Global Finance 360

FIVE MISTAKES THAT DAMAGE THE EFFECTIVENESS OF SHARED SERVICES

AND HOW TO AVOID THEM
Author: Stephen G. Lynch Leading companies have leveraged captive shared service centers to drive process standardization, improve service delivery and dramatically reduce costs. Yet many companies continue to struggle with the role of a captive service organization in their overall delivery strategy. Despite upbeat predictions from their business case, some companies have failed to realize the anticipated benefits from their Shared Service Organization. How is it that companies fail to realize the benefits of Shared Services that many other companies have successfully realized? While every organization is different, common traits have been identified among companies that are not achieving the goals of their captive Shared Service Organization.

The creation of a Shared Service Organization is much more than the consolidation of processes. It involves creating a distinct organization that is committed to creating value in the company by providing support functions more effectively and efficiently than if they were embedded in the business units. Avoiding these 5 common mistakes will enable the anticipated value creation.

1. Shared Services is not evaluated as part of a comprehensive delivery strategy

A Shared Service Organization developed apart from a comprehensive delivery strategy will not effectively support the companys corporate strategy. High performing companies focus on building a comprehensive delivery strategy that incorporates both rd captive and 3 party suppliers. An organizations service delivery strategy should support the overall corporate strategy and includes a consideration of the companys existing and planned business lines and geographic presence. It also includes an objective analysis of the supplier-side capabilities from both the captive service rd organization and 3 party service providers. Another consideration is the global distribution of support services including an analysis of onshore and offshore delivery options. When the decision to move to Shared Services is made in conjunction with a comprehensive delivery strategy, rational decisions can be made around the placement and delivery of services.

2. The vision for Shared Services is not clear and compelling

Once a comprehensive strategy has been developed and the role of the Shared Service Organization in that strategy has been defined, it is essential to craft the vision of the captive service organization. Too many companies move directly into the execution phase without clearly defining the vision around Shared Services. A clear and compelling vision will paint a picture of the future, provide a high-level direction for change and create a reason for people to engage in behavior that will enable the achievement of that vision. An engaging Shared Service vision is one that is ultimately desirable for the company and its major stakeholder groups, even if it involves short-term sacrifice. The vision should be realistic and concrete enough that people understand the goals of Shared Services. The vision should be easily communicated to and understood by disparate stakeholder groups.

Global Finance 360 | Copyright 2010 | All Rights Reserved

About Global Finance 360 Global Finance 360 covers the world of corporate finance and accounting and how these activities are impacted by globalization. Focus areas include Finance Delivery Strategy, Shared Services, Business Process Outsourcing, Process Improvement and Organizational Design. Global Finance 360 is run by Steve Lynch. Mr. Lynch is a Principal in the Finance Transformation practice of a global consulting company. He is responsible for the marketing, sales and delivery of Finance Transformation services in North America and serves as a key liaison for his companys global Finance practice. He brings more than 15 years of experience advising global companies on their service delivery strategies and has served over 60 clients in a variety of industries including consumer product and industrial manufacturing, aerospace & defense, transportation, technology, entertainment and financial services. He has also served as a Controller in private industry and as an auditor in public accounting. Mr. Lynch is an active content contributor on the topics of Finance Transformation and globalization and has presented at various forums including the IQPC Shared Services & Outsourcing conference. He can be found on the web at www.globalfinance360.com. Contact Information: Steve Lynch Toll-free: +1.800.216.2512 Office: +1.719.481.2599 1042 W. Baptist Road Suite 194 Colorado Springs, CO 80921 slynch@globalfinance360.com www.globalfinance360.com

3. Processes are consolidated into Shared Services without the required transformation
Companies sometimes take poorly performing processes from the business units and move them to the Shared Service Organization without engaging in the transformation necessary to standardize and optimize the processes. Without this transformation, those poorly performing processes will continue to be a problem for the company by providing substandard service to the business units at a cost far above best-in-class. In order to fulfill the vision of the Shared Service Organization, disparate processes from multiple business units and geographies must be reengineered to standardize those processes, incorporate best-in-class practices and technologies, and reduce the overall cost of delivering those services.

4. Comprehensive change management is not a priority

Creating and sustaining change in any organization is difficult. Too many companies focus on the mechanics of creating a Shared Service Organization with little thought to the human element. Companies that have successfully reaped the benefits of Shared Services understand that a comprehensive and consistent change management program is essential to the successful deployment of Shared Services. An important component of change management is identifying and engaging significant stakeholders early in the process. When discussing Shared Services, the leaders of the companys business units must be included. Without engaging the business units in the change effort, the move to Shared Services will be seen as little more than the centralization of support services with only token input from the business units that will ultimately be the customers of the Shared Service Organization.

5. A strong governance structure is not implemented

The creation of a Shared Service Organization is much more than the consolidation of processes. It involves creating a distinct organization that is committed to creating value in the company by providing support functions more effectively and efficiently than if they were embedded in the business units. For this to be accomplished, the Shared Service Organization must be guided by a governance structure that provides the oversight and control that enables Shared Services to achieve its vision. The top governing body for Shared Services should include representatives from the major business units and IT as well as representatives from the major support functions such as Finance, HR and Procurement.

Conclusion
A Shared Service Organization that avoids these five mistakes will be far better positioned to achieve the stated vision and obtain the financial and intangible benefits that accrue to those companies that successfully implement Shared Services. A comprehensive delivery strategy and a clear and compelling vision set the stage. Business transformation enables the standardization and optimization of processes, policies and technology that drives performance. Comprehensive change management ensures success and embeds lasting change. Strong governance enables continued value creation.

Global Finance 360 | Copyright 2010 | All Rights Reserved