Shared Services: Is Your Aim True?

4 min read
  • Information Technology

Mention shared services, and the rationale that likely comes to mind is savings. After all, the word ‘share’ itself suggests the notion of maximizing resources. In a shared services model of operations, individual back-office groups within each department that handle functions such as legal, human resources (HR), and accounting, are consolidated into centralized offices whose services are shared by the organization as a whole. It’s the very definition of putting what you have to the greatest use, right?

True, but the reality is more complicated, and if done right, actually has less to do with cost-cutting and more to do with transforming an organization so that it performs better on many different measures, not all of them having to do with the immediate bottom line.

Shared services, or consolidation of back-office functions in a company, is getting more attention as the employment market becomes tighter and companies look for ways to economize. As more and more organizations turn to this strategy, it’s important they be clear on their aims. A recent survey from the consulting company KPMG found that as many as 84 percent of the companies surveyed were using at least some aspect of shared services, ranging from simply centralizing operations to full global shared services.

Moreover, large companies were more likely to use the shared services model, KPMG reports – as many as 80 percent of the Fortune 500, according to Deloitte. And 62 percent of companies reported that they were more likely to use shared services over the next two years. Industries such as universities and the government are particularly likely to use shared services. So, what should the aims of a shared services transformation really be?

Benefits of Shared Services

Increased efficiency. Having a single group to perform a given task helps leverage economies of scale. Also, in this day and age, where it can be challenging (and expensive) to hire a skilled workforce, a shared services model may well require fewer new employees.

Better quality. At the same time,you may be able to hire higher-quality ones for the same amount of total money or less. For that reason, don’t necessarily assume that shared services will save money. “While cost remains a key consideration, service quality and governance, process improvement and increased integration are also top-of-mind factors in designing a service delivery framework that lets organizations leverage the most appropriate internal, external or blended capabilities,” writes KPMG.

Enhanced security. Groups such as legal, human resources, and accounting can often be targeted by internal and external hackers due to the large amount of valuable information they manage. A single instance of each of these groups is easier to protect than multiple versions. “If you are a department, and it’s a loose confederation of agencies, and everyone is doing their own thing, and you have 17 of them, how many systems do I have to secure?” Jeff Eisensmith, chief information security officer at the Department of Homeland Security, says in FedScoop.

Improved consistency. Having a single department handling corporate services helps make the policies and procedures that those groups provide more consistent. This helps make those policies and procedures more efficient. In addition, this makes it easier for the departments that today interact with multiple groups, each with their own separate forms, policies, and procedures, such as expense reports and time-off requests. This also helps reduce the silos in an organization, particularly with the business-critical back office procedures.

Streamlined operations. Once a group has consistent policies and procedures, that opens the door to looking at those processes to see where they can be streamlined and even automated. That further improves efficiency.

A Game Plan for Implementation

If you’re sold on shared services, what’s the best way to go about implementing it?

Figure out your starting point. Find out how much it’s costing your company to provide services now so you can determine when shared services are financially feasible. “It seems obvious (if you haven’t marked where you came from, how do you tell how far you’ve come?) but in the rush to implement what many at a senior level might persist in seeing as a cure-all, quite often those initial metrics are ignored or pushed back,” according to the Shared Services and Outsourcing Network.

Start small. You don’t decide to go the shared services route and immediately dump all the work on one group, making them responsible  for the shared service’s success. Look for one process or procedure that’s common across just about every department – requesting vacation time or submitting expense reports, for example. Then form a team to look at all the different ways that process is performed and define a new process that will work for the entire company. Once you have that small success, add another one.

And no matter what the group or function, don’t assume shared services has to be “all or nothing.” Use shared services for the basic, simple cases, and continue to use a separate case management team for the complicated special cases.

Determine priorities. One disadvantage of having a single group perform the same function for the entire company is that departments accustomed to having their own dedicated team will instead find themselves sharing that team with other departments. And sadly, even though we’re all grownups now, not everyone is good at sharing. As new processes get added to the shared service group, you will need to decide which processes, and which departments, take priority in case of a conflict. Develop service-level agreements for the group.

Exercise change management. Just as with any change, some people aren’t going to like the new system, even if it’s different. Look at this like any other change management exercise: get people’s buy-in (both from the grassroots and from the C-level), listen to concerns, and give people time to get used to the new way.

Finally, market the service. Don’t assume that everyone will just automatically switch over to the new way. Habits are hard to break. You’ll need to remind people of the existence of the new service and encourage its use. According to one PricewaterhouseCoopers survey, “There was a negative ripple effect when companies failed to support Shared Services with a robust, proactive communications program that identified both the benefits expected and the changes required.” And don’t underestimate the power of a bribe—er, that is, an incentive—such as a contest or other gamification system that gets people involved. Shared services or no, people are still people.

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