Shared Services: The boardroom dilemma
The recent global economic downturn has left its mark on the retail industry and marketplace. As global companies emerge from the recession, CXOs of various Fortune 1000 companies across the globe representing the consumer-packaged goods, retail, quick service restaurants and other sectors have passionately articulated a common set of needs: to leverage their scale, to be truly global and to use their information as an asset. These needs have led to an increased interest in a global shared services model. CXOs want to use this recovery phase to drive global shared services to consolidate, define and possibly centralize key functions and services in the company to help leverage efficiencies of scale globally, reduce costs and deliver competitive advantage.
Shared services is an innovative service delivery model to provide administrative, support and maintenance services of enterprise applications to multiple customers delivered by a common pool of resources around-the-clock that could include employees, consultants, infrastructure, technology, reports, transaction and processing services,etc. The interest is there, but the concept can sound complex. The understanding, or lack of understanding, of the shared services concept often impede companies selling shared services internally, although the model has been employed successfully and has benefitted many companies.
Once you have decided that the shared services model is a good course for your company to take, the biggest challenge is gaining support from management. Convincing the boardroom to sell the shared services concept internally can be intimidating and most often, unsuccessful. Advocates that take up the shared services mandate are faced with skeptics that have a counter-argument ready. Most of these companies are grappling with three key questions: What does it mean to be a truly global company with global shared services? How do they convince their board on the vision, scope, nature and benefits of this strategy? How can they begin?
When they think of shared services, they often think of the potential challenges – external perception from customers that support is not exclusive or unique, change management, the cost to implement such strategy and whether or not this model would achieve immediate benefits, unique local practices in different regions and countries and how they would change in a global shared services model, local staff and their continuity, etc. Every cost saving business case is met with an alternative that ultimately puts the initiative on the back burner. For instance, one country head of a global beverage company explained that while his board loved the business case of immediate cost savings, once the topic of organizational change was brought up, the discussion was stopped short.
One approach that has worked for several companies is abandoning “shared services” all together. What they’ve done is deliver the concept by replacing the “shared services” label to “business enablement initiatives” or “platforms.” It may sound strange, but many advocates have succeeded in selling the idea to the company board by using this approach. For example, one CPG company we worked with looked at a completely non-traditional process - marketing - for which to create shared services. They set up a standardized technology platform for all their digital marketing needs and a “factory” of talented individuals who followed strong processes and methodologies that would help increase reuse and improve speed to market for their brand managers each time they wanted to launch an ad campaign. The creative ad agencies involved loved the model, and the metrics have helped this company demonstrate the power of shared services to the top line of the company. The critical win here is that the team never called this a "shared service,” but promoted it as a new “platform” that they wanted to adopt. Another company that set up a global shared service helping their front-line business development teams all over the world centralize administrative activities, called their initiative “Enabling the Sales Force.”
In summary, the recession and the recovery we are now experiencing has only strengthened the case for shared services to be an important initiative. There are numerous benefits to shared services. Those that have achieved some extent of truly global shared services are enjoying fantastic benefits of large cost savings, improved speed to market, better business user experiences of these services and more aggressive adoption of the model. In fact, the president of a highly successful CPG giant publicly explained that with shared services his company has saved more than $500 million, integrated acquired companies faster than usual, made their value chain more efficient, flatter and simpler, and now moving to digitize that value chain end-to-end.
Shared-services champions are creating momentum within their companies by using business-enabling initiatives to further prove that shared services have a strong business case across most company processes. For most companies, traditional approaches to internally sell shared services in the boardroom are difficult and they have to resort to new, innovative methods. That can be as simple as leaving out the “shared services” in your shared services initiative.