As we previously discussed, there are many things to consider before embarking on a shared services journey, including selecting a location. This decision should not be taken lightly, particularly given the upfront investment typically associated with this type of implementation.
To determine the optimal location for your shared services organization, we suggest performing a site review during the early stages of the project. While this may sound daunting, we have broken it down into a simple evaluation process that could save your organization a lot of resources and headaches in the long run.
Here are the top criteria to consider when selecting a location for your shared services center:
1. Cost Effectiveness of the Location
It is no secret that cost reduction is often a primary motivation behind a shared services implementation. Therefore, it is critical to select a location that is cost effective both today and into the future.
Organizations will typically compare a number of key cost metrics across the locations they are considering. The most significant of these is payroll costs, as labor arbitrage between locations represents an unparalleled cost savings opportunity. Other examples include facility and telecommunication costs, as well as indirect considerations such as tax, anticipated inflation, and potential currency costs.
2. Access to Talent
One of the risks of transitioning to a shared services model is the potential loss of talent and the impact this could have on business continuity. To manage this risk, select a location that offers access to a talented workforce. Depending on the proposed scope of the shared services center, this might include access to qualified accountants, language skills, or technical knowledge. It is important to also be mindful of the demand for talent in each location. If a specific skillset is in high demand, salary costs may increase significantly over time, ultimately undermining your benefit realization ambitions. To help future-proof your plans, it is worthwhile to also consider the prospective talent pipeline in each location.
3. Business Environment
The business environment in which a shared services center is located can have a significant impact on its success. When selecting a location, environmental factors such as political stability, labor laws and regulation, infrastructure, and business cultural norms are worth considering. When comparing sites, an organization should consider how these factors might change over time, given the location’s political, social, and economic trajectory.
4. Proximity to Existing Business
Theoretically, shared services organizations and the processes they own should be designed to be location-agnostic. However, in practice there can be value in selecting a location that is relatively close in proximity to your current business. This is for several reasons, including a shared time zone, but most importantly is the need for the current business and the shared services organization to build a close and trusted partnership, much of which can be facilitated through site visits, open communication, and cross-organizational alignment. On the other hand, there is also an opportunity to leverage time zones so that processes are performed around the clock, resulting in accelerated process completion and minimized overall downtime.
Another model to consider is to have part of the shared services center both on-shore and offshore. This comes with tradeoffs, but may mitigate some of the issues and potential concerns with offshore locations, such as the perception of losing control and oversight over back office functions, or political fallout from offshoring
Selecting a location for your shared services center is critical to the long-term success of your shared organization. It is worthwhile to take time to evaluate several options and rank them based on predetermined quantitative and qualitative criteria. Do not cut corners when selecting a location. You will be thankful you did your homework in the long run.
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.