Making Non-Revenue Producing Business Functions 'Profitable' (page 1 of 5)

A shared services model concentrates company resources performing like activities, typically for the entire organization, in order to service multiple internal partners at lower cost and with higher service levels, with the common goal of delighting external customers and enhancing corporate value.

With the shared services model, corporations organize administrative, financial and other transaction-oriented activities into standardized services centrally provided by a single entity - a Shared Service Center. This reduces the administrative burdens placed on individual business units so they can focus on their core competencies while ensuring that standard business processes are used across an organization. The goal of the shared services model is to reduce costs, improve user satisfaction and standardize business processes. Additionally, Shared Service Centers significantly improve information access and quality, as they are and built on standardized business processes and integrated data systems. This is critical in 2003 when chief financial officers must certify the performance of diversified holdings around the world.

In this article, I will address the opportunities and challenges of moving to a shared services solution.

The Shared Services Model Benefits
Who can profit from shared services? While shared services discussions tend to focus on multinational companies with geographically dispersed organizations, many domestic companies also have disparate business structures. While larger organizations stand to benefit the most from Shared Service Centers any mid- to large-sized company can benefit from centralized financial planning, reporting and administration.

The problem is that many companies, large and small, still operate as fiefdoms. Each business unit or location has its own customized (or tailored) IT solution as well as processes and procedures. With this fragmented culture, it can take days, or even weeks, to collect and analyze financial information about the company's overall performance. Without standard business practices, the findings can be misleading, as different business units typically use different accounting methodologies, data consolidation methodologies, and reporting criteria (i.e., a 60-day versus 30-day reporting cycle).

But the benefits derived from consolidating services are multifold. Standardized processes allow companies to work with seamlessly integrated and consistent data. As a result, they can begin to manage business activities as complete, end-to-end process. When an organization can track how work is accomplished, it can identify what steps can be automated or will support self-service. As services become automated, financial managers and administrators, both in the local business units and at the Shared Service Center, can spend more time on high-level analysis and planning, and less on "paperwork" and non-value added processing steps.

Streamlining operations also can translate into significant cost savings. According to industry expert Andrew Kris, companies that implement Shared Service Centers experience initial savings of 20% to 30% through the elimination of redundant personnel, tasks and infrastructures. Average savings can reach upwards of 40 percent with automation of transactional activities and self-service solutions, he further posited in akris.com, an online publication dedicated to shared services.

There are significant gains in operational efficiency as well. With a centralized delivery infrastructure, service updates and additions only have to be implemented once, and the changes are instantly available to all users of the system.