Global Trends in Human Resources and Finance Management in the Shared Service Centres

Vanda Čirčová ¹ , Dagmar Grachová ²

¹University of Economics in Bratislava, Faculty of Business Management, Department of Management, Bratislava, Slovakia

² University of Economics in Bratislava, Faculty of Commerce, Department of International Trade, Bratislava, Slovakia

https://doi.org/10.5817/CZ.MUNI.P280-0197-2022-1

Abstract

Nowadays global economies must face many challenges due to the current trends. To these we can include globalisation, digitalization and mainly pandemic. All these factors influence enterprises all over the world and accelerate in innovations. Moreover, enterprises of all size tend to implement Shared Service Centres into the business strategy. They have realized that this decision may provide numerous advantages to their business, such as increase in the competitiveness, orientation on the primary business activity and consequent overall effectiveness. Consequently, enterprises can contribute to the overall sustainable development since they are innovative. The main objective of this article is to make implications about how the mentioned paradigms increase innovative behaviour of companies and promote sustainable development. In our research we mainly used meta-analyses of the existing data from research of domestic and foreign authors, international institutions, and selected world widely significant SSCs on this topic. We focus on two impacted areas – finance and HR. The research gap and added value of this article is the new view on the business environment from wide scale of areas and the trend of globalisation accelerated with the spread of COVID – 19.

Keywords : shared service centres, finance, human resources

1 Introduction

Numerous enterprises aim to succeed in the competitiveness and reduce their costs, so they tend to find various ways to achieve it. One of the ways to establish this benefit is to implement the platform of shared service centres (SSCs) into the business strategy. SSCs provide various services to their subsidiaries and to other businesses globally. They are unified business units which provide selected services to businesses (national corporations/multinational corporations) with the aim of reducing costs, increasing quality, providing additional value, or increasing the competitiveness. SSCs deliver wide spectrum of services which can be divided into several fields. The concept of SSC is beneficial for the receiving country as it is considered as a direct foreign investment to the service sector.

According to Site Selection Group, (2019) the top 3 countries where the most SSCs are located are India, Poland, and United Kingdom. As every other sector of industry, the area of services has also been influenced by Industry 4.0 followed by digitalization. The consequence of this state is the implementation of innovations into the business models of companies. Current trends tend to contribute to the sustainable development in many ways which will be discussed in this article. As the early 2020, the COVID-19 pandemics stroke the whole world and so called New Normal has been established. Our article concerns the topic of how pandemic impacts companies which uses SSCs. The digitalization platform and its presence has been accelerated by the pandemic’s regulations and new ways of functioning. We focus on the changes brought by both pandemic and digitalization in the tree main areas of SSCs which are finance and HRM.

2 Methodology

The aim of the paper is to analyse tree main functional areas of SSCs using scientific methods. Partial aims are to evaluate and compare current views and opinions of foreign authors on how the pandemic and Industry 4.0 platform have impacted these fields. Moreover, to compare these fields from the point of view of how they have changed considering these two paradigms. The primary method of this paper was data collection of theoretical background. This data was basically collected from researchers who are professionals in the area of SSCs and whose articles are published in registered databases Web of Science and SCOPUS. Furthermore, the official statements of shared services centres and international organizations. In this paper we use deduction. This means that from general information that pandemic influence all aspects of society we move to specific examples of how pandemic impacted selected areas of SSCs. In the current state we focus on definitions of the researched functional areas and in the results of the paper we mention the digitalization and pandemic and its influence. In the first section of the article, we use meta-analyses. Moreover, we compare how these areas are influenced variously. In the results we used the synthesis method to conclude similarities and differences of the researched phenomenon.

3 Results and discussion

The pandemic affected all areas of society. Some in the positive way and others in the negative way. In the following text, we present the effects of the pandemic and the resulting digitalization on 3 functional areas of the company: finance and human resources.

3.1 Trends in finance

Today, information technology is constantly evolving and innovating. Along with the development of the Internet, a large amount of available data also comes to the fore - so-called Big Data. Based on this fact, there is also a constant advancement and improvement of business services in the field of financial sharing, which are closely integrated with big data. Big data is a new tool that can be used effectively, for example, in a group financial audit, which can be considered as one of the ways to support business development (Hong, J., Wang, Z., 2021). The SSC that provides this (or other) type of financial service is another component within the companies that use the SSC.

The era of the Internet and the resulting big data, sharing, or other current trends have a major impact on corporate finance. All these technologies can benefit both companies and consumers by providing better access to financial services, offering a wider choice, and increasing operational efficiency. They can also contribute to removing national barriers and stimulating competition in areas such as: online banking, online payments and transfers, peer-to-peer loans, personal investment advice and services.

In addition to the growing phenomenon of big data and sharing, due to digitalization, investment in research and development in all areas of the company is also gaining prominence. In the case of corporate finance, there is an investment in research and the resulting development of various software that companies implement in this field. They are thus trying to streamline activities in this area. This category includes, for example, financial planning and management software. The software is often built into larger ERP (Enterprise Resource Planning) solutions.

An ERP system is an in-house software information system used to manage and coordinate all resources, workplaces, and business functions through shared data repositories. ERP systems are focused within finance on accounting, invoicing but also other parts within the company such as production, logistics, distribution, inventory. They often have an impact on other areas of business activities, which may include the areas of business mentioned below, such as finance and HR. In practice, many different ERP systems can be encountered. According to a survey by the ERP solution review company, the best in 2021 included: Accounting Seed, Acumatica, Adeaca, FinancialForce, IFS, Multiview Financial Software, NetSuite, Oracle, Ramco, SAP.

The ERP system represents an opportunity to simplify, speed up and thus increase the efficiency of financial activities in companies. In this way, certain processes in the companies that use the software are standardized. SSCs that specialize in selected software within the ERP system can benefit from this standardization. Finance SSCs based on the ERP system are the latest form of management in the modern corporate financial management. The global pandemic has triggered a rapid increase in the digitization of SSCs to strengthen business operations and company value resulting from the gradual development of multinational corporations (Yao, 2018). Digitization has been greatly accelerated by the pandemic, the impact of which on finance is analysed later in this article.

Like all areas of the society, finance has not escaped the effects of the pandemic and the resulting changes. New challenges and opportunities are rapidly transforming financial services. The company's finance departments need to address common and lesser-expected situations while orienting themselves in a changing risk and regulatory environment. Organizations look to a future that is more interconnected, more collaborative , and frictionless - one in which trust, growth , and value delivery are paramount (KPMG , 2020 ) .

Good cash flow management is essential, especially during a crisis such as the COVID-19 pandemic. There are several business indicators that point to a lack of working capital. Many companies are currently facing this problem. As a result, there are other problems: the inability to pay bills at all, the inability to have the required stock, the material is purchased by the company only after receiving the order from the customer, resulting in further delivery delays and, last but not least, short-term cash in the form of cash. customers to finance the production of goods (Brag, 2015).

As in other parts of the company, there have been several fundamental changes in the finances and the companies have proposed new solutions for the future.

According to KPMG, the first fundamental change in 2020 was the change in the organization of work of employees working in financial services. In addition, however, they set the following priorities:

• increasing productivity and improving technology,

• reconnecting with customers (customer expectations and needs have changed)

• creating new partnerships (financial services companies communicate with non- traditional partners to create new value for customers)

• implementing social responsibility into the company's strategy

• improving risk management and agility (better preparedness for unexpected changes and risks in the future).

According to PWC, 2021, an increase in investments in innovation can also be expected., Many companies had already been undergoing a digital transformation before the outbreak of the pandemic, and the crisis only speed up this process and increase the amount of investment in this area. In addition, however, they anticipate that companies with sufficient capital will consider acquisitions, partnerships, or joint ventures. Their basic goal will be to generate new income and expand their activities.

The ACCS GROUP considers the introduction of work from it (work from home introduced as a solution to a pandemic situation in the finance departments) to be a situation requiring a further series of changes. In addition to the introduction of telework as a new norm, this trend requires further changes in the finance departments. One is the move to cloud technology, which offers much more flexibility and data availability for finance members. In addition to human work in the field of corporate finance, they realized the importance of automation, which will prevent inefficiencies in finance and situations such as pandemics, or other barriers to work will not be so affected by this department in the future.

As we stated in the first part of the article, SSCs allow companies to focus on reducing financial costs and optimizing working capital in today's uncertain environment. In financial SSCs (as well as other SSCs) and because of the pandemic, which reveals gaps in existing SSC support models, organizations face the urgent need to accelerate their digitization plans to strengthen financial operations and ensure business continuity (JP Morgan, 2021).

3.2 Trends in HR

Nowadays one of the key values of a company in each industry is digitalization. Digital technologies have significant effect on how organizations create and deliver value to the customer. Besides that, companies must create and transform original business models by integrating technology to their internal organization, administration, processes, and strategies. Digitalization of these models started to accelerate by the outbreak of the COVID-19 pandemics. In the HR field digitalization means introducing the digital discipline to all processes and systems and reaching an operational effectivity and cost optimalization through the introduction of digital tools (Minbaeva, 2013).

New concept of HR includes modern technologies and includes the following elements:

• social media and software for recruitment (LinkedIn, Facebook...),

• social interactions with multimedia,

• trainings (video, audio, courses, presentations) from digital sources,

• using AI and big data in talent management,

• mobile applications as a main HR tool,

• active participation of HR managers on all business activities,

• customer orientation,

• real time decision-making,

• data protection,

• online job interviews (MS Teams, Zoom, Skype, Google Meet).

Due to the pandemic and related regulations, businesses transform their operation to online way or hybrid model which combines work from home and from the office. An important part of HR is acquiring quality and qualified workforce and therefore it is appropriate that the companies implement digital platform in order to keep the social distance. For these reasons, the model of HRM has changed over time. Besides the mentioned activities and organizational changes, the competencies of managers in the HR field are naturally changing considering the digital platform implementation. In the table below we compare the current and digital HR model.

Table 1

Comparison of current HR model and digital HR

Source: processed by authors

Pandemic regulations established in March 2020 have influenced the way of work of employees and managers. Organization ILO accents on the fact that there is a new important role of managers which is checking the subordinates in the context of working hours. I tis important to realise that the job performance is rapidly changing while working from home. Significant role of manager is to ensure that all employees finished their job correctly and that their mental health is working well. New part of managing people is respecting that their private life has changed under the influence of pandemic, and they should give them the value of flexibility. The responsibility of each business is to provide their employees with the necessary technology and IT support for the work to be done in an appropriate way even though it is done from home. When we look at the new practices from the HR point, we can mention online interviews, recruitment, e-learning, online meeting etc. (ILO, 2021).

The COVID-19 pandemic brought changes on all levels of companies like economic changes, changes in the people behaviour and on the level of the whole organization. These changes are p ersonnel safety, unemployment, Home Office, change in the motivation of employees, lowered salary. Moreover, disrupted work organization and absence of employees due to quarantine or suffering from the COVID-19 virus, stress, adjustment of laws, policies, procedures. Furthermore, the need of training employees who need new skills, complexity in the technology and digitalization integration, low job independency and job insecurity, a nd increased work hours because of absent colleagues.

Pandemics accelerate challenges for people management and the human resources are needed for an effective operation of the whole organization. It is recommended to use creative methods of talent management for the aim of making sure the company will survive. Talent management plays significant role in defining competencies, motivation employees and talent retention. HR functions are key factor in combining talent management methods.

New trends are virtual communication with employees, creating benefits for supporting Home Office, supporting mental and physical health, improving training of employees in the given conditions. Currently, it is important to implement various strategies such as flexibility, work performance, job satisfaction, organizational performance, professional growth and development of social and work relations, motivation, and IT culture (Azizi et al., 2021).

3.3 Discussion

The concept Industry 4.0 causes changes worldwide and results in digitalisation. This trend comes along with regulations as the consequence of COVID-19 pandemic which started in early 2020 and accelerated the original conditions. Both phenomena contribute to the innovations which are part of UN sustainable development goals 2020-2030 (UNDP, 2020).  The scheme illustrates the mentioned mutual interrelations between all elements.

Figure 1

Interrelations of examined phenomena

Source: processed by authors

Whereas we focus on HR and finance department of SSCs the result of our examination is the conjunction of innovations in both areas. To clarify the similarities in the transformation process we illustrated the same characteristics in the following diagram. Digitalisation and pandemic have transformed both fields significantly and lead to business innovations.

Figure 2

Conjunction of the digitalisation and pandemic changes in HR and finance

Source: processed by authors

4 Conclusion

SSCs and their related advantages are used by many businesses all over the world. Companies has had to implement new strategies to their procedures and consolidation when they decided to implement this form of selected companies‘ services operation. That is just the beginning of the business transformation process. Companies must stay focused on constantly changing business environment and innovations, accept the changes and ideally use them for their advantage at the most efficient level. All the functional areas of business are affected by these changes. In relation to the stated challenges, all fields are influenced but the measure of change varies according to individual conditions.

One of the changes is the phenomenon of the current state – the digitalisation of business processes. In this article we focus on the impact of digitalisation on selected areas of business – finance and human resources management. Besides digitalisation, nowadays a very discussed topic is the global COVID-19 pandemic. Resulting from the article, the pandemic strengthened the ongoing digitalisation trend of business processes and companies have been forced to establish, respectively fasten the digitalization in all examined areas. As we mentioned in the last part of the article, innovations are one of the goals of sustainable development.

The differences in individual functional areas are apparent and it was possible to expect also slight differences in these fields based on the digitalisation and pandemic influence. In this article we focused on defining common and similar character of changes which became present under the examined trends.

These phenomena affected all two examined functional areas of business, and the most common similar changes are Home Office, establishment of new software, documentation digitalization, Big Data, standardized processes implementation and legislative changes.

Concluding the stated data about digitalization contribution from the previous chapters, we can refer to productivity optimization (employees, companies’ processes, data collection), flexibility, connectivity, and overall integration of business processes. The global pandemic introduced new changes in the digitalisation field and accelerated those existing.

Acknowledgement

This research was supported by Slovak Academy of Sciences VEGA project No. 1/0623/22 Virtualization in people management– employee life cycle in businesses in the era of digital transformation

References

ERP. (2021). 13 of the Best Financial ERP Systems You Should Work With in 2021. Retrieved 18 January 2022, from https://solutionsreview.com/enterprise-resource-planning/the-best-financial-erp-systems-you-should-work-with/

Azizi, M. R. at al. (2021). Innovative human resource management strategies during the COVID-19 pandemic: A systematic narrative review approach. In Heliyon , 7(1), 1–9. doi:10.1016/j.heliyon.2021.e07233

Digital Finance/European Comission. (2020). Retrieved 18 January 2022, from https://ec.europa.eu/info/business-economy-euro/banking-and-finance/digital-finance_en

KPMG. (2020). Financial Services: Five priorities post COVID-19. Retrieved 18 January 2022, from https://home.kpmg/xx/en/blogs/home/posts/2020/06/financial-service-priorities-post-covid-19.html

Hong, J., Wang, Z. (2021). Research on big data audit based on financial sharing service model. In Annals of operations research . 10.1007/s10479-021-04395-4

ILO. (2021). ILO Monitor: COVID-19 and the World of Work. Retrieved 14 January 2022, from https://www.ilo.org/global/topics/coronavirus/impacts-and-responses/WCMS_767028/lang-- en/index.htm

ILO. (2021). Implications of the COVID-19 crisis for enterprises’ human resource management policies and practices. Retrieved 14 January 2022, from: https://www.ilo.org/global/research/publications/WCMS_793080/lang--en/index.htm

Maatman, M., & Bondarouk, T., & Looise, J. K. (2010). Conceptualising the capabilities and value creation of HRM shared service models. In Human Resource Management Review , 20(4), 327–339. doi:10.1016/j.hrmr.2010.02.001

Maršíková, K., & Mazurchenko, A. (2019). Digitalization: transforming the nature of HRM processes and HR professionals' competencies. In The 14th International Conference Liberec Economic Forum 2019. 291–301. Liberec; Technical University of Liberec.

Minbaeva, D. (2013). Disrupted HR? In Human Resource Management Review , 31(4) 8 p. doi:10.1016/j.hrmr.2020.100820

NGA Human Resources. (2013). A Guide to HR Shared Services. Retrieved 5 January 2022, from http://www.legal-island2008.com/Guide-to-shared-services.pdf

ICAEW. (2022). Shared service centres and group audits. Retrieved 18 January 2022, from https://www.icaew.com/technical/audit-and-assurance/audit/group-audit/shared-service-centres-and-group-audits

Shen, Y. Lv, X. (2016). Research on Building Financial Sharing Services Mode of Construction. In 2016 INTERNATIONAL CONFERENCE ON LOGISTICS, INFORMATICS AND SERVICE SCIENCES (LISS' 2016). New York; IEEE. Retrieved 19 January 2022, from 10.1109/LISS.2016.7854379

Sotnikova, Y. et al. (2021). Digital Technologies in HR Management. In Management Theory and Studies for Rural Business and Infrastructure Development ,  42(4), 527–535. doi:10.15544/mts.2020.54

PWC. (2021). The finance industry needs to be part of the solution as the world recovers from the pandemic. Retrieved 10 January 2022, from https://www.pwc.com/us/en/library/take-on-tomorrow/financial-services-industry-after-covid.html

Site Selection Group. (2019). Top 20 Countries for Foreign Direct Investment by Call Centers, Shared Service Centers and Technical Support Operations. Retrieved 31 January 2022, from https://info.siteselectiongroup.com/blog/top-20-countries-for-foreign-direct-investment-by-call-centers-shared-service-centers-and-technical-support-operations

UNDP. (2022). What are the sustainable development goals? Retrieved 09 May 2022, from https://www.undp.org/sustainable-development-goals

Wang, R., & Chen, Ch. (2018). Based the Deliberation on the Problems of Construction of Efficient Financial Shared Service Center. In 2018 4TH INTERNATIONAL CONFERENCE ON SOCIAL SCIENCE AND MANAGEMENT (ICSSM 2018). (pp 1011-1015). Lancaster; Destech Publications. Retrieved 18 January 2022, from 10.12783/dtssehs/icssm2018/27125

Yao, J. (2018). Research on the Construction of the Mode of Financial Shared Service Center in the Internet Plus Era. In PROCEEDINGS OF THE 2ND INTERNATIONAL CONFERENCE ON CULTURE, EDUCATION AND ECONOMIC DEVELOPMENT OF MODERN SOCIETY (ICCESE 2018) . (pp. 1011-1015). Paris; Atlantis Press. Retrieved 19 January 2022, from https://doi.org/10.2991/iccese-18.2018.225

Yu, M., & Lu, Z., & Wan, X., & Hu, Q. (2017). Research on Management of Settlement Funds under the Financial Sharing Mode-Based on T Company. In PROCEEDINGS OF THE 2017 INTERNATIONAL CONFERENCE ON EDUCATION, CULTURE AND SOCIAL DEVELOPMENT (ICECSD 2017). (pp. 174-178). Paris; Atlantis Press. Retrieved 19 January 2022, from https://doi.org/10.2991/icecsd-17.2017.39

Zhao, X. J. (2019). Research on Process Design of Financial Sharing Service Center. In PROCEEDINGS OF THE 2019 4TH INTERNATIONAL CONFERENCE ON SOCIAL SCIENCES AND ECONOMIC DEVELOPMENT . (pp. 236-239). Paris; Atlantis Press. Retrieved 18 January 2022, from https://doi.org/10.2991/icssed-19.2019.44