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Achieving Shared Services Success – Part 1

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 Implementation Operations 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...

Achieving Shared Services Success – Part 2

In Part 1 of this series I outlined my perspectives on what is required to establish a solid foundation for shared services success.  The article addressed the need for a clear definition of shared services in the context of each organization, clearly defined scope, goals and outcomes, adequate long term investment and visible senior level executive commitment This paper addresses some key implementation success factors. Part 3 will address ongoing operational requirements for sustained success. Part 2: Implementation   1. Transfer Service Delivery Responsibility The first step in the implementation of shared services following Executive approval of the business case and agreement to proceed is to transfer the service delivery responsibility to the shared services organization. While still remaining physically separate all shared services staff start reporting to a common executive providing the basis and opportunity for commencing process and organizational redesign. 2. Differentiate Functional Governance From Service Delivery Most corporate ‘staff’ functions have traditionally carried out both governance and service delivery functions simultaneously, sometimes frustrating clients by attempting to control compliance to policy through controlled service delivery. When moving to shared services there is a need to clearly differentiate the delivery of services to clients from governance related activities such as policy development and assuring compliance to the rules. Differentiation can be accomplished in a number of ways. One option is to separate governance functions from service deliver organizationally.  A more pragmatic approach is to have policy and service roles carried out by the shared services organization but in the context of a clear understanding of the roles and accountabilities related to carrying out these two diverse functions. 3. Define...

Achieving Shared Services Success – Part 3

In Part 1 of this series, I outlined my perspectives on what is required to establish a solid foundation for shared services success.  The article addressed the need for a clear definition of shared services in the context of each organization, clearly defined scope, goals and outcomes, adequate long term investment and visible senior level executive commitment Part 2 of this series addressed key implementation success factors including the immediate transfer of service delivery responsibility, differentiating service delivery from governance functions, defining a workable financial structure, recognizing shared services implementation as a complex change management exercise and defining effective oversight of the shared services organization. This paper addresses essential ongoing operational requirements for sustained success. Part 3: Operations   1. Move Beyond Centralization Centralized functions achieve higher levels of consistency and standardization of systems and processes leading to reduced costs through economies of scale and a limited customization of services. Unfortunately, centralized functions often grow remote from their business clients, becoming inflexible and unresponsive to their needs. As a result, clients become frustrated with the service (or lack thereof) they are receiving and lobby for a decentralized model where staff functions are dedicated to their operation, understand their needs and are responsive to local conditions. Unfortunately this results in increased costs, duplication of services and inconsistency of practices, standards and systems. Shared Services was introduced as an approach that drew on the best from both centralized and decentralized service delivery, and attempted to mitigate the drawbacks of each. Unfortunately, very few shared services initiative move beyond centralization.  The fundamental requirement for moving beyond centralization is the establishment of a...

Why are outsourcing customers so unhappy?

We often hear that customers are dissatisfied with their outsourcing services.  Most service providers are quite competent so, why are so many customers unhappy?  Customers complain of lower than anticipated service levels, slow responses to problems, and a lack of new ideas for improved practices. I believe there are five common contributing factors for this customer dissatisfaction. 1. Different Expectations Customers often enter an outsourcing arrangement without clearly defining and communicating their goals. They typically want reduced service costs and improved service performance.  Service providers on the other hand want a secure net income stream. These goals are in conflict and unless they are clearly identified by both sides, there will be discontent. It is important to have openness of expectations and assumptions during contract negotiations. The root cause of customer discontent often lies in the failure to clearly articulate what services will be provided and how performance will be measured. Service providers excel at selling their services, however, what is presented in the sales presentation is not necessarily what ends up in the contract and what is eventually delivered. This can lead to frustration, disappointment and mistrust. When expectations are different, both sides need to revisit the vision and goals of the relationship, set clear, agreed on objectives, and re-visit their service, performance and financial expectations. 2. Failure to Manage Change Outsourcing is a complicated exercise. Transferred workers or those who stay behind cannot be expected to continue in a “business as usual” way.  Both groups of workers experience dramatic changes in their roles, accountabilities and expectations. Failure to provide substantial transition support and change management will result...

Fixing the outsourcing blame game

We hear a lot from customers who are unhappy with the services they are receiving from their outsourcing service providers; and most customers place the blame squarely on the shoulders of their service providers. When we get in behind the common customer complaints, we almost always find that the fix involves customers and service providers working effectively together to reposition expectations and manage the contract. Whenever the finger pointing starts it’s in the best interests of both parties to move quickly and find the fix. Here’s what we’ve found to help with the most common complaints we hear. 1. “It was never as good as it was when we did it ourselves” Customers, especially those new to outsourcing, are often shocked at the initial implementation challenges and then find that ongoing costs and service quality are not what they anticipated. The problem is that there is rarely a credible baseline of service costs and performance that can be used to compare the before and after experience. So it becomes the customers perception of the outsourcers service performance versus when services were in-house. Even when SLA’s are being met or exceeded, customers identify areas where performance compares unfavourably to when services were provided in-house. Service providers have difficulty challenging these perceptions, because they don’t have the historical memory and their point of reference is the current SLA’s.  What results is a lingering air of dissatisfaction hanging over the relationship. The Fix The current contract has to be the common point of reference for both parties. Customers need to directly communicate where their current experience is not meeting their expectations (even...