Pan-European shared services

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Pan-European shared services

Exploring the possibilities and limitations of an expansion of the service of Deutsche Bank’s Human Resources service line for Continental Europe

Joost Kanis

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Pan-European shared services

Exploring the possibilities and limitations of an expansion of the service of Deutsche Bank’s Human Resources service line for Continental Europe

Joost Kanis Student number: 1063448 Groningen, February 2004

University of Groningen

Faculty of Management and Organisation, Human Resources Management First supervisor: Prof. Dr. Arndt M. Sorge

Second supervisor: Dr. Justine M. Horgan

Deutsche Bank

Supervisors: Hartmut Jaschok and Harald Berkouwer

The author is responsible for the contents of the thesis. All right reserved. No part of this thesis may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, photocopying, recording or

otherwise, without permission of the author. © Joost Kanis, 2004

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Acknowledgements

Without the help of many people, this master’s thesis, which forms the final part of my studies, would not have been possible.

I would like to thank Hartmut Jaschok, Head of HRdirect Germany & Continental Europe, and Harald Berkouwer, team leader of HRdirect Continental Europe, for giving me the opportunity to do this research, for involving me in the project itself and for providing me with feedback.

A big ‘thank you’ to my colleagues in Frankfurt for a great working-atmosphere and for giving me the chance to work on some small projects so that I did not only have to focus on my thesis. I especially want to thank Dr. Birgit Hoock for advising me and for showing me areas of HR I had never seen before as well as Juergen Jordan for opening doors for me.

I am very grateful to my first and second university-supervisors: Prof. Dr. Arndt M.

Sorge and Dr. Justine M. Horgan. Thank you both for your time and valuable feedback.

Furthermore, I would like to thank all the people I have interviewed at Deutsche Bank, and IBM for the invitation to their HR service centre in Portsmouth.

Finally, I would like to thank the people standing the closest to me: my family, friends and of course Regine, for their support!

After all these acknowledgements, I invite you to read my master’s thesis.

Joost Kanis

Frankfurt, February 2004

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Executive summary

Companies face several business challenges that demand organisational excellence. It is recognised that Human Resources (HR) can support companies to deliver this excellence. At the same time, HR is strongly pushed to reduce costs internally. The concept of shared services has emerged against this background. It is believed to offer cost savings, quality improvement, organisational change and technological development.

The concept of shared services means that a common set of services is shared rather than duplicated in every division. An HR service centre, the department that offers these shared services for HR, centralises a large number of administrative HR activities and processes, which were done by every division separately in the past.

Besides, it also handles relatively straightforward inquiries from managers, employees and pensioners. This is the service line function.

Deutsche Bank has also implemented shared services for HR. Next to HR service centres, HR service lines were implemented which operate in parallel.

HRdirect CE (Deutsche Bank’s service line for Continental Europe) is expanding its service. However, covering a broader range of HR inquiries on a pan-European basis is more difficult than on a one-country basis. Therefore, this research is conducted in order to find out what the actual possibilities and limitations of such an expansion are. Is Deutsche Bank on the right track or should it adjust its strategy?

The research objective is: to provide insight into the possibilities and limitations of an expansion of HRdirect Continental Europe’s service and to give HRdirect recommendations on how to move forward.

The research question is: what factors facilitate or inhibit HRdirect CE from centrally answering a broader range of routine HR inquiries from employees in different European branches.

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Several facilitating and inhibiting factors have been found in different literature and research. However, more specific research is necessary in order to answer the research question of this thesis.

The Integration-Responsiveness (IR) framework can be perfectly used throughout this research as a theoretical framework. Firstly, in order to structure the results and findings of this research in a set of factors that pushes Deutsche Bank towards integration (facilitating factors), and a set of factors that pushes Deutsche Bank towards responsiveness (inhibiting factors). Secondly, in order to support the analysis of the factors on three different levels.

Interviewees at Deutsche Bank recognise four factors that push their company towards integration: HR efficiency, HR service quality, technology and universal needs. Five factors are identified that push Deutsche Bank towards responsiveness:

language, culture, leadership and commitment, need to adapt and privacy laws.

IBM (International Business Machines Corporation), that has already fully implemented a pan-European HR service line, recognised almost the same factors as Deutsche Bank. The following factors pushed IBM towards integration: HR efficiency, HR service quality, harmonised HR approach for Europe and technology.

Languages, culture, resistance to change, multiple country processes and privacy laws pushed IBM towards responsiveness.

In order to find out how critical these factors are, what the possibilities and limitations of an expansion of HRdirect CE’s service are in terms of covering certain HR themes and European branches, and whether a pan-European HR service line generally makes sense for Deutsche Bank in comparison with IBM, the two sets of factors are analysed on three levels. The results of the analysis are captured in the IR framework.

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HR themes European branches HRdirect vs. ask HR

High High High

Int. Int. Int.

Low High Low High Low High

Resp. Resp. Resp.

1. HR Online, 2. PMO, 3. data management, 4. HR policies & procedures, 5. compensation, 6. benefits, 7.payroll

Figure 0.1: IR frameworks, overview analysis on three levels.

Based on the analysis and IBM’s experience, the following recommendations are given to HRdirect’s management.

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2 1

3 4 5

6 7

Ita Es

NL AU

IBM DB

logical illogical

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Chapter 1 Introduction

An international, multilingual team equipped with headsets and flat screen monitors that answers Human Resources inquiries from employees in various European countries. This is probably the best description of the subject of this master’s thesis:

Deutsche Bank’s HR (Human Resources) service line for Continental Europe which is branded HRdirect. This first chapter will look at it in detail and aims to make clear what precisely the research is about.

The first paragraph shortly introduces Deutsche Bank. The second paragraph provides background information about the origin of shared services. The third paragraph outlines the concept of shared services. An HR service line is part of this concept. The fourth paragraph describes the shared services model which was implemented at Deutsche Bank. The fifth paragraph deals with the problem statement. The sixth paragraph presents the outline of the thesis.

1.1 Deutsche Bank

General information

Deutsche Bank was founded on the 10^th of March 1870 in Berlin. Its main purpose was to transact banking business of all kinds, in particular, to promote and facilitate trade relations between Germany, other European countries and overseas markets.

This explains Deutsche Bank’s early expansion not only in Germany but also abroad. During the Second World War, all branches in the Soviet-occupied zone were closed. After the war, Deutsche Bank was split up into several single independent banks. In 1957, the separation of the bank was ended and the Deutsche Bank AG was established with its registered office in Frankfurt. From that period on, internationalisation started to become very important. By taking over several foreign banks, Deutsche Bank has become a ‘global player’. (Pohl and Raab-Rebentisch, 2001).

At present, Deutsche Bank is reckoned among the world’s leading international financial service providers. With approximately 70,000 employees, Deutsche Bank serves around 13 million customers in 76 countries worldwide. More than half of

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Deutsche Bank’s staff works outside Germany. Most of them in Europe, which is Deutsche Bank’s home market, and the United States of America (USA).

Deutsche Bank offers a wide range of banking services. For private clients, for instance, account keeping, cash and securities investment advisory, as well as asset management. Payment processing, corporate finance as well as support in initial public offerings, and mergers and acquisitions are examples of services for corporate and institutional clients.

Deutsche Bank’s mission is to be the leading global provider of integrated financial solutions for demanding clients and the pre-eminent bank in Germany generating exceptional value for its shareholders and people. In achieving this mission Deutsche Bank operates by five core values: customer focus, teamwork, innovation, performance and trust.

Deutsche Bank endeavours to be a ‘new-style’ universal bank: a mixture of a globally successful corporate and investment Bank, a global leader in asset gathering, and a European bank for private and small business clients with a special strength in its home market Germany.

Figure 1.1: Deutsche Bank’s organisational structure, as of January 2004.

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Deutsche Bank is organised in three groups: Corporate and Investment Banking (CIB), Private Clients and Asset Management (PCAM) and Corporate Investments (CI) (see figure 1.1). These three groups are divided into eight business divisions:

The Global Markets division (GM) is responsible for sales, research and trading activities across a wide range of foreign exchange, debt, money market and derivative products.

The Global Equities division (GE) deals with sales, research and trading activities in several cash and derivative products.

The Global Corporate Finance division (GCF) controls all aspects of corporate finance, including traditional corporate loans and the issue of corporate bonds and convertibles. The division also advises organisations on mergers and acquisitions, divestments and initial public offerings.

The Global Transaction Banking division (GTB) is responsible for cash management of corporate and financial institutions, international trade finance and custody of securities.

The Private and Business Clients division (PBC) provides roughly 13 million private, retail and small business clients in various European countries with integrated financial solutions.

The Private Wealth Management division (PWM) serves wealthy individuals, their families and select institutions worldwide.

The Asset Management division (AM) combines asset management for institutional clients and private investors, offering several products in equities, fixed income and real estate.

The Corporate Investments division (CI) looks after Deutsche Bank’s portfolio investments in private equity, real estate and industrial shareholdings.

The eight business divisions are supported by eight functional committees: Finance, Investment, Risk, Alternative Assets, Asset/Liability, IT/Operations, Human Resources and Compliance. They are service providers for the Deutsche Bank group as an umbrella structure.

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Czech Republic

France, Luxembourg, Russia and Turkey Italy, Spain and Portugal

Belgium, Hungary, the Netherlands and Poland

Human Resources

Globally, Human Resources (HR) is split up into HR business partners and global practice teams (see figure 1.2). HR business partners act as relationship managers towards their customers: the different divisions. The global practice teams are each specialised in a certain HR product.

Figure 1.2: Organisational structure Human Resources, as of January 2004.

In order to ensure an appropriate balance in HR policies, practices and programmes against regional and country-specific needs, the Chief Operating Officer (COO), Chief of Staff (CoS) and almost all business partners are assigned different areas of responsibility according to the following regions.

Americas Asia Pacific Germany

UK, Ireland and Switzerland Austria, South Africa and Scandinavia

HR CAO

HR business partners

Chief of Staff

- Learning and development

- Compensation

- Graduate recruitment &

training

- Workforce analytics

- HR marketing

- HR research

Executive development

Labour relations

Global diversity - Asset Management

- Private Wealth Management

- Global Markets

- Global Equities

- Private & Business Clients

- Global Corporate Finance and Corporate Investments

- Global Banking Division

- Global Technology and Operations

- Corporate centre / divisional functions

Global practice teams

Chief Operating Officer - Benefits and

international services

- HR Online / employee lifecycle

- HR business management

- Payroll / administration

- HR quality

- HRdirect

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In addition, five HR Operating Directors provide overview of and direction on several other regional and country level HR policies and programmes. They are responsible for the regional management of operations in payroll, international services, HRdirect, HR Online and benefits.

Whereas the regions Americas, Asia and the UK are each assigned to one Operating Director, Germany has two: one for Payroll, HRdirect, HR Online and other HR services, and one for compensation, benefits and employee programmes.

1.2 Background

During the last decade, the business environment has changed rapidly.

Technological developments, globalisation, mergers and acquisitions, increased customer demands, and more recently, a weak economic situation have led to a very competitive environment. Firms of all sizes have to adapt to these changes in order to continue to increase shareholder’s value. This also accounts for Deutsche Bank.

Ulrich argues that companies face five critical business challenges, regardless of industry, size, or location. Firstly, globalisation requires organisations to increase their ability to learn, to collaborate and to manage diversity, complexity and ambiguity. The days are over when companies created products at home and shipped them abroad as is. With the rapid expansion of global markets, managers have to balance the demand to think globally and act locally. Secondly, companies are driven to be profitable. Especially, the recent weak economic situation has put a high pressure on the business to become more efficient by reducing costs. At the same time, the service quality should be maintained. Thirdly, technology increasingly affects how and where the work gets done. Therefore, companies should make sense and good use of what technology offers. Fourthly, knowledge has become a direct competitive advantage. The challenge for organisations is to make sure that they have the capability to find, assimilate, develop, compensate and retain talented individuals who are the company’s intellectual capital. Finally, continuous change is perhaps the greatest competitive challenge that companies have to face. Companies must be able to learn rapidly and continuously, innovate ceaselessly, and take on new strategic imperatives faster and more comfortably.

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Companies will need to be in a never-ending state of transformation, perpetually creating fundamental, enduring change. (Ulrich, 1998:126).

These challenges require organisations to build new capabilities. Ulrich argues that the competitive forces, that the business faces today and will continue to confront in the future, demand organisational excellence. HR can help to deliver this excellence in the following four ways. (Ulrich, 1998:125).

Focus on strategic partnering with the business.

Become an expert in delivering administrative efficiency and the way work is organised and executed to ensure cost reduction and quality maintenance.

Become a champion for employees.

Become an agent of continuous transformation.

On the other hand, the HR function itself has also been looking for ways of becoming more efficient, because internally, not only the business divisions but also functional divisions, like HR, are strongly pushed to save costs. This is reflected by the latest trends in HR.

One of these trends is the concept of shared services. Companies have discovered that this concept, which originated in the USA, can support the business to deliver organisational excellence and simultaneously make the HR function itself more efficient.

1.3 Concept of HR shared services

This paragraph deals with the concept of shared services in detail. It aims to find out the precise role of an HR service line in this concept, and in what way shared services might support companies to deliver organisational excellence and to enhance the HR efficiency. Firstly, various definitions are presented. Secondly, the benefits and potential pitfalls of HR shared services are discussed.

Definitions

As mentioned in the beginning of this chapter, an HR service line is part of the shared services concept.

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Quinn et al., say that shared services means that a common set of services is shared rather than duplicated in every business unit. (Quinn et al., 2000:11). Ulrich explains that in divisionalised companies, each operating entity (division, business unit, function or regional unit) likely has support services (such as Human Resources, real estate, finance, law and IT) dedicated to the entity’s needs. Shared services merges these separate service activities into one unit. (Ulrich, 2000:14).

The payroll, for example, is not done by each business unit separately anymore, but an HR service centre administrates payroll for all business units (see figure 1.3). It can also be applied to IT. Instead of having their own IT helpdesk, business units now share one IT helpdesk that serves all business units at the same time.

Figure 1.3: Shared services model.

Schulman et al. define shared services as the concentration of company resources performing like activities, typically spread across the organisation, in order to service multiple internal partners at lower cost and higher service levels. (Schulman et al., 1999:9).

Please note that it is not the same as just the centralisation or consolidation of services. Quinn et al. argue that what differentiates shared services from the simple consolidation of transactional services is the focus on the client. Shared services must start from a client vision, how benefits will accrue for the client and what will

Shared Services

HR service centre Business

Unit

Business Unit Business

Unit

Business Unit

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satisfy them. Another factor, which shows this differentiation, is the opportunity for the clients to choose the levels of service. (Quinn et al., 2000:24).

Ulrich agrees and explains that the concept of shared services is not the rebirth of centralisation. In fact, although it may look like centralisation, it is just the opposite.

In a centralised organisation, the corporate centre controls the resources and dictates policies, programmes and procedures to the field (the different divisions). In a shared service organisation, resources from the field are shared, but the control over the use of these resources resides with the field. He states that “the user is the chooser” (that means, the user is the one who controls the activities of the shared service organisation). (Ulrich, 2000:12).

Figure 1.4 shows how the concept of shared services captures the best elements of both centralisation and decentralisation, while leaving behind the problems.

(Schulman et al., 1999:12).

Figure 1.4: shared services: the best elements of centralisation and decentralisation.

The department that offers these shared services for HR is often called an ‘HR service centre’.

IDS argues that HR service centres have two main characteristics. The first characteristic is that they centralise a large number of administrative HR activities and processes which are relatively routine, standard and repetitive. For example, the administration of benefits, pensions, payroll, recruitment, employee data, training and absence monitoring. The second characteristic is answering relatively straightforward inquiries from line-managers, employees and pensioners. Therefore, an HR service centre might alternatively be described as an HR service line.

However, this may not do justice to its administrative role. (IDS, 2001:3).

Higher costs Variable standards Different control environm ents Duplication of efforts

Pooled experience Enhance career progression Independent of business Synergies

Lean, flat organisation Recognition of group functions Dissemination of best practices

Unresponsive

No business unit control of central overhead costs Inflexible to business unit needs

Remote from business

Decentralisation Shared services Centralisation

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The service line function is often integrated into an HR service centre. However, there are also independent HR service lines, like HRdirect, that operate in parallel with an HR service centre. Such a service line is a unit that primarily answers routine HR inquiries from managers, employees, pensioners and applicants which come in per telephone or email.

Technology is an important hallmark of shared services. Call management technology, for example, enables a service line to route customers to the appropriate representative. Customer relationship management systems facilitate the tracking of case histories by documenting the complete process: from the inquiry of an employee till the closure of the case with the right answer. A knowledge database with stored questions and answers is often included. Intranet enables the publishing of information concerning HR products, policies and processes.

Employee and manager self-services support the administrative part of the service centre. It enables employees and managers to administrate certain processes themselves. For example, address changes, times of absence and working overtime.

Many organisations have implemented shared services for HR. However, it is still rarely applied to various countries at the same time. Most HR service centres and service lines only serve one particular country where the biggest part of the workforce is employed. However, there are also service lines that cover certain regions. Deutsche Bank’s HR service line for Continental Europe is a so-called pan- European service line, because it serves various European countries at the same time.

Benefits and pitfalls

Why do companies implement HR service centres or service lines? There are four main reasons that can be found in different literature sources. They offer: cost savings, quality improvement, organisational change and technological development.

Reilly and Williams say that companies believe that costs can be reduced in four ways. Firstly, cutting staff numbers and reducing accommodation charges can be

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obtained by pulling together a number of separate administrative service activities into one place. This will lead to economies of scale. Secondly, relatively more expensive activities can be converted to a lower cost base, such as an HR service line, a self-service portal and the Intranet. Thirdly, more buying power can be obtained, because processes are centralised. Fourthly, organisations can achieve more efficiency by streamlining services. (Reilly and Williams, 2003:11).

Companies do also have certain quality reasons. According to Reilly and Williams, shared services can make the HR function more professional, achieve greater consistency and accuracy, use better processes in order to complete its work and deliver work on time and within budget. Through these means HR can provide a more efficient and effective service. A greater self-awareness of the need to meet standards of service delivery and to monitor accuracy and timelines can lead to an HR function with a more professional approach. This again will be reflected in a high quality performance. (Reilly and Williams, 2003:14). Walker adds that if service is delivered on a decentralised level, knowledge can be quite variable at any location and, as a result, the answers given to the customer are not always correct or consistent. A centralised centre enables HR to train their staff in a consistent manner and therefore, deliver the same answers to all customers. (Walker, 2001:215). Hays argues that HR advisers are not available all the time. Besides, they often have to contact other HR departments, because they do not know the answer themselves. By implementing an HR service centre or a separate service line, these phone calls can be eliminated. (Hays, 1999:126).

According to Reilly and Williams there are four sets of organisational reasons behind the establishment of shared services. Firstly, an HR service centre can be a product of a wider change. Pulling together HR operations that were previously discrete may, for example, support the integration of business activities. Secondly, the shared services concept offers more structural flexibility, because it makes HR

‘future proof’ against organisational reconfiguration. Business divisions might reconfigure their organisational structures, but a common HR service centre can easily adjust. Thirdly, benefits can be obtained from cross-company learning.

Bringing services together in one place results in the advantage that expertise is available not only for a particular business. Fourthly, many companies share

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services quite explicitly to reposition HR and change its role. This means changing the function towards a more strategic role. (Reilly and Williams, 2003:19). Walker clarifies that the need to remove the administrative activities, which often constitute a significant portion of HR advisers’ work, is fundamental to reaching this strategic goal. Centralising these administrative activities in a service centre allows this to occur. (Walker, 2001:215).

For some people, technology is considered to be a facilitator of change rather than a trigger in itself. However, Reilly and Williams argue that this may underestimate its impact, because technological innovations in communication have enabled far- reaching structural change. (Reilly and Williams, 2003:21). IDS adds that, without call management techniques, customer relationship management systems, self- service portals and Intranet, the concept of shared services would not be that successful, because these technologies have enabled companies to reduce costs and achieve a greater consistency and a better customer focus. (IDS, 2001:3).

Greengard also states that technology has created remarkable new opportunities to eliminate administrative overhead and transform the HR department into a strategic partner. (Greengard, 2000:38).

Walker has done research on the reasons for 82 companies to implement shared services. 45% name quality reasons, 30% HR transformation (organisational reasons), 18% cost reasons and 7% other reasons. (Walker, 2001:216).

Looking at the benefits, one can see that shared services might support the business to deliver organisational excellence and make the HR function itself more efficient and professional. However, there are also potential pitfalls that should be taken into account. Firstly, Ulrich states that the loss of face-to-face contact might produce a depersonalised service for both the customer and the HR professional.

(Ulrich, 1995:23). Secondly, Pickard adds that an obstacle lies in dealing with new technology, because some people are hesitant to use it. (Pickard, 2000:30).

1.4 Shared services Deutsche Bank style

The actual motive for implementing shared services is different for each company.

Besides, there are many ways of organising them. Therefore, this paragraph deals

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with the reasons for Deutsche Bank to implement shared services for HR, the way they have organised their service centres and service line, as well as Deutsche Bank’s future plans on this area.

Human Resources

Deutsche Bank’s Human Resources division has formulated the following vision: to become the strategic adviser and delivery expert optimising human capital to create and sustain stakeholder value.

Strategic adviser: by complementing client knowledge (knowledge of the environment where HR’s customers, employees and managers, are working in) and the business partner function (HR as strategic partner of the business) with the expertise of the global practice teams on several HR products, the client relationship can be maximised and business results accelerated.

Delivery expert: HR must drive operational excellence. A state-of-the-art HR platform should lead to continued efficiency and quality.

Optimise human capital: includes the promotion of the ‘one bank, one team’

approach to achieve continued long-term results. Deutsche bank has launched this approach last year. The motto ‘one HR’ derived from it. It simply means that Deutsche Bank should act like one team instead of several different ones. It does not mean that as many departments as possible should be integrated. Deutsche Bank argues that global integration should be balanced with local responsiveness and divisional focus.

Figure 1.5: Deutsche Bank’s HR delivery platform.

HR Online Self Service Portal

- Employee Self Service - Manager Self Service

HR Service Center Processing

all standard processes in admin. and payroll HRdirect

HR Service Line

for all standard HR-related questions

HR Advisory Individual coaching

of Employees and managers

HR Shared Services HR advisory

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Deutsche Bank’s state-of-the-art HR platform consists of four elements (see figure 1.5): the HR service centres, HRdirect, HR Online and the HR advisory. The first three elements are part of Deutsche Bank’s HR shared services concept.

HR shared services concept, reasons for implementation

By implementing shared services for HR, Deutsche Bank wanted to achieve the following strategic objectives. (Jordan and Hoock, 2003:24).

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HR service centres

In autumn 2001, the first element of Deutsche Bank’s shared services concept was implemented in Germany. Four HR service centres were formed which provide HR administration as well as payroll services for about 50,000 employees, pensioners and apprentices of the Deutsche Bank Group in Germany.

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HRdirect

In January 2002, HRdirect Germany went online. It is Deutsche Bank’s HR service line which is situated in Berlin. It operates in parallel with the four HR service centres and addresses all employees at Deutsche Bank Germany, the domestic subsidiaries, as well as pensioners and applicants for all questions concerning HR matters. At present, HRdirect Germany serves around 50,000 customers.

Employees can contact the service line by telephone, fax or email from Monday to Friday, 8 am to 6 pm, Central European Time (CET). HRdirect helps employees with all routine HR inquiries. These are frequently asked questions regarding operational HR issues which are relatively easy to answer. HR advisers remain the first point of contact for individual counselling and support.

Deutsche Bank had the following reasons for implementing an HR service line.

(Jaschok and Jaschik, 2003:10 and 18).

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HRdirect Continental Europe (CE), which is also situated in Berlin, went online in October 2002. It serves approximately 13,000 employees and pensioners in fourteen European countries: the Netherlands, Belgium, Luxembourg, France, Portugal, Spain, Italy, Switzerland, Austria, Turkey, Hungary, Czech Republic, Poland and Russia.

Additionally, there were also HRdirect teams formed in London (covering Great Britain and Scandinavia), in Bangalore (covering Asia Pacific) and in New York (covering Americas).

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HR Online

HR Online is Deutsche Bank’s global employee and manager self-service portal.

The employee self-service portal was introduced in October 2002.

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Future plans

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However, covering a broader range of HR inquiries on a cross-border basis is more difficult than offering this extended service on a one-country basis. There are various reasons for that: HR products differ between countries, because of differences in labour law and other regulations, different languages are spoken and every country possesses its own culture.

HRdirect wants to know from an external point of view what the actual possibilities and limitations of an expansion of HRdirect Continental Europe’s service are. Is it possible and reasonable to offer the same extended service as HRdirect Germany for each European Deutsche Bank branch?

To find out whether HRdirect CE is on the right track or whether it has to adjust its strategy, a research has to be conducted.

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1.5 Problem statement

The problem statement can be split up into the research objective and the research question. The research objective states for whom the research is conducted, what knowledge will be produced and why the knowledge is of interest. In conclusion, the relevance of the research is made clear. (De Leeuw, 1996:85). The research question is more specific and indicates what kind of information is gathered.

(Verschuren, 1996:33).

Research objective

To provide insight into the possibilities and limitations of an expansion of HRdirect Continental Europe’s service and to give HRdirect recommendations on how to move forward.

Research question

What factors facilitate or inhibit HRdirect Continental Europe from centrally answering a broader range of routine HR inquiries from employees in different European Deutsche Bank branches?

Sub questions

What is said in different literature and research about factors that facilitate or inhibit companies from implementing pan-European shared services and what theoretical framework can be used throughout the thesis? (Ch. 2).

Which factors that facilitate or inhibit HRdirect CE from centrally answering a broader range of routine HR inquiries does Deutsche Bank recognise? (Ch. 5).

Which facilitating and inhibiting factors did a comparable company recognise when it decided to implement cross-border shared services? (Ch. 6).

How critical are these factors, what are the possibilities and limitations of an expansion of HRdirect Continental Europe’s service in terms of covering certain HR themes and European branches, and does a pan-European HR service line

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generally make sense for Deutsche Bank in comparison with another company?

(Ch. 7).

What can be concluded and what recommendations can be given? (Ch. 8).

1.6 Thesis outline

After having introduced what the research is about, chapter 2 provides some theoretical background. Firstly, it presents a literature review about factors that facilitate or inhibit companies from implementing pan-European shared services.

Secondly, it introduces a theoretical framework that supports the actual research.

Chapter 3 outlines the research design. Chapter 4 consists of a description of HRdirect and HR in different European branches. Chapter 5 offers the results and findings at Deutsche Bank. Chapter 6 deals with the results and findings at a comparable company. Chapter 7 forms the analysis. Chapter 8 presents the conclusions and recommendations.

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Chapter 2 Theoretical chapter

2.1 Introduction

The research question of this master’s thesis is company-specific. However, in order to find out which factors are possibly involved, the next paragraph deals with the first part of the first sub question: what is said in different literature and research about factors that facilitate or inhibit companies from implementing pan-European shared services? The third paragraph discusses whether these findings are useful and what information is possibly missing in order to answer the research question. The fourth paragraph presents the second part of the first sub question: what theoretical framework can be used throughout the thesis? The theoretical framework forms the basis of this research.

2.2 Literature and research findings

As mentioned before, the concept of shared services originated in the USA. Several companies in Europe have successfully copied the concept on a one-country basis.

However, do the benefits of shared services which were mentioned in paragraph 1.3 also apply to a pan-European version?

According to Quinn et al., not only on a one-country basis, but also on a pan- European basis, economies of scale are far too compelling to ignore. (Quinn et al., 2000:217). Mercer agrees to a certain extent but adds that a lack of critical mass will compromise savings if a company has a European staff of less than 15,000 employees. Moreover, if the European headcount is spread out across several small branches, consistent solutions as well as cost savings will be more difficult to achieve. (Mercer, 2003).

Quinn et al. add that there are two additional organisational reasons for companies to implement pan-European shared services. Internally, companies are worried about the fragmentation of their brand and identity across countries and are looking for a more consistent image. Externally, global customers and dealers demand an integrated holistic package, because they operate in different regions at the same time. (Quinn et al., 2000:217).

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Schulman et al. argue that the benefits of shared services are universal and therefore, also apply to a pan-European version. However, companies deciding to implement pan-European shared services must take into account European implications which are not considered by the USA driven concept. (Schulman et al., 1999:53). The following challenges have to be faced.

A first challenge concerns language. Walker argues that there are at least five languages commonly used in European business: English, Spanish, Italian, German and French. Of course, in large companies English is understood and spoken at management level without difficulty. However, this is not true on a lower level.

(Walker, 2000:278). Therefore, Schulman et al. argue that a pan-European service centre needs personnel which is able to speak at a minimum three languages from the five languages mentioned above. (Schulman et al., 1999:56).

A second challenge refers to cultural and social divisions within the European population. Walker states that especially the differences between Southern and Northern European countries are significant. The ways of organising work, communication and negotiation, and corporate hierarchies can be quite different in those countries. All these aspects have to be taken into consideration if a company wants to set up a pan-European service centre. (Walker, 2001:278).

A third challenge is the international variation in, for instance, labour law, HR policies and benefits. The Corporate Leadership Council (CLC) argues that common benefits, such as medical insurance, vary widely between different European countries. (CLC, 2002:8). Walker adds that there are no unified European laws regarding payroll reporting and taxation. That is why, no pan-European provider has been able to offer a complete outsourcing service, until now. Moreover, even though single European legislation has been enacted and built into national labour laws, there are often different interpretations of these laws among the member states.

(Walker, 2001: 285). According to Mercer, the fact that every European country uses different information systems is a related challenge. If HR programmes, processes and regulations are not consistent and vary across regions, cost savings will be more difficult to achieve. (Mercer, 2003).

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A fourth challenge is the European privacy law. The CLC argues that these privacy laws, which are more restrictive than in the USA, inhibit the transfer of employee data to another country that lacks comparable privacy standards. (CLC, 2002:9).

Walker adds that with certain exceptions, transfers of data can take place only between European Economic Area (EEA) countries and a further group of countries outside the EEA with adequate data protection laws such as Poland, Switzerland and the Slovak-Republic. However, even without the European data protection laws, there are restrictions within individual European countries about the way in which data may be used. In Italy and Germany, for example, it is forbidden by their domestic laws to hold data on individuals that list religion or ethnic origin. (Walker, 2001:284).

A fifth challenge concerns the historical dimension. Walker explains that in the past, large companies operating across Europe were led by a number of ‘country kings’

who autonomously ran their part of the business. HR was managed on a one- country basis and HR directors reported directly to the country head. The business as well as HR have become more globally driven. However, some country heads and HR directors have not embodied this role yet. This may slow down or even hinder the implementation of pan-European shared services. (Walker, 2001:279).

A sixth challenge which is related to culture is technology. Walker clarifies that it is often seen in European countries that new technologies are only used if the curiosity and interest of employees are sparked and therefore, demand is created. In the United States, for example, people are more open to new technology, such as an HR service line or an employee self-service portal. (Walker, 2001:286).

2.3 Information gap?

On the one hand, several benefits (facilitating factors) have been recognised. On the other hand, various challenges (inhibiting factors) have been identified. However, these factors only form a starting point. Still, extended research on this matter has not been executed since it is only recently that companies increasingly decide to implement pan-European shared services. Moreover, every company is organised differently, and every company has a different starting position and a different strategy. Thus, in order to answer the research question of this thesis, it is

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necessary to explore whether the factors mentioned above also apply to HRdirect CE, what additional company-specific factors have to be taken into account, and how critical the different factors actually are in this particular situation?

2.4 Theoretical framework

In the previous paragraph, an information gap was recognised and it was argued that more specific research is necessary. This paragraph presents a theoretical framework that will be used in order to structure and analyse the results and findings of this research.

In international management literature, the terms multi-domestic, global, international and transnational are often used to describe competitive strategy.

Companies following a multi-domestic strategy give prime importance to national responsiveness. Their products or services are differentiated to meet different local demands, and their policies are differentiated to conform to different governmental and market demands. Companies following a global strategy give prime importance to global integration. They integrate and rationalise their production to produce standardised products in a very cost-efficient manner. Companies following an international strategy give prime importance to the development and diffusion of innovations worldwide. Their competitive advantage often lies in research and development. New technologies are developed in the same country and transferred and adapted to foreign countries. Companies following this strategy only pay some attention to global efficiency and local responsiveness. Companies following a transnational strategy recognise that they should pay attention to global efficiency, national responsiveness and worldwide learning at the same time. In order to do this, their strategy must be very flexible. The strategy is to have no set strategy, but to let each strategic decision depend on specific developments. (Harzing and van Ruysseveldt, 1999:38). The four configurations can be captured in the IR (Integration-Responsiveness) framework (see figure 2.1).

The vertical axis represents the level of global integration and the horizontal axis the extent of national responsiveness or differentiation. Prahalad and Doz explain that integration refers to the centralised management of geographically dispersed activities on an ongoing basis. Local responsiveness refers to resource commitment

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decisions taken autonomously by the subsidiary in response to local competitive and customer demands. (Prahalad and Doz, 1987:15). Barlett and Ghoshal argue that there is a set of forces that drive companies to be more integrated and coordinated across borders and a countervailing set of forces that require companies to national differences. (Barlett & Ghoshal, 1998:307).

High Global Transnational

Integration International

Multi-domestic

Low Responsiveness High

Figure 2.1: The Integration-Responsiveness framework.

According to Harzing, the place of a transnational company in the upper right corner does not mean that it is always high on both integration and responsiveness. The transnational approach is to decide whether to stress integration or responsiveness for each particular situation. The accent can be different for each business, function, task or country. (Harzing and van Ruysseveldt, 1999:47).

Like many companies operating in an international environment, also Deutsche Bank simultaneously has to manage global efficiency and respond to local differences in various situations. The expansion of HRdirect Continental Europe’s service is one of these situations. HRdirect wants to find out to what extent it is possible to implement a more integrated approach for Continental Europe by exploring what factors facilitate and what factors inhibit HRdirect from doing this.

The facilitating factors are the factors that push Deutsche Bank towards integration and the inhibiting factors push Deutsche Bank towards responsiveness.

The IR framework can be perfectly used as a theoretical framework throughout this thesis, because as Prahalad and Doz argue, it provides a useful way of capturing the forces on a given business. The purpose of this framework is to assess the

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relative importance of the two sets of conflicting demands and determine which of the two provides strategic leverage at a given point of time. (Prahalad & Doz, 1987:18-22).

Firstly, the IR framework is used in order to structure the results and findings. They are split up into factors that push Deutsche Bank towards integration and factors that push Deutsche Bank towards responsiveness in this situation. Secondly, the IR framework supports the analysis.

As mentioned in the beginning of this paragraph, a transnational company must decide in each particular situation whether to stress integration or responsiveness.

The accent can be different for each business unit, country and task. Therefore, the analysis is done on three levels. Firstly, the two sets of factors are analysed for each HR theme in order to find out for which task (answering inquiries regarding certain HR themes) a centralised service makes more sense. Secondly, the two sets of factors are analysed for each European branch in order to discover for which branch a centralised service is more logical. Thirdly, the two sets of factors are analysed for both Deutsche Bank and a comparable company in order to learn for which company a centralised pan-European HR service line is a matter of course. The IR framework will visualise the two sets of forces on each level.

After having analysed the two sets of factors on the three levels, it will get clear what factors actually facilitate or inhibit HRdirect Continental Europe from centrally answering a broader range of routine HR inquiries, and what is possible in terms of covering certain countries and HR themes, and what are the limitations.

2.5 Conclusion

This chapter dealt with the first sub question: what is said in different literature and research about factors that facilitate or inhibit companies from implementing pan- European shared services and what theoretical framework can be used throughout the thesis?

Several facilitating and inhibiting factors have been found in different literature and research. However, in order to answer the research question of this thesis, it is

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necessary to explore whether these factors also apply to HRdirect CE, what additional company-specific factors have to be taken into account and how critical the different factors actually are in this particular situation?

It was decided to use the Integration-Responsiveness framework throughout this research as a theoretical framework. Firstly, the framework is used in order to structure the results and findings in a set of factors that pushes Deutsche Bank towards integration, and a set of factors that pushes Deutsche Bank towards responsiveness. Secondly, it supports the analysis of the factors on three different levels: a task level, a country level and a company level.

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Chapter 3 Research design

3.1 Introduction

Before starting with the actual research, three questions have to be answered: how is the research structured, what are the boundaries of the research and how can the research question be best answered? Therefore, this chapter deals with the research design. Firstly, the research model is presented. Secondly, the scope and limitations of the thesis are discussed. Thirdly, the methodology is outlined.

3.2 Research model

The five sub questions, which are formulated in chapter 1, can be captured in the following research model (see figure 3.1).

Figure 3.1: Research model.

The research model shows the different stages of the research. In chapter 2, literature and research findings were presented. It was concluded that additional research is necessary. Therefore, this research firstly explores which facilitating and inhibiting factors influence an expansion of HRdirect Continental Europe’s service, according to three groups of interviewees at Deutsche Bank. The results and findings are presented in chapter 5. Secondly, the research makes use of the experience of a comparable company that has already implemented pan-European shared services in order to find out whether additional factors should be taken into account. Besides, Deutsche Bank might learn something from the experience of this company. These results and findings are outlined in Chapter 6. However, previous to this, chapter 4 provides a description of HRdirect and HR in the European Deutsche Bank branches. In the future, HRdirect CE will move towards HRdirect Germany. Therefore, it is useful to compare both service lines. Besides, the organisation of the European branches influences which factors have to be taken

Factors found in literature / research

(Chapter 2)

Exploration of factors Deutsche Bank

(Chapter 5)

Exploration of factors Comparable company

(Chapter 6)

Analysis (Chapter 7)

Conclusions &

recommenda- tions (Chapter 8) Description

HRdirect / HR Eur. branches (Chapter 4)

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into account and how critical the factors actually are. Chapter 7 analyses the results and findings, as explained in chapter 2. Chapter 8 deals with the conclusions and recommendations.

3.3 Scope and limitations

Scope

Due to time constraints, this research only focuses on four European Deutsche Bank branches. Unfortunately, it was not possible to choose each branch.

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Italy and Spain were chosen, because they are clearly the largest branches in Continental Europe. In order to compare these two large Southern European countries, a medium and a small branch with each a different native language and culture were added. The Netherlands was chosen as medium branch and Austria as small branch.

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This research only makes use of the experience of IBM (International Business Machines Corporation

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This research only deals with seven HR themes in detail.

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Limitations

De Leeuw argues that the limitations of a research can be split up into product and process limitations. Product limitations are limitations with regard to the end result.

Process limitations are limitations concerning the research process itself. (De Leeuw, 1996:85).

Product limitations.

The results of the research are exclusively entitled to the Deutsche Bank Group.

Deutsche Bank has the right to use the research without copyright restrictions.

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Publication is only allowed for examination at the university and with explicit allowance of Deutsche Bank.

Process limitations.

The internship started on the 1^st of April 2003 and ended on the 30^th of September 2003. Most of the data had to be gathered by then.

The progress of the research had to be presented to HRdirect’s management a several times during the internship. The final results had to be presented when the master’s thesis was finished.

3.4 Methodology

In this paragraph, the research process ‘onion’ is discussed. According to Saunders et al., the model which is especially designed for business research offers a good method to find out how to best answer the research question. (Saunders et al., 2000:85). Figure 3.1 shows a graphic image of the model.

Figure 3.1: the research process ‘onion’.

Positivism

Phenomenology Deductive

Inductive Experiment

Survey

Case Study

Grounded theory

Ethnography

Action research

Cross sectional

Longitudinal Sampling

Secondary data Observation Interviews Questionaires

Research philosophy

Research approaches

Research strategies

Time horizons

Data collection methods

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Research philosophy

The first layer of the ‘onion’ raises the question of the adopted research philosophy.

Saunders et al. state that the research philosophy depends on the way the researcher thinks about the development of knowledge. This affects, sometimes even unconsciously, the way research is done. Two views about the research process dominate the literature: positivism and phenomenology. The positivist view can be compared with the view of natural scientists. They prefer to work with an observable social reality and an end product with law-like generalisations.

Researchers with a phenomenological view criticise this and argue that rich insights into this complex world are lost if this complexity is reduced entirely into a series of law-like generalisations. This line of argument is persuasive in the case of business and management research. Business situations are not only complex but also unique. (Saunders et al, 2000:85-86).

This business research is also done from a more phenomenological point of view, because generalisability is not of crucial importance. Firstly, the circumstances of today may not apply in three months time anymore because of, for example, changing laws and organisational changes. Secondly, companies are unique, because they have different organisational structures, cultures, strategies and starting positions. Consequently, the results and findings will differ for every company.

Research approach

The second layer of the ‘onion’ deals with the choice of the research approach.

Saunders et al. argue that the extent to which the researcher is clear about the theory at the beginning of the research raises an important question concerning the design of the research project. This is whether a deductive or an inductive approach should be used. The approaches are not mutually exclusive. The deductive approach can be seen as testing theory. It moves from theory to data. The inductive approach as building theory. It follows the data rather than the other way around.

(Saunders et al., 2000:87).

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This research uses a combined approach. A deductive approach was used in chapter 2, in that the present available body of knowledge was studied. The different literature and research findings were used in order to find a theoretical framework.

Additionally, the literature review serves the purpose of illuminating and enriching the analysis.

However, primarily an inductive approach was used, because as mentioned in chapter 2, it was impossible to answer the research question with the different literature and research findings. The absence of much literature and research on this relatively recent topic and the fact that the research question is company- specific encouraged the choice for this approach. The analysis of the results and findings resulted in the formulation of a theory: the recommendations.

Research strategy

The third layer of the ‘onion’ presents the research strategy, a general plan of how to answer the research question. Therefore, the chosen strategy should always be based on the nature of the research question. Saunders et al. recognise the following strategies: experiment, survey, case study, grounded theory, ethnography and action research. (Saunders et al., 2000:92).

This research makes use of the case study strategy. Robson defines case study as the development of detailed, intensive knowledge about a single case or a small number of related cases. He argues that this strategy will be of particular interest if the researcher wishes to gain a rich understanding of the context of the research and the processes being enacted. (Saunders et al., 2000:94). This strategy perfectly fits the nature of this thesis’ research question, because it aims to gain a rich understanding of the factors that facilitate or inhibit HRdirect from expanding its service.

Time horizon

This research is a graduation project and thus, time constrained. Therefore, this research is cross sectional, that means a study of a phenomenon at a particular time. (Saunders et al., 2000:96). However, by looking at IBM, a certain longitudinal

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view can be added, because the way different factors change over time and the development of a pan-European HR service centre can be studied.

Data collection method

Robson argues that research can also be classified by its purpose. The classification most often used is three-fold: exploratory, descriptive and explanatory.

He adds that explorative research is a valuable means of finding out new insights and a particularly useful approach if you wish to clarify your understanding of a problem. (Saunders et al., 2000:97). This approach matches with the objective of this thesis, because it aims to provide insight into the possibilities and limitations of an expansion of HRdirect Continental Europe’s service.

Saunders et al. argue that there are principally three ways of conducting exploratory research (Saunders et al., 2000:97).

Search of the literature (desk research).

Talks to experts in the subject (field research).

Conduction of focus group interviews (field research).

This research primarily applied the first two methods. As mentioned before, firstly, literature was used in order to link the research with the existing body of knowledge and to find a theoretical framework. For this desk research, especially secondary data has been gathered. This is data that has already been collected for some other purpose. The following sources were used.

Book literature (recent books about shared services and the IR framework).

Electronic academic articles in several periodicals (recent articles about HR shared services).

Internet (the services of the Corporate Leadership Council and a web-meeting organised by Mercer about pan-European shared services).

A complete list of used literature can be found in the bibliography, which is attached at the end of this master’s thesis.

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Secondly, talks were held with experts in the subject. This field research made use of primary data obtained from semi-structured and in-depth interviews which were held face-to-face and by telephone. In contrast to secondary data, primary data is specifically collected for a new purpose: in this case, to find an answer to the research question of this thesis.

In in-depth interviews there is no predetermined list of questions to work through, although the researcher needs to have a clear idea about the aspects to be explored. In semi-structured interviews the researcher has a list of themes and questions to be covered, although these may vary from interview to interview. This means that the researcher may omit some questions in particular interviews, the order of questions may be varied depending on the flow of the conversation and additional questions may be required. (Saunders et al., 2000:247).

The two kinds of interviews perfectly match with this explorative research, because as Saunders et al. argue, these two kinds of interviews provide the researcher with the opportunity to ‘probe’ answers, where the researcher wants the interviewees to explain, or build on, their responses. This is important if a phenomenological approach is adopted, where the researcher is concerned to understand the meanings which respondents ascribe to various phenomena. (Saunders et al., 2000:247).

Four groups of people were interviewed. Firstly, HRdirect (shared services experts) that aims to offer an extended centralised service for Continental Europe. Secondly, HR staff in the four European branches (experts national processes) for whom this will have major consequences. Thirdly, three GPTL’s with a lot of international experience and knowledge on shared services who look at it from a greater distance. Fourthly, the management of IBM’s HR service centre that has already gone through this change. In conclusion, this part of the research was done by looking at four different perspectives. The following individuals were interviewed.

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In order to better organise the results and findings, the quotations of the interviewees at HRdirect were collected. The same thing was done with the quotations of the different interviewees within a certain European Deutsche Bank branch.

The first interviews with HRdirect and the GPTL’s were indepth in order to get an idea of the ‘big picture’ and of the possible factors involved. The interviews which were held later on with HR staff in the European countries, IBM, and again HRdirect were semi-structured, because then it was clear what kind of themes and questions were relevant to discuss (see the appendix for the lists of questions).

Thirdly, data was collected at two meetings: an internal Deutsche Bank meeting concerning the extension of HRdirect Continental Europe’s service and a meeting which was part of the visit of IBM’s HR service centre in Portsmouth. At both meetings, the subject of this thesis was discussed.

Data analysis

The collected data is mainly qualitative, because it is based on meanings expressed through words. Saunders et al. state that the collection of results in non- standardised data requires classification into meaningful categories. In this way it is easier to understand and to manage data, to combine related data from different sources, to identify key themes or patterns from them for further exploration, to develop and / or test hypotheses based on these apparent patterns, or to draw and verify conclusions. (Saunders et al., 2000:384).

The names of the categories emerged from the actual terms used by participants and terms used in existing literature and theory.

As argued in chapter 2, the Integration - Responsiveness framework supports the analysis of the categories on three levels. On each level, the factors were split up into two categories. Factors that push Deutsche Bank towards integration and factors that push Deutsche Bank towards responsiveness. The two categories were again spilt up into different sub categories.

Pan-European shared services

Pan-European shared services

Joost Kanis

Pan-European shared services

Acknowledgements

Executive summary

Table of contents

Chapter 1 Introduction

Chapter 2 Theoretical chapter

Chapter 3 Research design