Shared, or business service functions are a well-established part of large organisations today. Generally considered to be a place where different (traditionally back-office) operations are consolidated to be used by multiple parts of the wider company, it is estimated that 80% US-based Fortune 500 companies use some form of shared services in their operations, with similar levels of deployment in other countries.
But what does it take to make a shared services centre work, and how do organisations go about implementing them in such a way that does not alienate the rest of the business?
To answer that, it is important to understand why an organisation has implemented, or wants to implement, a shared service centre. For Chris McLarnon, a business services expert with experience in fast-moving consumer goods, construction and finance, traditionally that reason could fall into one of four categories: “reducing cost, leveraging scale, driving performance or integration.”
It is vital, in his eyes, that companies considering shared services are absolutely clear on the reason for establishing such a function. “Establishing your ‘Why’ is critical,” he says, “otherwise you won’t get the buy-in from the wider organisation.” He does not just mean leadership, either. “Everyone is going to want to know what it means for them – is it going to help, hinder, or even threaten their role? If you don’t articulate why you’re bringing in business services, you’ll be on the back foot from the beginning.”
Honesty is a critical part of the process, says Sara Peters, Shared Services Director for the UK and Europe at transportation services company Genesee & Wyoming Inc. “People often have a negative view – they might have seen shared services implemented somewhere else, and it hasn’t worked, so they don’t think it can be successful. You have to be honest, not just about what the goal is, but what the journey there involves,” she says. “If you’re cutting costs, make it clear how the pain is worth the end result.”
That said, neither Sara nor Chris see the traditional role of shared services, that of a way of taking cost out of the business, as the right way today. “Major companies were using shared services for wage arbitrage 15 years ago. Why do that now? If your focus is on transactional processes, then you are missing a huge opportunity,” Chris comments.
Sara sees it as being about what can be put in, not taken out. “Even if you want to reduce costs, it shouldn’t be about how much you reduce some figures on a P&L, but what value Shared Services can bring to the wider organisation. It might start with transactional processes, whether it’s basic finance procedures, customer service admin, or HR tasks, but if you stop there the business is never going to realise the investment in shared services, and you’re going to end up with an us and them mentality which helps no one.”
So, what does that value look like?
For Sara, shared services value is “as a truly integrated part of the business, where other functions regularly talk to shared services about how they’re enabled to do more in their areas, and ultimately enhance the experience you deliver to external customers.”
Chris sees it as a way of turning what once might have been seen as pure cost centres into being able to generate income themselves. “Being able to realise new revenue enhancement opportunities, because shared services have optimised the core of your organisation and then used that model to offer the same services to other organisations.”
How do businesses get to that point? Both are unanimous on this – it is a people first focus. As Chris says, “you’re talking about making changes to operational models, and people don’t like change. Even if you aren’t reducing headcount, they’re going to be resistant.”
That means, says Sara, answering “what’s in it for them?” She refers to the rest of the business as shared services’ customers. “You have to get your customer to trust you, so you have to understand them, and not just as a part of the business – what cultural differences are there that you need to be aware of. Then you have to explain why it’s of value to them, in a way that they comprehend.”
It is not easy – Chris likens it to rebuilding an engine while driving the car. But both agree that by building that people or customer-first focus in, shared services can be the foundation for significant success, both for itself as a unit within the organisation and for the wider company.