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Making The Choice To Move To Shared Services

Contributor:  From the HRIQ Editorial Desk
Posted:  07/18/2011  12:00:00 AM EDT  |  0

Rate this Article: (4.7 Stars | 3 Votes)

Tags:   HR shared services | implementing shared services | HRSS model | shared services center | Shared Services

The difficult economic times experienced over the past few years have caused businesses to take a step back and seriously reconsider how they use their resources to deliver services and ultimately boost their bottom line.

Indeed, this is a process which is ongoing as the world exits recession and enterprises shift from crisis to growth mode.

The outsourcing sector in particular has felt the impact of the change in behavior being seen, as more organizations view it as a way of cutting costs without forgoing essential skills. Shared services have benefited from similar imperatives.

Before choosing to embark on either, however, businesses must establish what their expectations of the project are and which activities they can successfully transfer.

Merits of Outsourcing and Shared Services Center

The 2011 IT Outsourcing Survey from IDG Enterprise provides a good picture of the forces which drive businesses to employ an outsourcing strategy.

Some 1,175 respondents from a range of industries said the most common reason for outsourcing was to access skills which were not accessible in house (52 percent), reducing costs (50 percent) and managing variable staffing needs (44 percent).

However, equally there were concerns relating to reduced service quality and the erosion of internal knowledge – fears which also exist when deploying a shared services model.

Michael Friedenberg, president and chief executive officer of IDG Enterprise, said among the most important things when planning an outsourcing strategy is selecting the right partner to provide the greatest value to the organization.

"As demands of the organization shift from cost optimization to growth, outsourcing partners now need to transform their solutions to add deeper expertise around business process, speed to market, and customer engagement," he explained.

When To Introduce Shared Services and Outsourcing

With its reputation as a way to cut costs firmly established, shared services and outsourcing projects are often things which are undertaken during times of budget restrictions.

Yet, Mark McMullen, head of Financial Services at Scottish Development International, said businesses should perhaps move away from this type of thinking.

Speaking to Professional Outsourcing, he said: "The shared services message is equally relevant to fast-growth, early stage companies, such as those in the renewable energy sector.

"Early stage companies should not wait until they have different offices and functions dotted across Europe or the US before thinking about shared services."

Introducing a shared services model can also help to overcome some of the cultural challenges which present themselves when establish functions shift to shared services, particularly the tough challenge of getting employees to buy in if there are jobs at stake.

Mr. McMullen also believes there are further functions which are beginning to be considered as candidates for shared services projects.

"The HR, IT and finance departments are the obvious candidates for shared services, but as companies look more closely at their operations, they're finding other parts of the business that could perform more efficiently and profitably through shared services.

"We're talking about front end functions, those first touch-points for customers," he told the publication.

What should be transferred?

Choosing to move the right functions has a profound impact on the potential success of a shared services initiative.

Somerset Council was one of the local authorities in the UK to take up the shared services model early, entering a ten year contract with public-private partnership SouthWest One around three years ago.

In its report on the success of the partnership, it highlighted some of the key challenges which must be overcome within both organizational structures and functions which will work under the shared services model.

Weaknesses were said to have emerged in the initial management training and leadership, while it was noted that some services do not function well within the shared services model.

"Certain elements, such as advisory services, may no longer fit comfortably within the Southwest One umbrella and could be re-examined as they are flexible, reactive, and strategic in nature and a case could be made for them to be realigned," the review noted.

However, customer contact was shown to have seen an improvement, while the review noted "business process re-engineering has helped to clarify and refine many systems."

With more public and private partnerships of this nature likely to appear in the future, there are lessons to be learnt here about the need for careful planning no matter the nature of the project.


From the HRIQ Editorial Desk Contributor:   From the HRIQ Editorial Desk

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