Q&A: Neil McEwen, PA Consulting

SSON: What are the first steps for companies that are looking to move toward a shared services or outsourcing framework?

Neil McEwen: A reality check: you have to determine what is doable or not. Firstly, if it is a very decentralized organization with a small number of people spread globally, particularly through acquisition, the complexity in making it work is great. Therefore, you will need to make a business case to verify that an SSO will deliver for you. In order to make the business case, you have to look at the totality of the function, and not only shared services with some functional pieces: it is the whole retained organization. You need to streamline and change roles and put new operating models in place. Also, change the totality of the function. A shared services is not a function of cost reduction, but a balance between cost and quality of service. In the end, you have to look for a payback theory of 18 months.

SSON: What is the most challenging obstacle to overcome in creating an effective change practice?

NM: As roles and responsibilities shift, the teams most knowledgeable about business processes and outsourcing often end up in different areas of a company or leave the organization. Most of the retained staff are usually employees who formerly engaged in administrative and transactional activities. These workers do what is customary: setting up shadow systems of familiar functions. As a result, companies will not generate the cost reduction or efficiency they expect because of those duplication issues. People do not think fully about the impact on function and change implication of the business. Everyone severely underestimates change management and its underlying issues: education on self-service, retention of staff with the right skill set, and number of people spearheading the effort.

SSON: What integral factors do you look at when designing a new operational model for a client?

NM: Capability of regional resource to produce a positive outcome and a strong internal resource to drive things internally.

SSON: How do you design a new operational model that can offer the best in class and high standards of service and efficiency while cutting costs?

NM: If you are thinking about a functional transformation, first decide on a target operational model. Next, assess what sort of organization you want and what you are trying to achieve. Then determine how much service quality you want to build in. You already have in place an internal group of employees to service the business — Finance, IT and HR amongst others — you should view them as business managers whose reputation stands for results, so they are equally accountable. You would need a group of experts as part of the retained resource tier within what is normally a split between Finance/HR — payroll, a/c payable, a/c receivable and benefits across various parts of the organization — in shared services. The critical element is determining how many of those people you will need, where you are going to position them, and from which venue you would like them to operate: virtually, regionally or from country-based and/or global centers. The balance depends on the philosophical organization you want.

SSON: What is the key to managing the change process?

NM: Communication is critical. Involve workers in the decision-making, so they are a part of the process and would not feel like something is being done to them. If you make employees part of the change, they would be willing to understand and accept it.

SSON: How can companies that have integrated a shared services model foster a continuous culture of improvements?

NM: Continuity of innovation: if it’s an outsourced service delivery, you have to build a continued program of innovation and service improvement into the contract from the outset. "You can’t stand still." In theory, you should have a tighter service level agreement that is well written and documented in an internal shared services center (SSC).

SSON: How do you help corporations that have adopted the shared services process improve communications and service delivery?

NM: The first thing in effecting change management is defining all the components of the group: Identify who the stakeholders are, their positions, future locations, the issues affecting them, and the level of communication they would need to effectively operate. Also, involve workers (at all levels) in the design phase by making them a part of the review team. Reorganize and restructure aggressively to reduce your HR cost per employee down to a reasonable benchmark.

SSON: Do you foresee any innovations to up the ante to help organizations gain efficiency and economies of scale moving forward?

NM: You have two choices. You can move toward a consolidated service business unit: a separate entity for all G & A functions, which actually delivers financial, IT, procurement, HR and legal. The other is to change operations from a top-tier internal SSC to a profit center competing directly with outsourcing providers.

SSON: What are your predictions for the change management process landscape?

NM: There will be significant activity relating to the organization and reconstruction of shared services in lower-cost locations such as Germany, Poland and Hungary within the next few years. Additionally, there will be a surge within the government sectors both in the US and UK. Overall, outsourcing would become more accepted.