As Shared Services Matures, How is it Evolving? [Infographic]
By Richard Sarkissian
Shared services is no longer the new kid on the block. For almost 30 years, companies have sought to control costs and improve service quality by consolidating business support operations into a single service organization, often with considerable results. But although the basic concept has hardly changed, it’s being applied today on a much larger scale.
The expansion of shared services operations in both size (more business units and geographies) and scope (more processes, more functions, and more advisory services) has given rise to new challenges that are driving a corresponding shift in the way companies manage and oversee their shared services efforts. According to a recent survey conducted by Deloitte Consulting LLP, companies with a shared services model in place are relying heavily on this approach to drive consistency across the business, particularly when it comes to processes: 84 percent of survey respondents say they’re using shared services to keep processes consistent. Nearly half have carved out a position to manage SSCs across the organization, indicating a deeper commitment to this approach. And they’re just getting started. From increasing the number of transactional processes handled by SSCs to serving more business units, geographies, and regions, business leaders clearly signaled their plans to ramp up their usage of shared services in the future.
So what impact might these trends have on organizations that rely on shared services? The challenges of increasing size and scope are perhaps most effectively illustrated by tracing shared services’ typical path at many early adopters. The initial foray into shared services is usually made by a single function, often finance. The services to be “shared” are moved out of the individual business units and into one or more SSCs. The consolidation of processes and personnel can enable near-immediate savings through headcount reduction; ongoing efficiency and effectiveness gains are pursued through automation and standardization, particularly with respect to processes, policies, and technology. Throughout, the focus is on reducing unnecessary complexity as a means for improvement.
So far so good – but what happens next? If the initial effort “works,” additional functional leaders, eager for similar benefits, may start to implement shared services in their own domains. Absent central coordination, multiple single-function shared services organizations (SSOs) may spring up across the enterprise, each independently managed by its own function. The almost inevitable result: rampant, value-killing complexity in the company’s total shared services operations – the very thing that shared services was meant to combat in the first place.
Fortunately, there’s an effective way to address shared services “meta-complexity.” That’s to bring all of the enterprise’s disparate shared services activities under a single organizational umbrella led by a single top shared services executive. Done effectively, this can transform a motley collection of silo-specific SSOs into an orderly, enterprisewide SSO that manages investments and operations with an eye to the company’s overall benefit. This, in turn, can reduce the risk of optimizing shared services activity within silos while inadvertently sub-optimizing performance for the sum of all silos, as well as helping to reduce duplication of effort.
The impetus for creating an enterprise-wide SSO often comes from a specific event that triggers leadership epiphany about the advantages of closer coordination. At one global organization with three fairly mature single function SSOs, for instance, it was only by chance that leaders discovered that two of them had simultaneously issued a Request for Proposal (RFP) to replace their contact center technologies – and that each was gravitating to a different vendor. By subsequently combining efforts, the two single-function SSOs were able to obtain greater functionality in their jointly selected solution, and get it more quickly and at lower cost, than either would have been able to accomplish alone. Moreover, they were able to do it in a way that supported the strategic plan of the third function’s SSO, which was looking to build out its contact center in two years. As a result of this experience, the company quickly established a cross-SSO investment and leading practices “council” to share and leverage investments and ideas.
Another organization with several function-specific SSOs found itself supporting an increasing number of SSCs around the world. When capital request forms for two new SSCs in Asia – one for Finance and one for Human Resources (HR) – happened to cross the CFO’s desk within days of each other, the CFO’s natural reaction was to ask if there was any reason one facility couldn’t house both. In addition to mounting an effective search for a single shared facility, the organization created a “coordinated” multi-functional shared services model where each SSO continued to “sit” in its own functional organization, but all technology investments (e.g., imaging and workflow), governance models (e.g., service-level agreements and metrics), business process outsourcing efforts, and facilities were managed centrally. The new coordinating function was affectionately referred to as the “shared services for shared services” function.
Some organizations that are just beginning to adopt shared services are taking the idea a step further by establishing multifunctional SSOs with “consolidated” management models from the start. In a consolidated model, shared services personnel report directly to centralized shared services leadership instead of to their respective functional leaders. In addition to cost and knowledge-sharing benefits, a consolidated approach can give companies an edge in attracting and retaining shared services talent. An individual who joins a company’s SSO in HR, for instance, could later be able to make a lateral move to its finance or supply chain arm with relative ease. This opportunity to diversify can be critical in attracting and retaining younger employees, who tend to place much more value on mobility and diversity of experience than prior generations.
These cases demonstrate where shared services appears to be headed. The model’s results, which has encouraged its adoption in multiple functions, has created a new layer of complexity that can sabotage its effectiveness if not appropriately addressed. For this reason, the future of shared services lies in integrated management approaches with new operating models and roles to help leverage synergies across silos and drive enhanced benefits.
A Response from an Industry Leader
Deloitte Consulting LLP
As shared services matures, how is it evolving?
I’d just add that, no matter what the organizational structure, a multifunctional SSO should also set up complementary governance mechanisms that help facilitate cross-communication. Leadership councils and/or other forums for dialogue are critical in a “coordinated” model, where each SSO reports into its own function. But even in a “consolidated” model, mechanisms like process ownership can be useful for keeping all the functional SSOs aligned with the business and with each other. That way, the various SSOs can work together to catch and address issues that may not be big enough to raise with the the global shared services leader, but that can make a difference in service or cost nonetheless.
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