Making Shared Services Work at a Mid-market Company

Shared Services are no longer a new concept, nor merely the domain of the large global players. Admittedly, larger companies were early to the game, able to identify opportunities to enhance business results and better manage costs effectively. We might even say that they were the training ground for the array of shared services models that have been developed and implemented across industries, companies, business functions, and geographies. What started out as a shared service IT model has grown to encompass a far-reaching array of processes that include finance, Human Resources, procurement, facilities, real estate, research and development, marketing -- you name it, it's been tried. Some organizations have even taken it a step further, creating a Shared Services Center of excellence which guides the shared services activities in different parts of the organization, making certain that all opportunities are explored and pursued.

But it's not quite as simple for middle market companies, many of whom are more limited in geography, depth (and breadth) of expertise, and resources -- financial and otherwise. For purposes of this article we will define these businesses as organizations with revenue of approximately $750MM-$1.5B. While these organizations may not have had the ability or critical mass to innovate in the area of shared services, they have learned from others and have seized the opportunity to introduce shared services into their own businesses. In some cases they have done this by hiring talent who had already done it. In other cases they have observed industry best practices and modeled appropriately. Many organizations have turned to outside advisors who have developed expertise in this area.

The success of the Shared Services model is similar in both types of organizations, and yet there are also nuances that are particular to the middle market company as contrasted with the large global company. The purpose of this article is to further explore and examine these nuances, and identify a talent model for Shared Services leadership.

Building Shared Services capabilities in the mid-cap companies

We live in an open economy, and middle market companies have become abundantly aware of the benefits that larger players have found through the development and utilization of shared services. All they have to do is speak to a supplier, or a customer, pick up the Wall Street Journal or any other publication that focuses on the topic, or speak to a candidate who might come from that background. They've also been approached by a variety of consulting firms that have moved down-market, having deeply penetrated the larger organizations with their capabilities, either shared services and/or outsourced capabilities. For most it's not difficult to see the potential benefits that may be gained: higher productivity, lower cost, faster speed to market, better distribution, a variety of possibilities. But turning the concept into reality can bring a host of new challenges, many of which are particularly relevant to middle market companies. These 'bumps' are not insignificant, yet are manageable and can be effectively addressed.

Bumps Along the Way

1. Organization willingness to embrace change

Of course change management is a critical aspect to any shared services implementation - regardless of the size of the organization. There are certain unique considerations that any middle market organization should keep in mind when rolling out a shared services mandate. Identify the function(s) and processes where shared services can be employed. In this environment, it is more important to start with "easy wins" - small scale change that can be quickly implemented with minimal disruption to the standard operations of the business. With efficacy proven, work to establish buy-in for a more expansive transformation.

2. Developing the competencies to take advantage of shared services

Choose the right team within the company to be involved in the shared services initiative, once you've decided which 'easy win' to go after. Build the right internal team, both because of their credibility as well as their competencies. If the competencies do not exist within the team, recognize these gaps and make sure there's a solution. Possible alternatives? Identify the right person who might be involved on a project-specific basis, in an interim role, bringing the competency into the organization. Or maybe the competency and skill set lies in another, less obvious part of the organization. In any event, figure it out and make sure the right team is in place.

3. Selecting appropriate service providers when shared services are outsourced

While the major global BPO providers may dominate the large-cap landscape, mid-market companies must evaluate service providers through a different lens. Questions to consider include: does the provider bring the spike of expertise your company needs; can they address your need without overwhelming your organization with unnecessary services; will their pricing and outsourcing recommendations be responsive to your organizational structure and resources? And the obvious: have they done this before, for whom, and with what results?

4. Building and measuring the appropriate metrics of performance

In many cases, a mid-cap company may find that they are ill-equipped to effectively monitor and improve the performance metrics critical to justify a shared services organization. Start simple, figure out what key metrics may be positively impacted, and measure all results along the way. Sometimes the benefit that occurs is not the one that was set out initially.

5. How companies are finding solutions

While mid-market companies may be receptive to shared services, there can be an inherent conflict between their level of comfort and the current state of best practices currently employed by larger organizations. While all shared services initiatives are fundamentally driven by people, process and technology, the specific initiatives and priorities will be dictated by the company's stage of shared services implementation.

Similarly, the right shared services leader will understand the best way to customize a strategy to address the organization's current needs and future aspirations. This is a delicate balance to manage and the risks are high. If a leader from a mature shared services environment tries to push things to aggressively in order to come up to speed with current best practice, they may lose support for the initiative because the change is too disruptive. Conversely, if they do not leverage appropriate change management skills to drive the implementation, they may lose institutional support because of disappointing or unanticipated results.

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About the Authors:
Stuart Sadick is a Partner with Heidrick & Struggles and the Global Leader of its Consulting and Advisory Services sector practice. His work has focused on search and assessment for global clients including top consulting firms, Fortune 500 corporations, as well as earlier stage venture and private equity backed companies. Earlier he was a consultant with McKinsey & Co. Stuart has written and spoken on the topic of executive talent development in many venues.

Joshua Clarke is a Senior Associate in the firm's Global Technology and Services Practice with a specific focus on Consulting and Advisory Services. His work has focused on searches at the Managing Director, Partner and Managing Consultant levels for world-renowned consultancies in addition to C-level and senior level searches for leading corporations across multiple industries. He has also completed numerous executive assessments and coaching sessions with senior executives at a Fortune 50 technology company.

Note: this is a repost of a previously published article.