As organisational priorities shift, benefits teams tend to yo-yo between centralised and regionalised structures, but both set-ups have their pitfalls and their positives.
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- Technology and a desire to optimise cost efficiencies are key drivers of centralisation programmes.
- Centralised structures can facilitate a more focussed, company-wide vision and foster departmental teamwork.
- Downsides include issues around organisational agility and staff development, and the potential for regional staff to feel sidelined.
Many employers have been looking at their benefits team structures in 2014, with several making new employee benefits appointments and restructuring their teams to better serve their business.
For example, Royal Bank of Scotland has restructured its group benefits and pensions team, having drafted Carol Young into the newly-created role of pensions chief. Meanwhile, childcare service organisation Cafcass is in the throes of integrating an organisational and development arm to its benefits team as part of a restructure (see box below).
Andre Spicer , professor of organisational behaviour at Cass Business School, says: “There tends to be a pendulum swing in organisational structures, so they move between decentralised, regionalised or divisional towards more centralised structures over time.”
Drivers of benefits team restructures
The decision to move between structures can be driven by staff changes, particularly on the appointment of a new team manager keen to make their mark on the organisation.
Technology is another driver for change when organisations are implementing integrated benefits systems. Terry Gostelow , account director at benefits technology provider Staffcare , says: “Technology often lends itself to more centralised administration because an employer is consolidating everything in one place.”
He adds that centralised benefits teams can often better manage organisational risk and compliance.
Employers’ desire to implement the ‘Ulrich’ HR business model can also drive structural changes within benefits teams. The model is the brainchild of business academic Dave Ulrich and is based on three principles, of which creating an HR centre of excellence is one.
Mark Childs , director at reward management organisation Total Reward Group, says: “There’s a long-term trend towards organisations adopting the Ulrich’s centre of excellence model on how to run HR, and that lends itself to a more centralised approach to benefits management.”
There are many upsides to a centralised benefits team structure
Each benefits team structure has its upsides and downsides, which become apparent when employers move between different models.
For example, a centralised team is well positioned to gather and analyse employee data and identify workplace trends that require benefits support.
Team support is another attraction of the structure. Charles Cotton, performance and reward adviser at the Chartered Institute of Personnel and Development, says: “It brings one team under one roof to coordinate work, share information, skills and advice. Another advantage is that benefits people together feel part of a team of like-minded colleagues, where previously they may have felt a bit isolated out in the sticks.”
Centralised structures also prevent common anomalies associated with regionalisation, such as empire building by divisional teams. “Powerful parts of an organisation will take over more resources and may begin doing things that are completely out of line with an organisation’s policy,” adds Cotton.
Andrew Steels, UK practice lead, HR service delivery at Towers Watson, says: “There is definitely a trend for centralisation, but also, at the same time, a trend for localisation.”
This means that organisations are retaining regionalised benefits structures, but increasing their control of these from their head offices. “We’re seeing headquarters wanting to have more of an influence,” adds Steels. “It’s about cost and risk. It’s also about wanting to make sure there’s best practice around benefits processes in terms of consistency of provision and about being a bit smarter in terms of tailoring benefits spend.”
Spicer agrees: “The benefit of centralising is that employers have more power to develop consistent policies, so they can create one [corporate] vision and one voice with some degree of simplicity. It can be efficient because instead of five or 10 different remuneration operations in different regions they have one.”
There are also downsides to centralised benefits teams
Despite the many favourable outcomes of a centralised benefits team structure, it does also have its pitfalls.
For example, Total Reward Group’s Childs says that centralised structures can negatively impact employers’ talent management programmes. “They can get in the way of career paths because employers with fewer staff managing benefits in a more centralised team cannot offer staff out in the regional divisional operations the opportunity to pick up benefits experience,” he says.
He adds that a centralised team model is associated with more dislocated career paths because staff do not pick up the foundational benefits knowledge that will permit them to go into a specialist benefits role later on in their careers.
Steels fears a loss of organisational agility. “One of the traps that organisations fall into is wanting to centralise all administration, because there is a danger of losing agility and being able to identify, tailor and react to what works at a local level,” he says.
Cotton agrees, adding that it can be easy for benefits teams to lose sight of what is going on outside their building. “Other parts of the business may then start to perceive the team, rightly or wrongly, as being remote, isolated and not understanding their local needs,” he says.
Benefits teams should avoid disappearing up an ivory tower
He advises benefits departments that want to centralise their teams to consider how to do so in a way that is not perceived as them disappearing up an ivory tower and imposing initiatives on the rest of the business.
He adds: “Employers need to look at how they can still get information from different parts of the business, how they can respond to their needs and concerns, and how they can still communicate in a way that is not perceived as ‘them and us’.”
Social media is useful in helping benefits teams communicate their initiatives to the regions, but Cotton believes that the most effective form of communication is face-to-face , so centralised benefits teams need to interact with regional staff in person through, say, benefits roadshows and workplace fairs.
Daryl Maitland , HR manager (people strategy) at Cafcass , says: “It is important for employers to bring visibility of what they are doing to their organisation. When [benefits teams] are out there in the field working with managers day in and day out they know they are putting value into their organisation, but [employees] do not have visibility of their day-to-day workings, and the risk is that they will ask what that unit is doing.”
Case study: Cafcass launches new arm for benefits team
Childcare service organisation Cafcass has restructured its benefits team to help engage its employees.
Until around two and a half years ago, 80% of the employer’s benefits resource was focused on employee relations, which dealt with case work, discipliniaries and sickness absence. But the structure was inefficient in resolving employee issues and resulted in the Office for Standards in Education, Children’s Services and Skills (Ofsted) consistently grading the organisation as ‘inadequate’.
Consequently, Cafcass embarked on a robust period of challenging staff performance and sickness absence, which resulted in Ofsted grading the employer as ‘satisfactory’. However, the trade-off was that employee engagement declined.
Daryl Maitland , HR manager (people strategy) at Cafcass , says: “The changes we made came at a cost of poorer levels of engagement that we were happy to live with, but once we got ourselves to ‘satisfactory’ we recognised that we needed a softer approach to get a ‘good’ grade.”
Cafcass concluded that it needed to focus on organisational development (OD) to get to a ‘good’ rating and improve employee engagement and the wellbeing of the organisation. To this end, it equally split its benefits resources between OD and its established employee relations arm.
Maitland says: “Employee relations has been hived off almost separately and organisational development in the future will be about reward, wellbeing, engagement, and learning and development, because they all sit hand-in-hand together.”
The new structure is scheduled to be integrated by April 2015.
He adds: “This might not be for every organisation, but we are still quite keen to increase employees’ understanding of total reward . It is not just about them being paid their pension and annual leave, but about everything that they are getting in exchange for coming in and putting in the blood, sweat and tears for Cafcass .”