CUSTOMER OR PARTNER? THE ROLE OF THE BUSINESS UNITS IN SHARED SERVICES

Global Finance 360 | Copyright 2011 | All Rights Reserved 1

Global Finance 360

In developing the framework for shared services in an organization, there are different approaches to how the business units should be viewed. Some organizations view the business units as customers while other companies view the business units more as partners in a journey. How the Shared Service Organization views the business units will impact their relationship with the business units and the way they chose to deliver services. A Customer-centric perspective As customers, the recipients of services have the opportunity to decide if the services they are receiving are worth the price they are paying. They can continue their relationship with the service center or they can go outside the company to obtain the services if they are better or cheaper. From the Center's perspective, they are competing against numerous choices in the market and they need to be better, faster and cheaper than the competition. From the customer perspective, here are some questions for the Shared Service Organization to consider: • What services are you providing to the business units?

• What is the pricing model for your services? Will it be based on transaction volume or on a static driver such as the number of FTE’s in the business units?

• How will the Shared Service Organization monitor its delivery levels to ensure the business units continued satisfaction?

• How will the Shared Service Organization continuously monitor its costs to remain competitive with outside service providers?

• What is your promised response time for requests? How will it be measured? How will people be held accountable?

• What new and innovative services will the Shared Service Organization develop to enhance service delivery capabilities?

SHARED SERVICES RELATIONSH A Partner-centric Perspective As partners, the recipients have a great deal more influence in how services are delivered. They help shape the service level agreements that govern the behavior of both parties. They are actively engaged with the Shared Service Organization to craft delivery capabilities and cost structures that will enable the business units to remain competitive. They are not as concerned with comparing the Shared Service Organization to outside suppliers, although they are mindful of what the market is providing and the cost for providing those services.

Author: Stephen G. Lynch

“The most

successful shared

service

organizations are

the ones who

constantly strive for

solid service

delivery and a

competitive cost

structure, while

simultaneously

partnering with the

business units to

create a mutually

beneficial solution.”

Global Finance 360 | Copyright 2011 | All Rights Reserved 2

About Global Finance 360

Global Finance 360 covers the world of corporate finance and accounting and how these activities are impacted by globalization. Focus areas include Finance Delivery Strategy, Shared Services, Business Process Outsourcing, Process Improvement and Organizational Design.

Global Finance 360 is run by Steve Lynch. Mr. Lynch is a Principal in the Finance Transformation practice of a global consulting company. He is responsible for the marketing, sales and delivery of Finance Transformation services in North America and serves as a key liaison for his company’s global Finance practice. He brings more than 15 years of experience advising global companies on their service delivery strategies and has served over 60 clients in a variety of industries including consumer product and industrial manufacturing, aerospace & defense, transportation, technology, entertainment and financial services. He has also served as a Controller in private industry and as an auditor in public accounting.

Mr. Lynch is an active content contributor on the topics of Finance Transformation and globalization and has presented at various forums including the IQPC Shared Services & Outsourcing conference. He can be found on the web at www.globalfinance360.com.

Contact Information:

Steve Lynch

Toll-free: +1.800.216.2512

Office: +1.719.481.2599 1042 W. Baptist Road Suite 194 Colorado Springs, CO 80921

slynch@globalfinance360.com www.globalfinance360.com

From the partner perspective, here are some questions to consider: • What will be the governance structure of the Shared Service Organization? How will the business units be represented?

• How will processes be governed? Who decides on the corporate standard for processes?

• How will service level agreements be structured? Who determines the response times and what are the penalties for not meeting them?

• What feedback mechanism will exist to provide the basis for continuous improvement?

• How is joint accountability created to ensure that all parties are satisfied with the continuing delivery of services?

Customer or Partner? So which is it: Customer or Partner? The choice is a false dichotomy. The truth is that it's both. It benefits the company overall when the shared service organization and the business units it supports work together to create the right delivery and pricing model. It works more efficiently when there is on-going dialogue between the parties to ensure that any issues that crop up are solved quickly and that the long-term direction of the service organization is in line with the strategic goals of the business. A key point in maintaining on-going dialogue between the business units and shared services is to establish a governance council that ensures the representation and participation of the business units. By participating in the shared services governance council, the business ensures that shared services is not just another word for corporate consolidation and bureaucracy. It gives the business units a real voice in which services are offered and at what price, how response times are established and monitored, how issues between the Shared Service Organization and the business are resolved, and how the SSO will evolve over time to meet the needs of the business. Although the business units are certainly partners in the shared services model, it's important for the Shared Service Organization to never lose sight of the fact that the business units are in fact paying for the services and that they deserve to have the best service for the lowest possible price. To approach it otherwise would be to regress to a bureaucratic mentality that was supposed to be eliminated through the move to shared services. Specifically, this means that shared services must be committed to performing according to the standards established in the Service Level Agreement. Issues raised by the business units must be addressed and resolved promptly. Additionally, shared services must always be mindful that they are competing with a number of 3rd party providers that deliver the same services. If shared services can’t provide a quality service at a competitive price, the company should take a look at outsourcing those activities. It is this mindset that should motivate shared services to continuously improve its delivery capabilities to provide the best services at the lowest possible cost to the business units. The most successful shared service organizations are the ones who constantly strive for solid service delivery and a competitive cost structure, while simultaneously partnering with the business units to create a mutually beneficial solution.