low-cost or value-adding - how do shared services truly stand out

8/14/2019 Low-Cost or Value-Adding - How do Shared Services Truly Stand Out

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Low-Cost or Value-Adding? How do Shared ServicesTruly Stand Out?

By: Jo HartDirector of Business Support ServicesAlliance & Leicester( Issue Details: Volume 10, Issue 12, March 2008).

Most successful organizations have clearly articulated strategies and businessmodels in terms of their customer service proposition. A clear, defined approach isnot always evident in the way organizations source and deliver internal supportservices. Options range from insourced, onshore models, to outsourced, offshoremodels, with most organizations choosing one strategy or the other.

I have long believed that there is a third way, a middle ground to the varioussourcing options, which delivers financial benefits, an improved customer

experience and exciting opportunities for internal staff to fulfil their careerambitions.

To launch this proposition, two factors are vital: Firstly, there has to be a leader of the function who passionately believes that shared services will make a materialdifference to the overall performance of the organization. This person will not onlychampion the cause but will, as for any business unit, develop a sustainablebusiness solution with a time horizon of several years. The experience,competency and entrepreneurial outlook of this leader needs to dovetailseamlessly with the second essential element: iron commitment and visiblesupport from the corporate executive team. The most senior business unitexecutives, from the CEO down, must not just want this to succeed, they need to

truly believe it will succeed, and must be able to articulate the benefits to theorganization.

Having established these prerequisites, the organization needs to agree, quicklyand clearly, the scale and scope of the work the shared service function is goingto be responsible for. At the outset this may be single- or multi-functional, andwill typically include finance. There are a number of other key elements tocreating and delivering a successful shared services model, but in this article I amgoing to focus on the specific elements that I believe create real economic valuefor the organization.

Organizational Structure

Whilst SSCs are rarely profit centers they should behave with a strongcommercial bias, optimizing corporate resources. As a leader, I have alwaysencouraged my team to think of the shared services center as a small to mediumsized company that needs an executive board to lead and manage effectively.This board should have a CEO, a finance director, an operations director, acustomer services director, an HR director and a business development director.But the right structure is only part of the success. Recruiting the right people intothese roles, and moulding them into a high performing leadership team, is farmore important. The team also needs to create and communicate a vision, amission and values to the business: where is it going? How will it get there?These are essential elements for success.


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Back in 1997, I joined the internal shared services center of Arthur Andersen inthe U.K. The performance of this internal operation was not what you would haveexpected from such a prestigious organization. In fact, it was in dire distress,having seriously broken down in terms of processes, people and elements of itstechnology systems.

How bad the situation had become is best illustrated by the CEOs commentswhen I took the rescue plan to the board: Nobody doubts the need to takedecisive action, or indeed the need to invest. The big question is whether thepatient is so sick they will die on the operating table, however skilful the surgeonmay be! After a further review, the board decided to accept the plan, agree thepatient was strong enough to survive, and nominated me surgeon! It is a matterof public record that their judgement was correct. Over the next four years, thecenter grew from supporting 5,000 customers in the U.K. to supporting 40,000customers across 60 countries on all five continents.

Not everything went as planned. We did start with the two elements I highlighted

above: a corporate executive team committed to owning and supporting theventure and a leader passionate about making a real difference and creatingvalue.

Case Study: Arthur Andersen

Once given the go-ahead, I moved quickly to establish the organizationalstructure and appoint the appropriate people into that structure, with clear linesof responsibility and accountability, and with defined objectives. We invested timein creating high performing teams, in developing like-minded thinking, and inestablishing the rules as well as the messages for our teams and the business.

Vision: To provide excellent business services which add value to our customers.

Mission: We will provide shared services to EMEIA, partnering with the practiceand enabling the businesses to exceed their clients expectations. We take pridein being a Center of Excellence, achieving best practice through people,technology and processes.

o Values o Customer Focus o Investment in People o Co-operation and Teamwork o Excellence o Responsibility and Accountability o Openness and Honesty

We engaged all SSC staff in agreeing the values and made it clear these were thevalues of the function, not personal values we were imposing on our people.

The other clear message I wanted to convey were that this was a long-term,sustainable solution explicitly aimed at creating value and improving the customerexperience; but we were not setting ourselves up to become the lowest costsupplier.


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Investing in Success: The root cause of the problems in the old shared servicescenter had been a lack of investment in people, processes, technology andmanagement. The rescue plan now provided me with some capital to invest and Iused this in three significant areas:

People: There had been an absence of customer service in the old center; notbecause we had bad people, but because we had never trained them or providedmanagement support on what good service should look like and why we shouldprovide it. We now launched four customer service and people developmentmodules that we rolled out to everyone in the center, simultaneously reinforcingthe first two of our values (Customer Focus and Investment in People).

Processes: Existing processes were difficult to follow as they were not aligned toa single common policy across the group. Virtually all transactions were recordedon paper and, once approved, sent to the service center for data entry. Thecenter had become a huge typing pool, trying to support ill-defined processes andout-of-policy customer behaviors.

Technology: Technology represented a quick win and the fastest route to visiblechange and improvement for our customers. It was abundantly clear to me thatwe had to eliminate all non value-adding activity from the center (most of whatwe did!) and automate data entry, thus moving it from the users workstations tothe central systems without manual intervention. We established somefundamental principles for our technology investment and identified theconstraints.

Principles:

o Right first time o Data validated at source o Data only entered once o Minimize manual intervention o Low build costs, minimal maintenance and support costs

Constraints:

o All data had to be entered into the global mainframe system in Chicago. o The U.K. IT infrastructure was good (for 1997) but had limitations (bandwidth

and resilience)

Three months later we incorporated three bespoke applications written in LotusNotes Databases or Visual Basic that sat on every member of staffs workstationand supported the most heavy-duty elements of data entry. This was not anovernight success for everyone, and was hard work, but we succeeded massivelyin delivering our principles and improving the experience of both users and SSCstaff.

Moving Up the Value Chain

Very quickly, we had transformed the operation and eliminated large volumes of data entry. As a result, we had excess capacity in the SSC and had to downsize.

Whilst this was a difficult experience, other dynamics were also going on in thecenter.


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The strategy of investing in people, processes and technology was presenting newvalue-adding opportunities. Along with the improved customer service culture itwas clear that the operation needed a front of office desk with greater customerservice competencies to deal efficiently with customer complaints and queries. Inaddition, staff from the center who had worked on the new processes andapplications had developed new skills and knowledge that made them processexperts in the organization, not just in the Centers of Excellence. They now hadproject and change management experience that was transferrable to other areasof service delivery ripe for improvement; and they were thirsty for change formanaging, supporting, and even driving change in other areas of theorganization.

At this stage we also had to make a major decision: either to bank the savingsgained by eliminating the work (i.e., make substantial redundancies) or invest thesavings in future value-adding activities across the group.

The SSCs service offering had evolved to adding value, with a clear distinction

between the Operational Teams, the Customer Service Teams and the Centers of Excellence. The latter were providing an internal consultancy service to the groupby driving the continuous improvement agenda and acting as agents of change.Almost exclusively, these teams comprised exactly the same staff who had beenpart of the original distressed operation but who now possessed newly-foundskills. As individuals, they had developed way beyond their original expectationsand, because they were home grown talent with little or no formalqualifications, were contributing significantly more for less money than anexternal counterpart would have cost. This value-adding component took time tonurture but was one of the most satisfying elements of the program.

The Corporate Executive Team decided to continue investing in the SSC whichnow had the remit to identify value-adding opportunities across the group.

At this point we really started expanding on many fronts:

Geographically: The existing automated services provided for the U.K. were nowoffered as a fully managed service to other countries across EMEIA. What startedas an acorn rapidly grew into an oak tree. At the time of the demise of Andersen,the U.K. SSC was providing fully managed services to 40,000 users across 60countries. Staff from the U.K. SSC who had become process experts weredeployed to visit these countries, undertake due diligence, assess their readinessfor change, and then actively manage the migration.

New Services: The U.K. SSC which had previously been focused only on financeservices now added HR services to its scope. This required recruiting some newfunctional competencies but was predominately covered by retraining existingstaff.

Customer Service: The front of office team was now operating with a singlepoint of contact and an effective IVR system. A customer contact managementsystem was used to record, track, monitor and report all customer calls. The datawas used to analyze customer problems and produce monthly action plans basedon feedback captured during the contact. Monthly customer satisfaction scoreswere published on our intranet. We now had our rifle sights, and not a

blunderbuss, on the business needs.


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Middle Office Services: Some of the activities previously performed in thebusiness units and regarded as being more skilled, or business generation focused, were reviewed to assess the benefits of consolidating within the SSC. Asa result, a number of new activities were migrated to the SSC. For example, allset ups and changes to client data was moved from the country to the SSC toensure better business control and improved consistency for managementreporting. (Incidentally: This was contrary to other migrations and automatingactivity as it required a specific and additional manual intervention to applyknowledge, consistency and judgement to the process.)

Exporting Experience: One of the regional SSCs in the Nordics did not have thecritical mass to justify expensive dedicated senior management, but by secondingmyself three days a fortnight, I was able to share the solutions of the U.K. After12 months, the Nordic operation was being supported almost exclusively by theU.K. team and the subsequent decision to close the center in Oslo and move thework to the U.K. was affected with the minimum of disruption and cost. An annualsaving of 500K was achieved.

I was able to replicate these lessons in other organizations, most recently at BAA.There, the SSC, located in the West of Scotland, developed value adding activitiesvia three main strategies:

1. Increased scope of existing financial servicesThe service offering of the finance SSC was increased when the followingactivities were added:

o Group consolidation accounting o Group statutory accounting o Tax compliance o Fixed asset accounting o Business unit management accounting and reporting o Treasury and cash flow forecasting

The necessary increase in headcount resulted in the recruitment of qualified andpart-qualified accountants, changing the cultural and working environment withinthe SSC.

2. Creation of a new functional shared serviceThe decision to create an HR shared services offering resulted in the Glasgowoperation expanding significantly to accommodate this. The headcount in the HRSSC rose to some 100 staff, and resulted in recruiting qualified and experiencedHR professionals.

3. Move into middle office.The front of office (helpdesk) team identified an opportunity to leverage itspeople skills and telephony platform to consolidate activities being performed inseven separate locations across the U.K. The groups engineering fault reportingand scheduling of all reactive and planned preventative maintenance wasconsolidated into the SSC operation. Having demonstrated significant cost savingsand quality improvements, the team focused on the groups contact withpassengers and airport users. The airport-based help lines were all migrated tothe SSC again creating material cost savings and quality improvements.Business managers were now also able to receive reliable managementinformation, for the first time consolidated at company level.


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The net effect of these consolidations was to increase the headcount in the SSCfrom 125 to 300 over the two years of migration, whilst saving the group at net4.3m per annum.

Lessons Learned

If I had my time again I would give greater consideration to the early structuredinvolvement of a governance group. In fast moving environments where thecorporate executive has stated its objectives, it is all too easy to get totallyfocused on executing the changes. There is a positive aspect to this in terms of results delivered quickly, but sometimes a particular customer group may initiallybe less than supportive of the changes. In my experience, particularly atAndersens, this was overcome by the technical competence and relationshipmanagement skills of the Business Development Team and the credibility andexperience of the SSC Leadership Team. Real engagement (and therein often liesthe problem; but that is a whole separate subject) from senior managementrecognizing their responsibilities would have eased some of the paths.

So, What Does Great Look Like?

For me, success occurs where a true partnership is created between the businesscustomers and the shared services providers. I have witnessed such successmany times, but it does truly require the alignment of business leadership,culture and SSC delivery teams in an integrated solution that focuses on valuecreation, not solely cost reduction, to deliver business support.

Summary

The insource vs outsource, onshore vs off-shore debate will continue, no doubt, ina healthy tension. I firmly believe that both have a place and that it is theresponsibility of the organization to determine the appropriate model. Thisdecision can, and should, be heavily influenced by a shared services leader whopresents a compelling case to deliver a captive, onshore service that adds valueto the organization by moving from a low value commodity product, to a highvalue service.

Its up to you! Stand still with a low value, date entry, commodity, in a relativelyhigh cost labor market and I can only see one inevitable outcome. Be prepared tobe off-shored, and probably oursourced, to a low cost location.

Trying to differentiate yourself as a shared services provider for transactionsprocessing and data entry is likely to result in disappointment. Your errors will benoted but very, very rarely will you be recognized for getting it right. I amcertainly in this camp as a customer: in my career, I have received in excess of 300 monthly salary payments and never once phoned to thank my payrolldepartment for getting the right amount, into the right account, on the right day!Get one element wrong, though, and theyll hear from me very quickly.

Positive differentiation comes from offering great customer service that addsvalue to the user through a positive experience, and adds value to the corporatethrough reducedthough not lowestcost, improved quality and businesscontrol. That is a sustainable solution.

It also creates a fun place to work.


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Jo Hart is a qualified Chartered Accountant who spent eight years in the profession before leaving to undertake a number of roles, firstly as a financemanager, and more latterly as a general manager in an executive role. He has 18

years involvement with creating, managing, leading, growing and even closingshared services centers. His original roles were exclusively focused on providingfinance services but this soon broadened to include HR. More recently, hemanaged multi-functional services offering contact centers, procurement and facilities management services. Previous roles included BAA and Arthur Andersen.

Copyright 2008 SSON. All Rights Reserved.

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low-cost or value-adding - how do shared services truly stand out

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