SHARED SERVICESThe fundamentals you need to know

Shared services organizations can help your company achieve big savings and create significant efficiencies.

But the right implementation is critical for success.

Shared services organizations (SSOs) are internal corporate centers that provide centralized administration and management services for the general operation of a business. An SSO puts core business functions under one roof. Centralizing human resources, finance, accounting, procurement, and information technology can drive business efficiencies and reduce costs. It can also minimize the risk of potential errors that occur with far-flung back-office functions.

Large, global companies that implement shared services can reduce costs to the tune of hundreds of millions of dollars. Companies of all sizes may glean costs savings from new efficiencies and flexibility and reductions in headcount, salaries and other administrative expenses. A shared services center should achieve a 40 percent savings on functional costs from the outset. That’s an incredible value: Consider that one dollar of revenue is worth 10 cents on the bottom line, while one dollar of cost savings is worth one dollar on the bottom line.

What are shared services organizations?

If your SSO is reaping less than 40% in savings, it’s time toinvestigate and troubleshoot problems.

Best practices for shared servicesThe process of creating and implementing an SSO is not intuitive. Keep the following in mind:

Lift and shift. You don’t have to standardize your business processes before centralizing in a common location. This will merely slow you down. Instead, centralize and then standardize, otherwise known as lift and shift: First lift people, processes, hardware and software from one location to your new center. Once in place, shift to standardize and automate processes to make them more efficient.

Know your company from the inside out. If you don’t fully understand how processes and procedures tick in your current organization, moving to a new location could disrupt workflow or otherwise negatively impact operations. Before implementing shared services, do a detailed analysis to understand and document the state of current processes.

Consider locations near and far. Many U.S. companies believe that labor arbitrage, or offshoring to lower-priced markets, will automatically create savings. This is not necessarily true. Cultural and social dynamics, labor law discrepancies and geographic variances in the definition of full-time equivalent, could cause unexpected costs. In fact, it may be cheaper and more beneficial to keep these jobs in the U.S.

Shared services mean big potential.

Caroline Perez is National Director of Shared Services at SolomonEdwards. She helps clients reduce costs and increase efficiencies by designing, implementing and maintaining effective shared services organizations.

$1 of revenue is worth 10¢ on the bottom line, while $1 of cost savings is worth $1 on the bottom line.

Take charge. Appoint a shared services committee to “own” the SSO and include representatives from each function as well as leaders from operations. This board will set goals, establish the SSO and ensure ongoing governance and compliance. The leadership committee will also monitor Key Performance Indicators (KPIs) on a monthly basis. Centers should measure cost, efficiency and other sensitive data points. They should also provide a high level of service to internal customers, and ongoing communication between shared services and business units.

Mind the gaps. Do a gap analysis between your current-state process and desired future-state process to identify when process changes may create risk. Go beyond the books. During the discovery process, interview both leaders and personnel who are actually doing work on the ground. This can uncover miscommunication, duplicate or unnecessary work, and other unknown business-sensitive dependencies. Draw up a business case based upon risk analysis.

Go for the quick wins. Once you have done a thorough analysis showing what you are doing and what you can do better, determine how the SSO can show immediate returns. Although SSOs mature at varying speeds and ROI doesn’t happen overnight, the gap analysis will identify low-hanging fruit. For example, if you see senior managers performing lower-level functions, or working in areas outside of their area of expertise, quickly redirect them so they can focus on what they do best.

Find the right support. Consider retaining an outside expert with the technical expertise and systems knowledge – someone who has been there and done it – to help you navigate this multifaceted process. They can benchmark back office support functions against best practice service models; help you determine a model that meets your ROI objectives; design KPIs to measure savings in terms of efficiency, effectiveness and cost; and implement an optimal plan that works for your business.

For more information about Shared Services, contact:Caroline Perez, Director O: 713.960.8880 | C: 832.941.9074cperez@solomonedwards.com

SolomonEdwards is a national professional services firm that helps public and private companies by providing subject matter experts for their complex business situations, applying proven project delivery models, and designing custom solutions. Based on business’ six key challenges, we help organizations take their strategies from the boardroom to execute their projects on-time, on budget and with the expected results in the areas of Accounting & Finance, Business Transformation, Governance & Regulatory Compliance and Transaction Regulatory Advisory Services. Whether it’s assessing how a new regulation will impact your business or creating a project plan for a new implementation across the organization, our consultants have hands-on experience, enabling them

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