Five mistakes that damage the effectiveness of Shared Services and how to avoid them - Part 3

Note:  This is Part 3 of a 5-part series.  You can click here to read Part 1 and Part 2.

3.  Processes are consolidated into Shared Services without the required transformation

Companies sometimes take poorly performing processes from the business units and move them to the Shared Service Organization without engaging in the transformation necessary to standardize and optimize the processes.  This is often done with the best of intentions.  The thinking is that the company will consolidate the processes into a Shared Service Center to obtain the immediate benefit of labor cost reduction.  Many times this is done in conjunction with a shift in the delivery model from onshore to offshore.  Unfortunately, this often leads to the "my mess for less" syndrome, where there is some immediate cost benefit but the company is still left with a host of non-standardized processes that are no where near as effective as they should be.  This is fundamentally the "lift and shift" method of consolidation that does not focus on the simultaneous transformation of processes as they are moved to Shared Services.  Without this transformation, those poorly performing processes will continue to be a problem for the company by providing substandard service to the business units at a cost far above best-in-class.

In order to fulfill the vision of the Shared Service Organization, disparate processes from multiple business units and geographies must be reengineered to standardize those processes, incorporate best-in-class practices and technologies, and reduce the overall cost of delivering those services.  This is the "transform and shift" model and is most often used by companies seeking true finance transformation.  This approach takes a phased approach where the early phase is focused on understanding the existing processes and designing a series of standard future-state processes based on best-in-class practices and technologies.  Once there is a corporate standard for the in-scope processes, they can be migrated to a Shared Service Organization, either onshore or offshore, where the benefits of standardization will be delivered.  Leading companies often make this move in conjunction with an implementation or upgrade of a common technology such as SAP to facilitate the standard delivery of services.  This approach takes more time up front, but delivers far greater benefits for the long-term.