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Are Shared Service missing the point?

Shared Services or Centralised Functions have long been used as a strategic enabler to support cost reduction initiatives and improve efficiencies. They are often situated in low-cost offshore or nearshore locations with local management teams. But are they delivering to their potential?

According to Gartner: “Shared services or shared services center (SSC) refers to a dedicated unit (including people, processes and technologies) that is structured as a centralised point of service and is focused on defined business functions.”

According to Wikipedia: “Shared services is the provision of a service by one part of an organisation or group where that service had previously been found in more than one part of the organisation or group. Thus the funding and resourcing of the service is shared and the providing department effectively becomes an internal service provider”.

Reality often is that Shared Services are a collective of bad inefficient processes that have been shifted to cheaper locations. They’re still bad and they’re still inefficient and to make matters worse they become almost uncontrollable. They have their own overriding business goals and KPI’s, which can be in conflict with what the customers – the internal business the service is being delivered to – actually needs. Errors can cause various other problems and the cost benefit become off-set by resource being tied up putting things right or customers going elsewhere.

A simple example is:

An organisation centralises its Accounts Payable – a fairly simple and straight forward process usually. The Shared Service supports 7 countries. 3 of those countries have 2 separate business units and 2 countries have 3 separate business units. That’s 14 different inputs, processes, and, potentially, IT systems used requiring up to 14 separate teams to support them. The greater the variety in the processes the harder it is to cross-skill staff therefore the less effective the Shared Service is.

Even back office processes have an impact on the customer in some way. For example, HR processes have a direct impact on employee satisfaction whose frustration due to incorrect pay or slow laborious time consuming expenses process can be felt by the customers.

The key to having a really effective Shared Service is process standardisation. Consistent processes means cross-skilling is much easier, improving operational flexibility ensuring better utilisation of resource, reducing overheads and errors. Overall providing a better, cheaper and a much more efficient process. But that’s easier said than done. Countries or regions have their own priorities; they may not have liked being told to use a Share Service in the first place; they may be reluctant to change their in-country processes or systems to make life easier for ‘other areas’.

The benefits of developing Standard Operating Procedures (SoP’s) can be huge. There are naturally ‘better processes than others’ and just by making the ‘best’ the standard can generate big savings not only in terms of the cost of running the Shared Service but also in the quality of the service provided to its internal customers. By undertaking a Rapid Business Assessment of the operation and comparing the various processes across a number of dimensions an overwhelming business case for change will be delivered. It will also provide a future state picture of how the enhanced Shared Service will work and the advantages it will provide. This can be used to gain support buy-in and assist in the transformation.