Clear Strategy: Five Steps To Establishing A Shared Service Centre
The need for businesses to reduce costs and increase efficiency, to achieve more while spending less, has never been greater. In the quest to stimulate profits and growth through efficiency, the creation of shared service centres (SSCs) – consolidating financial, marketing or other functions at one location – is proving to be one of the most popular business trends of recent years.
The shared services approach optimises business support processes and consolidates these into one or a few locations. These functions are often transaction or information intensive and occur in most business units of a company. Business processes that are not a core component of business services are ideal candidates for a shared services operation, such as finance, human resources, marketing and communications. A SSC brings these business processes together in a single location that supports multiple business entities on a customer-supplier basis.
The finance and treasury functions are often chosen to be included in SSCs as companies realise that FSSCs (financial shared service centres) provide an ideal vehicle for the centralisation of higher value added activities such as treasury, cash flow management, accounting and reporting. The need to align the business strategy and administrative processes combined with a desire to reduce headcount are often the primary motivation for the move to SSCs. This highlights the evolving role of the treasury and finance functions and the ongoing efforts to improve the quality and create value from shared services.
The following five steps could be taken as guidelines for companies that are considering establishing any type of shared service organisation:
This is fundamental to the success of any shared service. Senior level sponsorship should be obtained to ensure that the project is viewed seriously within the organisation. Executive leadership tends to focus the attention. The operation should be viewed as a standalone business, and as such a detailed business blueprint should be prepared. This should address issues such as how systems will be integrated and how business processes are harmonised across regions and business divisions. Clear decisions have to be made as to what exactly the SSC will be responsible for and what processes will be left in country. The strategy should be formulated to break down any cultural, organisational and political barriers that may prevent the adoption of shared services.
It is vitally important that the benefits of the transformation are communicated clearly to all parties who will be affected by the implementation of shared services. People will inevitably be affected by the changes that shared services bring and how these people will be affected should be communicated as early in the process as possible. Senior stakeholders should be prepared to convey the message that staff will be able to concentrate on value added activities rather than the unproductive tasks that will be performed by the SSC.
Technology will be a core component of any SSC. The challenge is to integrate and configure the systems that are used to manage the shared service business. One of the benefits of centralising business activity is to increase visibility and control. Web based technology is increasingly used to facilitate the interaction between SSCs and their internal customers. Much of the SSC activity will be transactional and getting processes as automated as possible is a principle aim. This allows the SSC staff to concentrate on managing exceptions and driving efficiency gains.
Establishing SSCs can be a catalyst for reengineering the business processes that will be performed centrally. There should be constant review of the activity to ensure that it is best in class. Most centres will be measured by service level agreements and these should be updated regularly to ensure that they reflect process improvement and change.
Once a SSC has been set up, it is very likely that shared services will remain a feature of most complex multinational organizations. At inception, many SSCs will start with transactional back office activities but as the internal customers become more comfortable with the structure and standardised process, more companies are looking at moving some front office type activities into their SSCs. Other options include expanding the services into new regions or consolidating regional SSCs into global centres.