The Shared Services Salon
The place for learning the basics of Shared Services Concepts and
accessing the expertise needed to make your organization's Shared Services initiative a success!
Why Shop Here?
Our shared services team "has been there and done that"... and done it well. If you want to work with folks who have
designed, supported, and run shared services organizations within today's modern organization, the Shared Services Salon is the place to shop!!
Our team not only knows first hand how to design a shared services organization, but they know how to manage the organizational changes that are necessary
to take advantage of the shared services concept. HDI has been engineering organizational change for more than 20 years ... since before the concept of "Change Management" was fashionable. HDI has
helped more than 100 clients with change initiatives over the past 20 years... supplying hands-on consulting, project and program management as well as training and coaching... in simple and practical terms. What is Shared Services?
Shared Services is a business model with the following characteristics:
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An internal organization becomes an internal service provider and manages a non-core, but essential functional area
- Business organizations request products and services from the shared service provider
- The shared service organization provides products or services to multiple business organizations in the company
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The users of products and services are charged by the provider for the things they use
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The shared service organization is run rather like an independent business, covering their costs through revenue
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Measurements including external and internal benchmarking assure that the shared services organization is efficient and always improving
What Functions are Candidates for Shared Services?
The following functions are frequently established under the shared services business model:
- Accounting
- Information Technology
- Purchasing
- Human Resources
- Environmental
- Law
- Tax
- Finance
- Facilities Management
Why Shared Services?
The objective of the shared services model is to improve the financial performance of the corporation.
This objective is accomplished by:
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Shared services allows internal providers to be more efficient through common processes, economies of scale, standardization
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Shared services provides an internal function with enough size to provide a community of expertise, attractive for hiring, training, retaining
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A shared service business model allows the business units to discontinue their fragmented focus on non-core support areas, because the shared service group accepts responsibility and
accountability for those areas
The shared services business model provides efficiency by consolidating redundant processes, while still assuring responsiveness.
The following chart, based on a diagram from a book on shared services by Donniel Schulman, Martin Harmer, and others, compares the shared services model with other structures:
The shared services model has been successful in many large
corporations including Xerox, Johnson and Johnson, Exxon, Weyerhaeuser, Amoco, and Kodak. These companies have found that forming shared service organizations allows them to eliminate many redundant
functions across their operation units reducing costs, while allowing business organizations to be focused on their particular business. Shared Services Model
Key factors in the success of the shared services model are the relationship between the providing organization and the customer organization, and the communications within the provider organization
and within the customer organization. The diagram below helps visualize these concepts:
Critical Factors
An organization that is aware of the following features and concepts will have
greater success in implementing and following the shared services model:
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Products and Services:
Common products are defined and communicated, setting expectations for the customer and establishing service targets for the provider.
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Customer:
Products and services are specifically designed to meet customer business needs. Service agreements establish demand forecasts and set
relationship expectations. An appropriate order fulfillment process allows the shared service team to be very responsive without losing efficiency by defining which products and services are provided.
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Finance and Cost Management:
The provider understands the cost structure and can explain how the underlying costs relate to the product and service lines. Pricing is
accomplished consistent with the cost structure and market information. Organizations are charged for the products and services which they actually use.
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Strategies, Principles, and Policies:
The shared service organization has clear direction which is widely communicated. The underlying principles and strategies establish
direction and expectations, allowing users to anticipate and prepare for changes. Policies guide users to follow patterns of behavior which contribute to overall operating and financial performance from a
corporate perspective.
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Processes:
Because customer interface processes, vendor relationship processes, and operating processes are well defined, the shared service provider is
efficient and consistent. Customers know how to interact with the provider and know what to expect from the provider.
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Measurement:
Key product and service performance metrics are tracked, and action taken. Customer satisfaction is continuously monitored and those
behaviors which contribute to business performance are rewarded. Costs are monitored to enable actions to be taken. Best practice work and benchmarking with respected companies provides an external
measure of performance and highlights opportunities for improvement.
What Are the Key Steps in a Migration to Shared Services?
For corporations with multiple business units, the shared service business
model provides improved financial performance by reducing costs while meeting the needs of the internal businesses for non-core products and services. This approach has been tested and the successes verified. A migration to a shared service business model requires a change in thinking by the providers and the customers. Relationships and processes must be revised to gain the full benefits provided by the
model. Therefore, the move to shared services should follow all the principles of change management. The following five requirements are necessary to bring about major organizational and operational change:
1. Communication of the vision
2. Alteration of the processes/procedures
3. Alteration of the plant, equipment, tools (P.E.T.)
4. Alteration of the performance management system
5. Communication of the action plan
Listed below are a few of the key
steps in a migration to shared services. Greater
detail is available in a separate Holland & Davis, Inc.
document.
- Analyze candidate functions and select which should become shared services
- For each of the selected functions, develop the following:
- Product and service directions: which products common, how to provide custom
- Customer strategy including customer interfaces
- Supplier strategies and plans
- Operations strategies including process improvement
- Financial strategy including cost management
- Sourcing principles and strategy
- Strategies for organizations and human resources
- Shared Service principles and policies
- Implementation
- Monitoring and Improvement
A comprehensive strategic framework including all of these
areas will enable a corporation to gain the full benefits of
the shared services business model, providing business organizations
with excellent products and services at very competitive costs.
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