Where should the Shared Service Organization reside in a company?
/A common question that I get in my consulting work revolves around the governance structure of Shared Services, specifically the issue of organizational reporting and accountability for the Shared Service Organization. Essentially it boils down to: To whom should the Shared Service Organization (SSO) report?
The answer isn't as clear cut as it once was. Companies continue to leverage their investment and knowledge in Shared Service to migrate additional services to the SSO. And many of these functions and activities are outside of the traditional domains of Finance, IT and HR. If an SSO handles a large number of operational activities, say direct materials purchasing and transportation scheduling, it might make sense to have the SSO report to the COO.
For the purpose of this post, however, I'll cover an SSO that focuses on the traditional functions of Finance, IT and HR. In this case, the question is still relevant. What is the right level within the organization and to whom should the SSO report? I'll come right out and say that I believe it should be the CFO. Not every company agrees. I've had clients where the SSO reported to a lower position, such as a Corporate Controller or the Chief Accounting Officer. The argument, either made explicitly or implicitly, is that the SSO primarily handles transactional, and tactical, activities such as accounts payable processing.
While I wouldn't argue that A/P processing is strategic in nature, I believe that argument misses the bigger point that how a company chooses to deliver services domestically and globally is a much more strategic decision. A comprehensive strategy that addresses global delivery capabilities and that aligns with corporate strategy is very much a concern of the CFO. For that reason, the Director of the Shared Service Organization should report to the CFO. Add to the fact that in many organizations the CFO has direct responsibility over IT and other administrative functions, and it makes sense that the CFO is the logical choice to oversee a company's Shared Services Organization.