 |
Ask The Expert
Q: How do I get started?
A: Be clear about why you are considering a Shared Services model and what benefits you are seeking to gain. Once you are clear you can carry out an education process with your senior management about the range of proven models that are available. It is critical to start with a broad view of the opportunity rather then drill quickly down to a possible solution. Until this education process is finished in terms of the ‘why’ and possibilities for the ‘what’ it is not practical to drill down into the feasible options for the organisation.
Q: Is a Shared Services operating model the only answer to a back office transformation?
A: For the full benefits of a back office transformation to be realised, it needs to take into consideration a range of elements covering process simplification, organisation, culture, management, technology platform and sourcing models as well as the change process. These strands can be considered individually or a Shared Services implementation can draw them together into a single picture. However, it is important to address not just the service model but also those elements of the functions which sit outside of the service, i.e. the retained functions. Failure to address the transformation of all elements of the function will result in loss of potential benefits.
Q: Why not go straight to Business Process Outsourcing?
A: Whether a BPO route or an internal route is chosen, the organisation must be transformed to interface appropriately with the new service. BPO may ultimately be the right delivery model, but the route to BPO could be evolutionary, with the creation of an internal Shared Service and customer supplier relationship followed later by a move to BPO. Alternatively a transformational outsourcing model could be used. The decision on the preferred route will be based on a balance between management capacity, risks and rate of benefit realisation; driven by a clear view of the benefits required, be they cost savings, quality improvements or customer service improvements.
Q: What key factors will ensure success?
A: The most important factor is to engage active support and sponsorship from the top. Without it the project is doomed because opposition from local management is almost inevitable. A clear, compelling vision that is capable of being articulated throughout the organisation is essential. Choosing the right location is also important for ensuring the right balance between low labour costs, inflation and turnover – as well as high labour availability and flexibility. Being clear and realistic about scope is important; moving processes that ‘touch the customer’ carry a much higher degree of implementation risk than moving processes that are either internal or supplier facing. Related to this is the need to be realistic about the implementation path. There is risk of vital knowledge being lost through a poorly executed transition. So demonstrating early successes through migrating some easier processes or countries is a good way of proving the concept. Finally, and related to the first point about local management opposition, ensure current performance is adequately baselined before migration so that you are able to objectively demonstrate success.
Q: Shared services are established in western Europe; is it time to move east?
A: Many ‘first wave’ Shared Services were established in the mid 90s in western Europe, most notably the UK, Ireland and the Netherlands. Since then, a viable market has opened in eastern Europe, including Poland, Hungary and the Czech Republic. With labour rates in eastern Europe up to 50% cheaper than in western Europe, and with labour costs comprising around 70% of the costs of a Shared Services centre, significant savings are possible. In April 2002 Alcoa began consolidating its western European Shared Services centres into a single location in Hungary, yielding substantial savings along the way (source; Economist Corporate Network, Shared Services briefing paper; February 2003).
Q: Should I standardise or consolidate first?
A: There is no right answer to this question. A lot will depend on what you are trying to achieve. Consolidating first can result in a quicker payback through taking advantage of cheaper labour and some economies of scale. However, without standardisation the Shared Services centre could potentially be faced with supporting multiple legacy systems and platforms. Access to consistent data may be just as much of a problem in a centre with multiple systems and processes. Standardisation, on the other hand, is a major investment in time and money and hence will delay the achievement of savings. A third alternative is to standardise and consolidate at the same time. This is possible, but significantly increases the implementation risk in that, depending on the location chosen, this will involve new people undertaking new processes on a new system. It is not for the faint-hearted and needs very careful planning.
|
