Why sharing is synergy. The role of decentralized control mechanisms and centralized HR capabilities in creating HR shared service value
| DOI | https://doi.org/10.1108/PR-09-2016-0245 |
| Published date | 16 October 2017 |
| Pages | 1297-1317 |
| Date | 16 October 2017 |
| Author | Marco Maatman,Jeroen Meijerink |
| Subject Matter | HR & organizational behaviour,Global HRM |
Why sharing is synergy
The role of decentralized control mechanisms
and centralized HR capabilities in creating
HR shared service value
Marco Maatman and Jeroen Meijerink
School of Behavioral, Management and Social Sciences,
University of Twente, Enschede, The Netherlands
Abstract
Purpose –HR shared service centers (SSCs) have been claimed to innovate human resource management
service delivery by centralizing resources and decentralizing control and, in doing so, create value for other
business units. In response, to explain the value of HR shared services for the business units served, the
purpose of this paper is to test hypotheses on the joint influence of HR SSC operational and dynamic
capabilities and of control mechanism usage by the business units.
Design/methodology/approach –A survey methodology was applied to collect data among business unit
representatives from 91 business units in 19 Dutch organizations. The data were analyzed using structural
equation modeling in AMOS.
Findings –This study found that the use of formal control mechanisms (e.g. contracts, service-level
agreements) relates negatively with HR shared service value, but that this relationship becomes positive once
mediated by informal control mechanisms (e.g. trust and shared language) and operational HR capabilities.
Furthermore, it shows that the dynamic capabilities of HR SSCs relate positively to HR shared service value
for the business units, but only because of their effect on operational capabilities.
Originality/value –Whereas previous studies into HR SSCs have examined the two antecedents
independently, this study shows how organizational control and capabilities interrelate in explaining the
value of HR shared services.
Keywords Quantitative, Dynamic capabilities, Value, Control mechanisms, HR capabilities,
HR shared service centers
Paper type Research paper
Introduction
Increasingly, organizations are centralizing human resource management (HRM) activities
in an HR shared service center (SSC) (Farndale et al., 2009; Richter and Brühl, 2017). In the
literature, the HR SSC is defined as a hybrid organizational unit that bundles resources (e.g.
human capital, information technologies, and organizational processes) to perform
consolidated HR activities that are controlled by those it serves: the decentralized
business units (Farndale et al., 2009; Maatman et al., 2010; Meijerink, Bondarouk, and Kees
Looise, 2013). Driven by the belief that HR SSCs increase the quality of HRM services and
simultaneously reduce their costs (Cooke, 2006; Janssen and Joha, 2006), academic studies
started to examine HR shared service value, which refers to the utility of the services
provided by an HR SSC in terms of the trade-off between their benefits and their costs
(Meijerink et al., 2016). Indeed, empirical studies have provided initial evidence that HR SSCs
do increase the value of HRM services (Redman et al., 2007; McCracken and McIvor, 2013;
Personnel Review
Vol. 46 No. 7, 2017
pp. 1297-1317
Emerald Publishing Limited
0048-3486
DOI 10.1108/PR-09-2016-0245
Received 21 September 2016
Revised 8 April 2017
2 June 2017
Accepted 14 June 2017
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0048-3486.htm
© Marco Maatman and Jeroen Meijerink. Published by Emerald Publishing Limited. This article is
published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce,
distribute,translate and create derivative worksof this article ( for both commercialand non-commercial
purposes),subject to full attribution to the original publication and authors. Thefull terms of this licence
may be seen at http://creativecommons.org/licences/by/4.0/legalcode
The authors wish to thank Professor Dr Tanya Bondarouk for her assistance in the conceptual
phase of this research and her support in collecting the data.
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Why sharing
is synergy
Hofman and Meijerink, 2015) and, in so doing, help HR business partners to adopt a more
strategic role (Farndale et al., 2009; Meijerink and Bondarouk, 2013) and support the
business units served in committing and retaining their employees (Wildes and Parks, 2005;
Gilbert et al., 2011).
Despite highlighting the relevance of maintaining high levels of HR shared service value,
these studies have examined selected antecedents in isolation when seeking to explain
the value of HR shared services (Richter and Brühl, 2017). This is striking given that
research suggests that the value-creating potential of HR SSCs lies in their hybrid nature
and, specifically, in the fact that they integrate centralization and decentralization models
(Ulrich, 1995; Janssen and Joha, 2006; Meijerink, Bondarouk, and Kees Looise, 2013).
HR SSCs integrate both approaches in that they centralize resources for the consolidated
provision of HR services, but decentralize the control over these services to the business
units served (Strikwerda, 2004; Maatman et al., 2010). Accordingly, some researchers have
examined the centralization features of SSCs in terms of how they bundle, integrate, and
hence advance resources for creating high-level value (Cooke, 2006; Maatman and
Bondarouk, 2014). Others have examined the control (or governance) mechanisms that are
used in decentralizing control and thus ensuring that HR SSCs create value for the business
units (Farndale et al., 2009; Coelho et al., 2012). Although these studies have empirically
uncovered the resources and control mechanisms of HR SSCs, we know relatively little
about how they interrelate in explaining the value of HR shared services (Richter and Brühl,
2017). Without gaining a better understanding of how HR SSCs, through integrating these
centralization and decentralization features, provide high value to the local business units,
it is likely that managers and employees will remain suspicious about the advantages of HR
SSCs and may have to engage in guesswork in deciding which HR SSC features
(centralization, decentralization, or both) they should invest in to ensure that their HR SSC
provides high value.
To gain a better understanding of the features that enable HR SSCs to create high
value, we examine how centralized resource deployment and decentralized control
interrelate in explaining HR shared service value. In doing so, we formulate and test
hypotheses on the joint relationships between HR SSC operational and dynamic capabilities
and control mechanism usage by the business units in determining HR shared service value
for business units.
The contributions of this paper are threefold. First, we add empirical nuances
regarding the interrelationships among dynamic capabilities, operational capabilities,
and value. Some have suggested an explicit direct link between dynamic capabilities and
value (Griffith and Harvey, 2001; Helfat and Peteraf, 2009), whereas others have
questioned the existence of such a linkage (Bowman and Ambrosini, 2003; Ambrosini and
Bowman, 2009). We contribute by addressing whether dynamic capabilities directly,
or indirectly through the mediating effect of operational capabilities, relate to HR shared
services value. Second, this paper provides further insight into the role of various control
mechanisms. While some have argued that formal controls (e.g. service-level agreements)
and informal controls (e.g. tie strength, trust) are alternatives (Farndale et al., 2010),
others have claimed that both are necessary and interdependent in creating high value
(Meijerink and Bondarouk, 2013). Here, this study contributes by showing how formal and
informal control mechanisms interrelate in explaining HR shared service value.
Finally, previous studies into HR SSCs have independently examined capabilities and
control whereas, in theory, organizational control and resources may be interrelated
in explaining value (Mahoney and Pandian, 1992; Bergh, 1995). By studying both
antecedents in an integrated way, we shed more light on how organizational control
and capabilities interrelate in explaining value creation for the business units served
by an HR SSC.
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