Severstal: HR Shared Services

With Accenture’s help, Severstal, the steel company, created a customised HR shared services model for its global business. The new HR shared services capability will, the company estimates, improve workforce productivity by 30 percent while cutting HR costs by 20 percent. More important still, it will give the company the agility to respond to complex workforce challenges on its journey toward high performance.

Severstal is one of the world’s leading vertically integrated steel and steel-related mining companies, with assets in Russia, the United States, the Ukraine, Latvia, Poland, Italy, Liberia and Brazil. The company has more than 30 subsidiaries around the world and in excess of 68,000 employees globally. Severstal generated $15.8 billion in revenue in 2011. Severstal’s Cherepovets Steel Mill is one of the world’s largest standalone integrated steelworks by capacity, producing 11.4 million tons of crude steel in 2011.

Efficiency and standardization can be difficult to achieve for large companies with global operations such as Severstal. Local business units often develop their own ways of doing things to address specific contexts and challenges, which can have unintended negative consequences—such as increased complexity, difficulty gaining a true understanding of performance, and duplicated processes and activities. These developments inflate costs; more important, they can sacrifice a global company’s ability to understand, control, and improve its overall performance, or respond with agility to changing conditions and goals.

Severstal was aware of these risks. The company faced challenges in gauging HR effectiveness, as well as maintaining consistency across its HR processes and applications across business units—thus limiting its ability to access and use HR-related information.

The company understood the potential of shared services to overcome these challenges, having recently implemented the model for finance and accounting functions. However, at the time of the project’s launch, no Russian business had yet applied shared services within human resources. Given the pioneering nature of the project, Severstal wanted to work with a company experienced in HR shared services design and implementation, and chose Accenture to be its ally in this important initiative.

Severstal selected Accenture for a number of reasons, including Accenture’s deep skills in human resources and shared services, extensive experience working with mining companies and relevant Russian businesses, and Accenture’s focus on business value and on supporting high performance.

Working together, Severstal and Accenture focused on bringing tested shared services implementation methodologies, HR and industry knowledge, and comprehensive project management support to the initiative, as well as developing the HR shared services center’s organization design and service management framework.

The project team began by developing a detailed understanding of Severstal’s current human resources capabilities and processes, using Accenture’s HR Time Distribution Survey tool. The tool—tailored to Severstal’s HR process model and the Russian manufacturing sector—helped the project team understand how the company’s HR employees spent their time, as well as assess productivity for specific processes and operations.

Combining information from the time distribution survey with data on the cost of providing HR services, the project team estimated Severstal could drive substantial annual savings. Further analysis enabled the team to determine which HR activities should be kept under local business unit control, and which should be transferred to the shared services center.

To manage its portfolio of activities and processes, the HR shared services center would require skilled staff and superior business processes. The project team addressed both aspects by defining target roles and an organizational structure for the center. The team devised a service management framework for the shared services center, focused on delivering excellent value to the overall business. This framework included a granular and adaptable pricing model, which supports future flexibility.

In a dynamic and global environment, success depends upon efficiency, control, and responsiveness to changing conditions. By adopting the shared services model, Severstal has taken a major step in this direction, replacing a collection of processes and activities with a centralized HR capability supported by leading methodologies, processes, and technology.

And while the full company-wide transition to HR shared services is still underway, today Severstal estimates it will improve HR workforce productivity by 30 percent while cutting HR costs by 20 percent. But the journey does not end here, particularly given Severstal’s commitment to building a truly efficient HR organization. “The new operating model has given us significant potential for productivity improvements,” noted A. Belyshev, the Mining division’s HR director. “Our local HR directors are becoming more enthusiastic about the efficiency which their departments can demonstrate, even with reduced headcount.”

In sum, working collaboratively with Accenture, Severstal has enhanced its agility, efficiency, and cost effectiveness, all of which support its ongoing pursuit of high performance.