Shared services isn’t just a utility designed to save money; at best, it is a value-adding business partner. Here’s how to demonstrate value.
This article has been updated from the original, published on August 17, 2015 by CEB, now Gartner.
Over the past decade, shared-service centers (SSCs) have developed into discrete units with their own strategies, visions and mission statements — and many aspire to be value-added business partners to the internal customers and operating units they support. Very few define what it means to add value or provide a description of how they would accomplish that goal.
SSCs largely developed as utilities. By consolidating employees and all the attendant knowledge, training, technology and IT infrastructure, they confer clear cost advantages.
Our research shows that there are three different ways in which SSCs provide value to internal customers:
- Reliability of services
- Simplification of effort
- Insight that helps partners improve business performance
SSCs primarily add value by delivering reliable services at a competitive price. Internal customers must know, without question, that the books will be closed, vendors will be paid, receivables will be collected and employees will be paid, accurately and on time. Delivering reliable services adds value in two ways: First, this allows internal customers to focus on their own jobs; second, the productivity improvements realized through standardized, consolidated and re-engineered processes are passed on to business units as reduced transaction-processing costs.
This value normally tops out after the first 3-4 years of shared-services operations. In the early years, productivity improvements over 30% are possible, and internal customers are satisfied with the corresponding cost savings. In later years, cost reductions could easily drop below 5%, and aren’t as likely to be celebrated by business leaders.
SSCs must make it easy for their customers to interact with them. For example, when integrating a newly acquired business unit or expanding into a new country, shared services teams can help manage the requisite processes and policies. During the hiring process, SSCs can make the process smoother by coordinating with IT, office facilities, HR, finance, etc.
The clearest and most direct way to provide value to internal customers is to improve their bottom lines by increasing revenue or decreasing cost. SSCs have access to a wealth of data that can be analyzed to improve business performance. Consider these examples:
- Accounts receivable provides the history of late payments by a particular customer, enabling the sales organization to justify a price increase for the next contract term.
- Analysis of employee expense reports reveals a large percentage of travel is from one company location to another. Business-unit leaders can encourage the use of video conferencing or other collaboration tools to reduce travel expenditures.
- Sales analysis identifies a market segment that is too small to warrant visits from the sales team. The SSC suggests an inside sales team be created to deal with this group of prospects.
Finally, as shared services teams work on becoming “value-added partners,” they should document all the work they do to improve the reliability of their services, simplify the effort required to do business with then and improve internal customers’ financial performance. It is tough to be recognized as a value-added partner if you’re not documenting your contribution.