SSON Clinic: Implementation Approach for Shared Services

SSON News and Analysis
Posted: 07/09/2012

QUESTION: We are considering moving to Shared Services. What would be the best approach for implementing Shared Services?  Should we implement Shared Services first and then redesign processes, or redesign and standardize processes first and then organize for Shared Services?

This is one of the most critical questions that enterprises face when they decide to move toward Shared Services.  There is not a single recommended approach for this and the answer will vary depending on a number of factors, including the current complexity of existing processes, the current technology landscape, associated business risks and organizational willingness to change.

Some companies have centralized functions into Shared Services organizations first, have migrated processes from corporate or the business units into this new organization and then redesigned these processes to standardize and often support the implementation of a new Enterprise Resource Planning (ERP) solution.  Other companies have started creating the environment by standardizing processes first, sometimes involving a move to a standard ERP platform such as SAP or Oracle, and then once these standard processes and new technology have been implemented and stabilized, they then embark on the actual Shared Services implementation. Others may want to pursue process/technology and organizational changes at the same time to take a more direct route.  This can result in the achievement of more rapid and more significant cost, service and control benefits.  This "big bang" approach provides an integrated solution and organization from the outset and an immediate platform for future expansion and development.  However, this approach involves more organizational change at the same time and is a larger project involving more of the entire organization, higher up-front cost and potentially more risk.

Whilst having standard systems and processes will represent an enabler to implementing shared services quickly at any organization, this should not represent a roadblock to start moving ahead with Shared Services as Shared Services itself can be used as a lever to standardize processes to a large degree and actually supports the move towards common technology and processes over time. The key element would be to look for common processes as far as possible during the first stage and to ensure that there is a technology roadmap that Shared Services can link to, support and enable.

There are certainly pros and cons for each approach that one should definitely consider before embarking on a Shared Services implementation:

A) Process/Technology first:  enterprises where management may have been initially resistant to centralization have sometimes redesigned their processes before moving to Shared Services. Occasionally this may involve the implementation of a new ERP platform.  This can be the less disruptive approach to the business environment. The initial communication plan is more straightforward and the transformation may be easier to embrace by business units as it is seen as a 'bottoms up' effort that might require more limited change management support.  Having said this, moving to a new ERP platform and standardized processes should involve significant change otherwise the benefits of the new ERP and standardized processes might well be significantly limited.  

One downside of this "process first" approach is that there may be a risk that the target organizational model will not be realized with loss of synergies, economies of scale and efficiencies as clarity of process ownership can be problematic and some process changes may require organizational change to be effective. This approach could also lead to some significant employee uncertainty about future positions, "where this is all headed" and end state organizational structure.

B) Shared Services first: This approach is often taken by companies that need to accelerate their cost savings opportunities through organizational consolidation or perhaps need to react quickly to internal political and cultural resistance. The organizational change creates the platform for process excellence and efficiencies. Senior management can also send a powerful message to the organization by creating a new Shared Service organization which is 'here to stay'. The Shared Services organization can then own the design and drive quickly towards implementation.  It could also enable different process teams to redesign their activities to share with the new organization structure. It should be added that there are always opportunities to standardize to some degree and implement targeted technology enablers such as workflow, document management solutions, automated reconciliation tools, etc. 

The potentially negative consequences of this approach are the limited benefits of leveraging technology and improvements to current processes.  It may also lead to some initial confusion on what should be under Shared Services. The Shared Services Centre will also need to resource for and manage multiple different ways of processing transactions which will cause inefficiencies as compared to when there are standardized processes.  This approach may also be perceived as a 'top down' decision with limited value being seen by the internal business units.

C) Process and Shared Services at the same time: This is what is sometimes called the "big bang" approach. It is the most direct route that provides a coherent integrated solution and organization from the outset and an immediate platform for savings and growth.  Process redesign and organizational changes are necessarily interdependent so this approach ensures that transformation is optimized.  As all the changes take place at the same time, it also can result in reduced total business disruption over time.

One main downside of this approach is that it can be perceived as more risky, requires more rigorous design analysis and risk mitigation management and it will also require more complex change management efforts across the broader enterprise. 

So, in summary:

The decision to transform and reorganize into a Shared Services model is a strategic decision that will require detailed planning and a structured approach.  Each enterprise’s situation and drivers for change will be unique to some degree and each will require a solution based on their unique situation.  Which route to be taken really depends.

There are advantages and disadvantages to each route to the ultimate goal of standardized processes and technologies supported by an effective Shared Services organization.  "All roads lead to Rome" one might say.  There is no right answer, but all directionally move towards the ultimate goal and each route can bring significant benefits. Whatever route is taken, the approach should be justified by a convincing business case and feasibility analysis and be supported by a robust and comprehensive implementation plan. 

Phil Searle
Founder and CEO
Chazey Partners
www.chazeypartners.com

SSON News and Analysis
Posted: 07/09/2012

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