Shared services is not a new concept in business. Nevertheless, interest in this service delivery model is rising as more and more business owners realise the benefits of implementing it.
Shared services is the process of centralising back-office functions into a single business unit within an organisation. Through it, a company is able to streamline its operations, eliminate redundancy and improve the quality of its products and services. Put simply, shared services allow businesses to create more with less.
If you think this model suits your business, read this first before implementing the change.
Top Benefits of Shared Services
Having a shared service centre (SSC) to manage business support processes, like finance, HR transaction and IT services, presents a multitude of benefits, including but not limited to:
- Lower operating costs. Shared services build economies of scale around non-core services. It also allows a company to cut infrastructure costs and training expenses.
- Process standardisation. Because a single department handles a specific operation, it is easier to impose standard processes across your organisation. This, in turn, allows you to adopt best practice, reduce processing time and drive efficiency.
- Task specialisation. A shared services centre is a spin-off of all operational tasks from the corporate headquarters, allowing it to focus on strategic planning and corporate governance. Having a SSC also provides a better opportunity to focus on the skills and training deployed in the service delivery, which may lead to higher productivity and improved service quality.
Risks in Implementing Shared Services
Before you adopt shared services, it is important to know the pitfalls of such system so you can better prepare for what you may encounter down the road.
Probably the biggest issue with implementing shared services is the disruption to the existing service flow as you move the work to a centralised location. This could lead to duplication of work, which may lengthen the time required to deliver a service. Consequently, there is the risk of failing to coordinate demand and supply of services between SSCs and business units. Effective communication may also be a problem.
Another issue is the inability to attract or retain top talent. A shared services arrangement doesn’t spawn great challenges, a motivation for top producers. Without top talent, it will be difficult to continually improve the quality of your products and services.
Moreover, granting a shared service centre a status equal to that of a business unit could create confusion as to which unit is primarily responsible for managing market opportunities.
When is Shared Services Ideal?
When you want to reduce costs and focus on your core business, you typically outsource a non-core task to a third party. Outsourcing is great where there is lack of skill, technology or capital. However, if you are not comfortable with delegating internal functions to a third party or if you already have the resources to deliver the service, shared services becomes a more practical option. Shared services also makes sense if a company operates in many countries or regions.
Adopting a shared service approach involves major changes to your existing infrastructure and operational systems. So, make sure to weigh in the pros and cons before implementing it.