In an increasingly competitive environment, cost containment remains a key strategic priority. In fact, the ability to grow revenue without seeing a parallel increase in operational expenditure represents a competitive advantage for maturing organizations.
One way to achieve this is through the centralization of back-office functions into a shared services center. The potential benefits that this presents exceed mere cost savings. Shared services also offer an opportunity for improved governance, increased service quality, and centralization of expertise. In theory, these benefits are widely accepted; however, in practice many organizations struggle to realize them in full.
Careful planning, thoughtful design, and tactical implementation are all critical to the success of any shared service initiative. In order to help organizations think through these factors, we have outlined five things to consider before embarking on this journey.
The first thing an organization should determine when contemplating a shared services model is its operational vision. It is likely that functions such as finance, HR, IT, and procurement will have their own ideas; however, these should not be considered in isolation, but should instead be aligned to the overall corporate strategy.
One example of a vision for the finance function is to structure the organization based on process area (such as Record-to-Report, Procure-to-Pay, and Order-to-Cash) and minimize the time spent on transactional activities. Having a vision is critical for success as it garners leadership’s buy-in, facilitates medium-term planning, and enables alignment across the organization.
2. Scope & Implementation Approach
Once the vision has been finalized, the next step is to determine the overall approach needed in order for it to be achieved. For example, while the vision may be to centralize all back-office finance activities in the next three years, the organization may wish to pilot this in one region or with one process area.
There is also an open question in terms of the transition approach: Should processes be moved to the shared services center in their current state (usually referred to as a “lift and shift”), or should they be redesigned or automated simultaneously as part of the transition? Typically, organizations will move the most straightforward, repetitive, and standardized processes first. This will form the foundation of the shared services center and, over time, increase the center’s scope. Once an organization has determined the overall approach, it will need to further break it down during the planning and design phase.
3. Team & Talent
After the initial scope of the shared services center has been agreed upon, it is time to expand the team. As well as having traditional project roles - such as a project sponsor, project manager, consultants, and subject matter expects - it is also common for leadership to name a Global Process Owner (GPO) for each of the end-to-end processes moving to the shared services center. This concept is somewhat unique to shared services, and is typically a senior manager with a detailed understanding of the end-to-end process being transitioned. Because this individual will own the global process after go-live, it is important to involve them early on in the shared service design.
4. Location Strategy
Before embarking on this journey, considerpotential location options for your shared services center.While the final decision might not be made until the organization completes a thorough location assessment, leadership will typically have a directional view on where it might be located. Location plays a key role in benefits realizations, as labor arbitrage, talent, and infrastructure can vary significantly from one site to another.
5. Risk & Change Management
Transitioning to a shared services model can be a sizeable change for many organizations. With change comes risk, and it is important to plan for risk mitigation and management early on in this journey. Both the operational and the project risks associated with this implementation should be considered.
The most significant operational risk is that existing staff may leave the organization before processes are fully stabilized in the new shared services center. While this sounds troubling, these threats can be either mitigated or minimized if planned for appropriately. Establishing accepted guiding principles, a thoughtful communication plan, change management, and sufficient leadership buy-in will ensure that the required resources and support are in place to manage them.
Shared services continues to offer organizations an opportunity to influence their bottom line, while simultaneously increasing the quality of services provided to internal and external customers. However, the decision to embark on a shared services journey should not be taken lightly; these functions are the backbone of your business. Our advice: Handle them with care!
Interested in learning more about shared services?
View our guidebook for an insight on the critical considerations and options organizations should evaluate before, during and after pursuing a shared services delivery model.