Shared Services – Should or Shouldn’t?
Over the years, most of the mid-sized and large corporations have grown inorganically through acquisition. When these acquisitions happened, they tried to assuage the feelings of the people in the acquired company by providing them autonomy to function. This has resulted in lack of standard practices across the organization and even larger organizations are not able to leverage the economies of large scale for the simple reason that the scale was not large enough. That is confusing right? What I am trying to say is that these corporations look bigger from outside, but essentially they function as a large group of smaller organizations. How will these companies have a better bargaining power with their suppliers when every division and location chose its own suppliers and made their own merchandizing decisions?
During tough times, like the one we are currently experiencing, this situation of lack of standard practices across organization presents a huge opportunity to the business to make the processes more efficient, reduce cost significantly, improve customer satisfaction and more importantly improve both top-line as well as bottom-line. Now, traditionally, the concept of shared services has been looked at as more of a cost reduction opportunity. But there has been a significant mind-shift in that though. Some matured organizations are looking at this as a means to drive better top-line.
For example, companies in the distribution industry have always had a bigger sales force. It is very obvious that there can be a significant cut in the sales force, but still produce the same, if not, better results, if. I am not talking about the productivity levels of the field staff. One closer look at how the sales people are spending their time will provide alarming findings. One study says that almost 60% of their bandwidth is spent on administrative tasks like helping the customers track their order, payments, etc. These can very well be carried out by a back office organization more efficiently. By creating a CRM shared service center, companies can reduce cost significantly by cutting down their sales force and/or increase sales since their sales force will have double the bandwidth to do business development and not get bogged down with the administrative tasks.
Though the outlook of executives has changed over the years on shared services, quite a few of them are still very conservative in their thought. They fear backlash from their employees the moment they talk about shared services. The companies need to relook at their communication strategy and see if they can convince their employees to look at shared services as a positive step. They need to be told that the company will not be able to do business in the same profitable manner, if they don’t take steps to cut down cost and increase revenue. Put these two options in front of them – do you want to impact a smaller percentage of the organization (from an employee base perspective) thru shared services and benefit the whole company Or continue as it is, which will result in negative growth, which in turn might result in head count reduction. The moment the employees see these two options in front of them, they will understand that shared services is a win-win for everybody
Another way of gaining support internally on shared services is by letting people from various levels and various divisions within the organization be involved in the decision making process. Put the ownership on this task force to identify those areas of business which can be brought under shared services. The decision on which functions go into shared services should not be decided by a select top executives sitting in a corporate conference room. Rather it should be a collaborative effort of various levels of people who should jointly decide with the corporate executives on what parts of their business functions should be brought under shared services. This way there is an ownership of this concept much beyond the corporate executives and the members of this task force will become the champions to sell this idea to the rest of the company
