During the 1990s large multinational corporations adopted shared services as a tactic for reducing costs of transactional processing functions. They consolidated payroll, travel and expense claim, accounts payable and accounts receivable processing. Over the last fifteen years thousands of private and public sector organizations have adopted various forms of shared services. Today the question remains as to whether shared services has lived up to its expectations.
This series of articles reviews key elements for achieving the value of shared services three key stages:
- Establishing the Foundation
Part 1: Establishing the Foundation
1. A Clear Definition is Required
The term ‘shared services’ was adopted to define a model for consolidating transactional processing functions into shared services centres. Today there are as many models as there are installations. Dr. Ray Johnston, a long time shared services practitioner, states that “if you have seen one shared services model… then you have seen one shared services model”. No two are similar.
Our definition of shared services is simple: consolidate common services, think enterprise wide and operate like a customer driven business.
2. Agree on Scope, Goals and Desired Outcomes
Defining the up-front the rationale for moving to shared services and the vision of what it will ultimately become is the cornerstone for any shared services initiative. This includes a clear definition of the proposed business model, what specific services will be included and what clients will be served.
Successful shared services requires clarity of goals and desired outcomes. While cost saving is always an important expectation, a sole focus on cost saving has obscured improved services and resulted in a great deal of customer satisfaction. Savings are about achieving cost reductions over time: achieved through process simplification and standardization.
Shared services goals include:
- Improved organizational productivity
- Improved services performance and customer satisfaction
- Enabling customer organizations to focus on their core business
- Organizational alignment around processes and systems
3. Be Prepared to Invest
Organizations considering shared services need to ensure adequate long-term investment funds are available and committed, not only for the initial transition to the new model, but for ongoing changes required to processes, systems, policies, technology and most importantly the establishment of a service culture.
The design and implementation of shared services requires upfront investment funding and the return on that investment may not be seen for many years. For most shared service implementations the return on investment is estimated to break even in three to five years. The sourcing of investment funding is usually a key issue for organizations considering a move to shared services and it is imperative that the investment requirement is built into the business case.
4. Ensure Visible Executive Support
Shared Services is typically a top down driven strategy and there must be strong, active leadership and commitment across the system to drive the changes required and to maintain the momentum and focus on the difficult transition issues. It is difficult to achieve success without clear, committed and visible executive sponsorship and leadership. In successful shared services initiatives a great deal of up-front effort has gone into gaining senior level commitment and buy-in.
In successfully transitions to shared services there is both senior level commitment to ensuring success and an environment where support and commitment to shared services is recognized and rewarded.
Organizations should identify and remove where possible barriers to success that exist within their organizations in the form of formal or informal rewards for non-compliance as well as policies, practices or conditions that restrict flexibility and potential success of the new model.
Part 2: Implementation
About the Author: Rob Cooke is a leadership advisor, strategist and coach. He helps organizational leaders address emerging challenges, seize opportunities and execute approaches to enhancing their personal, leadership and business performance.