Posts Tagged ‘Shared Services’

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

http://www.szarafin.info

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(Almost) perfect, at less cost and applicable in the outsourcing and shared services industry

May 22, 2010

Good quality does not cost – it pays. But many companies do not recognize it as they do not know how much things cost due to missing cost calculation in many areas. And that is the reason why it usually takes a long time for them to think their processes over and to implement simple measures assuring reduction in cost of delivering customer satisfaction. The latest one does not have to be as high as the cost of materials!

Good, better, (almost) perfect… – there is always a better way to make things. That is an old approach known as continuous improvement or kaizen and being an integral part of TQM (total quality management). It got very famous in Japan thank to quality gurus of Western origin and then the idea fascinated the rest of the world. Originally applied for industrial processes and by engineers, could be then successfully implemented for administrative tasks. And after the boom of outsourcing and shared services industry has begun, it has also been an attractive approach worth following to improve outsourced or insourced operations.

Six sigma, lean management – they are no more the domain of production, engineering or of in-house made operations. Even more insourcers and outsourcers recognize their importance to cut cost and increase customer satisfaction as quality pays. And the concept of “customer” itself does not just cover external but also internal clients you provide your work to.

While six sigma is a statistical method of quality control, lean management implies a qualitative approach. The main principles of lean / six sigma are as follows:

• they provide a system for improving the performance of a process, product or organisation,
• they help to understand performance from the customers’ perspective (how to put yourself into customers’ shoes),
• they provide a way of thinking in terms of end-to-end,
• they put a stress on making value flow and removing waste,
• they are in fact a pragmatic and rational approach to data and statistical variation.
• they help to treat causes not symptoms (in place of the fire-fighter approach).
• they focus on people, learning and continuous training being crucial to sustained competitiveness of the organisation.

Lean / Six Sigma
Source:Mike Way, Six Sigma and Lean in a shared services environment, presentation Prague 2009

Many organisations could reduce cost and/or increase revenue by reducing waste in existing processes thank to implementing lean / six sigma: Better, faster, safer with lean / six sigma implies quality improvement, reduction of response/reaction times and reduction of operational risks.

That all sounds nice, doesn’t it? Why not try it?

Magdalena Szarafin
http://www.szarafin.info

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
http://www.szarafin.info
_______________________________________________________
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.

Zero-defect quality: Management tools to meet the challenges of tomorrow

July 21, 2009

Can a shared service center be better, i.e. more efficient (quantitative aspects) and more effective (qualitative aspects)? How can performance be measured? What is the gap between our shared service center and the best ones?

Did you know that the most enterprises manage their shared service centers in form of cost centers, while a profit center model would be better for them in terms of delivering of the value added for the whole enterprise, customer orientation, operative cost cuts and shorter period of amortization? And although such instruments of continuous improvement as six sigma and total quality management (TQM) contribute to increased productivity and process standardization, only a few companies can successfully use them. The most shared service centers have relative big potential of improvement regarding the process and service standardization. Companies also experience problems with implementation of a complex internal control system, which could support them to transparently measure the performance and to deliver relevant information for strategic and operative management.

But: over 50 per cent of shared service centers use benchmarking as the instrument to measure performance. There are some performance measure tools available online, which deliver the gap analysis between our shared service center and the best in the class.

As the findings of a current study of The Hackett Group show, 65 per cent of companies could cut the costs of the finance function by minimum 21 per cent implementing the shared service organisation model. In some cases the cost reduction was up to 60 per cent. The Hackett Group expects the use of shared services to grow in the coming three years by 50 per cent.

For a shared service center to be successfully implemented, good leadership is needed. The reason why shared service center projects can fail is among others not sufficient support offered by the top management.

Six sigma, leadership for shared services, centralisation within decentralisation, the question of efficiency and effectiveness, profit center vs. cost center, process and systems harmonization, shared services vs. outsourcing and many other interesting topics will be presented in form of presentations, round-table discussions and case studies during the event “Financial Shared Services 2009” organized by Axiom Groupe and held on 17-18 September 2009 in Barcelona, Spain.

Why not learn the way to zero-defect quality and prolong the summer, spending a few days in Barcelona?

Magdalena Szarafin
http://www.szarafin.info
_______________________________________________________
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 services industry penetration experience.

_______________________________________________________

Axiom Groupe is a leader in production and communication, delivering business intelligence and strategic information. Offering e-marketing solutions, best practice conferences, business training, sales incentives, in-house training, first class corporate hospitality and privileged membership services to European executives, Axiom Groupe provides a significant competitive advantage for enterprises. more >>