COVID-19: Spurring innovation in shared services operating models

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Manoj Kalra
10/22/2020

innovation

COVID-19 has presented fresh challenges to businesses across the globe, irrespective of size and industry. Companies are grappling to find ways to increase efficiency and achieve more with limited resources. To succeed in the new normal, organizations must rethink their shared services operating models to support their business strategy in a sharper manner.

Today, as many businesses are operating remotely, an effective shared services model is more important than ever.

So, how do shared services functions continue to deliver value amidst the crisis? How do we maintain agility during this extraordinary time? How do we leverage technologies to optimize efficiency?

To answer these questions, let us revisit the emergence of the shared services model and its evolution over the years.

Evolution in Shared Services

In the early 1990s, shared services was a simplistic model whereby a company set up the function within its operating regions and was geared towards reduction in costs. The function was largely segregated into core and non-core services and was restricted to a business unit or region.

Over the years, shared services evolved into a hybrid model which combined diverse functional activities into a holistic standalone integrated unit. Further evolution led to a scalable, globally integrated business service unit built on the pillars of data analytics and automation.

This represented a shift from the cost savings-led approach to a value-added, agile approach; it not only increased process efficiency but delivered enhanced capabilities. From value addition to innovation, technology, increased agility, improved business insights and better decision making, there emerged several advantages.

Need for Agile Shared Services

In the post-COVID world, the need of the hour is organizational agility.  For any organization wanting to stay ahead of the curve, the ability to adapt and be agile to opportunities as well as threats is critical. Shared services models support this and assume more importance in today’s volatile, uncertain, complex and ambiguous (#VUCA) world.

"In the post-COVID world, the need of the hour is organizational agility."

An agile approach essentially means:

  • enhancing the fit between a service and evolving customer needs
  • accelerating the speed of delivery
  • nurturing innovation and adoption of new technologies

Having worked in operating models where the ownership is centralized and where it is not, I have witnessed the pros and cons of both. The key to agility is perhaps in balancing the “ownership” to a distributed model. Let’s see how.

MODEL A: CENTRALIZED OWNERSHIP

In this model, various teams, such as Human Resources, Finance, IT and others report into a centralized Global Shared Services Head. The role here can be very powerful and enabling. The leader can provide services such as real estate, analytics, and automation ­– and manage overarching objectives at scale. He or she can also deliver a unified experience to the employee as well as the end customer by combining skills of HR, Technology, Finance, etc.

The process of identifying and managing risk through efficient management of resources and clear communication among team members and stakeholders is streamlined. It helps keep everyone on the same page to ensure the services’ success.

The disadvantage here is that the CXO typically loses control of the team or employees as all power is vested in the hands of the Global Shared Services Head. He or she can make demands but at the end of the day does not have much say. The SSO Head can also decide to outsource work to another enterprise and perhaps leverage the latest advancements and specialized expertise whilst cutting costs, instead of using the SSO’s own resources. He or she can manage one centre or x centres. The Head can become a barrier or an enabler. In essence, it is a very powerful role.

Pros:

    • faster adjustment of priorities
    • faster time to customer
    • economies of scale

Cons:

    • inflexible decision-making
    • risk hinges on the key decision-maker (Head)

 

MODEL B – DECENTRALIZED OWNERSHIP

In this model, respective teams report into respective Chief Officers. The Finance team may report to the Chief Financial Officer, the technology team reports to the Chief Technology Officer, the HR team reports to the Chief People Officer, etc.. The Chief Officers then manage the people, their performance, appraisals, etc.

So all the functions are managed by the CXOs with little or no role played by the shared services chief. The chief’s position can be very glamorous but content-wise it can become hollow and non-fulfilling. Whatever he/she desires will need the nod or consent of the various CXOs involved. All that the chief manages is perhaps the real estate, business continuity and transport.

Pros:

    • delegated authority
    • responsiveness
    • distributed risk

Cons:

    • slower adjustment of priorities
    • difficult to scale

How Has Covid-19 Impacted the Operating Model? 

The new work-from-home paradigm is having a significant influence on the shared services organization and its operating model. While some industries adapted more easily to remote work of all types in the past, today, across a variety of industries, remote teams are succeeding. They are doing so in different parts of the globe and while working on a variety of different projects.

However, the things that make traditional ways of working challenging—lack of prioritization, multitasking and unclear decision-making—are more significant when things are completely virtual.

Swiftness and the ability to change or adapt is a huge challenge in today’s environment. COVID-19 has changed the way shared services need to operate to function optimally. Therefore, is there a need for the shared services operating model to be reimagined?

Think of shared services as a three-legged chair. All three legs must have the same length and strength for the chair to be stable and function properly. The legs represent processes, technology and people. Just as the seat of the chair is important in making the stool functional, so is the ownership model in shared services.  Solving the ownership conundrum is the challenge for the evolving shared services model to achieve its full potential.

The success of remote teams during the COVID-19 pandemic suggests that in the future companies would benefit from combining the best of both the models.

Is the Future Agile and Distributed? 

Are distributed, remote teams something temporary to be endured? Or is the COVID-19-imposed experiment teaching us something important about teams with distributed ownership? Something that might permanently change shared services for more remote agility?

It may be unlikely that remote teams will remain the norm once the COVID-19 pandemic is behind us.  There are many benefits to the centralized ownership model. But there are also advantages to decentralized ownership. In a remote everything world, combining scale with flexible decision-making, and pulling in stakeholders to collaborate, is more efficient. It can advance shared services value and bring in agility, among other things.

Shared services functions shouldn’t just revert to the pre-COVID ways of working. Rather, they can adopt the best of both in the form of distributed ownership.

An agile, distributed model may help companies, teams and individuals more effectively cope with changing circumstances and unknowns. And, that may well be the next-generation model of the future.

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