Shared Services Implementation

November 18, 2009 – 2:59 pm by Margaret Chang

Co-Authors: Cindy Lo, Jessie Wang

In today’s recessionary market, many organizations are trying to do away with waste and create efficiencies by optimizing and consolidating operations through the implementation of shared services. There are many design considerations an organization must assess when deciding to implement a shared services model. Due to the breadth of changes in the organization’s design and structure that will result from such a model, careful planning and coordination are required from the cross-functional program management team. Other factors that are also critical to the success of a shared service model include governance, organization, operations and metrics. Most importantly, shared services needs to support the different teams in an organization while the model is taking root.

In our last blog, An Overview of Shared Services, we discussed data management shared services, AP shared services and the high level challenges of implementing shared services. In this blog, we will discuss the implementation of shared services, including developing an approach and effectively transitioning people within and outside of the shared services organization.

Phased Approach

As an organization begins creating a new shared services organization, setting up a program management office (PMO) to plan and guide the shared services journey is critical to success. The PMO should outline the vision, define the value proposition and put the tools in place to ensure continuous improvement. Additionally, program leadership should build a platform to manage the execution, migration and change by defining a multi-phase program roadmap. This also serves as an input to the broader business case for socialization to stakeholders and impacted groups. This roadmap should include four key phases for the shared services journey: strategy and planning, design, implementation, and continuous improvement.

The initial phase of the roadmap, strategy and planning, focuses on strategy formulation and brainstorming to build the foundation and alignment of the overall work effort. This is the opportunity for the organization to define the shared service vision, strategic objectives, and scope. Typical efforts include performing a data collection and inventory analysis of the current state across people, processes, policies, systems, and critical inputs and outputs and customers and suppliers. The program team can leverage the data to drive an overall cost / benefit analysis. The leader of shared services should be appointed immediately and the PMO team should help shape the shared services operating model and determine the change strategy and requirements needed to implement the new organization. Resource mapping for shared services can be a time-consuming and tricky task that requires careful planning because of the sensitivity to the employee jobs that are getting replaced. The key to resource mapping is to get the right people involved at the right time. This includes both appointing the right people in the organization to the new shared services organization and hiring the right people or shifting the right people from existing job functions that will be replaced by shared services.

The second phase of the shared services approach is focused on the design of the organizational structure and operations (i.e. processes, systems, policies). Design principles include establishing governance and standards of excellence, funding models, service delivery / management framework, performance measurement, business and technical architecture design, workforce transition planning, facility and site selection, communications and training, and roll-out strategy. The program team should work with the business to define quick wins and longer term recommendations. Some key considerations when designing the shared service structure are determining where the shared service will be implemented and where the structure will sit in the organization. Creating a centralized team enables participants to work together more closely, whereas creating a decentralized team might make them more global in reach and coverage while working together on a virtual basis.

The third phase is the implementation of the shared service. This means that the shared service center should be built with the capabilities / services offered and organization design complete. Usually, a shared service is not rolled out with a “big bang” approach, where the entire scope is implemented at once, but rather is divided up into different phases with different capabilities and functions implemented at each phase. For the initial rollout, management should choose a capability that will make the most impact to the organization. That way the team will be able to point to the success of that shared services model when implementing the next phases. This success will also help to gain buy-in from stakeholders and support to for the next phases. Some options that management might consider when choosing a capability for the first phase are:

1. High-volume data services that can be easily automated
2. Various experts within the organization that know the services and capabilities that are highly visible in organizations to create a “Center of Excellence” with these experts
3. Cost effective reduction of resources through a combination of people, process, systems, data

Other work efforts include the detailed roll-out planning, training delivery, and synchronization with technology and applications required to set up the pilot organization.

The final phase, continuous improvement, is the global roll out of the shared services model to the broader organization. Effective communications and training help to enforce workforce transition, and additional organizational movements may occur after the pilot shared services program has stabilized. The goal is to optimize a fully operational shared services organization that centralizes fragmented activities across the organization, streamline processes and automation, drive cost savings and scalability, and balance services with customer-facing functions.  Key metrics and cost savings measurements are important in this phase to assess the effectiveness of the shared service to the organization. These statistics can be delivered to executive and operations level stakeholders so management can improve upon what is already being delivered.

Stakeholder Adoption and Change Management

To ensure a successful deployment of the designed shared services organization, it is critical to understand, plan, and implement necessary and practical steps to support people through the organizational transformation. In other words, the leader of the shared service must be effective in managing the people in the organization through the change. They must be actively involved in preparing the entire organization to transition to the new shared services model, which is vital to its success. Effective change management and communication are needed to reduce risk and potential costs, and increase the likelihood of a successful transition and a positive relationship between the newly created shared services organization and the retained functions. A thoughtful and thorough change management strategy significantly contributes to a successful shared services implementation by developing a leadership team and organization that is focused on achieving the objectives of the shared services program, preparing employees for the transition by building the new skills they will need, creating customer confidence in the new model, and building buy-in among all stakeholders.

A carefully planned and executed change management strategy translates into an end-to-end process that includes building buy-in, optimizing the workforce size, and training employees. To ensure a successful outcome, change management should span the entire duration of the transition, beginning at the decision to create the shared services organization and ending after the governance model is in place. After the transition is complete, the operational leadership team within the shared services organization assumes the role of managing change and takes the forward-looking responsibility of identifying, planning and integrating new shared services and process improvements into the shared services solution.

Common elements of shared services change management include communication, sponsorship, ownership and accountability, workforce transition and training, change readiness, and implementation, rollout and stabilization. The success of shared services change management can be measured by the following outcomes:

• Disruption to the organization during the transition is kept to a minimum
• People directly impacted by the movement are guided through the change to the shared services organization
• The right kind of leadership and structure are established to support the shared services organization’s objectives

Conclusion:

The shared services model has been implemented by many organizations, but only a handful of companies have successfully reaped the full benefits that this model can offer. It is imperative for leadership to view the program as a long-term strategic shift rather than a myopic cost-cutting effort to leverage labor arbitrage. Shared services can be a cost-effective means to scale and grow the organization. Some of the key decision regarding location and funding might be harder to change than others; therefore due diligence needs to be done before executing the shared services vision. At the end of the day, the success of the shared service organization needs to be measured by setting and measuring against goals and finding the right balance between financial and operational measures.

References:

• SS Principles.pptx
• John Phillips: A View of Shared Services
• Alsbridge. Change Management for Shared Services and BPO, Part 1. Retrieved October 9, 2009, from www.sourcingmag.com/content/c070502a.asp
• Accenture. (2007). Managing Shared Services Change: Beyond Communications and Training. Retrieved October 9, 2009, from www.accenture.com/Global/Consulting/Finance_and_Performance_Mgmt/R_and_I/ManagingTraining.htm

 Contributors: Keshav Gupta, Sanjay Shitole

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