Designing Meaningful Performance Metrics for a Shared Services Center

In early 2000, the BellSouth Affiliate Services Corporation (BASC) was established to serve as a Shared Services Center (SSC) within BellSouth Corporation, providing best-practice accounting, employee services, and remittance processing on behalf of multiple domestic BellSouth affiliate entities. BASC maintains Service Level Agreements (SLAs) along with discrete product lines and pricing to bill each affiliate entity for the volumes and services consumed.

Integrated Focus vs. Process Specific

BASC is organized around functional processes. Each process has a unique set of technical processing and service delivery requirements and goals. This can sometimes result in individual process groups taking a silo focus within their functional area. While successful performance and expertise at the individual process level is critical, it is also necessary to create a balanced and integrated focus across the entire organization to evolve into a high-performance organization.

High Performance Organizational Culture

Webster's dictionary defines a culture as "the integrated pattern of human behavior". It is not one good thing done well by one, but all good things done well by all, that defines a successful high-performance organization. Creating a common focus among all, on easy-to-understand performance metrics, is one way to drive behavior toward common definitions of success. This can be accomplished by implementing an integrated overall performance framework that includes common definitions and measures of success.

The first step is to define a handful of Key Focus Areas (KFAs) that are common for the organization. Then, Key Performance Indicators (KPIs) should be established that indicate success in accomplishing positive results in the KFAs. Next, actions should be identified and taken to drive employee behavior toward success. These actions serve as "performance levers" to lift performance. Process-level detailed metrics should be established to monitor the success of individual actions.

BASC provides continuous reinforcement of desired organizational behavior via constant evaluation, calibration, and communication of the KFA and KPI results across the entire organization. This communication includes linkage of BASC's performance and goals to overall corporate enterprise goals and results.

BASC Success Matrix

BASC strives to drive behavior focused on balanced performance dimensions via the BASC Success Matrix. BASC's four KFAs (customer satisfaction, financial performance, innovation, and employee development/engagement) seem obvious. What is not so obvious is the interdependency among the four KFAs. A significant imbalance in the level of focus given to one KFA could suboptimize total performance results. For example, a disproportionate focus on driving overly aggressive cost reductions, could negatively impact overall results in other areas (e.g., could drive decrease in customer service or insufficient employee training and development). Of course, the opposite example of driving too little focus on cost could also cause suboptimal results (e.g., higher cost drives higher prices, which drives customer dissatisfaction).

Internal targets are set to create a benchmark for comparing against actual results, and determining success. The KPI targets and results are summarized at a high level from detailed data and metrics tracked underneath the KPI (e.g., SLA metrics). Performance levers, or actions to be taken, are established to help drive positive results in achieving the KPI targets.

Customer Satisfaction

Measuring customer service using customer surveys relies somewhat on human perception and emotion. While perception is reality from the customer perspective, it should also be balanced with measurements derived from empirical data. For this reason, BASC also includes a KPI based on SLA metrics.

BASC performs web-based customer surveys about once a year. The surveys collect feedback on timeliness, accuracy, responsiveness, teamwork and professionalism. The target score is set at a minimum of 4.0 out of 5.0, with 5.0 being highly satisfied. In addition, BASC receives many unsolicited "thank you" notes. This customer feedback is used to recognize and reward employees for service excellence. Feedback also helps us to identify and act upon improvement opportunities.

Financial Performance

BASC measures financial performance from both an internal and external perspective via external benchmark studies, unit-cost trends, and budget variances. BASC conducts a formal external benchmark study every few years to compare cost and operational performance to external companies. The overall BASC objective is to continue moving toward 1st-quartile results, as compared to other companies. Benchmark results are used to measure progress toward 1st-quartile rankings, and provide a motivation for targeting and tracking year-over-year unit-cost trend improvements. Once 1st-quartile rankings have been accomplished, it is important to retain this status without forcing additional deep unit-cost declines that may eventually result in weakened control functions.

BASC has been setting year-over-year unit-cost targets and tracking trends since "go-live". This has driven us to understand cost drivers and fixed vs. variable functions, with the goal of changing fixed cost to variable using automation and self-service, whenever possible. Care should be taken to prevent cuts in fixed cost that fund high-value-added functions such as compliance, or improvement initiatives that drive long-term efficiencies.

Budget variances are monitored by process and are used as an indication of success. Budget cost levels are generally determined via front-end unit-cost targets. If sudden drops occur in the volumes used to set unit-cost targets, BASC creates "stretch budgets" to minimize unexpected increases in unit cost.

Innovation

Continuous process improvement initiatives are critical to an organization's success. Benefits include continued cost and productivity efficiencies, enhanced controls, minimization of risk, and the creation of employee development opportunities.

BASC tracks the number and quality of improvements initiated (large and small) and measures project success using project milestones met. Generally, BASC targets projects with one-to-three-year payback and/or increased control and compliance value.

Actions taken to drive success in this KFA include developing the correct skill sets, as well as creating an environment that fosters everyone to think of improvements. Creating targets focused on cost levels and customer satisfaction also create an environment that stimulates improvements.

Employee Development and Engagement

This KFA is perhaps "where the rubber meets the road". Employees must have the skills and desire to deliver quality services to customers, drive cost efficiencies, and initiate improvements. If not, overall results in all KFAs will suffer.

BASC measures the success in engaging employees via employee surveys, tracking number of job changes and monitoring formal education/certification status. Employee surveys are conducted each year across the BellSouth affiliates. The survey attempts to capture employees' perspectives on the company work environment, supervisor relations, and leadership direction. BASC's target is to exceed the enterprisewide composite percentage results.

Employee development is one way to drive employee engagement. BASC provides changes, formal education, certification, and training. BASC has also established a mentoring program, with 20 percent of employees participating. Communication in BASC occurs frequently, and at multiple levels (e.g. within the work group, informal town halls with leadership, quarterly state-of-the-union message, outside speakers, teambuilding sessions). Communication feeds a common understanding of the big picture, and a constant calibration of expectations and celebration of success.

Performance Results and Future Plans

BASC has achieved considerable success in its first few years. Results include:

1) best-in-class customer satisfaction rankings;
2) double-digit percent declines in unit cost and top-rank benchmark results;
3) process improvement initiatives such as web-based self-service, imaging, workflow and integrated platforms;
4) increased control and compliance contributions such as Sarbanes-Oxley 404 documentation and voucher payment policy enforcement and monitoring;
5) engagement and development of employees via job changes (20 percent to 30 percent per year), mentoring program (20 percent participation) and training opportunities, communication, and recognition vehicles.

Recent BASC employee survey results were considerably higher than the national norm.

In early 2003, BASC identified and assessed a number of options to create additional future value. This resulted in the development and initiation of a three-year plan that includes organizational changes, additional technology integration, and self-service initiatives. Additional double-digit percent declines in cost are expected. BASC's value contribution toward control and compliance functions will also continue to increase. The overall performance framework will ensure that we continue to maintain a balanced focus as we pursue these future opportunities.