New Performance Levels for Shared Services Centres
Cost reduction and service level enhancements remain drivers behind the initial establishment of shared services centres (SSCs). In fact, when asked the main reasons for implementing a shared services model, 93 per cent of those who responded to an online survey conducted by the Shared Services and Business Process Outsourcing Association (SBPOA) said ‘reduce costs through simplification and standardization’ while 63 per cent said ‘increase productivity and service excellence to customers’. (The survey was conducted in 1993 but the SBPOA affirms that the trends and responses are still current today.)
In their very early stages, shared services organizations typically achieve – or strive to achieve – the above-noted goals of cost reduction and increased services levels via process and systems harmonization across various business units, primarily with transaction-intensive processes. As they move past the infancy stage, they may seek to gain economies of scope and scale by increasing the number of transactional or knowledge-based services under the shared services umbrella.
When managed and operated correctly, SSCs finally reach a stage of maturation at which there is true process integration, not just within the centre’s own four walls, but also across the entire value chain with suppliers and customers. Yet when they reach this level of maturity, especially in multinational or global corporations, the parent organizations of SSCs expect more of them; they expect them to demonstrate higher levels of performance. Before we enter into a discussion about these expectations, let’s first take a look at the accounts payable (A/P) function and how it migrates to, and evolves in, a shared services environment.
The A/P function in an SSC environment follows a four-phase maturation lifecycle: consolidation, standardization, process automation and digitization.
In the first phase, the A/P departments within the corporation’s individual business units are centralized into one central function at one location. This stage, which can be the most difficult and painful due to human resource and cultural issues, is also where the greatest efficiencies are achieved as considerable redundancy is eliminated.
In the next phase, companies attempt to create standard processes and systems for supporting A/P across the various business units. This typically coincides with the conversion to one standard ERP platform for A/P processing.
In the third phase, SSCs attempt to implement labor-saving technologies that make the A/P process more efficient. Notable examples of this are scanning and document management systems, invoice and purchase order auto-matching and workflow.
The last step in the evolution of A/P automation is digitization or the automated capture of data on an invoice in order to enable straight-through processing. The tools available to companies to actualize digitization include electronic data interchange (EDI), optical character recognition (OCR), supplier web portals and third-party provided e-invoicing solutions. It is when the A/P function within an SSC has matured to this stage that commercial competence is expected by the parent company.
According to sourcing advisory firm, EquaTerra, effective and mature SSCs exhibit eight key characteristics:
Generally accepted success factors for shared services organizations include:
But to reach a higher performance level, shared services organizations must also:
In order to meet the requirements listed above, an increasing number of shared services organizations are selecting the outsourcing path to process improvement. Forty-six per cent of respondents to the SBPOA survey stated that outsourcing – or a plan to do so – was a part of their corporate or shared services strategy. Global market leaders realize that all of their processes must be at a certain level in order to compete. For those services where they cannot meet such high standards, companies are looking to outsourcing as a solution. For example, in an age when most companies are tightening financial controls, all aspects of financial operations are being scrutinized. Among these, the A/P process has become a major focus of attention, in particular, procure-to-pay.
To achieve a higher performance level for SSCs, an organization must focus on shared services as a business and create transactional processing capabilities as well as the management discipline necessary to achieve best-practice processing strength