8/7/2019 Five Mistakes That Damage the Effectiveness of Shared Services and How to Avoid Them

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FIVE MISTAKES THATDAMAGE THE EFFECTIVENESSOF SHARED SERVICESAND HOW TO AVOID THEM

Global Finance 360 | Copyright 2010 | All Rights Reserved 1

GlobalFinance360

Leading companies have leveraged captive shared service centers to drive processstandardization, improve service delivery and dramatically reduce costs. Yet manycompanies continue to struggle with the role of a captive service organization in theiroverall delivery strategy. Despite upbeat predictions from their business case, somecompanies have failed to realize the anticipated benefits from their Shared ServiceOrganization. How is it that companies fail to realize the benefits of Shared Servicesthat many other companies have successfully realized? While every organization isdifferent, common traits have been identified among companies that are not achievingthe goals of their captive Shared Service Organization.

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

A Shared Service Organization developed apart from a comprehensive deliverystrategy will not effectively support the companys corporate strategy. High performingcompanies focus on building a comprehensive delivery strategy that incorporates bothcaptive and 3

rdparty suppliers. An organizations service delivery strategy should

support the overall corporate strategy and includes a consideration of the companysexisting and planned business lines and geographic presence. It also includes anobjective analysis of the supplier-side capabilities from both the captive serviceorganization and 3

rdparty service providers. Another consideration is the global

distribution of support services including an analysis of onshore and offshore deliveryoptions.

When the decision to move to Shared Services is made in conjunction with acomprehensive delivery strategy, rational decisions can be made around theplacement 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 SharedService Organization in that strategy has been defined, it is essential to craft the visionof the captive service organization. Too many companies move directly into theexecution phase without clearly defining the vision around Shared Services. A clearand compelling vision will paint a picture of the future, provide a high-level direction forchange and create a reason for people to engage in behavior that will enable theachievement of that vision.

An engaging Shared Service vision is one that is ultimately desirable for the companyand its major stakeholder groups, even if it involves short-term sacrifice. The visionshould be realistic and concrete enough that people understand the goals of SharedServices. The vision should be easily communicated to and understood by disparatestakeholder groups.

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.

Author: Stephen G. Lyn

8/7/2019 Five Mistakes That Damage the Effectiveness of Shared Services and How to Avoid Them

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Global Finance 360 | Copyright 2010 | All Rights Reserved 2

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 inpublic accounting.

Mr. Lynch is an active content

contributor on the topics of

FinanceTransformation andglobalization 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 therequired transformation

Companies sometimes take poorly performing processes from the business units andmove them to the Shared Service Organization without engaging in the transformationnecessary to standardize and optimize the processes. Without this transformation,those poorly performing processes will continue to be a problem for the company byproviding 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 processesfrom multiple business units and geographies must be reengineered to standardizethose processes, incorporate best-in-class practices and technologies, and reduce theoverall cost of delivering those services.

4. Comprehensive change management is not a priority

Creating and sustaining change in any organization is difficult. Too many companiesfocus on the mechanics of creating a Shared Service Organization with little thought tothe human element. Companies that have successfully reaped the benefits of SharedServices understand that a comprehensive and consistent change managementprogram is essential to the successful deployment of Shared Services.

An important component of change management is identifying and engaging significanstakeholders early in the process. When discussing Shared Services, the leaders ofthe companys business units must be included. Without engaging the business unitsin the change effort, the move to Shared Services will be seen as little more than thecentralization of support services with only token input from the business units that willultimately 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 ofprocesses. It involves creating a distinct organization that is committed to creatingvalue in the company by providing support functions more effectively and efficientlythan 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 providesthe oversight and control that enables Shared Services to achieve its vision. The topgoverning body for Shared Services should include representatives from the majorbusiness units and IT as well as representatives from the major support functions suchas Finance, HR and Procurement.

Conclusion

A Shared Service Organization that avoids these five mistakes will be far betterpositioned to achieve the stated vision and obtain the financial and intangible benefitsthat accrue to those companies that successfully implement Shared Services. Acomprehensive 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 changemanagement ensures success and embeds lasting change. Strong governanceenables continued value creation.