The (Not So) Surprising Secret to Finding Shared Services Success

September 5, 2017

In an age of digital disruption, enterprise organizations are in a race to find the operational efficiencies that will enable them to invest in the future. As a result, many of them have once again turned to the creation of shared services organizations to reduce operational overhead and redeploy those resources toward more strategic efforts.

Enterprises create these centralized services organizations to provide a wide range of corporate services within HR, finance and IT to the organization’s business units. The logic is that they can gain significant resource efficiencies through centralization — but these hoped-for efficiencies are often difficult to realize, because despite serving similar functions, operational units within the various business units of an organization frequently operate in wildly divergent ways.

As they seek to establish shared services organizations, many enterprises choose to ignore these differences — and suffer the consequences, as a result. They are left scratching their head wondering why they have not realized efficiency gains and are unable to focus on more strategic and transformative efforts.

The Challenge with the Shared Services Promise

Almost as soon as the modern, multi-business-unit enterprise organization came into being, there was a push to create a shared services organization. On the surface, this move is entirely logical: centralize commonly used services and eliminate the need for inefficient, redundant functions across the organization.

But as organizations implement shared services organizations, they often find that the efficiency gains are not automatic. Instead, they discover that organizations organize and operate these ostensibly similar business functions very differently in their various business units.

In many cases, there is no good reason for the variances. If the organization acquired the business unit, the variances might be an artifact of legacy operational practices left over from a time in which the business unit operated independently. In some cases, the differences in operational practices are an echo of a need that once existed, but which has now simply become “the way things are done.”

In other cases, however, operational variances have a legitimate business purpose and either create competitive advantage directly or support some advantage-creating business process. The question and challenge for organizations creating a shared services organization is: which is which?

Deconstructing Shared Services Success

Understanding which operational variances create or support competitive advantage — and which don’t — is a critical capability in an era of digital transformation. Organizations that don’t pay attention to this distinction, or simply get it wrong, run the risk of undermining one of the critical outcomes of digital transformation: business-process-derived advantage

Sorting through business process variances amongst business units, however, can be an arduous task with little perceived benefit. As a result, many organizations instead choose to implement a simple, homogenized version of operating processes within their shared services organizations — and then are surprised that their constituent business units bristle and sometimes outright resist the centralization effort.

The shared services organizations, however, typically have no idea if the bristling is merely the result of changing long-standing — but otherwise inefficient — practices, or is because the standardization has threatened a significant competitive advantage or compliance requirement.

Distinguishing between needed variance and mere inefficiency is critical as organizations execute a shared services initiative – particularly when dealing with multiple global geographies, as is now often the case. As a result, it is imperative that they deconstruct the operating practices of their target business units and operational functions before attempting to merge them into a shared services function.

The Intellyx Take

Such a deconstruction will take the organization beyond managing processes “on paper” and expose how the underlying business processes work in practice. This exposure of the actual operating practices and how they interconnect with other business processes enables the implementation team to understand which variances create value for the organization.

The power of this deconstruction should be readily apparent, but many organizations have not attempted such a deconstruction, because of the perceived cost and labor-intensity of doing so. New tools, however, promise to make this process much easier and faster.

Tools such as Promapp enable organizations to rapidly deconstruct and map business processes and manage multiple process variances. This ability to both establish a standardized process while managing process variations allows organizations moving to a shared services model to catalog business processes in practice, manage the elimination of those processes that provide no distinct business value, and to maintain those that do.

While digital transformation is now critical to every organization, the transformation process begins with improving efficiency to free resources to work on transformative efforts. As organizations look to shared services as one way of achieving these efficiency gains, they must ensure that they have deconstructed their business processes to identify efficiency opportunities and protect those processes that drive competitive advantage now and in the future.