Transferring back office activities such as finance transaction processing to an in-house shared service facility can deliver substantial benefits to an organisation. But exactly what pitfalls need to be avoided to ensure success?
The processes and methodologies for establishing shared services are well known and tried and tested but each new organisation approaching this solution has to adapt them for their own values and ways of working. This article endeavours to provide some thought provoking questions and practical advice to those thinking of taking the first steps in this direction.
1. Ask yourself "why are you doing this?"
Start by making sure that shared services is the right course of action for your organisation. What about outsourcing? What about making the status quo more efficient? Many organisations are not entirely honest with themselves when undertaking this strategic view so make use of independent specialists to challenge and inform your decision making.
2. The business case must be challenging but achievable.
A balance needs to be struck between only picking the low hanging fruit and aiming for best in class performance. Do not make the benefits realisation so difficult to achieve that even a successful initiative can appear to have failed because it hasn't met the business case expectations. Also financial benefits are not the only aspects to include in the business case - do not forget opportunities such as service improvements and building a base to support future sustainable business growth.
3. The longer you wait to start the longer until the benefits are delivered.
Once the decision has been taken to proceed the project needs to be initiated as quickly as possible. The size and complexity of the organisation coupled with any planned technology changes will tend to drive the timetable, but most shared services projects will take six months or longer from initiation to switch on followed by several more months of onboarding each part of the organisation. Maintain momentum.
4. It is important to have a coherent and integrated plan.
But do not waste time by trying to plan every detail of all aspects up front, as this will only delay the initiation. All plans will have to change over time as circumstances dictate - it is more important therefore to have a robust change control process in place from the beginning to ensure that plan changes are properly controlled. Finally do not ignore the development of 'Plan B' - hopefully you may not need a good backup contingency plan but it is better to develop one that is never used than hope that it is never needed.
5. Tell staff what is going to happen.
People will very quickly become aware that 'something is going on'. The longer that unsubstantiated rumours continue the more disruption is liable to occur. Your communications and HR strategies should be developed at the same time as the overall business efficiency strategy is being determined. Management are liable to be inundated with questions even before an 'official' announcement is made so there needs to be clear, accurate and consistent answers right from the start.
The key employees to address are those whose jobs will be directly affected by the changes - people may not react well to bad news but the uncertainty caused by a lack of specific information can have a serious impact on maintaining existing service e.g. staff leaving for new jobs and leaving you to cope with temps; reduced efficiencies through increased absence and sickness etc.
Clear, accurate and timely communication throughout the project will pay dividends.
6. Tell suppliers and customers what is going on.
They will hear stories and rumours about what is going to happen from their regular contacts with employees but it is likely that they will get an accurate picture. Again there needs to be clear and accurate communications with both suppliers and customers - a press release is useful but it needs also to be sent to every organisation you deal with. It is also recommended that wherever possible management undertakes face to face briefings, especially with key suppliers and major customers. Although you plan and hope for a smooth transition to shared services there is always the chance of some disruption so having well informed, and hopefully understanding, suppliers and customers can relieve the pressure during a difficult period.
7. Don't forget about the retained organisation.
Most of the focus will be on the processes and staff directly affected by the transfer to shared services but the impact on the retained orginisation can often be downplayed or forgotten altogether. There may be additional efficiency opportunities to be gained from the retained processes and staff but at the very least there needs to be very clear understanding of exactly who will do what and where in the new setup to avoid any duplication or gaps in processes.
8. Ownership for benefits realisation.
The business case included a range of expected benefits - the costs will definitely be measured and scrutinised against project budgets but benefits realisation also needs to be measured. Ensure that clear responsibilities are established for delivering benefits and that the process for measuring them is simple and robust and not turned into a huge numbers generation activity.
9. Implementation does not mean 'job done'.
A: But if it is done it massively simplifies the contracting and transition process, because both client and supplier can deal with the facts – neither has to take an unquantified risk. More than that, it keeps the client in control of the service it will receive, which is the key to successful outsourcing.
10. Measure, review and improve.
The effectiveness of any shared services facility will be perceived in two ways - costs and service. Key performance indicators and appropriate metrics need to be established with actual performance reviewed regularly and targets reset when appropriate. The effectiveness of a finance shared service facility can often be affected by circumstances outside their direct control e.g. first time invoice matching may be well below target - this often arises due to the lack of, or inaccuracies in, purchase orders.
The organisation will get better value form shared services if it establishes key performance indicators that reflect the entire process e.g. Purchase to Pay, and not just the financial part of the process.
11. Charging for services - keep it simple.
It can be very temping to try to establish very detailed and 'accurate' charging mechanisms from the beginning and unfortunately some organisations have turned this activity into a mini business. Initially it is recommended that the charging mechanism established is fair but simple e.g. agree a fixed charge for the first 12 months to provide certainty to your customers. This allows the shared service centre time to measure and review their processes and understand where problem areas are and what, or who, is causing them. Actions can then be taken to resolve issues both within the shared service centre and with the customers and if necessary the charging mechanism can be updated to include appropriate variable performance elements. Your customers need to be confident that they are not being 'ripped off' so the shared services operations and costs need to be transparent and there should be regular meetings to review performance and issues.
12. Maintaining senior management support.
Because shared services initiatives can take some time to plan and execute, the initial enthusiasm and support from senior management can decline or be distracted by other business issues but it is important to ensure that management do not lose sight of the importance of making shared services a success, especially after 'go-live'. One way is to make the success of shared services everyone's concern by including an element in either personal objectives or bonus mechanisms e.g. by measuring customer conformance with the new processes. This may not be a very popular approach but it certainly gets people's attention.
So there you have it - I'm not saying that following these twelve tips will guarantee success but by using them as a guide they may help you avoid some of the pitfalls along the way.
Don Guthrie is a Senior Manager at Alsbridge plc, the independent advisors on outsourcing, shared services and offshoring. Don can be contacted on +44 207 242 0666 or email don.guthrie@alsbridge.eu
