Key Challenges to Overcome in Building an Effective Shared Services Organization
December 24, 2009 – 1:16 pm by Evgenii ZherebchevskiyThe blog “Shared Services Implementation” from November 18, 2009, co-authored by Margaret Chang, Cindy Lo, and Jessie Wang, (http://trianzblog.com/wordpress/?p=136#more-136) provided an effective outline of key considerations to build an effective shared services model. The actual implementation, however, is likely to face several hurdles and setbacks that need to be proactively addressed for an organization to seamlessly transition to the shared services model. Based on our recent experiences of planning and building a shared services organization in a Fortune 100 company, we can outline some of the most critical challenges that a company needs to address in order to create a best-in-class shared service organization.
The first challenge many organizations face is organizing a high-performing project team to lead the shared services implementation efforts. Many companies make the mistake of solely relying on the business process outsourcing partner to organize the implementation team. While the thought partnership, best-practice sharing, and project management support of a consulting or BPO partner with experience in this area is critical, it cannot substitute for a strong internal team. While the support of the senior executive team is critical to influence internal stakeholders, it will not be enough to move the program forward. Knowledge of the internal systems, processes, and people (the most critical piece) cannot be gained quickly enough by the consulting team without significant ramp-up time.
With a dedicated team of internal resources working alongside the consulting experts, the organization can avoid starting from the clean slate and overinvesting in the development of the capabilities it may already have. Furthermore, the credibility and personal relationships, established over the years by the internal team, will be a vital asset in driving such a complex and often organizationally sensitive effort. Therefore, when identifying the successful team that will build the shared services organization, the executive management needs to do the following:
- Identify a strong internal leader to lead the effort
- Dedicate some of the most talented employees to the shared services implementation team
- Use consulting resources to cover gaps in specific knowledge, frameworks and industry best practices
The second challenge that needs to be addressed early in the process of building a Shared Services organization is the clarity of the scope and management’s expectations. Companies tend to start with a vision of shared services, which includes a wide range of services to be delivered through this operating model. While the long term vision may be the right one, the time to get there is often underestimated. If the implementation team faces problems, such as operational issues, push-back, and political resistance, the scope must be reduced to a fraction of the original vision. As a result, the project may be deemed unsuccessful, which will make it difficult to get the internal stakeholder and executive support necessary to continue the effort. To avoid this shortfall, it is critical to do the following:
- Set realistic expectations on what can be achieved in the short-to-medium term
- Make sure the proposed changes are transformational enough, but not more than the organization can handle within the given timeframe
- Demonstrate patience and continuous support
The third challenge organizations face is a natural desire to build the organizational structure of the shared services before having a complete and thorough understanding of the scope. Working with organizational design experts, we learned that putting together an organization chart in itself is not a complex exercise, once you know what the organization is going to do, the skills that will be required, and the future internal and customer-facing processes. However, if a company attempts to develop a clean organization chart and then try to retrofit the new organization and what it does to this chart, most likely it will not be successful. In addition, if the processes and engagement scenarios are not adequately understood and documented, it will be difficult to manage the new organization, deliver the services to customers, and interact with partners. The recommended approach is to focus first on the processes, the activities, and required skill sets within the future organization, with the organizational structure to follow.
Finally, the transition to a shared services model often generate political / cultural resistance. This is probably the most well-known but least understood challenge, and for a good reason. As one of business leaders who led his company through the process of building a shared services effort said, “People may be nodding their heads at the meeting, but as soon as their office door closes, there is nothing but resistance.” That is why change management is an integral part of the roadmap of building the shared services model. It is important to approach all of the key stakeholders early and often to promote the overall effort and seek input on issues that directly affect their organizations. Just as importantly, the executive management should make it clear that there is no “opt out” option to the proposed changes.
The transition to the shared services organization involves many factors, including cultural changes that are difficult to absorb. The list of above challenges is by no means complete, but helps us understand the complexity of building a successful shared services model. Despite the complexity, more and more companies successfully utilize the shared services model to reduce costs, scale operations, and provide higher level of service to their internal customers.
Contributors: Keshav Gupta, Cindy Lo
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