Question: What's next for Shared Services?
The sharing of corporate services across an entire organization is not a new concept. It has been around for as long as businesses have existed. Centralizing "back office" services within an organization, is also not new in concept, but optimizing the centralized services through organizational redesign, process optimization, technology enablement and behavioral change is more of a recent development.
But after an organization achieves those benefits through the set up, stabilization and transformation phases, a question that many mature shared service organizations are asking is what comes next...We see that there are three or five key options for a shared service center in that position.
1) Increase scope to more complex areas of the same function
After achieving success in the shared service center it is always worth challenging yourselves and asking the question around whether you have been aggressive enough. Many organizations are initially comfortable only to transfer "transactional" processes to a shared service centre environment. As a result of the success of that transfer, the change management of transferring further processes can be much easier.
Hence, a number of shared service center organizations follow the initial transfer with a next phase of migration, which are generally more complex processes that are closer to the tactical and strategic end of the function.
2) Increase functions in the shared service center
The primary struggle in setting up a successful shared service centrer is the change management challenge, and it would be foolish for any organization not to lose the momentum gained. Finance is always a popular first phase of a shared services center. Given the success of a Finance Shared Service Center transition, the opportunity exists to utilize the goodwill generated to progress with other functions of the organization.
This can include migration of the HR function, which is an increasingly popular candidate for shared services, the Procurement function, or even a function specific to that organization that is repeatable, measurable and predictable in nature. When doing this, it is wise to largely leverage the structures, governance and operating models in the business with appropriate customization for specific functional requirements.
3) Deliver further process efficiencies
On migration and transformation of the processes migrated to the shared service center, organizations introduce continuous improvement to provide optimal process efficiencies. In addition to this, shared service centers can consider further changes that will align their ways of working to "best practice" and provide even further process efficiencies.
In reality, following the first phase of a shared service center migration and transformation, the additional efficiencies that can be delivered from optimizing the processes become more and more challenging i.e. it can take as much effort and resource to achieve 30% efficiencies in the migration to shared services, as it could to achieve a further 10% in efficiencies once all the low hanging fruit is already grabbed!
4) Deliver true "value" for the business
One can spend hours reading wonderfully written consultancy and research reports that describe the amazing value a shared service center can bring to an organization. However, aside from faster cycle times, service improvement and cost reduction the true "value" to a business can be minimal.
To really assess the benefit that a shared service center can bring, you must analyze the business strategy, understand the key issues faced in the business, and ask yourself what the organization needs. Only then, can it be assessed how the shared service centre (if at all) can truly benefit the organization.
This can be through better management information in a particular area, improved relationships with key suppliers, better support for customer facing staff or even slicker processes that make life easier for the entire business. However, to achieve this is no easy task and can involve more cost in the shared service center to provide true "value"!
A shared service center is now an asset that can be sold to bring cash inflow to an organization. In the current economic environment, where cash is most definitely king, many are considering the sale of their shared service centre as part of a "sale and leaseback" arrangement, where they buy the services back from the acquiree of the center.
The deals are attractive to a BPO provider as they provide sustainable long term revenue streams, and are attractive to organizations with shared service centers, as it enables cash inflows coupled with further efficiencies.
For more information, contact Rakesh directly on firstname.lastname@example.org or directly on +44 (0)7545 143587.
Points of Discussion
1. SSON’s online editor Rakesh Sangani says "sale and leaseback" arrangements are looking increasingly attractive as organizations are looking to increase their cash flow. But are Boards really comfortable with the resulting "ownership" issues?
2. With F&A generally leading the way in services delivery models, multi-functionalism is a natural progression. Apart from HR and IT, which may or may not follow, which functions are natural bedfellows for a shared services organization?