HR Analytics
Sep 14, 2021

The Shift from Centralized HR to Decentralized HR

There’s something we’re seeing more and more in HR and HCM – a shift from centralized, all in-house HR to a decentralized HR model; where some, if not all HR and HCM is offloaded to a third party.

Why would a company want to trust their most important data – and most important assets – to an external service provider?

Because it opens you to a world of best-in-class, cutting edge tools and processes, that operating in a silo could never afford you. Many in-house HR teams have already offloaded some of their workload to third-party tools, thereby decentralizing their process at least in part.

Why are organizations moving from all-in-one platforms to best-in-class tools?

It’s evolution.

When the earliest humans first picked up a rock, there was no way they could have known what would eventually come. And for the longest time, that one tool used to be enough for everything.

But time and progress are always marching. Rocks gave way to purpose-built tools: hammers, levers, knives, swords… and at that point, nobody was taking a rock to a swordfight and winning.

And – as crude an analogy as it is, it’s kind of where we find ourselves with digital tools today. Things move a lot faster now, but many HR teams are still stuck in spreadsheets, or underpowered all-in-one software ecosystems. Rocks, if you will.

One tool just doesn’t cut it anymore. Not because they’re bad – they’re great for smaller teams and leaner ops – but we’re talking elite-level, here. You can’t take a rock to this fight and win.

Today, there are hundreds of human capital management and HR tools available. Some are highly specialized to one area – like Gusto or OnPay for payroll and compensation, or SmartRecruiters or Jobvite, for applicant tracking.

Best-in-class solutions offer a level of depth into a single area that no all-in-one solution can.

These best-in-class HCM tools are attractive solutions – but they have their own set of requirements. You need people with knowledge and expertise in these tools. You need to reconcile data from one tool with the rest of your tool kit. This additional requirement can often lead to companies adopting another kind of decentralized HR model – one that operates on outsourcing; working with trusted partners to make HCM more effective and efficient.

That sounds risky, right? Well, not if there’s trust – and stringent processes in place to maintain that trust. And there’s potentially a greater risk in keeping all your HR processes internal and in silos, especially when it comes to data.

One of the biggest challenges facing centralized HR is global growth, and communicating effectively in multiple languages, over multiple time zones. 

The problems caused by siloed HR data

Data silos can be frustrating at best, damaging at worst. Centralized HR teams using multiple tools and platforms can find themselves jumping between tools trying to piece together the information they need.

Mistakes are easy to make in these scenarios, even with total diligence and dedication. Data quality suffers, and lengthy data cleaning or auditing will be required to resolve it. It just multiplies and duplicates work – and it’s totally avoidable.

Worse, poor data quality can lead to faulty decision-making and the prevalence of bias.

Tightening the process, reconciling multiple sources, and making decisions with clean data – this is what decentralized and partial outsourcing can achieve, with far less input from internal resources.

This is where best-in-class tools meet best-in-class services. It’s a powerful draw for companies that want to grow, and hit their goals faster.

Advantages and disadvantages each HR model

Centralized HR

A corporate HR office – the hub for all decision-making, which supplies all HR and HCM services throughout the organization.

Advantages
  • High economies of scale
  • Consistent standards and full control
  • Highly specialized to the organization
Disadvantages
  • Can be inflexible, not agile
  • International communication challenges
  • Silos can form – bias may go unchecked

Decentralized HR

Autonomous HR functions carried out in separate arms of a business, or by standardized third-party outsourcing.

Advantages

  • Can be highly localized, agile, and goal-specific
  • Best-in-class solutions: elite-level software and processes
  • Greater accuracy, at speed far beyond internal HR capacity

Disadvantages

  • Lower economies of scale
  • Higher costs

Fully decentralized or outsourced HR models won't work for everyone. Some businesses will naturally need to retain ownership of their HR process – but even where security and confidentiality are obstacles, establishing good partnerships can overcome them.

For the vast majority of companies, a blend of both centralized and decentralized HR represents a huge opportunity. By streamlining HR through outsourcing standardized tasks, using best-in-class tools, and having reliable data to base decisions on, growth can be accelerated.

And with eqtble, making sense of data from multiple sources has never been easier, either.

Best-in-class people analytics solutions

Combine the data from all your best-in-class people analytics tools, with eqtble – the most powerful way to gain insight from your HR data. Want to know more? Click here to request access.

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