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Don’t Let Stagnation Kill Your Shared-Services Operation

Don’t Let Stagnation Kill Your Shared-Services Operation
Speed is of the essence, DeMent says.

By Patrick HallerSuccess of a shared-services operation depends upon more than just a good plan and solid execution – like any good relationship, it requires constant monitoring and regular maintenance. Without a serious, ongoing commitment by the CEO, CFO, CIO, and managers throughout the company, shared services will implode. The entire corporate way of thinking has to change.

With a shared-services approach, support functions such as finance, HR, IT, and supply chain are run as if they were outsourced even though they are still internal to the company. “You change the mindset from being aligned to corporate offices to being aligned to business units,” says Brad DeMent, partner at management consulting firm ScottMadden.

One of the first fundamental decisions to deal with when developing a shared-services organization is whether the center will serve a single function or multiple functions. The former has been more common in the US, where a company might have a financial services center in Tennessee and its HR services in Missouri. Whereas the trend in Latin America is to open combined centers so that all of the shared services are operated from one location and under one manager, who most likely will report directly to the president of company.

That is the case with Alpina in Bogota, Colombia, which has about 300 employees working in the same location, as opposed to a company like Pfizer, which has centers throughout the US. DeMent recommends the same-location approach. “By combining all of these functions, you can instill one culture, under one leader. You can even build a shared services center within a shared services center,” he says.

Not only is it easier to coordinate various areas in a multifunctional center, there are also economic benefits and the ability to cross-train employees, enabling them to become a resource across the organization as opposed to being rooted in one area.

There Will Be Resistance

When considering opening a shared services center, those involved should be prepared to confront the “big change barriers.” Getting over the hurdle of the corporate headquarters not wanting to relinquish control is one of the greatest challenges. DeMent points out that friction can be especially heated when it is time to release people from existing business units, and hire new people at a remote location. Having strong executive support for such a momentous organizational change is integral or else the shared-services operation can become fragmented.

“Speed is your friend; there are a lot of things that can happen, such as turnover and a change in executive leadership,” says DeMent. “We were working with a pharmaceutical company in Bogota, they got through initial phases, then the company sold off a large business unit. You want to knock these things out as fast as you can – in less than a year.”

Rather than trying to build a shared operation all at the same time, it is more efficient to phase it in. Start with the functions or departments that are more isolated, such as finance, which is very transactional and doesn’t touch everyone in the company. Save things that affect everyone, like HR, until later. For example, during a two-year timeline, Alpina went live with finance after seven months, HR four months after that, and IT one month later. This approach allowed the organization to adjust to the idea of a shared-services operation and react to any problems as they arose.

Take a Tiered Approach

DeMent recommends using tiers to create the most beneficial shared arrangements:

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Tier 0 – Provide as many self-service, automated, on-line procedures as possible so that people can get as much done by themselves without interfacing with a human.

Tier 1 – Establish transactional procedures, move fast and automate.

Tier 2 – Provide excellent customer support; the shared services center should treat the business unit as a client (this is part of what distinguishes it from corporate operations).

Tier 3 – Establish centers of excellence made up of very small groups of people who know specific areas, to establish uniform policies and procedures.

From Internal to Outsourcing

Shared services are growing to include legal operations, engineering, marketing, corporate communications, and plant maintenance. Some companies, when they feel they are competitive as an outsourcer and when the corporate office gives the green light, have been offering their services to others. Doing this creates another profit stream, but it can also create a situation where the services center becomes too focused on making money and loses sight of its primary client – the parent company.

DeMent suggests that companies set up a mirror organization that can market and provide outsourcing while the core operation still concentrates on the business units it was created to assist. Procter & Gamble had such an arrangement with its hemispheric employee services center in Costa Rica. That facility caught the attention of IBM, which took it over and started offering those services to P&G and other clients.

Organizations tend to make the mistake of thinking that once their shared-services operation is up and running that it will take care of itself. There is always the possibility of self-sabotage if the company slips back into a duplication of efforts, or the type of corporate oversight that was in use before the center was established. One productive way to help prevent this from happening is to create a unit dedicated to continuous improvement. This would involve a staff member who is designated as shared-services quality champion; he or she attends conferences, learns about new practices, keeps up with and tests new technology, and stays abreast of any developments in the shared-services space.

Complacency is the enemy of an effective shared-services operation. “Stagnation will kill you,” DeMent warns.

 

 

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