Shared Services and Outsourcing Network (SSON)
Shared Services Implementation
No-one ever said adopting the shared services model was a walk in the park (indeed, plenty of people have said entirely the opposite!). It simply isn’t meant to be easy. However, some of the biggest problems arising when an organization moves to shared services are of that organization’s own making: simple mistakes creep in which if not discovered and averted can spell serious difficulties further along the line.
SSON reached out to some of the biggest names in shared services and outsourcing to get their take on the most common - and potentially most devastating - mistakes companies make when setting up shared service organizations. The result: the Top Ten Mistakes Made When Implementing Shared Services. It’s literally a catalogue of errors - so just make sure you don’t order from this particular catalogue when it comes to your own great adventure… Ready? Then read on - and try not to wince too often…
1. Not measuring costs or service levels before a move to shared services
As we all know, shared services can perform a host of functions for an organization, from cutting costs and increasing efficiency through to driving wholesale business transformation at a philosophical level. But all too often all those gains are overshadowed by an inability to assess exactly how successful the SSO is proving, caused by a lack of proper measurement of existing service levels and operating costs before beginning a shared service implementation. It seems obvious (if you haven’t marked where you came from, how do you tell how far you’ve come?) but in the rush to implement what many at a senior level might persist in seeing as a cure-all, quite often those initial metrics are ignored or pushed back - and cue general lamentation down the line when what would be impressive results appear less impressive simply because there’s little to measure them against.
"In many cases," says Alejandro Abella, partner with Ernst & Young in Argentina, "the highest priority in the SSC implementation project is that ‘processes should work OK‘, and all other key elements like defining KPIs and obtaining information are set aside. When the time comes to negotiate SLAs or to start offering the service, clients demand quality and efficiency levels far superior than the ones they need or can internally obtain. Therefore, it is essential to gather information on costs and service quality levels before implementing the SSC so that one can negotiate with the client on objective bases and set reasonable goals. It is understandable that clients may wish to obtain a better and less costly service from the SSC than the one they currently have, but clients should also understand which is the starting point and how long it will take for the SSC to reach its ideal performance level."
2. Not documenting processes and work streams pre-implementation
As with metrics telling an organization how well a task is carried out, it’s also critical to assess just how the task is carried out, and who’s doing what in relation to it. Tight process documentation and clarification of employee responsibilities should be standard operating procedure for any firm whether or not it’s operating shared services - but it’s particularly important to have those things down in writing before starting to implement an SSO as only then will you have anything like an accurate idea of how all the myriad individual pieces making up the shared services jigsaw puzzle fit together.
"As work and functions are identified to be moving into shared services, get a jumpstart on documentation of processes and work streams of all types. You should do this regardless of whether or not employees currently doing the work are also transferring into the SSC. Sometimes they don’t transfer in or leave before training a back-up, and the knowledge in their head I lost. Build extra time into the business case if necessary, to keep employees longer to document the work," advises Kathy Bishop, former VP/GM Finance Shared Services at Pitney Bowes.
3. Not appointing a full-time head honcho early in the process
A good shared services center needs a strong, solid team - and like any successful team in history that team needs someone to direct and coordinate its efforts. The general manager performs that role: however, it’s surprising how frequently the appointment of that general manager is left until comparatively late in the day, with non-specialist managers ‘filling in’ during a crucial period for the whole organization. It’s important that firms make an appointment early as the responsibilities of the general manager - or whatever the particular job title may be - don’t just start at go-live. You want someone in charge who’s totally focused on the task in hand, not part-time players who might be juggling other responsibilities while not possessing the specific experience required to hit the ground running..
All too often, says PwC’s Charles Aird, organizations "do not hire or appoint a full-time general manager of the SSC early in the SSC development life cycle. Once the feasibility of the SSC has been agreed upon, the GM of the SSC is critical to the recruiting of the team who will take ownership of the SSC and be responsible for the knowledge transfer from the legacy organization to the SSC. [Organizations] also often do not appoint a full time project team. Project managers and transition staff often are part-time doing both their ‘day job’ as well as the SSC project."
4. Not focusing sufficiently on the transition period
In an ideal world, once given board approval a shared services organization would spring into existence at the click of a CFO’s fingers and would be operating at 100 per cent from the word "go". Unfortunately this is not an ideal world, and even with the leanest, sleekest and best-performing SSOs a period of transition is inevitable. An inability to focus on what that transitional period entails, and what it requires, can give rise to serious issues both during the transition itself and long into the future.
"The transition is an important part of the shift to shared services," explains KPMG’s Cliff Justice. "Many organizations invest most of their time and effort on strategy, design and deal execution when vendors are involved, but dedicate inadequate resources to transition activities. But mistakes made during the transition can be magnified for years to come. For example, a poor transition can lead to delays and loss of financial benefits. But potentially more costly is that it can also possibly lead to stakeholder dissatisfaction, which can prevent a broader adoption of the shared services model throughout the organization."
5. Not having a robust project plan clarifying employee resources
Staffing a shared services organization is of course a major aspect of the operation - but it’s unfeasible to expect that every last one of the SSO’s employees will (or should) be a new hire. Much of the groundwork - especially during the early stages of the project - is going to be carried out by existing employees, with existing responsibilities. Drawing up a solid and very granular project plan outlining what’s required of every member of the team - however temporary their involvement might be - may be a clunky and irritating task but it’ll save tears and tantrums further down the line. If you know exactly who’s meant to be doing what, and when, your implementation will be all the smoother - and your success all the sweeter.
"One of the keys to success is having a strong project plan with reasonable deadline/completion dates in regards to your employee resources," believes Debbie Kraft, Shared Services Supervisor at International Automotive Components. "Let’s face it; the majority of the work will not be done by VPs and Directors, but by middle management and those reporting to them. More than likely most of your employee resources will be employed by the company already. Will the employees be pulled from their current responsibilities, forcing that position to be back-filled requiring extra time for training, or will the employee have extra work on top of current responsibilities? These will be the people putting in the extra hours needed to complete the projects by the requested deadlines. Taking employee resources into consideration when creating a project plan will save on over-worked employees, stress and the dreaded frustration from senior management when your roll-out is pushed back."
6. Fighting the battles of yesterday, not those of tomorrow
Creating a quality SSO doesn’t happen overnight - indeed, it can be a matter of several years between concept and launch, let alone full operating capacity. One problem with this is that the challenges which shared services must overcome develop and evolve over time - but the methods and processes designed to overcome them remain stuck in what quickly becomes an increasingly distant past. Each part of the team working on a shared service implementation must be aware that their own creations need to have embedded within them both a flexibility and a degree of foresight, in order to avoid becoming obsolete even before going live.
"Too often, the design team works to deploy a common business process that is geared for the business profile of yesterday," cautions Peter Allen, Group President, Strategy & Business Development at CSC. "An SSO must service the business needs of tomorrow, so the design approach must engage the business and corporate function leadership on the form and nature of the business to come."
7. Becoming bogged down standardizing technology and processes pre-implementation
It’s crucial, of course, to try to iron out as many wrinkles as possible before putting on a dress shirt: applying that metaphor to shared services, it’s important not to move a wrinkled "mess" - in the form of numerous different and potentially incompatible platforms and processes - into a new SSO. However, while the ideal is to standardize all those platforms and processes before moving them over, in some instances it might actually be better in the long run to avoid lengthy delays to a project by compromising and moving a handful of different systems over and working to standardize them while the SSO gets up a full head of steam. It’s a fine line to walk and it might terrify you to consider anything other than a full standardization pre-implementation - but is it worth putting back by months or even years a potentially game-changing SSO implementation while the tech team agonizes over yet another incompatibility?
"[Organizations] think they must implement a standard technology platform and common processes before moving to the SSC. In practice, the common platform is significantly delayed and it becomes very difficult to harmonize distributed processes. While it's not good practice to run a center with 20-plus difference technology platforms, it not uncommon to have a center with four or five systems. The resulting labor cost reduction and productivity gains can be invested in the technology. Also once the processes are under control of the SSC, it becomes less difficult to standardize these processes," opines Charles Aird of PwC.
8. Believing that "it’s already a centralized process: there’s nothing we should do"
In almost the direct opposite of the last point, problems can arise when companies consider processes that are already centralized and standardized to be perfectly able to fit into a new shared services organization. Just because they’re already homogenized to a certain extent, or have already been standardized and brought into a single point of delivery, doesn’t mean they’re automatically fit for purpose. Take a good hard look at even your most centralized processes and assume not that they’re ripe for transition but that they need to be analyzed and potentially overhauled just like everything else. Chances are you’ll have to change at least something - and there’s a possibility that major work will be required even here.
"In some cases," says Ernst & Young’s Alejandro Arbella, "companies which have implemented a shared services center include processes which are already operated in a centralized manner, and people thus make the mistake of believing that ‘there’s nothing we should do’ about those process. In practice, this notion is actually untrue because, even though it may not be necessary to make significant changes from an operating point of view, there certainly are other aspects just as important that can be worked on. Some of these aspects are:
- Services scope: Business units for which the centralized service is offered are usually not the only clients using the services offered by the SSC. These other clients' requirements thus need to be identified and products and processes should be adapted to their needs.
- Process role: Centralized services not operated within a SSC also have control functions not compatible with the new model. Therefore, those functions need to be redefined and processes and organizations need to be adjusted accordingly.
- KPIs: In most cases, centralized services lack the appropriate KPIs to be measured as part of a shared services model.
- People skills: Even though users probably know how to operate the process, their attitude toward customers and their customer service skills should be reinforced, since these are skills that are not considered to be important when things are centralized."
9. Having no, or inadequate, risk management or monitoring
There’s no excuse for this one - which makes it all the more shocking that so many firms fall foul of it. Any project on the scale of a full shared services implementation - especially if added complexity is thrown into the mix via offshoring or building new infrastructure - comes with its own risks inherent within it, and it’s critical to be aware of those risks and to have in place contingency plans (which of course are useless without a monitoring system that allows you to know when you need to initiate them). It seems obvious - so why does it trip up so many?
"There are many value levers that organizations can pull to increase savings and improve effectiveness in a shared service organization," says KPMG’s Cliff Justice. "What most companies fail to realize is the corresponding risks associated with these decisions are usually left unchecked. This can lead to surprises and costly mistakes. Setting up a risk monitoring dashboard can provide insight into the key areas that should be monitored based on the structure of the organization. For example, monitoring the status of offshore delivery markets (currency, politics, labor pool), contractors, outsourced service providers and infrastructure can provide an ongoing risk profile to the shared services organization."
10. Omitting the "make versus buy" equation
Shared services can be a wonderful solution to a plethora of problems - but it’s unlikely to be the only one, especially considering what’s been taking place in the outsourcing world in recent years. Organizations considering implementing a shared services model need to look at every other option before giving the SSO the go-ahead; it’s all very well crowing about the efficiency increases and cost savings that have resulted from your new SSO, but if twice those increases could have been gained at half the cost through the judicious use of outsourcing, it doesn’t really sound so great, does it?
"In all cases, it will be important to demonstrate that you considered the merits of contracting for a managed service versus investing resources in constructing your own delivery capability. Increasingly, senior management is challenging the thinking on proprietary solutions (especially when capital expense is required)," explains CSC’s Peter Allen.
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