Most organisations are clear about the benefits of implementing functional shared services. Key among these are reduced labour costs through location-driven arbitrage, the standardisation of functional services, such as HR and finance, and a common experience for internal customers across the business.
But what about the incremental value of moving further along the value chain and making the transition from functional shared services to a multi-functional model or even an integrated shared services model? Is this a journey your organisation should consider?
It is important first to be clear about the three basic shared services models; and calculate the incremental value you may be able to realise.
1. Functional shared services means that service delivery approaches, service scope and technology are designed to meet functional requirements and are often different for each function. Although functional shared services may operate in shared locations, service definition and leadership structures remain hard-wired to the functions.
2. Multi-functional shared services involves several functions sharing a management team, certain technology and usually some service delivery locations. Most are managed by a single leader although strong dotted lines exist back to the functions for the design of processes, service scope and service standards (transition, transformation and financial management including investment decisions of service delivery usually remain firmly under functional control).
Extra value: Moving from functional shared services to a multi-functional model, organisations can reduce overheads significantly. They do this by consolidating locations and management roles, most commonly at service delivery leader level. Assets and tools, such as office space, telephony and case- and call-management technology can be shared and the cost managed between the functions using them.
3. Integrated shared services operate as business units in their own right, delivering customer-centric, end-to-end services through a consistent infrastructure that cuts across functional boundaries. Customer needs rather than functional definitions determine the scope of services and the design of processes. Transition, transformation and financial management of service delivery are managed by the integrated organisation.
Extra value: Because integrated shared services take customer needs rather than functional priorities as their basis for service design, it improves the service experience for customers, enabling them to really focus on what is core for the business. Besides, by redesigning end-to-end services and processes, businesses can further reduce costs incrementally, removing duplication and sharing management and asset infrastructure at all levels. In addition, they can adopt a more commercial approach to pricing, supplier management and service delivery, allowing them to manage cost, risk and supply and demand most effectively.
Any business weighing up the case for integrated shared services must consider the substantial organisational and cultural change this model requires. We see our clients taking many different paths.
One client in the construction sector, with functional shared services for finance, payroll and supply chain management, wanted to assess the potential for using this capability for IT. PA led the development of a case for change, the design of the end-state organisation, solution and sourcing approaches and an integrated plan to deliver the new functional shared services organisation.
For another client, we designed the vision and strategy for a new integrated shared services organisation, comprising 6,000 employees and delivering business services to over 100,000 people around the world. We also designed and delivered change management activity to embed the new organisation within the business and help internal customers and suppliers understand the new operating model.