Money-spinners

Faced with the threat of retrenchment, Hitachi Aisa’s HR division transformed itself into a revenue-generating business. Kazunobu Yamazaki and Florence Chow reveal the inside story.

A brave step saved a major restructuring at Hitachi Asia from turning into a staffing crisis four years ago. Due to strategic reasons, the company carved out its two heavyweight divisions, the hard disk drive and semiconductor businesses. The biggest impact yet was the “re-classification of regions”, which saw its China, Hong Kong and Taiwan operations – revenue and control – taken out of the region’s remit

The restructuring saw an immediate drastic drop in revenue source, and the total workforce went down by 65%. Evidently, its various corporate services teams consisting of divisions such as HR, IT and finance became too large for the new set up.

Although not large to begin with, the HR team could no longer justify a six-man team. But like other divisions, the HR team leaders were reluctant to let anyone go because it would mean taking away the experiences, how-how and skills with them.

The turning point was when the team leaders thought up the idea of being less dependent on company funding and becoming more self-sustainable. This meant that the different corporate services divisions must not only focus on managing the respective in-house functions, but also generate revenue from other sources.

Paying for itself

How this works is through a system of shared service centres where the HR, finance and IT divisions at Hitachi Asia double as outsourcing centres, providing a series of administration and advisory services to other companies, albeit for a fee.

The content of the shared services varies. In the case of HR, it ranges from full service routine administration such as payroll, recruitment, and training, right through to supplying specialist HR information and advice on HR policy and practice.

Elsewhere, this would mean that the corporate services divisions would have to sell their services to other companies. However, because Hitachi is so diverse, it was actually feasible to limit their scope within the group, formerly known as the Hitachi Group of Companies.

Although the concept of shared service centres is not entirely new, it is still relatively rare in the case of Hitachi Asia, where the same small groups of staff double as internal teams and client-serving outsourcing centres.

Managing HR shared service centre

Kazunobu Yamazaki and Florence Chow, general manager and deputy general manager of Hitachi Asia’s human resources & administration group, estimate that the HR team is serving about 10 companies under the group today. Mindful that the team has a key priority of serving its own internal HR needs, Chow says they cannot take on clients indiscriminately.

Overall, the centres’ healthy business growth not only helped save jobs at Hitachi Asia after the restructuring, they also contributed to their department’s growth. Recently, the HR division has even added two new employees to its six-man stable. The team was able to do so because the revenue generated from the HR shared service centre pays for as much as 70 to 80% of the division’s local personnel expenses. This includes the salaries, bonuses and training costs of HR staff.

However, the success did not come easy.

One of the trickiest hurdles the team leaders had to cross was to change employees’ mindsets.

“The question on everyone’s mind was how they were going to serve so many companies at one time.” To that, she says the company chose to be very open with them about the situation it was facing. The bottom line was if the teams couldn’t find a way to justify its headcount, the company would have to make a painful decision of cutting staff.”

She adds, “2003 was a bad year, which makes it difficult for employees to find good job opportunities. That works to our advantage somehow”.

Mindset issues aside, Chow also had to deal with the more technical side of things. The most apparent one was the need for customer service training, although this is not to say that the HR team lacked those. Expectations were much higher when it came to serving external customers.

As a third party administering clients’ HR policies, one can only exert a certain level of control. “Unlike an internal HR manager, we don’t have the same level of authority and controlling field over how things should be done, Chow says. “Most of the time, we had to use a softer approach – yet we know we have to be firm at the same time; It’s about learning to say ‘no’ with a smile,” she adds.

As the number of clients increases over the years, the HR team finds itself putting in greater effort to understand individual clients’ own set of policies. “Sometimes we hear our staff comment that they only get one salary but work for so many companies. In such instances, the right communication and the ability to lead with positive leadership is paramount,” Chow says.

At a higher level, Chow and Yamazaki say they are careful about how they position themselves as a share service partner to never raise suspicion that they’re there to take over their clients’ jobs. “We are not a full-service outsourcing company. The service centre is only meant to help the Hitachi Group of Companies as a whole”, Chow says.

As a shared service centre, Hitachi Asia’s HR team had to compete with other HR service providers for clients. But what makes them different was the fact that the team generally shares a similar HR framework with its clients. Apart from that, it provides “value added” services to clients which often involve free advisory services.

Now in its fourth year of managing the service centre, the HR team has become smarter about the business. Chow says one of the main pitfalls it faced when they first started was not having a clear scope of the kind of services it provides and those it does not. “None of us had the experience of running a share service centre back then, and we were really excited about the venture, so we went in with a ‘all-can-do’ attitude,” Chow says.

But the team soon hit a snag when it was tasked to deal with an employee disciplinary issue. As a provider and not an internal HR function, Chow says they possessed neither the understanding of the issue nor are in the position to perform the role. So as to avoid such complications from arising again in future, she made sure both parties understood the scope of work before they entered into an agreement.

Globalising HR
 
Hitachi Asia’s HR team also has an additional role of strategic HR with the Hitachi head office; a role that grew in importance as the group strives to globalise its businesses.

This was triggered by a top level business initiative five years ago to grow Hitachi’s businesses outside its domestic market, Japan. With globalisation, Japan, like other parts of the world, is fast opening up to international players, making it more competitive to do business in the country. Consequently, it was also no longer viable for Hitachi to depend solely on generating revenue within Japan. Today, the group aims to get 50% of its total revenue from overseas markets.

What HR needs to do to support this initiative is ensure there is a high level of consistency in its policies, Yamazaki says. At Hitachi, the plan was appropriately referred to as the “globalisation of HR”.

One of the main activities of Hitachi’s globalisation movement involves regular meetings with other top business executives and senior HR managers in the region and sharing of best practices. At these meetings, Yamazaki and Chow play a “sales” role, presenting HR strategies, often innovative, that Hitachi can adopt for the rest of the group.

“Yamazaki would do most of the ‘sales talk’ when addressing a very senior level of audience such as MDs and CEOs, while I will take over the more technical issues,” Chow explains the duo’s partnership in this aspect.

Cultural lessons

Judging from the interview, theirs is an interesting partnership indeed; the parties seem to have a strong understanding of what the other is thinking, even with minimal verbal communication.

During the session, Chow is evidently chattier than Yamazaki, who occasionally raises a few brief, though key, points, leaving Chow to elaborate on them. Interestingly, she always manages to quite skilfully pick up from he had left off, as if she initiated the topic in the first place.

Surprisingly, the understanding between them was established only after having worked together closely for the past three years. Although the duo joined Hitachi almost two decades ago, Japan-based Yamazaki was only posted to Hitachi Asia’s regional headquarters in Singapore in 2004.

Yamazaki recalls having to come to terms with certain practices here when he first came to Singapore. For instance, the HR GM who was used to working until midnight almost everyday in Japan, was rather surprised to see staff leave the office on time. But over time, Yamazaki has come to value work-life balance a lot more, as it allows him to spend more time with his family here.
   
What Yamazaki is still trying to grapple with is the high turnover rate in Singapore, or so he perceives – as well as in many parts of Asia. Like the earlier generations of Japanese, the senior executive feels a great sense of loyalty towards his company and greatly values the laudable, if elusive, concept of “lifetime employment”.

In any case, at least the resignation process in Japan appears to be a more thought through one. He says in Japan, when someone decides to resign, the employee gets the consent of the manager first. “The whole resignation process can take up to three months. The key difference is, you talk to your manager first, before you submit the formal resignation letter,” Yamazaki says.

Then when it comes to delegating a task to one’s  team, Yamazaki had to take to assigning the work to the right person, and not just any staff member working in the team – another common practice in Japan.

Plans for HR

The past four years have seen the HR team at Hitachi Asia successfully establish itself as a self-sustainable division, as well as take on additional responsibilities in other aspects. In view of that, Yamazaki sees the need to double the team in the near future.

Elaborating on his point, Chow says they are also looking to broaden the skill sets of HR employees. “As our responsibilities grow, the team’s skills are no longer enough. Most of our staff are specialists in their own areas. I want them to be able to rotate their roles and do so in a more structured way,” Chow says.

As for Chow and Yamazaki, their immediate plan would be to take more leadership in strategic planning. In fact, they are already making inroads to that end, with both of them spending a lot more time engaging in discussions with the company’s MD, on proposals relating to how the company can boost talent attraction and retention.

Despite more strategic involvement, Chow says the team must continue to fulfil its operational tasks. “As a shared service centre, operational excellence is very important, we must continue to ensure that everything is done on time and done correctly,” she says.

It looks set that the HR team will continue to expand – in scope and headcount – as the business grows. Perhaps what would be helpful for the team is to try and adopt a more traditional Japanese mindset this time round. That, Yamazaki says, is the thinking that, “If the company gives me more tasks, I should take it in my stride because it means they trust me.”

Biographical data

Kazunobu Yamazaki

1989
Graduated with Bachelor of Law degree from Kanazawa University

1989
Joined Hitachi. Within Japan, he had held several human resources and administration roles in a few business units.

2004
Consultant & assistant manager human capital office in corporate headquarter Hitachi Ltd

Assigned to Singapore, appointed as Hitachi Asia’s deputy general manager of human resources & administration group.

2006
Promoted to general manager human resources & administration group

Florence Chow

1989
Graduated with Bachelor of Arts degree from National University of Singapore

1992
Completed Diploma in Training and Development Management from Singapore Institute of Management

1995
Completed Graduate Diploma in Personnel Management from Singapore Institute of Management

1999
Graduated with Master of Human Resource Management Degree from Rutgers University

Career
1989
Joined Hitachi Electronic Devices (S) as personnel officer. Chow had held various operational HR and administration roles in the company and the her last position was personnel & administration manager

2001
Joined Temasek Holdings, as administration manager

2002
Joined Hitachi Asia as human resources manager

2003
Promoted to senior human resources manager

2006
Promoted to deputy general manager, HR & administration group