January 30, 2018

What Are Shared Services Best Practices?

Shared services has been widely recognized for many years as being a very effective way to achieve the triple benefit of lower costs, improved service levels and a tighter, more efficient, enterprise-wide control environment. Each company or organization will have different primary motivators for embarking on shared services, but it is usually for one or more of these three main reasons. When considering whether to move further down the path of shared services, consider the following elements for shared services best practices: scope, technology, standardization, organization, location, outsourcing, and lessons learned.

Scope

The decision on what to include in-scope for shared services needs to consider processes, functions, locations, regions, and entities. The organization can achieve some benefits with a limited set of functions, but ideally shared services will encompass all the non-core support functions.

There is tremendous opportunity to globalize and expand the scope of shared services across borders and continents and across all legal entities wherever they are domiciled. Many companies have achieved shared services in certain regions, but not in other regions. There are also some excellent examples of success across the globe.

One also needs to consider how far up the value chain shared services can go, from more traditional transaction-based into more professional/technical services. This will ultimately depend on the effectiveness of the services being offered by shared services.

Technology

Technology is becoming a real enabler for shared services and business process outsourcing. One example is global enterprise resource planning (ERP) platforms. The user-friendliness and reporting of these ERP platforms has significantly improved in recent years. Moving to a single ERP system for finance and implementing consistent data/technology standards can achieve significant cost savings.

Another emerging technology is Robotic Process Automation (RPA). Robotic Process Automation (RPA) is the latest proposition to promise a quantum advance for Shared Services. It introduces greater speed, efficiency, standardization, and accuracy to the repetitive high volume rules based tasks. With all sound propositions, business leaders are advised to develop a structured framework as the building blocks with clear, tangible benefits and correctly defined expectations before embarking on RPA initiatives.

Standardization

Standardization, simplification and centralizing processes can improve service levels and minimize costly exceptions. This will enable automation and also has the significant benefit of tightening an enterprise’s internal control environment. The best shared service operations employ full time business process experts.

Organization

Bringing the provision of as many of the non-core services as possible under one organizational umbrella allows the generation of a new mindset and the offering of end-to-end services rather than specific task-based services. Organizational realignment has the benefit of removing silos and knocking down barriers to change and can help foster a strong shared service culture and team spirit. Centralizing and consolidating this way also allows an organization to leverage economies of scale, succession planning, job rotation, and to run targeted and consistent training programs, all of which can all increase productivity and lower costs.

Location

There can also be significant value gained from moving to centralized shared service center locations as this can still result in economies of scale, better leverage and reduced cost of labor (through offshoring to lower-cost locations). A number of factors should be considered including greenfield/brownfield, labor cost comparisons, expertise of workers, language/cultural requirements, time zone, political/economic stability, availability of local government incentives, and communications infrastructure.

Outsourcing

In theory, any non-core service can be considered for outsourcing. The question is really one of cost versus control. The attitude to outsourcing also depends on other factors as well such as company culture, risk sensitivity and the level of development and maturity of any existing shared service functions. Outsourcing can also sometimes be used as a lever for rapid change. Refer to our article on the make or buy decision for more information.

Lessons Learned

Executive sponsorship is key
Distinguish between solutions versus quick fixes
Innovation & continuous improvement is critical
Measure baseline performance
Develop a clear business case
Do not underestimate change management
Regularly communicate with stakeholders
Assign your best resources
Continual training & re-training
IT department doesn’t own the technology
Be requirements focused
Stick to best practice.
Follow 80/20 rule for Shared Services ERP
Regular, meaningful steering committee meetings
Cleanse the data before each main cut-over
Leverage expert outside help
A quality implementation requires investment