Four Best Practices for the Mature Shared Services Organization

Shared services results are intrinsically difficult to sustain over the long haul. Once the organization has achieved its initial objectives, the law of diminishing returns often applies.

Following are four techniques to keep the momentum alive in your organization.

Use benchmarking to drive improvement, not validate the organization

Benchmarking of shared services is, inherently, suspect. While many good sources of benchmarking data exist, comparability is a challenge. No two shared services organizations (SSOs) provide exactly the same services to their corporations, and these differences can have profound cost and productivity implications.

The only way to truly measure like-for-like cost and productivity is to document your internal environment in detail, develop a base case, and take the package to market. Doing this effectively requires considerable time and resources, and so should be infrequent, and only when it can be done with sufficient transparency and objectivity to ensure the effort will not be manipulated to support the status quo.  Accordingly, use benchmarking judiciously to identify what others are doing better, and to assess opportunities to apply learnings to your own SSO.

Establish a multi-tiered governance structure 

Properly designed governance ensures that the SSO continues to align with executive priorities, and provides a cross-functional forum to ensure the transparency and credibility of the organization. The governance agenda should specifically match the strategic objectives of the enterprise, and the composition of the governance committees should be designed to ensure creative tension. Our experience is that a two-tiered structure — one at the executive level and one representing middle to senior management peers of the shared services leadership, with a formal linkage between the two — works best to achieve these objectives.

Perpetually assess market developments to determine opportunities to exploit emerging capabilities

External service providers have a natural advantage over internal SSOs.  Because their service offerings are by definition "front office" rather than "back office," they can directly link their improved performance to increased profitability. Unlike internal SSOs, they are immediately vulnerable to market forces, and if they fail to stay at the top of their game, they very quickly fall by the wayside. Internal SSOs, which are somewhat buffered, can operate for an extended period before encountering a day of reckoning. Some sourcing advisors provide free, regular reports on these market trends, such as the quarterly TPI Index, which can help you keep abreast of these developments. 

Establish one or more strategic relationships with outsourcing service providers

The best SSOs are hybrids, combining both internal and outsourced delivery capabilities under the overall management of the shared services leadership. A well-managed, flexible shared services design that incorporates both models drives greater flexibility and tends to yield more competitive performance by both the internal and sourced providers. Additionally, a flexible outsourced relationship allows the SSO to take advantage of variable global service delivery capabilities including higher-end "knowledge processes" such as market research, business analytics, or management reporting to augment internal resources.

This article first appeared in SSON's May 2008 Mature Service Delivery eAlert. For information on how to register for this targeted e-Alert click here.