Five mistakes that damage the effectiveness of Shared Services and how to avoid them - Part 1

Leading companies have leveraged captive shared service centers to drive process standardization, improve service delivery and dramatically reduce costs. Yet many companies continue to struggle with the role of a captive service organization in their overall delivery strategy. Despite upbeat predictions from their business case, some companies have failed to realize the anticipated benefits from their Shared Service Organization. How is it that some companies fail to realize the benefits of Shared Services that many other companies have successfully realized? While every organization is different, there are common traits among companies that are not achieving the goals of their captive Shared Service Organization. Five of these mistakes include:

1. Shared Services is not evaluated as part of a comprehensive delivery strategy
2. The vision for Shared Services is not clear and compelling
3. Processes are consolidated into Shared Services without the required transformation
4. Comprehensive change management is not a priority
5. A strong governance structure is not implemented

In this first post, I'll address the issue of including Shared Services as part of a comprehensive strategy:

1. Shared Services is not evaluated as part of a comprehensive delivery strategy

A Shared Service Organization developed apart from a comprehensive delivery strategy will not effectively support the company’s corporate strategy. Depending on a company's previous success handling specific activities and its overall strategy, some processes that might move to a captive service center would be better of handled by a 3rd party, either onshore or offshore.

High performing companies focus on building a comprehensive delivery strategy that incorporates both captive and 3rd party suppliers. An organization’s service delivery strategy should support the overall corporate strategy and includes a consideration of the company’s existing and planned business lines and geographic presence. It also includes an objective analysis of the supplier-side capabilities from both the captive service organization and 3rd party service providers. Another consideration is the global distribution of support services including an analysis of onshore and offshore delivery options.

One of the major steps in determining where an activity will reside is to document the end-to-end process to include not only the individual activities in the process but also the department (such as Accounts Payable) that will be performing the task.  Once the totality of the individual tasks is understood and documented, a company can make a more informed decision regarding its ability to handle those activities in-house.  A number of factors will go into this decision including the company's ability to handle that specific activity, the effectiveness of handling it and the anticipated cost.  These metrics and others can be evaluated against 3rd party service providers.   When the decision to move to Shared Services is made in conjunction with a comprehensive delivery strategy, rational decisions can be made around the placement and delivery of services.