, we are under constant pressure to improve and meet increasing demands from these senior leaders.”

Rojas said a core team of individuals was instrumental for assembling the shared-services center with such speed and success. Along with HR head Tim Miller, he credits PK Medappa and RU Srinivas, who “was the person in Chennai who established our leading-edge shared-services center,” Rojas says. The center’s operational schematic, similar to those used by major HRO providers such as Ceridian, takes the form of a donut (see Figure 1).

A POTENTIAL PATH TO HRO?
Standard Chartered Bank, like hundreds of other multinationals, has invested to make its SSC an essential part of the bank’s infrastructure. Now in its fourth year of continuous operation, the center has realized its initial cost savings and strategic goals. But as Rojas acknowledges, its success has amplified expectations. More investment will be required to reach the next level of strategic value and cost savings. The question is: will there be the institutional will to make those capital investments, or will the bank, like dozens of other multinationals such as Motorola, Bank of America, Tenneco, British Telecom, and BP, look to an outside provider to risk the capital instead and assume those services for Standard Chartered?

Rojas says he is contemplating these questions and has come up with some of his own. “To outsource,” he says, “we have to have a clear view on the long-term benefits on why we would do it. What can a third-party offer in service, risk and continuous improvement that we cannot do ourselves for the same cost? Beyond the next round of improvements, what can the third-party do year after year? And are they just a third-party or a strategic partner?”

The shared-services journey, Miller agrees, has been the right path for Standard Chartered. No two companies are exactly alike, Rojas and Miller remind me, and there is no silver bullet that fits every company’s needs. The secret is to understand your company’s key drivers.

“We already had the presence in India,” Rojas says, “with over 100 years of operating history. It was not foreign to us. For others, an Indian shared-services capability may be difficult. For us, it delivered improvements in efficiency and a path for growth. I would expect a third party to say how we can work on quality and process in addition to other expertise in the form of strategy, other views of the banking industry, and endless continued improvement.” That might be a tall order but it’s one that today’s top echelon of HRO providers seem to see often and seem increasingly able to handle.

Click here for HR Shared Services Centers figure

Posted December 10, 2005 in Contributors

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