Shared Services is the convergence of a company’s essential business functions to an internal service provider as opposed to outsourcing it. Shared Services Organizations (SSO) or Shared Service Centers (SSC), as they are often called, ensure the delivery of required services to the business as effectively and efficiently as possible. The most common business support functions integrated to Shared Services are Human Resources, IT, Finance, Procurement, Office Services and Legal.
2. Cost and Quality
Shared Service is more than just centralization and is different from outsourcing (or the use of an external third party). Some successful Shared Services Organizations are managed as a business — providing efficient and effective services at a cost and quality better than other alternatives.
3. Business Value Creation
Traditionally, the development of a Shared Services group within an organization was a result of the need for cost reduction through economies of scale, centralization and standardization of processes. Businesses nowadays drive even more value creation from its Shared Services out of other functions like process management, knowledge management, product and service innovation, customer solutions, project and portfolio management, and business performance solutions among others. This allows the business to focus on its core activities.
4. Integrated Business Systems
Most Shared Services Organizations rely on an integrated set of electronic business processes, technology and IT applications — usually anchored in a major piece of enterprise resource planning software. This integrated business system standardize and automate Shared Services processes, thereby increasing reliability, decreasing operational cost, and ensuring quality.
5. Organizational Transformation
Shared Services implementation entails significant executive management sponsorship to carry out needed process and organizational transformation as its implementation may require changes in processes, roles and work practices.
6. Service Level and Performance
Shared Services make use of Service Level Agreements (SLA) to establish an accord with internal customers. SLA quantifies the target quantity, quality, and cost of services in a period of time. Shared Services make use of benchmarking and measurement of strategic, tactical and operative key performance indicators to drive performance improvement.
If you are looking for a book about Shared Services, I would recommmend Shared Services: A Manager’s Journey By Daniel C. Melchior. This book is a fantastic and a very enjoyable read with its unique story-like style. The dialogue between the characters explains many concepts and allows readers to understand why take certain decisions. It presents the realities of living the journey of implementing a shared services organization. It provides excellent insights into the methodology behind managing day-to-day Shared Services operations.
Innovation is bringing creative ideas to life. It occurs in the organizational context when individuals and teams work to spark new product development, to implement new technology and even to transform the organization. Innovation is always linked to performance and growth through incremental improvements in efficiency, productivity, quality and services. On the other hand, it is also associated with radical improvement like inventions, new products and radical changes in the business model. It is a balance of incremental improvements and radical innovations that keep the company competitive in a changing world.
We are on the brink of important change in the world— and it is economic in nature. We have seen massive job cuts, company bankruptcies, budget reductions, etc. We are in a period of profit-focused cost cutting. Innovation may be a low priority for many companies in this period of recession but I think it is a big mistake. Innovation ought to be a crucial element in a firm’s recession strategy. It will allow them to do more with less and to generate profit by exploiting existing resources.
Two kinds of Innovation that are especially valuable in a recession:
Internal and External Collaboration
Greater internal collaboration– between departments and business units, as well as external collaboration– with customers and suppliers, are essential if companies are to stay healthy during the recession. For example, internal collaboration could result to a Cross Selling strategy that could increase sales to the existing captured market while lowering cost of selling. Collaboration can be a channel for transfer of best practices between operating units. Internal Collaboration can also result to inter-business-unit product innovation by creating new products and services from existing knowledge, technologies, products and brands. External collaboration, specifically with key entities of your supply chain network — from suppliers to customer, is vital to staying in business during a recession. The big challenge to firms is to reduce cost while maintaining service levels. Businesses need to have open communication with suppliers and customers alike and ensure a more effective and efficient supply chain.
It is also important for firms to use new technology and cheaper options for collaboration. Leveraging Web 2.0 in the enterprise can be one option. Let me give you a clearer example. It is critical for companies to understand how customers reassess priorities, reallocate funds, switch brands and redefine value of products and services. Web 2.0 platforms can be both a source of information and a channel to facilitate this kind of collaboration in a cost effective way.
Leveraging Shared Services
If it’s all about cost reduction and economies of scale, it’s probably the best time to implement Shared Services. In these demanding times, companies are challenging themselves to discover business processes and business models that will open undiscovered synergies. Shared Services could be the answer to companies keenly looking for convergence and streamlining of an organization’s functions.
Shared Services has to ensure that they deliver the services required of them as effectively and efficiently as possible. In a recession, this convergence enables the appreciation of economies of scale within the function and can enable multi-function collaboration where there is the potential to create more synergies. A word of caution though, a Shared Services implementation involves a large scale cultural and process transformation; it must come with a well-planned organizational transformation and change management strategy.
In a nutshell
Shared Services has been around for years and companies have always strived to collaborate — internally and externally. I think the emphasis this time should be precision, timing, and bringing the best ideas forward. Forward looking and innovation-focused companies are seeing the light at the end of the tunnel. I strongly believe that this is the best time for innovation, for breakthrough value and for paradigm shifts. This is the best time to position your company ahead of the pack when the economy regains momentum again.
- Shared Services is the outsourcing of essential business functions to a centralized support organization.
- Most successful Shared Services run its organization as a business, providing efficient and effective services at competitive prices to its internal customers.
- Shared Services relies on an integrated set of electronic business processes, applications, information and technologies usually anchored in a major piece of purchased enterprise resource planning software.
- Shared Services implementation requires significant executive management sponsorship.
- The most common essential business support functions outsourced to Shared Services are Human Resources, IT, Finance, Procurement, Office Services and Legal.
- Shared Services focuses on value improvement more than cost reduction and on deliverables more than activities. Shared Services values customer service and alignment.
- Shared Services uses Service Level Agreements (SLA) to establish an accord with internal customers. SLA quantifies the target quantity, quality, and cost of services in a period of time.
- Shared Services makes use of benchmarking and measurement of strategic, tactical and operative Key Performance Indicators to drive incremental performance improvement.
- Shared Services locations can be on-shore, near-shore or off-shore although near-shore and off-shore are more associated to outsourcing.
- The value of Shared Services for an organization grows over time – from short-term to medium-term benefits of cost reduction and reengineering for productivity enhancement, to long-term continuous improvement and integrated strategic service delivery.