A number of “DAX” companies (businesses listed on the German stock exchange), but also medium-sized enterprises, have established HR Shared Service Centers in recent years. These departments perform no strategic role. Instead they provide personnel services that support the business’s core competences. Recently, as well as achieving their original aim of cutting costs (through efficiency improvements), these centers have raised service quality (through effectiveness improvements). As part of his Ph.D. at Steinbeis University Berlin, Stefan Röder examined the origins of service quality judgments, taking a customer perspective in this specific area of in-house client-supplier relationships. Simultaneously, he attempted to pinpoint effects on downstream activities.
Shared service models take a different approach to the performance and provision of selected services which may support the business but do not add value – in this instance: HR activities (e.g., payroll accounting). They are independent of senior managers and, in some cases, they are market-based and competitive. Geared to long-term needs, they are a kind of hybrid department, positioned on a continuum between the market and business hierarchies. They are set up specifically to operate as an organizational unit tasked with delivering certain services. Typically, they are then called the human resource shared service center, or HRSSC. By their very nature, these centers compete with external service providers, albeit according to corporate objectives. They deliver previously transferred HR services – just like (external) service providers, based on previously arranged delivery agreements – to clients within the business, but sometimes also to external clients.
An analysis of reference literature showed clearly that, compared to customer-and-client relationships outside the company, internal customer- and-client relationships have been generally ignored in scientific research until now. This is particularly true for customer-and-client relationships between HRSSCs and in-house clients. As a result, Stefan Röder first focused his analysis on identifying individual models for a) the “client-side-perceived perception of HRSSC service quality” and b) how such a construct affects downstream factors on a psychological and behavioral level. The second emphasis of his study lay in the theoretical merging of these two partial models into an integrated “origin and outcome” model. So ultimately, the aim of his work was to examine causes and effects to derive practical recommendations for planning (service) quality management.
Röder examined the literature on a selection of topics, including “information economics”, behavioral research and acceptance models. Drawing on theories developed by Christian Grönroos, Röder split client-side, subjective, general quality perceptions into two “quality dimensions”: potential and process quality. Based on the theories contained in the literature, this meant there should be three key factors within the “potential” dimension (technical/organizational performance potential, personnel performance potential, information-based performance potential), and two key factors within the “process” dimension (interaction, delivery of customer benefit). For the first time, this established the concept of a third-order construct within companies: client-side-perceived perception of HRSSC service quality. Choosing to develop a factor- based concept overhauls the approach on a contextual level – for clients making use of HR shared services this is of particular interest in terms of the individual benefit it creates.
Taking the success chain of the marketing expert Prof. Manfred Bruhn as a basis, plus a variety of (partly) structured interviews, it was possible to identify three key influencers that are perceived by clients with respect to HRSSC service quality: customer satisfaction, customer confidence and “customer behavior intentions”. One new development was that, as part of Röder’s study, not only were direct cause-and-effect relationships examined within the in-house context, but also indirect ones, and, for the first time, non-linear relationships. Using Bruhn’s internal success chain made it possible to link multi-dimensional and multi-factorial causal models to an effect model consisting of the three causal constructs. The fundamentals underlying this integrated service quality model for HRSSC are transferable to other shared services (e.g., shared IT services) although adaptations would need making to suit the context. To check the integrated service quality model empirically, i.e., in quantitative terms, Stefan Röder conducted an international online survey among clients of an HRSSC who work for a German IT company. A questionnaire was completed by 763 clients, consisting of managers and other employees. The results showed that the measurement model and the structural model itself meet pertinent validity and reliability criteria. All hypothesized direct and indirect correlations were confirmed.
To explore a priori (assumed, possible, perhaps unknown) non-linearities between the model constructs, a technique called universal structural modeling (USM) was used for the first time in an in-house context. This was carried out using a software application called NEUSREL. The advantage with USM (and NEUSREL) is that users need no previous knowledge of existing causal relationships. Almost any kind of non-linearity can be uncovered, as well as overall effects and interaction effects. For the first time, an interaction effect was successfully proven (empirically) between the quality factors “technical/organizational performance potential” and “personnel performance potential.”
There is tremendous capacity to transfer these findings to business practice, as understanding the interdependencies now makes it possible to base HRSSC technology and employee decisions on even more solid evidence than was previously possible. The results of the study have been discussed in detail in several workshops involving companies who either want to introduce HRSSC or who have already done so. Within the business context, this provides a variety of pointers for designing HRSSC quality management systems. Also, NEUSREL makes it possible to calculate total “average simulated effect values”, unveiling quality criteria with the strongest influence on causal model factors. This means that HRSSC managers will now be able to plan resource allocation more accurately. This could, for example, improve customer confidence and thus, as desired, influence “customer behavior intentions”.
By developing a concept for an integrated service quality model in HRSSC, and then translating it into actions and validating his findings quantitatively using empirical methods, Stefan Röder partially closed the gaps in previous research. A starting point for further research could be to investigate further causal constructs, to test the model in other areas of industry, or to question the hitherto postulated unidirectional nature of impacts.
Prof. Dr. Frank Keuper, Dr. Stefan Röder
Steinbeis University Berlin (Berlin)
Frank.Keuper@stw.de
Stefan.Roeder@stw.de