Posts Tagged ‘shared services approach’

Shared services: friends, that is really not just about cost!

May 22, 2010

An old stereotype, common-known (in a new scenario of the global financial crisis): We implement BPO or shared sevices (SSC) solutions as we want to cut cost. And the global economic crisis would just support that way of thinking (and doing things). However, things are not as simple as they seem to be at first glance…

“Going up the value chain to knowledge-based services isn’t just about cost reduction; it allows you to create a lot of value for the organization.” (Shared services shines in challenging times: Insights from Deloitte’s global shared services survey, p. 8)

Good news for people perceiving F&A (F&A – finance and accounting) BPO and SSC operations in a long-term perspective, adding value for organization running them and developing also advisory services, not just transactional ones: corporations tend to recognize that quality is more important than quantity, although the latest one is obviously not unimportant.

While a few years ago the main reason for implementing a shared services organization was the cost aspect, it is not the most important reason any more. Why is it so? One reason is the increasing role of the F&A function for corporations. Professor Joe Lampel from the Cass Business School in London, describes the situation as follows: “Today (…) it’s much more difficult to obtain money, your own ratings have come under greater scrutiny, and bonds have to be carefully managed. All of these things have put a lot of pressure on the CFO.” No woner then that according to 70% of top performing corporations (according to KPMG methodology, refer to KPMG survey Thriving not just surviving: Insights from leading finance functions) the F&A has significant influence on core operations, for 61% of them the finance function has material influence on marketing, supply chain (55% of respondents) and IT (53%). That clearly means: F&A managers actively influence business leaders to make better decisions across all functions. Therefore timely reporting of business results, delivering accurate budgets and forecasts, and investor relations management are the priorities for the F&A function.

Timely reporting, accurate figures… – it is all about quality. Let’s briefly discuss the findings of some surveys undertaken in the past two years and showing the increasing role of qualitative aspects in the F&A function, incorporated in shared services organizations (SSOs).

Higher transparency, process quality and process security are the most important drivers to implement an SSO according to the study Shared Service Center – the 2nd Generation undertaken by PricewaterhouseCoopers (PwC) in 2008. These objectives are followed by decrease of error rates, increase of customer satisfaction –
and cost reduction, expressed as less important than the previous objectives.

Service and quality improvement, accuracy and timeliness have been given as main reasons for having established or for establishing an SSO by 85% of world-class corporations identified by The Hackett Group in 2008. Service standardization was the next reason for 83% of them and about 80% said that cuts in
administrative costs, headcount and salary/wages reduction are the most important drivers to implement a shared services organization.

The increasing role of F&A (which – as such – “just” represents back-office operations) and the supporting business processes performed by shared service centers make the F&A function and the SSO existing within this function even more important for corporations. Shared services become strategic influencers, offering
corporations a tool to facilitate enterprise growth, improve focus on core business and enhance talent management.

Magdalena Szarafin


Key issues you wanted to know about shared services

July 25, 2009

It is about standardization, managing complexity, controlling cost, profitable growth, and performance – it’s all about the way a modern corporation is doing

Shared services – old wine in new skins or something really new? Well, it doesn’t actually matter. They enable organization to standardize the processes, manage complexity, reduce costs, ensure profitable growth and performance… – do you want to achieve something more?

Here some findings characterizing the shared services approach:

Issue 1: Location. While choosing a location for their shared service center, corporations take the following criteria in consideration:

• Availability of qualified personnel,
• Local cost structures,
• Experience already gained regarding the location,
• Integration with the company infrastructure,
• Political stability,
• Life quality,
• Transport and technology connection.

Issue 2: Benchmarking and measurement. Benchmarking and measurement are the MUST while establishing and running one or more shared service center(s). Benchmarking allows to compare the service provision with the best in class. The measurement mostly occurs using agreed key performance indicators (KPIs). The amount of KPIs chosen differs from corporation to corporation, the experience shows than 10 carefully chosen KPIs will deliver the best results.

Benchmarking can be used to achieve different objectives including:
1. Improvements in performance,
2. To align the processes with these used by the best ones enabling organization to become world class with processes.

Issue 3: Shared service center – challenges and opportunities. The following issues are to be carefully considered while establishing and running a shared service center:

1. Precise definition of objectives (is our shared service center to be a profit or a cost center?)
2. New organizational structure and considering of formal and informal groups of influence – how will the new organization look like and who is going to play the leading role after the shared service center has been established?
3. Product and service dimension – what products and services will be delivered at what prices? Considering quality and time of delivery issues is a very important matter, too.
4. Measurement and benchmarking to ensure that the shared service approach delivers more value comparing with alternative options (like outsourcing or traditional solution) and learning from the best in class.

Magdalena Szarafin
Magdalena Szarafin has immense knowledge of the outsourcing sector and is one of the authorities in shared services and outsourcing industry analysis. Her research interests include insourcing and outsourcing in connection with the value chain. She is an author of many publications dealing with outsourcing, knowledge management and total quality management (TQM).
Magdalena lives in Frankfurt, Germany and she works as an International Management Accountant in a big multinational group, dealing with preparation of financial statements under IAS/IFRS and local GAAP. In her leisure time she prepares a PhD dissertation focused on shared service centers.
Contact her to leverage her knowledge and in-depth BPO and shared service industry penetration experience.