“A case analysis on Philips Singapore: Creating Value through Human Resource Shared Services Center”

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Table of Contents
Chapter- One: Introduction.......................................................................................................................4
1.1 Origin of the Report ............................................................................................................................4
1.2 Objective of the Report.......................................................................................................................5
1.3 Scope of the Report ............................................................................................................................6
1.4 Limitations of the Report....................................................................................................................7
1.5 Sources and Methodology ..................................................................................................................8
Chapter- Two: Background of the Company.........................................................................................10
2.1 Establishment: ..................................................................................................................................10
Chapter- Three: Background of the Case...............................................................................................12
3.1 Background .......................................................................................................................................12
3.2 Journey to world class HR.................................................................................................................13
3.3 Management of PPS..........................................................................................................................14
3.4 Challenges.........................................................................................................................................14
3.5 Benefits: ............................................................................................................................................15
3.6 Customer satisfaction .......................................................................................................................15
3.7 Cost Management.............................................................................................................................15
Chapter- Four: Problem Statement ........................................................................................................17
4.1 Maintaining Promised Quality of HR Services Versus Reducing Service Fees: .................................17
4.2 Why Reducing Service fees is a Challenge........................................................................................18
4.3 Why Ensuring high quality HR services is a Challenge? : ..................................................................19
Chapter Five: Decision Criteria and Alternative Solutions ..................................................................21
5.1 Enhancing service quality to tackle price erosion:............................................................................21
5.2 Specialization in PPS Centre..............................................................................................................22
5.3 Variation in fees according to difference in divisions/departments ................................................24
5.4 Intra division/department communication: .....................................................................................25
5.4 The continuing cost cutting of the service fees in relation to the price erosion..............................25
5.5 Introduction of Intranet in exchange of Computer network............................................................26
5.6 Increase Outsourcing from South Asian Countries...........................................................................27
Chapter Six: Recommended Solution and Justification........................................................................29
Chapter- Seven: Conclusion.....................................................................................................................32

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Reference ...................................................................................................................................................33
List of Figures
Figure 1: Product Divisions of Philips Singapore ..................................................................................10
Figure 2: The Core Problem of PPS........................................................................................................17
Figure 3: The Process of Enhancing Service Quality to Tackle Price Erosion ...................................22
Figure 4: Justification of Service fees reduction ....................................................................................26
Figure 5: Outsourcing from Asia.............................................................................................................27

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Chapter One: Introduction

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Chapter- One: Introduction
1.1 Origin of the Report
To have an overview of Human Resource Management in practical life we’ve a study on a case
analysis on “Philips Singapore: Creating Value through Human Resource Shared Services
Center”, a electronics products manufacturer company and one of the largest companies in the
world. Now a day’s education is not just limited to books and classrooms. In today’s world,
education is the tool to understand the real world and apply knowledge for the betterment of the
society as well as business. From education the theoretical knowledge is obtained from courses
of study, which is only the half way of the subject matter. Practical knowledge has no alternative.
The perfect coordination between theory and practice is of paramount importance in the context
of the modern business world in order to resolve the dichotomy between these two areas.
Therefore, for the B.B.A. program we are assigned to prepare a report on “A case analysis on
Philips Singapore: Creating Value through Human Resource Shared Services Center” for
Human Resource Management (F-303) course by our honorable course teacher Sultana
Shahreen Karim.

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1.2 Objective of the Report
Our objectives are…
 To increase our experience in data collection & analysis.
 To know about the actual picture of Philips Singapore.
 To have practical knowledge of Human Resource Management.
 To know the implications of Human Resource Management on Philips Singapore
 To have better analytical abilities regarding Human Resource Management in real world.
 To know Philips Singapore from a closer view.

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1.3 Scope of the Report
While completing the report we’ve had a lot of scopes of gathering knowledge of real
business world and the wide horizon of business, although the report is only concerned about
the Philips Singapore. We have collected their information from the internet as it a
multinational company and its head office is outside of Bangladesh. We got almost all the
information we needed because the website of the company is very much updated and
resourceful. We knew about their mission, vision, products, area of operation, accounting
system, managerial and organizational structure etc. We are really grateful to our course
teachers for assigning us such an interesting and knowledgeable topic.

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1.4 Limitations of the Report
While preparing this report, we have faced some problems. The main problem was to co-
ordination all the group members. Moreover, during data collection we faced several
problems.
 Due to limited access of the data, this study may not be perfect to the scent percent.
 Lack of enough experience in analyzing of data.
 Due to inadequate information, in-depth analysis could not be done in the report.

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1.5 Sources and Methodology
This report’s research is based on application of Human Resource Management in Philips
Electronics Private Limited. The data types are secondary that were collected from the
internet. The company’s updated information is given on its website and we mainly collected
information from there.

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Chapter Two: Background of the
Company

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Chapter- Two: Background of the Company
2.1 Establishment:
Royal Philips Known as PHILIPS the actual company was founded in 15th
May, 1891 by Gerard
Philips and his father Frederik Philips. The Headquarter is situated in Amsterdam, Netherlands
with worldwide operations.
Philips Singapore was established in 1950s as a sales and marketing business. That means the
company would buy goods from other sources and resell them to the customers. In between
1950s and 1980s the company turned into a manufacturing company and spread the business
operation in six different locations. The basic product division of the company is shown in the
below figure:
Figure 1: Product Divisions of Philips Singapore
Philips
Consumer
Electronics
Domestic
Appliance
Products
and
services
Lighting
Semi-
conductor
Philips
Medical
System

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Chapter Three: Background of the
Case

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Chapter- Three: Background of the Case
3.1 Background
Philips Singapore a manufacturing company merged its television and audio products plants into
Philips Consumer Electronics in mid-1998. As a result of relocation of manufacturing activities
total 950 employees of Philips’s lost their job. This retrenchment created a negative impact on
the existing employees. Dr. Martin, executive director, faced a challenge of engaging employees
with a vision and managing HR more efficiently. To deliver HR services more efficiently and to
build a world-class human resource management she had taken several steps:
In 2000 Philips launched the “HR Excellent 2002” program with a number of goals including the
development of existing process. To bring together the company’s functional areas, attain one-
time cost saving and explore ways to improve efficiency and effectiveness the management of
Philips launched “Transforming into one Philips” program in 2001.
In September 2002 Philips also launched “world class HR 2004” a two-year program with three
goals such as win the war of talent, create customer friendly HR and deliver HR services more
cost efficiently. For this program the management proposed three centers: Philips career center,
people performance management center, and shred services center. The impact of the 2002
global economic downturn brought pressure on the management to reduce costs and manage HR
more efficiently. In past product divisions of Philips were supported by separate HR departments
and they felt to centralize the HR activities. Study on different local shared services centers
encouraged Dr. Martin to establish a shared services center.
In 2003 Philips launched “Philips People Services (PPS)” to provide various standardized human
resource services to its 3500 employees at an annual service fee of $550 per employee. Dr.
Martin appointed Yeo Lay as Philips People Services (PPS)’s head and he also delegated with
the responsibility of planning, design and implementation. Later he split the HR services
portfolio into standard and strategic categories.

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Yeo minimize the movement of new employees after recruiting as meeting with different HR in
different office at different time. And created an HR information system for maintaining of
employee’s personal files. He also examined the entire portfolio for automating the query,
processing, and delivery of HR services and selected those HR services that were feasible into
the shared service Centre.
The support to HR services were organized in terms of three levels such as employees that had
predictable outcome were classified as level 0 (self-service), and those need assistance were
classified as level 1 and 2. To support the shared services center’s operations new staff members
were recruiting from internal and external sources with problem solving skills, service oriented
mindset, knowledge of HR and technology.
3.2 Journey to world class HR
Global Economic downturn: launching “HR excellence 2002” program, which is a number of
goals the company will achieve by 2002.
2001 (CFO): Due to the vulnerability of the Philips business and as a catalyst of HR excellence
2002 program a new action was taken which is Transforming into 1 Philips to minimize cost and
increase efficiency and effectiveness.
2002 Sep: A new program launched “world class HR 2004” with three goals:
 Win the war for talent.
 Create customer friendly HR.
 Deliver HR services more cost effectively.
Three centers were launce as a part of world class HR 2004.
 Philips Career Centre
 People Performance Management Centre.
 Shared Service Centre.
2000: Some separate HR departments (Business HR, Functional HR, Corporate HR) in different
countries, were consolidated to reduce cost and increased efficiency.
2002: manager recruitment for shared services: job description, and job specifications (The
person should have an eye for details and HR background so that he/she can align the HR
processes with the company’s business. Further the person should be young to know the
information technology.)

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August 2002: Yeo was appointed to guide, plan, and design and implement the shared service.
Yeo decided to consolidate and standardize recruitment, compensation, training, expatriate, and
management and HR administration of different functional HR departments. They categorize the
HR portfolio into two category; Strategic (performance and talent management, and
organizational development) and Standard (Consolidation and delivery).
End of 2002: Yeo found some problems and solutions to these problems as follows:
 One new recruited employee has to meet different HR manager at different HR office.
(Centralized recruitment).
 Employee personal file hard copy management problem. (Computerized soft
copy).(Centrally organized employee’s important information in a computer network)
 Transforming recruitment, tanning, performance management and reward system into
electronic form.
 Automation in query processing and delivery.
 IT mood activated.
The supports to HR services were in three terms:
 0 level ( self-services like corporate guidelines, corporate HR policies and practices)
 Level 1
 Level 2 (recruitment, training, development)
Yeo and her team developed e-portals, applications, database, user-friendly web interfaces and
standard operating procedures,
3.3 Management of PPS
From mid-2003 PPS started providing more than 50 HR Services to its 3500 employees of
products divisions of Philips Singapore. Dr. Martin introduced the PPS concept to the top
management of Philips. For a smooth transition she placed a comprehensive change management
program.
3.4 Challenges
Yeo faced some challenges in the second quarter of 2003in spite of well-planned launch. When a
domestic appliances division needed interpretation of a policy on eligibility of medical expenses
then the employee was referred to PPS center and PPS take one or two days to response. For
some HR staff it was hard to shift mindset from the disciplinarian regime of HR function to
service oriented regime of in the PPS.

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3.5 Benefits:
The PPS team develops assessment tools for new applicants as well as a guide for Philips’s
leadership and technical competencies and began sharing the employee database in the company
to facilitate employee selection and recruitment process. The key benefits are employer branding,
recruitment, career development and savings.
3.6 Customer satisfaction
PPS created more customer satisfaction than before the establishment of PPS a survey on
customer satisfaction showed that the percentages of total favorable response increase from 53 to
60 percent and overall rating for PPS services had improved from 65 to 72 percent. Also the
rating for PPS staff had improved in terms of friendliness and understanding the needs of
customers while the rating on competence and timeliness for response were maintained.
3.7 Cost Management
PPS worked as like a business organization to recover the total cost of providing services. It
charged $550 annual fee per employee and then reduced the amount to $500 in 2005. It
outsourced the entire payroll management, expatriate housing, administrative services for
recruitment and the employee benefit scheme and these helped to reduce costs.
In the first quarter of 2005 a product division head sought for a downward revision of the PPS’s
annual service fee to below $500. But Yeo did not agree to reduce the fee because all the
variable expenses were directly to the vendors. And then Martin felt that any further reduction in
annual service fee would be a formidable challenge.

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Chapter Four: Problem Statement

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Chapter- Four: Problem Statement
The main core problems faced by PPS (Philips People Service) are summed up to the basic core
problem of reducing service fee without any compromise in quality of HR services provided by
PPS while the product of Philips Electronics Limited, Singapore facing price erosion.
Figure 2: The Core Problem of PPS
4.1 Maintaining Promised Quality of HR Services Versus Reducing Service
Fees:
PPS is highly dedicated in terms of ensuring their quality of services. The main reason behind
establishing the PPS was to ensure the world-class HR service to the employees of Philips
Singapore and reducing costs of over classification of HR system. From 2003 to 2005, PPS is
providing world class HR that was a key goal, along with reducing the service fees from $550 to
500. But, in the phase of high turnover reducing the service fee has become a great issue. PPS
has no option to compromise quality of service provide which will increase turnover rate greatly.
So, the main challenge of PPs it o maintaining quality and decide whether to decrease fees while

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facing price erosion. The electronic product market is highly vulnerable to price. The price of the
electronic products decreases greatly over time. Companies have to innovate product new
product or product with variation quickly, because electronic product has a shorter life cycle.
From 2005, the products of Philips Singapore faced high competition that reduced their profit
margin and makes it urgent to reduce the service fees further to lower the cost and compete in the
market more effectively. It the great challenge for PPS to reduce service fees further as it has
made a 9% decline in service fees in 2004. It is challenging situation for PPS to reduce the fees
further where it pays all of their variable expenses directly to outsourcing service providers and
vendors. So, it is a formidable challenge for PPS to reduce service fees further.
4.2 Why Reducing Service fees is a Challenge
In 2004, PPS has reduced their service fees from $550 to $500. It is now considering whether to
reduce the HR service fees further which is a formidable challenge because of the following
reasons.
 It is highly difficult to reduce the variable costs of the services they provide, as
vendors are paid directly.
 Reducing cost without considering the quality issues will lower the customers
(employees of Philips Singapore) efficiency and performance that will be costly
for the company.
 The PPS is facing three-dimensional problem, while considering to reduce service
fees. They have to lower service fees without making any deviation in quality
standards while maintaining quality standards will make difficult handle the
price erosion problem.

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4.3 Why Ensuring high quality HR services is a Challenge? :
Ensuring a world-class HR service is the commitment of PPS to their customers (the employees
of Philips Singapore). But, PPS has to face the following challenges to ensure the high-quality
HR service over time.
 To provide high quality service and continue the value addition process, PPS has to incur
more cost that will prevent PPS to reduce or cut the service fees, rather it is generally true
that if they increase quality in great extent, they have to increase fees.
 The motivational factors of employees of Philips Singapore or the customers of PPS, is
highly linked with the quality of the HR service provided.
 High-class HR services ensure and enhance employee’s efficiency that turn into
productivity. So, it is a crucial factor of consideration before altering the quality of
services.
 The recent employee turnover rate of Philips Singapore has increased significantly. So,
PPS have to more careful about their service quality. If they show any negligence in this
issue it will increase turnover further and leads to more lower profit margin of the
products of Philips Singapore.

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Chapter Five: Decision Criteria and
Alternative Solutions

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Chapter Five: Decision Criteria and Alternative Solutions
The alternative solutions of the problems that are mentioned in the problem statement are
analyzed below:
5.1 Enhancing service quality to tackle price erosion:
The dilemma faced by PPS can be solved by ensuring service quality to tackle price erosion. In
this way of solution to the problem of cutting service fees maintaining service quality and reduce
the price erosion of the product of Philips, product quality will be enhanced first and the effect of
which will reduce loss due to price erosion problem. The process does not suggest to reduce the
service fees. The process is described below:
Step One-Enhancing service quality: The PPS service quality has to increase further. To do so
PPS can survey the employees to find out any additional service needs they have and their
importance to them. Using the survey result the PPS can implement that quality improvement
project.
Step Two-Increase of the employee’s motivational level: The employees of Philips (the
customers of PPS) will be more motivated at their work, because they have realized the value of
their opinion and wants in Philips.
Step Three -Increase of employee efficiency and productivity: With the help of improved HR
services, the employees of Philips will do their job more efficiently and in a more productive
way.
Step Four - Reduction of the cost per product: As workers are more productive now, the cost
per unit of their product will decrease. On the other hand demand for Philips product will
increase, because Research and Development department of Philips will innovate new features in
their product that will provide theme the competitive advantage over competitors.

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Figure 3: The Process of Enhancing Service Quality to Tackle Price Erosion
Step Five-Increased profit margin to tackle price erosion: Due to lower cost and innovative
products, the company will have enough profit margin to tackle the price erosion of their
products. On the other hand, they can take competitive advantage through the newly introduced
products.
5.2 Specialization in PPS Centre
After imparting specialization in PPS, then it will function centrally like PPS (before) but the
difference will be in the specialized operations, policy and procedures. The Service Centre will
be operated and managed by people from different departments, because in PPS (before) the
centralization process made the performance much more generalized, and generalization has
some vital drawbacks like;
 Not fulfilling the special needs.
o The special need will only be found out and solved when each and every division
will have specialized attention from the HR service center.
 Leaving bottlenecks uncovered.
Increased
profit margin
to tackle
price erosion
Reduction of
the cost per
product
Increase of
employee
efficiency and
productivity
Increase of
the
employee’s
motivational
level
Enhancing
the quality of
HR services

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o Expert people from each division will understand the HR needs and areas to be
developed more than the other managers with general knowledge of the divisions.
 Not concerning about the best outcomes.
o The best outcomes will be achieved only with the best use of and development of
the departmental resources and instruments. The centralization and the
generalization can’t thus achieve the best outcomes for the company.
 Main focus is operation not development.
o The centralization process focuses only on the operation not the development of
the process or outcomes.
So, to solve the generalization problem in PPS we decided to serve the company in a specialized
way to achieve the best possible outcomes, Where the HR functions like recruitment, tanning,
performance and talent management, reward system, organizational development, Consolidation
and delivery etc. will be performed centrally but by the specialized people in different
departmental knowledge, skill, and expertise. The benefits will be;
 Uncovering the bottlenecks.
The specialized people will be able to find out the bottlenecks much more effectively and
easily than others. Then it will also be easy to solve those problems.
 Fulfilling the departmental special needs.
The people with departmental expertise will be the first to realize the special needs of the
department. So these expert and specialized people can fulfill the departmental special
needs as soon as possible.
 Cost will be minimized.
Cost will be minimized to a great extent because expertized and specialized service will
be given centrally so extra people need not to be hired and thus saving the cost of these
extra people’s salary expense.
 The HR functions will be easy and simple.
The concerned specialist will operate the HR functions for individuals departments, so
others have not to pass much time and energy thinking about the other’s departmental
issues.

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 The HR managers will be able to achieve the best possible outcomes for the company as
well as the employees; because the company’s profit will be distributed to the employees
as salary. So when the company will be able to earn more profit the employees will b
benefited.
5.3 Variation in fees according to difference in divisions/departments
The HR activities will be needed differently in different departments according to the category of
company’s business. Here in Philips Singapore Company is a business of electronics products, so
the company faces most vulnerability among different business industries. The reason of this
vulnerability is the “price erosion” problem. Due to the nature of the electronics products the
price of these products decreases day by day. To face this price erosion problem the company
has to cut the cost of production and other cost of the products to cope up in the market. The
company can minimize the cost of production in different ways but the best two possible
solutions are;
i. Technological development in production.
That means with the same technological cost the company will be able to produce
more products and thus the marginal cost of production will decrease.
ii. Increase production employee’s productivity.
With the same labor cost the, if the company can produce more products the marginal
cost will decline. That means the individual employee has to produce more products
in the same duration of labor period and cost.
From the above discussion we can understand that, “The price erosion affects the production
department directly”.
So, we can precisely assume that to cope up the price erosion effect the production department
needs extra and specialized HR services compared to the other departments. So the products
department’s employees should be given discounts in HR service Fees; it won’t be a loss to the
Centrally Specialized Shared Service Centre because of the large economic scale theory and the
fixed cost theory. The other departments should also be considered individually while setting the
service fees for them. The benefits of this approach will be;

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Taking the advantage of large economic scale benefit for cost minimization.
The overall service fee per employee will decrease.
The employee satisfaction will also increase.
Better handle of the price erosion challenge.
5.4 Intra division/department communication:
Intra division/department communication has to be increased by appointing the HR managers
from each and every department (for example two most knowledgeable and best performers from
each division). The benefits will be
 Intra departmental tasks will be solved easily.
 Time will be saved by solving intra division problems as soon as possible by the HR
managers.
 The intra departmental policies and procedures will be easily accessed.
As we have noticed that, at the beginning of the inauguration of PPS Centre, a staff member
from domestic appliance division needed interpretation of policy on eligibility of medical
expense through PPS Centre. But it took two days to communicate with the concerning
department. As we all know sluggishness is costly for any system. Moreover if intra department
communication system developed the other cost will decline automatically.
5.4 The continuing cost cutting of the service fees in relation to the price
erosion
According to the changes in products price, demands, sales the annual HR service fees should
also be decreased. The employees are exposed to the price erosion challenge, so the HR
departments just cannot sit and charge the same fees over the periods. It will have a negative
impact on the company.

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Figure 4: Justification of Service fees reduction
So the HR manager should find out newer ideas, methods, technologies, and procedures,
instruments to cut the services fees as well as increasing both the quantity and quality of the HR
services.
5.5 Introduction of Intranet in exchange of Computer network
Intranet: Internal or private network of an organization based on internet technology (such as
hypertext and TCP/IP protocols) and accessed over the internet. An intranet is meant for the
exclusive use of the organization and its associates (customers, suppliers etc.) and is protected
from unauthorized access with security system such as firewalls. Intranet provide services such
as email, data storage, and search and retrieval functions, and are employed in disseminating
policy manuals and internal directories for the employees, price and product information for the
customers, and the requirements and specifications for the suppliers. Some intranets are confined
to a building whereas others span continents.
Decreasing
Price
Decreasing Production
cost
Incresing
Productivity
Decresing other
product cost
So the company
should decreas the
HR service fees

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Computer Network: A group of two or more computing devices connected via a form of
communications technology. For example, a business might use a computer network connected
via cables or the internet in order to gain access to a common server or to share programs, files,
and other information.
As Philips Singapore is a multinational and has business operation around the world, the
company can use the intranet technology rather than computer network in its automation
process, because it will be;
 Cost saving.
 Time saving.
 Easy access.
 Easy to maintain the system.
 Easy communication of policy, procedures, information.
5.6 Increase Outsourcing from South Asian Countries
Labor cost in south Asian countries like, Bangladesh, India, and China is very low compared to
the other countries. If more outsourcing is done from these countries the labor cost will decrease
to a great extent.
Figure 5: Outsourcing from Asia
Increased
Outsourcing
• From
Asian
Countries
Decreased
Labor cost
• Low labor
cost
Minimization
of Cost
• Cost
Savings

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Chapter Six: Recommended Solution
and Justification

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Chapter Six: Recommended Solution and Justification
Recommendation of alternative solution:
Increasing service quality of PPS to tackle price erosion: As we have seen, electronics products
of Philips face price erosion after a certain time in the market. If the company can increase
quality of their products anyhow, it will face less price erosion in the market. This will help the
company getting more sell out of a product and increased revenue. As the process described in
the alternative, we highly recommend to follow it.
Why we recommend this one over other alternatives:
 This will provide a long run solution to the problem.
 It will solve the problem even not bothering PPS to cut the cost.
 Employees will become more productive.
 The company will gain competitive advantage in terms of quality.
Long run
sustainable
price
Price will be
less prone to
erosion
Increasing
service
quality to
tackle price
erosion
Immediatiate
impact on
cost cutting
Short run
Charge
different
service fee
for different
employees
Didn’t work, Go to this

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Should the first one don’t work-
Charge different service fee for different employees: If the above one doesn’t work, or works
slowly, the company can go for this to have an immediate impact on cost. As it described above,
we recommend to follow this to get an impact on cost. This process will help to reduce the cost
by counting average of all the charges.
Merits of this method over others:
 It will immediately affect the cost, i.e. it will reduce the cost.
 For cost decreases, problem of production department will be solved.
 Profit will increase.
Another recommendation is to use a combination of these two approaches.

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Chapter Seven: Conclusion

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Chapter- Seven: Conclusion
Having a very good business with a broad market already, if Philips can reduce the cost of
training their employees through the ways we recommended, it will become a market giant
surely. And PPS will be providing world-class HR services at lower and compatible cost.
Satisfied employees, with a clear learning about their goal and activity through HR training, will
make the company boosted up within a little period.

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