Shared Services & Outsourcing for Small and Medium-Sized Enterprises

SSON is delighted to introduce John Kirk as a new columnist. John has extensive background in strategically advising the C-suite on operations, and is now focusing his attention on the burgeoning opportunity for the SME market to adopt share services / outsourcing as a model for non-core business activities. Much of this growth in outsourcing is driven by cloud-based technologies, which make scale and budget less of an issue than in the past. SSON has seen a strong growth in interest from SME businesses over the past year, reflected in the new offerings emerging from the BPOs providers. We look forward to promoting the exchange of knowledge and best practice for the SME market, through this and other content. The issues of business are somewhat constant even though the intensity changes. The issues we all have to manage are growth, cost, control, and service levels. The strategies we employ are somewhat constant as well: do we build or buy? Centralize or decentralize? Outsource or develop a shared services center? In this columns we’ll start the dialogue by covering four key areas in the decision process: Core Business Readiness What to send to a Shared Services Center or Outsourcer, and what to keep decentralized And the business case. Core Business Every organization should have formalized their Values, Vision, Mission and Business Plan or Map. Along with these, everyone in the company should know and live the organization’s Core Business. A few years ago, I was calling on the CEO of a global airline and quickly needed to make the point that they had to look at their non-core activities to cut cost and improve customer service. I started by asking, "What’s your core business"? The answer was that they transported people and materials from one point to another. I then asked, "Would cutting or redistributing resources to this core business and away from non-core activities be beneficial"? The answer was "Of course". The conversation continued as we walked through their budget, and I pointed out several hundreds of thousands dollars they were spending on non-core activities. I also explained that since these activities were not their core business they we not performing them very well or devoting enough resources to perform them well. That meeting lead to a project that developed a shared service center, outsourced a number of activities, cut hundreds of thousands of dollars and allowed them to reallocate significant dollars to their core business. So, the point is to understand and focus on your core business and consider a strategy that grows your business more effectively. That may include developing a shared service center or outsourcing your non-core activities. Readiness The next step is to determine if your organization is ready for a shared services center or the outsourcing of several activities. I suggest that you perform a readiness assessment to include these questions: Does the organization’s culture support centralizing into a shared services center or outsourcing? Are the processes standardized and well defined? Do you have Key Performance Indicators (KPIs)? Will your technology / systems allow for "remote processing"? Do you have sufficient training to get the shared services center employees and/or the outsourcer up to speed? Are there any regulatory issues that would prevent moving the work? Are there any intellectual property issues with moving this work? Will your customer base accept this move? What are the risks and can you develop mitigation for these risks? These items, along with more specific details pertaining to your company should be included in a readiness assessment. I recently finished a project for a national distribution and retail company, where the readiness assessment clearly showed that they were not ready for outsourcing and it would take considerable selling to move to a shared services center for the processes being studied. One of the arguments for not moving was the myth that their customers would only talk to a certain person in their various decentralized offices. By performing a customer survey we determined that the only thing the customer wanted was to get their request handled. We launched a well-orchestrated communications campaign and the project did end up going forward. The results will be tens of thousands of dollars in savings and better customer service due to consistent processes and training. What to move to Shared Services, What to move to Outsourcing Once you have made the decision to develop a shared services center or to outsource, you will want to pick the processes that are best suited and decide which model to move them into. Typically, these are the transactional processes and not the strategic, planning, and decision-making activities. The specific processes will need to be reviewed by functional area to develop the list to be moved. Then determine if the technology / systems will allow for the move. This list needs to be vetted with the stakeholders to ensure buy-in. Business Case Preparing a business case should follow your organization’s standard format and include the following information for at least the three options of "Do Nothing", "Develop a Shared Services Center", and "Outsource": Defining the options Description Assumptions Operational Plan Years 1–5 financial plan for each of the options Cash requirements P&L effect Savings and Benefits Risks and mitigation for each option Option recommendation In summary, develop a strategy that lets you grow and focus on your core business. Shared services and outsourcing can be a strategic advantage when done correctly. If you create a shared services center, make it a center of excellence and knowledge with the proper resources. If you outsource, make sure you devote the time and resources to transition and continue to support the decision. Focus on what you do best and let others focus on what they do best. [inlinead]

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