The Five Most Important Qualities in a Shared Services Leader

In any walk of life, strong leadership can make the difference between success and failure.  Shared Services is no different.  Strong leaders have a way of making a difference in their organization and in the lives of the people who work for them.

The Shared Services & Outsourcing Network has an interesting article on the most important characteristics of a Shared Services leader.  The article is based on a survey of employees in Shared Services.  Finance is well represented, but so is HR and other areas.  The results are not surprising.  What are they? Glad you asked. 

Here's a summary of the five points along with my commentary.  The percentage of respondents who voted for that particular attribute are shown in parentheses.  I'll post a link at the bottom of this post to the full article.  It's worth your time to read in its entirety.

• Provides a clear vision of where we are going and leads by example. (92%)

Leadership gurus Jim Kouzes and Barry Posner, in their book The Leadership Challenge, discuss the ability to craft and communicate a vision as one of the top traits of a leader.  Kouzes and Posner discussed the trait as the ability to be forward looking, but however it's phrased, people are looking for a leader that has a vision for the future and is able to communicate it in ways that are both challenging and reassuring.   So many times "leaders" spend time on everything but casting and communicating the vision.  If you're one of them, consider the results of this survey

• Empowers us / trusts us. (74.5%)

As a consultant, one of the things I hear from my client's personnel is that they want to be in a position where they can contribute and make a difference.  Very few people are content to show up at a cubicle each day, collect reams of data and issue a report that few people will read.  That life is death for most employees.  Effective leaders empower their employees to make a real difference.  Sure there could be some risk, but so what?  There is always risk.  As a leader, would you rather risk missing opportunities to make an impact on your organizations?  True leaders know they can't do it by themselves.

• Offer support and provide regular coaching (67.9%)

In most organizations and for most department heads (not I did not use the word Leader), the performance management process consists of a hastily prepared annual review which the manager then gets signed and submitted to Human Resources.  Whew!  Glad that's done!  Effective leaders understand that each day is an opportunity to provide meaningful feedback and enable employees to live up to their potential.  Waiting until the end of the performance year to Manage by Surprise is simply unacceptable.

• Keeping us informed of progress (55.4%)

No one likes to be kept in the dark.  Sometimes managers deliberately withhold information because they need to, but more often it's simply a matter of indifference or oversight.  They don't appreciate the importance of disseminating information on a timely basis.  Nature abhors a vacuum and in the absence of information employees will make their own conclusions.  Effective leaders communicate regularly and keep the employees apprised of progress.

• Manages performance fairly (49.1%)

Remember when you were in grade school and the teacher always called on Billy in the first row to go outside and clap the erasers?  Well, we hated favorites back then and we still do.  Most employees don't mind being judged, they only want to be judged fairly.  This means giving the criteria for performance before the beginning of the performance year and then reliably collecting information throughout the year.  It also means having realistic criteria to begin with.  Effective leaders use performance management as a way of reliably evaluating the strengths and development opportunities for each person in their group.  And they use it to provide frequent and fair feedback.

So there you have it, the Top 5 Qualities for a Shared Services Leader as described by the Shared Services & Outsourcing network. 

Finance Leadership: Creating a culture that supports open dialogue

Many years ago when I served in industry, I was part of a large team charged with the task of designing and delivering an ERP system to replace a number of legacy systems.  The project was enterprise-wide and, accordingly, incorporated talent from the business units and support staff.

There was one meeting in particular that has stuck with me over the years.  Many of us were in a conference room discussing the design and the various attributes the system should have.  It was a great discussion with many people contributing and the ideas flowing freely.  It was a great example of how collaboration across business and functional units should occur.  And then it happened.

One of the company's senior executives walked in.

The tone of the room changed instantly.  It was as if the room temperature dropped 10 degrees (fans of horror films will understand the implication).  The problem was that this particular executive had a reputation for undermining his people.  He would say one thing to you privately and when the political tide changed he would reprimand you publicly for doing exactly what he told you to do.  And the people learned very quickly that they should not take risks around him.

In the conference room, that's exactly what happened.  Everyone became quiet and only spoke when the executive asked them a direct question.  And even then it was just the facts and nothing but the facts.  No more creativity and no more ideas.

As you read this you might scoff and shake your head at such non-productive behavior, but my question to you is this:  If you're a leader in your Finance organization, what are you doing to encourage risk taking and idea generation?  Do you create a safe environment for your people to take risks?  Are you sure?

Effective leaders, whether they have the title of leader or not, are people who understand that they and their company can only succeed when the people around them are able to take calculated risks without the fear of failing.  That doesn't mean that there are never consequences for failing to meet expectations, but it does mean that people are safe to create and explore new ideas.  It the role of a leader to shape that culture.

What are you as a leader doing to create a culture where people are free to explore ideas?  What are you doing to stifle it?

Four Leadership Qualities Few Leaders Possess

Tony Schwartz has an interesting post over at Harvard Business Review titled The Four Capacities Every Great Leader Needs (And Very Few Have).Here's a summary of the four points:

1. Great leaders recognize strengths in us that we don't always yet fully see in ourselves.
2. Rather than simply trying to get more out of us, great leaders seek to understand and meet our needs, above all a compelling mission beyond our immediate self-interest, or theirs.
3. Great leaders take the time to clearly define what success looks like, and then empower and trust us to figure out the best way to achieve it.
4. The best of all leaders — a tiny fraction — have the capacity to embrace their own opposites, most notably vulnerability alongside strength, and confidence balanced by humility.

If you're a leader in your Finance organization, how do you score on these four points?  In my experience, most leaders are weakest on point 4.  For all the talk of diversity, I've met relatively few leaders that really seek out alternate opinions and encourge debate.  Far more likely is the leader who surrounds himself or herself with people who create an echo chamber, simply agreeing with the boss.  Of course, many people do this because it's the sane thing to do.  They live in a culture where debate isn't encouraged and could even be punished.

So, as a leader in your organization, what are you doing to encourage debate?  How do you let people know that it's safe to discuss ideas?  And how do you nurture and cultivate ideas that are generated through this process?

Deciding on the Composition of the Shared Services leadership team

When forming a Shared Services Organization (SSO), it's essential to create a governance structure that provides oversight and guidance to the new organization.  Part of that governance structure is the Steering Committee which has overall responsibility for ensuring that the SSO fulfills its mission and is properly funded.

In creating an effective Steering Committee, the composition of that Committee is extremely important.  It's essential that all major stakeholder groups have representation of the Committee.

• Senior customer representatives. From the beginning, an SSO should be a partnership between the SSO and the customers it serves.  This means that the Committee should have senior representatives from the major lines of business.  A good rule of thumb is that if you view the business as a reportable segment for SEC reporting purposes, or if your internal management reports segment the business a particular way, then a senior representative from the operations of that segment should have representation.
• Leaders of key functions in the shared services.  If the SSO focuses on a single discipline such as Finance, than a leader from that group should represent them on the Committee.  It's becoming more prevalent to have a multi-function SSO, so a representative from each group, such as Finance, HR and Procurement should have representation.
• IT.  Whether an SSO is regional or global, IT plays a critical role in supporting the processes of the SSO.  It's essential that IT initiatives support the broader business initiatives.  Representation on the SSO Steering Committee will enable tight integration between the evolution of the SSO and its ability to support that evolution with existing and future IT investments.

Through all of this, the representatives on the Committee must have the organizational and moral authority to lead the SSO and to ensure that it is properly funded and staffed.  When this occurs, the SSO will have the governance structure needed to fulfill its mission and to continue adding value throughout its existence.

Where should the Shared Service Organization reside in a company?

A common question that I get in my consulting work revolves around the governance structure of Shared Services, specifically the issue of organizational reporting and accountability for the Shared Service Organization.  Essentially it boils down to: To whom should the Shared Service Organization (SSO) report?

The answer isn't as clear cut as it once was.  Companies continue to leverage their investment and knowledge in Shared Service to migrate additional services to the SSO.  And many of these functions and activities are outside of the traditional domains of Finance, IT and HR.  If an SSO handles a large number of operational activities, say direct materials purchasing and transportation scheduling, it might make sense to have the SSO report to the COO.

For the purpose of this post, however, I'll cover an SSO that focuses on the traditional functions of Finance, IT and HR.  In this case, the question is still relevant.  What is the right level within the organization and to whom should the SSO report?  I'll come right out and say that I believe it should be the CFO.  Not every company agrees.  I've had clients where the SSO reported to a lower position, such as a Corporate Controller or the Chief Accounting Officer.  The argument, either made explicitly or implicitly, is that the SSO primarily handles transactional, and tactical, activities such as accounts payable processing.

While I wouldn't argue that A/P processing is strategic in nature, I believe that argument misses the bigger point that how a company chooses to deliver services domestically and globally is a much more strategic decision. A comprehensive strategy that addresses global delivery capabilities and that aligns with corporate strategy is very much a concern of the CFO.  For that reason, the Director of the Shared Service Organization should report to the CFO.  Add to the fact that in many organizations the CFO has direct responsibility over IT and other administrative functions, and it makes sense that the CFO is the logical choice to oversee a company's Shared Services Organization.

Success factors in Finance & Accounting Outsourcing

FAO Research, an independent research firm focused exclusively on the FAO and procurement outsourcing markets, has put together a list of criteria that companies have used to achieve success in their Finance & Accounting outsourcing models:

Working with a Sourcing Advisor Upfront: Four of 10 nominees for our 2008 FAO Awards involved sourcing advisors’ guidance that enabled the prospective customers to have a methodology and processes in place that could lead to successful provider selection, and contract, and manage expectations. 

Effectively Creating and Demonstrating a Future State: Customers with an FAO 2.0 mindset upfront understand that their engagement is being initiated for more than pure cost-cutting reasons, and that a focus on FAO could help them achieve long-term goals as opposed to short-term wins. 

Multiple Supplier Service Delivery Locations: The geographic diversity of FAO service providers’ delivery centers is of extreme importance to FAO customers, as they understand that having access to similar cultures and language skills as their employees and customers as well as having different cost options and geopolitical risk spreading are critical factors for their long-term, global business successes. 

Industry Expertise: Companies that aim to achieve FAO adoption seek to align themselves with service providers who have “been there, done that” with peers in their industry.  Process knowledge and technical expertise requirements differ by industry, as do the drivers and inhibitors for business success in each industry. Innovative companies understand that and aim to leverage the industry acumen of their suppliers to achieve long-term contract success.  

Senior Management Involvement in the Project Upfront and Throughout: Every successful implementation and FAO engagement involves the buy-in and direct involvement of senior management at the start of the project. 

Single, Dedicated Point of Contact: Since outsourcing is a services business based on relationships, single points of accountability are crucial to manage the many parties involved in ensuring contract success, including transition managers, governance leaders, administrative personnel, and the like. 

Introduction of Flexibility into Service Delivery: Adding a component of variabiliy accommodate evolving business requirements, seasonal fluctuations, etc. 

Previous Business Relationship:  It’s helpful to know the company you are working with from your previous relations with them, but it’s not always imperative.  

Establishing FAO Objectives Upfront: These may include cost saving targets, accomplishments desired, or some other types of quantifiable measures so that you can have realistic goals to achieve and also benchmark against after you embark on the FAO endeavor. 

For F&A Outsourcing to be successful, clients need to have well established goals in mind that include more than cost-cutting.  As important as that is, the choice of an F&O outsourcing provider must be part of an overall strategy to deliver finance services globally.