Most larger companies today have put in place some kind of Shared Services organization, be it a small, local group or a large, global structure. However, just creating a Shared Services organization is not enough in and of itself. This paper will address the key building blocks to help ensure that a Global Shared Services group is as successful as originally envisioned when the commitment was made to implement such a change.
Shared Services are defined as “consolidating non-core (back office) support services, and delivering these from centralized locations to provide lower costs, higher quality/reliability, standardization and harmonization of processes, and a flexible services delivery platform from which to leverage growth or manage business’ constriction” (from the Shared Services & Outsourcing Network Organization).
Many large companies have implemented a Shared Services organization in an effort to achieve the benefits mentioned above. However, not all of those implementations have gone smoothly, particularly global implementations. There are some key fundamental building blocks a company needs to have in place before implementing a Global Shared Services structure to ensure it delivers on its promise.
Foundation of Successful Shared Services
We believe there are 5 key design elements that build upon each other and are necessary to create a successful Global Shared Services organization. They are:
- Common Chart of Accounts/Definitions
- Standard Policy
- Common Work Processes
- Solutions and/or systems
- Separate Shared Services Organization
1. Common Chart of Accounts/Definitions
The first step is to standardize the Chart of Accounts and any Defini tions related to the internal work processes that will be moved to the Shares Services structure. More specifically:
- Standard Chart of Accounts means one set of common cost elements used in all internal financial reporting, and the definitions and the application of those definitions is also consistent throughout the company.
- Standard Definitions applies to activities in areas like HR, Real Estate and IT. For example, a standard definition for travel expense versus relocation expense, or how floor space is attributed to Business Units (BU’s) throughout the company.
The organization that is responsible for Corporate Policies should also be responsible for creating and maintaining the Standard Chart of Accounts or Standard Definitions. For each function, that will likely be a group in their global or corporate organization. So if there is a Corporate HR group, then they should own driving the common definitions for all of the appropriate HR terms, as well as all of the global HR policies. If everyone isn’t using the same definition for certain activities, then it’s going to be extremely challenging to create standard policy and common work processes.
2. Standard Policy
Once a standard Chart of Accounts and Common Definitions have been created, then the same global or corporate functional group should lead creating standard global policies for each of the internal processes that are part of the Global Shared Services transformation. However, they should also involve the BU’s and the Global Shared Services organization to ensure the policies allow for work processes that are implementable, efficient and effective.
Also, if the policies are not being followed consistently, it will be important for the functional head of that process to provide their visible support to ensure compliance. If people aren’t following the policies, the Shared Services transformation will not achieve its breakthrough improvements.
3. Common Work Processes
Once the Common Chart of Accounts and Definitions, and the Standard Policies are in place, the next step is the development and implementation of well thought out end-to- end work processes. The documentation of the current and future state work processes is critical. It needs to be laid out in a clear and concise manner, so the transition to the Global Shared Services structure is delivered in the most effective and efficient way possible. It also needs to clearly identify the key deliverables, as well as ownership and accountability of key inputs and outputs. Ideally, the key deliverables will be documented via Service Level Agreements (SLAs) that are agreed to with the customers during the design phase, when trade offs between quality, cost, speed and compliance are evaluated.
We recommend having one group centrally, led by the Process Owner, but with representation from the Policy team, the Shared Services Centers, IT, and the BU’s, develop work processes that are consistent with the policies, while also assessing efficiency and effectiveness. The starting point should be the current work processes. However, the Process Owner should look across all the BU’s to identify best practices for each work process, so when the work is moved to the Service Center, it’s using the current best approach (best here meaning the appropriate balance between quality, cost, speed and stewardship).
Unfortunately, most companies jump straight to replacing costly systems when implementing a Shared Service structure. However, before making any system changes, it is important to align on the optimum Process. Once that has been determined, then one can began to look at making system changes that enable the implementation and automation of the agreed to best practices. Putting systems in place before Policy and Processes have been finalized is like putting the cart in front of the horse……it will only lead to rework later on.
4. Solutions and/or Systems
The first step in developing the appropriate systems and solutions is to identify the current work process and system for each service that is going to be part of the Shared Services transformation. As mentioned previously, this often requires involving the people doing the work today. Once the baseline process and system are established, then work should commence with the team to identify the best overall approach and what additional improvements could be made, including opportunities to remove any redundancies, eliminate non-valued work, and minimize the number of times humans have to enter any data.
Also, one should utilize the work process and the systems experts to identify any watchouts associated with any changes. It will be especially important to have the IT experts participate, because sometimes the system itself may have limitations that need to be taken into account. Or conversely, the standard solution that comes with an “off the shelf ” system may be the simplest solution to execute and the easiest to maintain going forward.
5. Separate Shared Services Organization
In order to have a successful Global Shared Services organization, it is important that it be separate from the other organizations. That’s because:
- It is going to have different goals and measures then the rest of the organizations in the company.
- It is a services organization with a focus on internal customers, so its mindset will probably need to be a bit different than the rest of the company.
- It needs to be objective about what is best for the company overall, versus having any potential bias if it remains within one of the other organizations.
If the Global Shared Services group is going to be large, then we recommend that the head of this group report directly to the CEO, again to have the ability to make decisions that are best for the company overall, and not be biased by other groups within the company. If the Global Shared Services group is going to be small, then the services could report up through Corporate or the Functional Head that offers the most services within the Shared Services organization. However, if a company is trying to drive value from having a Shared Services structure, then we would suggest going with a larger Global Shared Services group reporting directly to the CEO.
Many companies have created Shared Services organizations over the past few decades, some more successfully than others. In this paper, we have discussed what we believe are 5 key building blocks for implementing a strong Global Shared Services organization, which in turn will allow the organization to deliver the desired savings, quality, speed and stewardship benefits. Note also that each of these 5 elements builds upon the others. So if you skip one of the building blocks, it will negatively impact any downstream elements, ie. if you don’t have common work processes, then it will be difficult to achieve any significant productivity improvements within the Global Shared Services organization. The 5 building blocks all fit together. As such, it’s important to execute them in the right order and involve the right people/organizations in order to have a successful implementation.).
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