This article was first published by Intelligent Sourcing.
What business leaders want from shared services is changing. Reducing operating cost remains the priority, as PA’s new shared services research confirms. But shared services that increase organisational flexibility and scale, and deliver a higher quality of service for the business, are becoming increasingly important.
The drivers for this shift lie in the wider business environment. With fast-paced political, social and economic change taking uncertainty to an unprecedented level, organisations need to be flexible and dynamic to survive and stay profitable. Shared services focused exclusively on reducing operational costs can’t support that.
Meanwhile, the requirement for a higher quality of service is driven by new digital technologies. These have given customers the power to dictate the products or services they need and how they want them delivered. Put bluntly, when employees come to work, they expect shared services to deliver the same quality of service they get from companies like Uber and Amazon outside work, such as information and query resolution in real time.
What business wants – and why – is clear. But our research shows that, in many cases, shared services are failing to deliver in areas such as organisational flexibility and scale. Only 21% of businesses realise significant benefits in these areas compared to 62% of businesses reporting reduced operating costs.
There’s also a problem around service quality. One in three organisations taking part in our research told us their internal customers would not recommend shared services.
To stay relevant and avoid being pushed to the side lines, shared services leaders need to find a way to deliver for the business on both fronts: cost reduction and strategic value.
Who’s on board?
Some organisations already recognise the need to refocus and are adapting their approach. For example, our research highlights a rebalancing of the insourcing/outsourcing mix, with organisations shifting towards insourcing in order to deliver the flexibility and service quality the business needs.
In particular, the trend is to bring knowledge-intensive roles such as analytics, centre of excellence and business engagement roles back in house, while automating more transactional activities.
Our research also identifies an expansion in the scope of shared services. HR, finance and IT services are still the main areas, but front-end functions, such as analytics and customer services, are being actively added.
This is a clear statement of shared services not only trying to deliver greater cost savings, but add further value by delivering more complex services.
Despite this, other aspects of shared services delivery are showing less development. Most companies are still operating functional shared services in siloes and missing out on the wider benefits from cost-functional integration as a result. These include being able to leverage data across multiple systems and deliver real-time information to speed up decision-making.
The rise of strategic shared services
The robots are here
For organisations looking to deliver simultaneously on the strategic value and cost reduction agenda, we believe new technologies, such as robotic process automation (RPA) and artificial intelligence (AI) hold the key. They can enable shared services to simultaneously reduce costs and enhance flexibility and service quality.
On the cost front, the impact of RPA and AI promises to be dramatic. As increasingly complex transactional work – typically a large part of the business services workload – is automated, traditional routes to reducing cost and getting better value, such as offshoring, consolidation and outsourcing, will become less significant. Robots can reduce the cost of onshore delivery by 35-65% and the cost of offshore delivery by 10-30%.
At the same time, increased use of automation will have a marked impact on shared services’ ability to deliver more strategic value. It will free up the organisation to focus on creating new services like cross-functional analytics to improve decision-making, or more efficient sales and marketing support. There will also be new opportunities to design and deliver end-to-end solutions, such as ‘source to pay’ or ‘hire to retire’, reducing cycle times and improving customer satisfaction as a result.
What the elite shared services organisations do well: four key strategies
The challenge then is for shared services is to make the shift to becoming a true strategic partner for the business while capitalising fully on the potential of automation. Some of the leading shared services organisations we work with are already taking active steps to achieve this. The strategies they use are an effective way for every shared services organisation to become more strategic, dynamic and customer focused.
Create a distinctive vision for the role of shared services
Leading shared services organisations make it clear the strategic intent of their shared services isn’t just cost reduction. It’s the ability to support the business agenda through increased flexibility, speed and service quality. They articulate the role technology will play in helping them achieve that.
A major European airline we worked with executed this perfectly. They accepted a less attractive short-term financial case to secure greater value from shared services in the long term. We helped the leadership team make the decision to implement an integrated business services function to drive simplification, standardisation and automation across the business, even though this would mean a lower short-term return on investment than they’d normally accept.
Equally, we’ve seen clients struggling to come to terms with this trade-off. For example, a major industrial services firm we designed a shared services solution for set out to improve customer experience. But when the financial business case became less compelling than expected, they scrapped the initiative due to cost alone.
Put the customer of shared services at the centre
Customers of shared services are becoming more demanding – they want information and query resolution in real time, like the service they get when they interact with companies like Amazon and Uber. So the second lesson from shared services leaders is to understand customer needs and use technology to deliver the flexibility, speed and quality of service they want without necessarily increasing the delivery cost.
A global FMCG company, where we set up a Global Business Services model, does this brilliantly. They’re using chatbots to resolve HR queries quickly and efficiently – contributing to their 10% a year cost efficiency. Not only that, providing real-time and accurate responses has contributed to an increase in internal user satisfaction of 5% a year.
Elsewhere, one of the Nordic countries has also recognised the potential of chatbots. They’re looking at leveraging ‘virtual agents’ to deal with the increase in citizens’ requests for new property valuations. Until now, they managed the peaks in volumes by using a combination of temporary workers and staff overtime – a solution that’s not sustainable due to cost, quality and employee satisfaction challenges.
Balance scale and flexibility across the operating model
The most successful shared services organisations choose an operating model that’s scalable, but flexible, to cater for changes in demand at speed. They keep down costs by using the right technologies and sourcing solutions.
Business process automation (BPA) is a key technology. Having standardised, end-to-end processes is essential to leveraging it to its fullest extent. This is clear from a recent project we did for a local government organisation. They had implemented BPA without having processes properly documented. Our analysis showed this had increased implementation time by 100% and also cut the organisations chances of reducing costs and increasing quality.
Cloud is another key technology, helping shared services organisations achieve greater flexibility while removing the need for costly and complex technology upgrades. One financial services firm we advised on transforming their finance and procurement functions has implemented a new cloud-based P2P solution that provides an Amazon-like purchasing experience and can be easily accessed through single sign-on. Not only has this boosted customer satisfaction as it’s now easier to purchase and pay suppliers. It’s also improved compliance, transparency and transactional efficiency in finance and procurement. In addition, the firm expects automating critical processes and reporting to lead to €6.5 million savings over five years.
In terms of sourcing solutions, few organisations now bind themselves into long-term contracts with outsourced providers. Shared services leaders optimise the split between in-house and outsourced services, and making sure the services sourced and delivered are relevant to the business especially at a local level.
Implement with a vision in mind and transform to achieve your vision
Having a clear vision lets the best shared services organisations drive changes to the operating model that aren’t purely steered by cost reduction, and helps them be more dynamic, flexible and efficient from the outset. In the best shared services organisations, there are three priorities for implementation:
A new agenda for shared services
Unprecedented change in the business environment means business leaders want shared services to support the business in becoming more agile and dynamic, and in meeting new demands from internal customers. Shared services that focus on cost reduction alone will be unable to deliver on this. Instead, shared services leaders need to exploit the potential of RPA and AI to deliver on all fronts an, in doing so, become a true strategic partner for the business.
Victor Torres and Vineet Khanna are shared services experts at PA Consulting Group