CHALLENGES OF SHARED SERVICES IMPLEMENTATION

УДК 65.014

Виноградова Г.В., студентка 4 курсу
ХНЕУ ім. С. Кузнеця

Abstract: Given article provides the overview on global trends in the implementation of shared services all around the globe. The main reasons for companies to create shared service centers and performance challenges after their introduction are described. After the analysis of global experience of shared services implementation, some recommendations on overcoming and minimization of possible risks are listed.

Key words: shared services, organizational structure, shared service center, performance challenges, reorganization.

Анотація: У даній статті описано глобальні тенденції щодо впровадження спільних сервісів серед провідних міжнаціональних компаній світу. Головні причини для створення центрів спільного обслуговування та можливі ризики, пов’язані з їхнім впровадженням були розглянуті та проаналізовані. У результаті аналізу світового досвіду щодо створення центрів спільного обслуговування, рекомендації було запропоновано.

Ключові слова: організаційна структура, центр спільного обслуговування, спільні сервіси, реорганізація.

Shared services implementation is considered one of the most effective method of organizational structure development, which can help company to achieve 30% of cost savings [1] and improve quality of service provided. Now more than 75% [2] of Fortune 500 companies have shared service centers (SSC) introduced for business support activities.

The aim of given work is to analyze possible risks companies face when implementing shared services. As it is important for companies to achieve aims set, the influence of these challenges on the performance of shared service centers should be defined.

Shared service center is the business unit providing one or several functions for internal customers of the company. Mainly SSCs are created by global companies, which have lots of international subsidiaries. In this case the main goal of such a center is to minimize duplication of efforts, increase the time business units spend on core processes and improve communication between subsidiaries and headquarters.

Mainly companies share non-core functions, which can be automated and don’t require tight contact between business units/subsidiaries. According to the survey conducted by Deloitte [3] among 330 respondents from different industries, finance is considered as the most popular function for SSC, having 88% of all interviewed companies provided accounting in such a way. Among popular functions there are also human resources management and informational technologies.

When implementing shared services, companies firstly expect cost saving and quality improvement. But in the reality a lot of shared service centers show negative dynamics of productivity indicators, generating spending. The main reason for this is high probability of mistakes and challenges appearing during implementation process, which directly influence overall company performance.

One of the first risk connected with SSC creation is location dilemma. Decision on the possible location of shared service center starts with the understanding, weather company subsidiaries situated in culturally different regions or similar ones. Depending on scope of possible mismatch in services provided, decision on multiple SSC or single one arises. According to the research of Buck Consultants international [4], among key factors for decision making there are languages to be supported, scope of processes dependent on language, difference of processes organization and time differences. Multiple SSCs strategy also allows companies to use full variety of benefits from SSCs offshoring, nearshoring and onshoring. Wrong location strategy chosen can increase connected costs and negatively influence the quality of services provided. That is why, when choosing location company should consider not only cost factors, but also quality and risks [4] connected with chosen location.

Understanding of other implementation challenges arises from the detailed analysis of main targets and chances for company, which introduces shared services. All factors listed above can be formulated as two main goals:

  • economies of scale reached by providing services to several business units from the one point. The main goal of the unit is to increase efficiency and internal/external customer satisfaction;
  • specialized, professional and process-focused activity provided, which is aimed on resources release for core activities, and involves less resources for performing its own main task.

Respectively, when measuring the performance of shared services implemented, cost of this implementation, cost saved after the implementation, level of internal customer satisfaction and increase of effectiveness of service should be considered [5]. Considering the main motives underlined above, several indicators of unsuccessfully shared services could be described:

  1. Poor quality of services provided, insufficient processes of standardization

Among the possible reasons of low-quality services, initial planning mistakes can be considered. When designing the future system of shared services, the initial structure is analyzed, splatted into separate activities and transformed into Service Partnership agreements. When they are unclear, with processes missed and poor distribution of responsibilities, the expectations of internal customers could not be met. When considering multicultural companies, providing centralized shared services to subsidiaries abroad, standardization is not always possible due to different market conditions of company’s business units. Quality of services provided also depends on communication between business units and perception of shared services by company’s employees.

  1. High staff turnover, ineffective collaboration of SSC and company business units.

Restructuring process itself involves downsizing, which demotivates employees. On the other hand, company business units luck trust of quality of shared services, making communication ineffective. Additionally, employees of newly developed structures may lack additional training and don’t really understand their functions.

  1. A lot of retained organizational units, duplication of efforts

Lack of trust also force employees to perform shared services tasks on places. When communication plans with internal customers are not detailed and difficult to implement, efforts are duplicated, bringing complexity to administration structure. It becomes difficult to be managed, thus involving more costs.

  1. High costs of running these services

Economies of scale are not met. As it was already mentioned, location plays the significant role in the effectiveness of shared services provided. When it was chosen not in the best way, costs involved can be higher than possible gains from location (cheap labor costs, raw materials, production). In such a case, the risk of constant relocation of shared services center increase, involving more costs.

In order to minimize or avoid listed risks, company can perform list of pro-active actions. The most important one is conduct detailed implementation plan long before the creation of SSC. Another plan important to be conducted is communication one. It should contain information about responsibilities, points of influence and main tasks of each involved party. Company should establish baseline in terms of current costs, customer service, together with explanation what is currently done and what should to be done. Right metrics for estimation of future results should be chosen in the very beginning.

So shared services are effective tool for increasing of company efficiency and minimization of costs involved. They are globally implemented and developed. But not all shared service centers created by company are as effective as it was expected. The main reason is high level of implementation process complexity. It is important for company to plan all the processes involved long before real center creation. It will allow organization to avoid such risks as ineffective communication, duplication of responsibilities and decreasing of service quality.