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05.08.03

By APQC (American Productivity & Quality Center)

Evaluating a move to a shared services center is as important as the move itself. With dozens of business units, strategies, and customer expectations to consider, the period of evaluating a move to shared services becomes integral to the overall success of the entire organization.

Proper evaluation ensures that the organization has deliberately analyzed the efficiency and effectiveness of each of the business units slated to rest under the shared services umbrella.

A shared service involves the provision of commonly used services by a single organizational entity for two or more business units. It is the term used for the standardization, re-engineering, and consolidation of a non-core function within a company. A shared services center allows an organization to remove duplicated processes (such as accounting, information technology, and human resources) within the organization and bring them together into one central unit. With this centralization comes the standardization of processes and the re-engineering of work aimed at achieving world-class service for customers.



The first step in evaluating a move to shared services is to determine the core processes and functions of the business--those processes that give the company a competitive advantage. These are typically processes in operations, the supply chain, and research and development, to name a few.

“Maintenance could be a core process to an airline whose safety record is critical to its public image,” said Christine Blagg, director of APQC’s Custom Solutions Group. “A company has to ask itself questions like: What are we known for in the market? What sets us apart from our competition? What is the source of our company pride and history? The answers to these questions should lead to the core processes.”

After determining what the core processes are, the organization should examine the processes or functions considered critical but non-core. These are the processes that, while not as crucial as core function, are still vital to the health of a company. Examining each non-core process individually, the organization must conclude if resources are being used effectively.

Shared services can be a vehicle to take better advantage of talented, but limited, resources, but if the non-core processes are not operated efficiently and effectively, the business cannot survive. The core functions of an organization cannot survive without the support mechanisms that are considered non-core.

After examining each of the non-core functions, the organization should decide which of those processes might better operate in a shared services environment. Several factors should be weighed before making a final decision, including:

Determine the scope of the project. Geography, the business units under consideration, and the processes or functions under consideration can all make the project more complex. A pilot with a few business units or functions might be practical at first.

Determine the facilities and the location. Will this shared service be housed in an existing location? Will it be near the necessary internal customers? Will it be in the organization’s home city?

How do you communicate the evaluation? In order for all involved parties to be on the same page, communication through the entire process is critical.

How would you staff the center? Do you pool together internal resources? How do you hire for key positions? Who manages the shared services center?

After walking through these issues, re-examine the processes that might be evaluated. Re-evaluating whether or not the correct processes or functions were included is vital to the development of a shared services center.

After carefully examining all of the external factors, the next step is to actually perform the evaluation. After studying the costs and benefits of a shared services environment in your company, create a business case for moving to shared services. This business case should include, among other aspects: the cost of technology; training, recruiting, and retention of specialists; facility costs; moving costs; and establishing new, efficient processes. The length of an evaluation process varies depending upon the number of processes under consideration.

There are plenty of reasons to move to a shared services operation, but the key component is to better serve customers. This centralized center runs as a business, offering a competitive service at a competitive price to all customers. Lowering costs and raising service levels alone makes a strong case for moving to a shared services center, but the shared service center also allows the core business units to concentrate on developing and improving core activities and focus on external customers.

By adopting a shared services policy, companies have demonstrated typical savings in the 25-30 percent range, rising to 50 percent in some cases. “But equally important is the improvement in service to internal business units,” said Lisa Higgins, APQC’s chief operating officer. “Efficiently serving the customer is the driving reason to consider a shared services arrangement.”

Once a company decides to move to shared services, the best approach is to communicate openly with the work force. Employees will find out, and they are more willing to be supportive if they are included in the evaluation process. Five key components of a successful evaluation process are:

1. Make a decision to evaluate shared services at an executive level and communicate the decision and the timeframe for analysis. Also communicate the criteria upon which the decision will be made.

2. Focus on employees during the evaluation; change management is arguably the most critical component. Employees are valuable resources that have knowledge about the company.

3. Analyze the choices using a customer-focused mind-set--external and internal customers. Keep their needs foremost in your thinking and the decision process will be more focused, more professional, and more accepted.

4. Be fair. Collect quantitative as well as qualitative data. Look for trends and seek out industry-leading practices. Challenge yourself. What kind of help will you need to be successful? Help from internal customers? External customers? Outside providers? The employees themselves?

5. At the onset, develop a set of criteria by which the evaluation will be run. Ask the question: how will we know we conducted a thorough, fair evaluation? What criteria will we use to judge effort?


About the Author:
Visit APQC on the Web at http://www.apqc.org.

 
 


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