All shared services efforts emphasize what it takes to actually create the new shared service center - defining the structure, hiring resources to fill positions, building the facilities and redesigning processes and technologies to support the new operating model. Certainly, all of these components are critical to making the new capability operational; however, my shared services experience has shown that it is equally important to focus on the people and associated activities that are impacted but not moved to the shared services model. Repositioning these resources from their traditional focus on transactions to a focus on driving analytics and decision-making will contribute significantly to the organizations ability to achieve the benefits and performance expected from shared services.
Over time, the typical priorities for pursuing the shared services model have begun to shift. Reducing costs remains a significant goal for most who take the journey.
Leveraging economies of scale and more fully utilizing resources is also critical. However, many organizations now find they must look beyond cost to find additional, more strategic value in making the investment. This point has taken on greater importance in todays increasingly multipolar world, where traditional centers of economic power are being dispersed more widely around the globe and demanding new skills and levels of agility to remain competitive.
This article discusses important considerations and practical recommendations for redesigning the functions that will remain outside of the shared service center in order to achieve high performance and maximize the benefits from a shared services implementation.
Redefining the Operating Unit Organization
When determining the scope of shared services, an organization must analyze a number of factors for each of the functions and processes under consideration, including the strategic value of the activity, the skills required to perform it effectively and the scale that can be leveraged if it were consolidated across the enterprise (either partially or in whole). Historically, routine functions that execute large volumes of transactions migrate toward the shared service center.
Functions that typically remain in the operations or corporate areas include those that require an increased skill level or serve a strategic need (high-value activities). Commonly retained functions include financial and competitive analysis, forecasting, human resources strategy, compensation and customer-facing sales activities, to name a few.
Aside from the functions that remain outside of shared services, an organization must also address the pieces of core shared-services processes that remain in operations.
As processes are defined end to end, almost every one will have touchpoints outside of the shared service center for tasks, such as requesting an action to occur and approving transactions as they are processed. While designing the new model, it is common to find partial resources left after the main activities are moved to shared services. The manner in which the remaining pieces are sewn together to make meaningful jobs, while still supporting the business case objectives, is critical to ensuring efficient performance.
Why Focus on Resources Outside of the Shared Service Center?
Resources outside of the shared service center, either in operations or within the headquarters functions, can play a number of roles throughout the shared services implementation and operational lifecycle. During the design, build and deploy phases, the existing organizations are particularly important for helping the shared service center understand operating unit specific nuances (for example, regulatory requirements, insight into critical or difficult relationships with external customers and vendors). At deployment, it is also common to have members of the existing organization present at the shared service center location during key processing times, such as financial closing periods and inventory cycle counts to minimize risk and begin to build confidence in the skills and abilities of the shared services staff and operating model.
Fully retained functions within a given process, such as financial analysis, have unique, dual roles. On the one hand, they are customers of the shared services organization - providing input and receiving data to complete their processes. On the other hand, they are often service providers themselves to the wider enterprise. Having a clear understanding of the activities to be performed and following the established accountabilities (often documented in service level agreements [SLAs]) is critical for the overall operating model to work.
Lastly, the disposition of the resources remaining outside of the shared service center generally drive the ability to meet the business case for shared services. For many, shared services will encompass their entire scope of responsibility, and their positions will no longer exist. For others, where only a portion of their responsibilities have been moved, leadership must determine how to combine partial positions into full-time roles that are effective and meaningful. If these resources are not rationalized and/or reorganized to support only the activities that remain their responsibility, there will be duplication of effort and therefore duplication of cost.
How Do You Reorganize the Resources that Remain?
Accenture has found that it is often difficult for leaders to guide their organizations through the cultural shift from having a transaction focus to having a skill or value focus. Leaders who have seen areas of their responsibility move to the shared service center can become anxious, because they are now responsible for managing a smaller, strategic component. Frequently, these leaders have concerns about the skill level of existing resources, themselves included, to perform the higher order activities. Careful consideration must be taken during the design phase to define how the local organization will work once the shared services model is live. It is important to clearly define the new roles and responsibilities and set the appropriate expectations of the remaining positions at both the individual resource level as well as throughout the enterprise.
Bear in mind that the move to shared services generally touches many internal operating unit and corporate organizations. Each group will have impacts from the operating model shift and will need to redesign their staff and structure to support the activities that remain their responsibility. There is not a single, one-size-fits-all organization that can be designed. Each unit will differ in size, structure, capability and individual requirements. These components will guide what the resulting organization chart looks like and the work effort associated with transitioning the personnel involved to a new way of working.
When starting to redesign the legacy organization, it is important to understand how it is presently structured. Layering on the decisions made about functions remaining and moving to shared services provides the first draft of the new organization chart. The next step is to review the end-to-end processes in more detail, in the form of process flows with swim lanes depicting the roles involved in the process and defining the handoffs. This activity will enable leadership to understand the partial pieces of the processes that must continue to be performed in the operational side of the organization.
To determine the appropriate size for the redesigned organizations, consideration must be given to the volume, effort and schedule required to complete the activities that remain outside of shared services. Understanding the turnaround time for the review of financial information or the effort required to monitor the strategy and maintain compensation schemes on a yearly basis, combined with the overall size of the enterprise, will lead to the optimal size of the new organization.
Activities that require a level of analysis and analytical skill typically remain in the operating unit. Indeed, one premise for moving transactional activities to a shared services model is to unleash the ability of remaining resources to more fully evaluate and analyze the business situation and make appropriate decisions. This new focus will often require new job designs and descriptions and, in many cases, a formal staffing effort to ensure that the right people with the right skills are transitioned into the new roles.
The impact of technology requirements for the new shared services model on other parts of the organization must also be taken into account. Shared services implementations often coincide with standardization of enterprise resource planning (ERP) technology throughout an organization, not just in the shared service center itself. Depending on the processes and functions in scope, enabling technologies such as workflow tools, case management and call routing may also be introduced. Many of these technologies will extend functionally to the retained organization to disseminate information, seek approvals and escalate issues. It is important to identify requirements for using new technologies in the future state. This is particularly critical if the remaining workforce is regulated by labor unions or works councils where contracts may limit the amount and type of change that can be introduced into a given position.
A keen understanding of where resources need to be located within a given geography or region also plays a part in creating the final retained organization structure. For example, while a streamlined, centralized organization is desired, it may be important to have local finance resources physically located close to operations. Building a solid relationship with operating unit leadership may further the ability of the local finance organization to manage the strategic activities in its scope.
When Does the Organization Redesign Occur?
The organization structure, processes and refined responsibilities of the legacy organization are most effective when designed and deployed in tandem with the shared services operating model. The newly designed business processes and the shared services business case are intertwined, necessitating changes to both organizations.
If done independently, the full benefit of the shared services model will not be achieved; indeed, employees will find the process more confusing, stabilization will take longer and the expenditure will be greater. Completing the design and implementation work together has the benefit of involving senior shared services leadership, program sponsors and operating unit representatives at once to more fully understand the scope of the changes to the organization as a whole.
Additionally, it allows communication of forthcoming changes to begin as early as possible. Addressing design and implementation concerns cohesively across the enterprise provides the added advantage of establishing a strong foundation for the future operational partnership.
How Does this Newly Defined Organization Interact with Shared Services?
During the development of the service management framework, the shared services organization and operating unit leadership should negotiate SLAs. The SLA provides the framework for maintaining the relationship between the two parties. It outlines the services provided by the shared service center, identifies activities that the operating unit is responsible for, and sets targets by which both parties performance can be measured.
After implementation, the operating unit organization becomes an internal customer of the shared service center. It makes requests, and the shared service center provides a service - in a timely manner and of a quality outlined in the SLA. If the agreed-upon service levels are not met, the customer relationship management (CRM) process should guide the shared services and customer organizations to partner together to determine the appropriate remedies for service deficiencies, recognizing that there are times when the root cause of issues resides with the internal customer.
The relationship between the operating unit organization and the shared service center will undoubtedly result in a culture change for individuals who have been used to receiving services locally. In many organizations, close relationships will have formed over time, in which people have become accustomed to walking down the hall or calling a person directly to expedite their request or circumvent a standard process. These relationships will change after implementation of a shared services organization. Everyone within the operating unit organization (regardless of title, geography or personal relationships) must now follow a common, standard process. Breaking these old habits is difficult and requires patience, tact and usually a dose of tough love by saying no to requests outside the standard. Many organizations find this one of the most difficult challenges of moving to the shared services model. In fact in some cases, organizations choose to physically locate their shared service center in a greenfield location, making it more difficult for legacy behaviors to continue.
The Operating Unit Organizations Role in Shared Services Governance
Governance plays a key role in all shared services operating models. For many, governance refers only to the role of the shared services leadership team. However, the shared service center will have trouble effectively serving customers if their needs and requirements are not understood. Therefore, the operating units should have an active role in governing the shared services organization, with resources filling positions on each of the shared services governing committees.
Employees would participate on a user committee, focusing on identifying areas of improvement related to the business processes. Next, select senior members of the operating unit organization may participate on an advisory board, responsible for approving the SLA and resolving any performance service issues at the macro level.
Lastly, the most senior operating unit individuals participate with the shared services leadership on the steering committee/joint review board, deliberating on and approving shared services investments.
Organizations have become savvy to cost-cutting mechanisms and the use of centralization to generate savings. The extension of centralization into a fully implemented shared services model creates sustainable benefit and enables high performance. Establishing a model that supports growth easily through defined and standardized processes and an expandable organization model, placing an increased focus and rigor on performance management, and more effectively leveraging skilled resources for higher-value activities are all now considered as important as cost savings. How much emphasis an organization places on the design of business functions and education of personnel outside of the shared services organization (but with a role in the new operating model) will heavily impact the organizations ability to deliver on these additional imperatives. Evolving the operating unit and headquarters functions as well as resources that interact with shared services to provide value-added analysis and business insight allows organizations to capitalize on true benefits of the shared services model and achieve high performance.
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