A low cost route to Shared Services ( Part I)

SSON News and Analysis
Posted: 07/09/2012

Shared Services can easily get off to a bad start through too high cost of design, build and implementation, often coupled with an expensive new ERP roll-out and unrealistic expectations of sufficient cost savings to cover the set up cost and make a major ongoing impact on the business. Now we’re working in a world that has come to understand how an economic downturn can really hurt an inefficient business, there should be a stronger case for consolidating decentralised, duplicated activities. However, the pain of recession has naturally created an environment of extreme caution, a greater degree of scepticism and a seemingly total aversion to high budget programs, however attractive they can be made to look in business case and ROI presentations. Perhaps it’s time to look at how the costs of a Shared Services program can be kept down while maintaining significant results.

The first and immediate benefit of undertaking a very low cost program is the shift of focus away from a purely cost saving end result. Without a high expenditure to recoup, you really can concentrate on delivering Consistency, Control, Compliance, Efficiency, Performance, Productivity, Simplicity, etc., and everything else from the program’s initial drivers and desired outcomes. Plus, there will still be operational cost savings and they will be realised earlier in the lifecycle.

Every company’s circumstances are different so it can never be a "one size fits all" solution. Moving to a Shared Services organisation needs "4 P’s" (a Program to get there, Processes, Premises and People). That will all cost something and that cost will be very dependent on the complexity of the current structure, the current level of inconsistency and, critically, the decisiveness and strength of leadership at the top of the organisation.

Program – 6 ways to keep costs to a minimum

It’s possible to use a lot of days of expensive consultants’ time throughout the program lifecycle. Whilst an element of external assistance is likely to be a necessity, there are many ways to keep the cost to a minimum, such as the following:

  1. Use internal resources where possible: It is very unlikely that everybody in the business works to 100% capacity all of the time. If the program is seen as exiting, challenging and good for career prospects, people will be flexible when it comes to creating the time necessary to contribute. Make use of existing internal resources the default for all project staffing requirements and the use of external help the fall back position.
  2. Maintain internal control of the project: Clearly establish the project sponsors (C-level), a steering committee of key business leaders and major stakeholders at senior management level and appoint a program Director to have day to day management responsibility reporting to sponsors and steering committee. If there isn’t an existing internal manager with experience of Shared Services, bring one in on contract for the duration of the program. That director should be considered to be part of the company. Control of costs can only be achieved when the day to day activity is managed by somebody who’s first and overriding loyalty is to the success of the business. Independent contractors work as if they were part of the business and rely on successful outcomes and recommendations for future work.
  3. Commission a feasibility study from one of the big practices: This could be a prudent step before plunging headlong into such a major program of change. However, staffing the program from such sources for its duration could add a multi-million $ cost that is avoidable.
  4. Check out the market for available individual contractors or small specialist teams and providers able to fill the program’s requirements at reasonable cost: The program will almost certainly need additional skills and knowledge at times and should look at options for a specific period or specific need. There is potential for considerable cost saving simply by not having too many people for too much of the time. Similarly, recruiting full-time temporary backfilling staff to replace internally seconded resources should be a last resort compared with making temporary arrangements for spreading and sharing duties, not necessarily full time.
  5. Staffing: The key to effective staffing on any project is to have a very few people with exceptional knowledge, skills, experience and abilities. It is very difficult to have too few people working on a project but very easy to have too many.
  6. Importance of Travel & Communication: One cost area that is difficult and inadvisable to avoid is travel and communication. Effective communication across the organisation and personal delivery of that communication are absolute essentials, almost regardless of cost. The difference between a Shared Services program shrouded in mystery, confusion and associated conflict and one that generally brings all stakeholders together in united effort is huge. Getting tied up in dispute and conflict may easily be one of the highest hidden cost items that can be (mostly) avoided. That said, it’s doubtful there has ever been a Shared Services program that didn’t ruffle a few feathers so the secret again is in doing enough but not too much.         

Process

Many Shared Services programs are combined with a complete standard process redesign and the implementation of a new IT system. A single, standard set of processes covering the tasks brought into Shared Services is the ideal scenario and designing this from scratch is often the preferred approach. Similarly, rather than bringing under one roof all the various systems, applications and spreadsheets scattered around multiple business units, the introduction of a single seamless end to end ERP system covering everything from CRM to Reporting sounds like a good idea. But, these are two major programs in their own right and both take considerably longer to execute effectively than a simple stand alone Shared Services program.

Multiple systems and processes are the norm across multi-site, multi-national businesses but provide one of the biggest headaches for a fledgling Shared Service Center trying to establish both improved performance and cost savings. During the migration phase of Shared Services implementation, the whole methodology is driven by the extent and nature of conversion from the "as-is" state to the "to-be". Migrating, learning and operating multiple ways of executing day to day tasks is not only difficult but removes much of the opportunity to streamline deployment of resources across similar tasks for several business units at once or to flatten the differing peaks and troughs of demand.

So, the challenge is to create an effective standardised operating environment for the Shared Service Center without the full cost of a bottom up process redesign or a totally new ERP.

Firstly, a Shared Service Centre (SSC) will tolerate some variation of process methodology but that needs to be restricted to an absolute minimum. Perhaps it would be acceptable to have some difference in processing for business units that handle totally different products in different marketplaces. A company that makes and sells from the same range of related products in several locations should be able to interpret, process, action, record and report its data following the same steps for each task.

One of the best ways of standardising process without going right back to the drawing board is to seek out the similarly structured and best performing processes across the "as-is" and build a "to-be" from those components for each task. The advantages of this approach are that the processes are already tried and tested within the business, can be operationally assessed for compliance and auditability within their existing usage and already have some degree of acceptance within the stakeholder community. The design time is reduced and, additionally, there should be some (hopefully scalable) systems and applications capable of running them.

Systems adoption can follow roughly the same logical approach. The best system for each of the existing tasks can be adopted for the SSC as the first pass on design with greater streamlining to follow. At its extreme, this method may mean initially using a simple spreadsheet for one task but it will have improved the process from using one spreadsheet design per business unit to using just one for the whole SSC. If there are elements of ERP or at least database applications already in use it should be fairly straightforward to migrate further tasks into those more sophisticated systems and decrease the reliance on separate spreadsheets. Depending on the "as-is" environment, the only new system or application required may be some simple form of workflow management tool to enable communication and control of the progress of tasks through the operation. This can be either bought in as a proprietary tool or built simply in a commonly used database system (e.g. MS Access).

Critical to process and associated system deployment in the SSC is to establish the "to-be" fairly clearly before starting to migrate work across from the business units. This approach should remove any potential need for elongated "work shadowing" in the business units as the work of each is migrated as, instead of migrating the work alongside the method the migration is just that of the work moving into the "to-be" process method established in the SSC. Full scale work shadowing with several Shared Services staff spending several weeks at each business unit can be very expensive but this methodology should reduce it to a short period at maybe the first and second unit to migrate followed by a short gap analysis and review at those following.

Having established the "to-be" processes and systems, probably the next biggest cost issue in this area relates to scope. Where similar tasks are distributed between the SSC and the business units, there is greater potential duplication of cost and a need for additional task management and review. Wherever possible, the simplest plan of either performing a task area wholly in the SSC or wholly in the business units is the most cost effective. Obviously, the whole idea of the SSC is to have a single place of operational task execution for as much as possible or practical.

*View Part II 

SSON News and Analysis
Posted: 07/09/2012

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