As technology eliminates competitive barriers and helps to create a “flatter world,” interest in the concept of shared services continues to grow. The concept is timely for companies that are seeking better ways to compete in the flat world. Companies can take advantage of the availability of enterprise-wide software platforms, inexpensive bandwidth/networking and the availability of cost-efficient labor to implement a shared services environment to help them compete.
“We believe that technology and business leaders can begin to address the implications of a ‘flat world’ for their companies by defining a business vision that includes shared services as a key strategic resource for the company,” says Greg Adkins, vice president for Avvantica Consulting LLC.
Smart Business spoke to Adkins about the opportunity companies have to use shared services to drive significant benefits for themselves.
What are shared services, and what companies and business functions are good candidates?
The overall concept behind a shared services organization is to leverage the functional and technological competencies of one organizational unit to deliver cost-effective, high-value services across an entire company.
Ultimately, all businesses compete on cost and service levels, and shared services can help companies of all sizes begin to leverage existing technologies and capabilities to address these competitive issues.
Typically, companies are good candidates for shared services if they are decentralized or multidivisional. Business functions such as finance, accounting, human resources, customer support, procurement and IT are all potential candidates for shared services. Shared services are not only cost-efficient, which has been the traditional focus, but are also tools for competitive advantage. Companies can use shared services to take strategic advantage of the specific functional and technological competencies they have.
What benefits are there in moving to shared services?
Companies can recognize several significant financial and operational benefits, including economies of scale/cost reduction, standardization of business process and technologies, improved quality and service levels, increased business control, improved management reporting and better corporate governance.
How should a company approach implementing shared services?
Successful shared service implementations begin by developing a comprehensive business vision for the future. Shared services may be the focal point or a piece of a larger overall vision.
Many of the most successful visions have had shared services positioned as a strategic tool or resource, combining the best processes and technologies with the best people to achieve world-class service levels and processing efficiency. This can provide a competitive advantage.
Shared services organizations are often launched as a separate business unit and run as their own entity. They should always be seeking to deliver the highest quality of services while being the lowest cost provider.
The key differences between shared services and traditional centralization is a focus on defined service level agreements (SLAs) and more emphasis on governance. In terms of implementing shared services, companies typically go through three stages of evolution: process/system standardization, centralization, and shared services (adds SLAs and governance to a centralized process).
What best practices have you seen in successful shared service implementations?
Every shared services design and implementation is different. The existing state and the business’s vision of the future drive many of the key decisions in each implementation.
In our experience, several recurring themes have made the transition to shared services more effective and successful. Those themes include a clear, compelling business vision that includes shared services; strong, consistent leadership/executive support; a robust implementation program with a strong project management approach; detailed business cases and project plans; comprehensive and effective communications throughout the company; the constant pursuit of process and technology standardization; and a desire to change the corporate culture to be service oriented.
In terms of operational best practices, successful shared services implementations include comprehensive, detailed SLAs; robust management reporting; and strong shared service governance. We have seen some shared services organizations go as far as issuing their own ‘annual report’ to customers, detailing their business strategy, plans, operations and financial performance.
GREG ADKINS is vice president for Avvantica Consulting LLC. Reach him at (214) 379-7903 or [email protected].