Shared Services: Have You Optimized Your Investment?
High or Low Performing?
Shared services is a well-established approach for the provision of high quality, cost-effective business support processes. However not all shared services do well. There is evidence that best-practice shared services organizations do provide significant benefits, but poorer performers struggle to do better than the traditional "back office" model.
Best practice shared services ensure that benefits accrue through continuous improvement and new ways of adding value. Poorer performing organizations fail to realize their full potential and have to grapple with issues such as:
- customer service complaints
- process failure
- poor morale
- high staff turnover
- ineffective technology
- cost savings behind target
Also, unless the "art of the possible" is understood, the potential for additional value-add is missed.
Take the case of a mature shared services organization which is performing relatively well but which is faced with a variety of pressures. Senior executives may be constantly pressing for additional savings. The shared services leader has heard of others who seem to have done well. How should he or she choose what to do next on the development path for shared services? What should shared services do to move forward?
A Range of Options
The range of options for shared services has significantly evolved over the past few years. Many organizations have realized that to sustain the shared services model it is not enough to focus on the mere centralization of transaction processing activities. Shared services centers (SSCs) have worked best when they are "business-focused" and have put the business units they serve in prime position as a customer – developing a high-performance service culture and establishing best-practice processes. For those SSCs that have not yet managed to get the basics in place, the focus needs to remain in finding the solutions to these challenges. Our experience is that attempting to solve the problem by leapfrogging to more advanced options such as outsourcing will create as many headaches as it will resolve and value is more likely to be passed to the outsourcer in the process.
Solutions for optimizing shared services typically fall into the following categories:
Customer Service Improvement
Shared services customer service management solutions ensure that customer service is embedded in everything the SSC does, from its vision, through to process and organization design, to recruitment and training. The customer ethos is accompanied by formal processes such as governance, customer relationship management, issue resolution, service level agreements and key performance indicators to provide a sustainable platform of an embedded customer service focus.
Process Improvement and Six Sigma
Business process re-engineering, process design and implementation (including Sarbanes-Oxley and other compliance approaches) have been around for a long time and are well proven. However increasingly, a full range of Six Sigma solutions (including Lean) are being applied in shared services environments as shared services processes lend themselves well to the approach. Six Sigma is focused on measurement and the diagnosis and resolution of the root cause of process errors. The analysis provides an objective assessment of whether errors are within quality standards or not and Lean techniques can reveal areas where the time taken to carry out multi-step processes can be dramatically improved.
Process automation tools such as optical character recognition (OCR) can deliver benefits over and above those delivered by standard ERP systems and can be designed to achieve a step change in performance. Implementation enables staff to focus on process and exception management instead of on data entry. Atos Origin have implemented many ePayables and automated purchase-to-pay solutions over the years with the result that service levels are significantly enhanced while headcount savings of over 50% can become a reality. This begs the question: if I can optimize shared services to operate on minimum staffing, do I need to go offshore or to BPO for labor cost arbitrage?
Shared services implementation often coincides with an ERP implementation. This provides mutual benefits – shared services is more efficient as it can operate on the basis of integrated end-to-end processes, and the ERP implementation cost is reduced because of the shared services drive for standardization. However, for those that have not yet moved to ERP or those that have, but still have legacy feeder systems or have multiple ERP platforms, the focus enabled by shared services may be a catalyst to review the next steps. A Service Oriented Architecture (SOA) approach could be deployed to make integration more cost-effective whilst creating a single interface for the business, making transaction processing simpler. If multiple systems are a barrier to optimizing shared services, SOA can overcome some of the issues associated with a patchwork legacy system.
Culture and People Development
The key to this challenge is to lead from the top – only by creating the right environment will your people deliver high performance. There are techniques to achieve this, including cultural assessment and development; shared services vision, mission and goal development; HR strategy and organizational development; leadership coaching; and performance management.
Once the foundation of high-performance culture and best-practice process excellence is achieved, where can additional value be obtained? One possibility is to extend into expertise services. One client we worked with was able to utilize the benefits of having easier access to global standardized data on customer debtors outstanding to significantly reduce working capital requirements. It is in areas like this that shared services can realize true value – far in excess of initial headcount savings included in the original business case which supported their development.
What About BPO?
Can these benefits be realized in-house with a captive shared services model – or do you need to partner with a BPO provider to gain access to the required capabilities? Indeed, should BPO be considered as a goal in its own right to gain the benefits from the significantly larger economies of scale that a BPO provider can generate and the labor arbitrage benefits from staff in cheaper locations? If such a path is taken, what implications are there for the future strategic capability of the remaining support function?
It is possible to move straight from decentralized processing to BPO, but most organizations take the shared services route first. Today, there are many different options and sophisticated models are required to analyze the best fit and develop the most appropriate business case. BPO for functions typically within the domain of shared services – finance, HR, IT and procurement – is growing very fast. Indeed, at this time its growth is probably limited only by the ability of supply-side organizations to respond in terms of the capabilities and capacity required. So, selection of the right partner is paramount, and significant value can be obtained by using an intermediary with experience of all aspects of BPO – from scoping through to partner selection, transition and governance.
Making the Right Decision
The challenge for shared services leaders is how to assess what is possible and make the optimal decisions for your own organization from the myriad of options available. What should the next step be – more of the same, or evolution? How will you understand what the options are, evaluate them, and decide what is right for you?
Atos Consulting have developed an approach to this dilemma which starts with an assessment of the current situation against shared services best practices, enabling issues and opportunities to be identified in the context of realistic, personalized goals. The approach is based on over 200 best practices from over 100 man-years of shared services experience.
The analysis facilitates decision-making about the future and generates an action plan. By comparing current performance against researched shared services best practices, the organization can identify its position on the maturity curve and identify areas of poor performance. Transparency of the situation helps provide clarity of improvement options and the directions available. This is given added realism by allowing the user to choose goals that are sensible for his or her own organization.
This tool enables the user to understand the areas within the shared services organization that require further attention and could pave the way for a more detailed assessment which includes individual detailed process diagnostics and diagnostic reports.
Practitioners have always understood that implementing shared services was just the start of a journey. It was a means to an end, not an end in itself. For those shared services leaders who are buried under the most recent customer complaints or process breakdowns, or grappling with poor staff morale and high turnover, doing nothing may not be an option. But even those who have passed this stabilization phase will leave undiscovered value on the table if they choose to ignore the various optimization options available today.
About the Authors
Associate Partner, Head of Shared Services Solution
Principal Consultant, Shared Services Team
Atos Consulting, the global consulting practice of Atos Origin (an international IT services company), is a leading provider of business, process and technology consulting services. With more than 2,500 staff globally, it focuses on delivering proven, pragmatic solutions to the telecom, manufacturing, financial services and public sectors.