International brewer Diageo Plc has picked Nairobi as the hub from which it will manage human resource functions for its operations in more than 20 African countries beginning next April.
Diageo, which owns 50.03 per cent of East African Breweries Limited (EABL), chose Ruaraka-based African Business Service Centre (ABSC), ahead of competing rivals based in South Africa, Nigeria and Ghana.
ABSC will provide the brewer with a range of back office services, including administration and computing payrolls, leaving country-specific HR units to oversee recruitment, terms and conditions, pay and benefits.
Africa is Diageo’s largest group of emerging markets in terms of net sales and employs more than 5,300 people or a quarter of its total global workforce.
“Kenya was chosen for many reasons including the fact that EABL already hosts ABSC for various finance processes,” said Charles Ireland, the EABL managing director.
“The aim is to have each market concentrate on its core mandate aiming at efficiency improvement and standardisation that reduces the chances of errors because instructions are coming from a centralised place.”
ABSC, which will be paying office space rent to EABL, was formed in August last year and its 108 employees have been handling back office financial functions for the brewer.
The new HR function means the centre must add 26 people to its workforce, 14 of whom will come from EABL having relinquished their duties.
Twelve more will be hired from the Kenyan market and will be backed by a small number of expatriates.
Seven individuals in the new unit will specifically oversee EABL’s regional business.
EABL said its HR employees, who will find themselves without a clear job description after the merger or reallocation of functions, will be redeployed to other areas.
The brewer did not disclose which jobs are up for grabs in the new unit or those that will be left briefly unmanned during the transition. Sources indicated that EABL employees have been invited to apply for some of the jobs that are expected to fall vacant once the office bearers are redeployed.
“Some people will have to change jobs while others will unfortunately be declared redundant,” said Mr Ireland, in a phone interview.
“As far as EABL is concerned, we do not expect to let go of any employees. We will transfer them to alternative roles, depending on the individual and specific market fit.”
Multinational companies have over the years favoured the shared service centres model as one way of streamlining operations in regions where they have a number of subsidiaries.
Not only has this model been used to ease expansion, but also as a way of cutting costs.
Nestle Group, for instance, operates a shared service centre out of Accra, Ghana which processes invoices for all its supplies across the continent.
“Rapid technological advancements, increased exposure to change and a complex global market has made shared services and outsourcing a strategic imperative for businesses around the world,” a 2013 report by audit firm KPMG says.
Diageo’s decision to shift part of its HR function to Kenya comes just a couple of months after the London-based brewer moved to restructure its global supply and procurement chain at a cost of Sh13.6 billion.
This was meant to ensure faultless transactions across the brewer’s 21 main markets including North America, Africa, Caribbean and Asia Pacific.
EABL in August completed a restructuring of its entire business in Kenya, Tanzania and Uganda, a process that saw about 80 roles transferred from their holders and 22 jobs rendered redundant.
EABL said the process, which affected all departments, was undertaken to eliminate duplication of duties and eliminate inefficiencies that were costing the firm millions of shillings.
In the year to June 2013, EABL reported a 38 per cent drop in net profits, which was weighed down by a surge in financing costs.
The company’s net earnings stood at Sh6.9 billion compared to last year’s Sh11.1 billion.