Andrew Kris shares his expert insights on how to set up a shared services center, what it takes, and how to find and retain the best talent for the job.
Shared services is about building a business, a business that delivers services inside the organization at a cost at a quality. And with a timeliness, that is competitive with alternative ways of doing the same thing. That means putting a business model on top of consolidation. And the reality is most shared services fail, when they fail to look at this, as a business. It's an internal business that has to deliver value, and has to do that repeatedly time after time to maintain his viability. That's how you start with shared services. So make that decision first, in my experience, people who have thought about shared services as an internal business, irrespective of how they ultimately account for that have been the most successful. And maintaining that as a metaphor, for every single thing you do in your Shared Services Center is absolutely key to having something that is truly sustainable. So those are the fundamental reasons, efficiency and effectiveness of internal service provision, creating it on a business like basis, ultimately, what will make you successful, or otherwise, there's another really good reason, which causes many companies to turn to shared services. And that is actually the opposite mode, which is a fast growing expansionary mode, or an acquisitive mode. Many companies today are growing, essentially through acquisitions. And my goodness, me isn't an acquisition a lot easier to do. When you already know from day one, you don't need to take over all of the administration of that company you're acquiring, you can fold that instantly into a well honed well managed business called your Shared Services Center. So companies that are acquisitive, moving from country to country are finding their acquisitions a lot easier. There is no question about whether the new company integrates, it's integrated on day one into a well run well managed business called a Shared Services Center. That is another wonderful reason not to build country by country infrastructures, and then have to dismantle them later, at a lot of expense, and a lot of disruption. Don't build them in the first place, fold new companies straight into a shared service center. I recall sitting a while back with 16 finance executives from a large corporation. And they were saying, Yeah, we absolutely going to put financial shared services in because we want to reduce the costs in our organization to no problem or what do you want to achieve? Well, we want to achieve a 30% reduction in providing finance related services within our company. That was a terrific thing to aspire to, at that particular point, I drew the conversation to a close and asked would five of you sitting at that end of the table, please leave the room. And they of course, they said why we're going to do that? Well, no, no, please leave the room said no. Why are we going to do that? Well, you did say you want to have a 30% reduction in your finance related services. That's what it means means less people essentially. So while it's not quite what we intended to do well, in that case, don't even bother with your initiative. In fact, the reality is that most companies consolidating replicated services across a company is almost a seasonal, seasonal activity. Very wise man many years ago, gave me a wonderful little device. And on one side of that device, it said, centralization starts here, when you spun it around on the other side, said, decentralization starts here. So consolidation, consisting of centralization, and decentralization, is, as many of us have realized when you've lived through a few cycles in the corporate world is just a regular activity. It's a flow of activity and control from the center to the outside to the countries or to the business units. And all the way back again, that is a wonderful thing to do. But that is absolutely not shared services. Let's talk about the right people that start at the top this time, who are the right people at the top? Well, just because you have a terrific finance person who really understands finance, is this the right person to lead your Shared Service Center? I don't think so. Not unless this person is also an outstanding General Manager, not unless this person is outstanding individual who understands what it takes to run a service business. When we're talking about shared services leaders, the number one issue that comes up is that headhunters get called in usually at the third phase of failure of shared services. In the first place. A wonderful person to do these projects is somebody who really understands a company or really understands the finance function, how it works in the company, wonderful for running a project on the other hand, running shared services center. Remember, it's about running a service business, understanding what it takes to deliver services at a cost and quality and timeliness, that's competitive and understanding how to motivate a large scale organization of anything from 50 to 500, or 1000, or 2000 people is that your best finance guy? I don't think so. Now, if as a leader, you understand how to spell finance, and can do the sums that is absolutely terrific. But in essence, it's about motivating a service company. That is what you're doing when you're running a Shared Services Center. So don't just put your best accountant in charge, unless you know that your best accountant is also a great general manager of a service business. What about the other people that work in this service business? Well, if you've worked in the back office finance function or HR function for many, many years, and I've always known what you thought your customers needed, and you attempt to deliver things the same way as before, you're setting yourself up for failure. Understand, of course, while the products are what it is, you need to deliver what people really value and deliver just that and deliver it with the right attitude and the right behavior. As we said in our earlier piece, setting up shared services, processes and systems is, you know, six week job or if you're really complicated a six month job, but changing attitudes and behaviors is not a six week job. I've never ever seen a single shared services unit that attempts to use many of the same people that were previously members of the functions that are now in shared services that has been able to change attitudes and behaviors to a service mindedness that is appropriate for shared services in under two years. So make no promises. If you're going to keep most of your people who were there before, make sure you give yourself plenty of time to change behaviors and attitudes to turn this into a service business. And make sure to that you give yourself plenty of financial backing to make sure that you can also outpace people who absolutely will not fit into this environment over a long period of time by always put in training. Or remember just one thing, skills and knowledge comes with experience and time and learning attitudes. And particularly behaviors are inherent to the individual. So don't attempt to change the impossible to something different about it. If you really if you don't have the right people in place, go to another location where you're going to rebuild from scratch, take the hits, as painful as it is do it. Otherwise, you will never build a shared service center that has the right people in place to deliver in a service minded manner. While we're on the subject of vocation who decides where you go to? Where's the ideal place to go to? Well, I can tell you certainly not corporate headquarters. Why is that because everybody who is not in corporate headquarters immediately believes that what you're doing is really a corporate initiative. It's the centralization. It's nothing to do about delivering services that you remediate value. So headquarters tend to make rather poor Shared Services Center location, go to what they say, a brownfield site or an existing site for your company. Well, of course, most people instantly think that the guys who run site will get the best service and everybody else will not. So think about independent locations for shared services, consult your favorite local development organizations. And this is not just to do with as a consultancy, leverage in cost arbitrage, or whatever else fancy words to put to it is about finding the right people who can deliver the right level of service. Shared Services is much more than just about consolidation to gain efficiency and effectiveness. It's also predominantly about running a business. Think about the people and think about the processes and the systems that it incorporates, I can tell you right from day one, that if you and I were to go into a Shared Services Center, or even startup, a shared services, you and I could sit together. And within a matter of two weeks to four weeks, we could have the ideal system designed for your company, we could put the ideal processes in place, there is not a single thing, particularly if you look across the complex structures across the whole of Europe, there's not a single question that has not already been answered when it comes to setting up a shared services set. So the principles are all very straightforward, and simply not nothing to be gained here that could not be done over two to four weeks. The real problem is shared services is people is to people that are no longer required because you require less people to run your shared services. And it is a changes in behavior and attitudes that comes from delivering shared services at a cost quality and timeliness. That's more competitive compared to alternatives. In other words, running a business. Running a business is not really a part of your mindset when you're sitting there in accounts payable and processing transactions. You don't think of it we're here because we're here because we're an important part of the company. And indeed you are aware Today, however, we think about everyone to think about running a business and that has a different attitude to it. And the primary attitude is making sure you keep your customers businesses tend not to be very useful without customers. The same thing applies to shared services. If we look at the failures over the last few years, and there have been many the failures have occurred because Shared Services has failed to treat the people its services as its cause customers. So how do you set up true client relationships? Well, first of all, deliver products that people need and value and are willing to pay for at a cost and quality that's competitive with alternatives. So how do you define your products, where's your product manager, I'm not suggesting you suddenly create a massive infrastructure to parallel you make your organization but somebody somewhere has to understand what people need has to be able to understand and define that need, in terms of the words that the customer values, and then has to decide how to deliver those services. That's all part of the shared services story. But it's not enough people need to understand what it is they're getting, I can tell you, I've gone into situations where I've gone with some head of shared services, who's gone to a customer and said, Well, you know, now you're going to buy this particular service from us. And we're going to sell that to you as your supplier. This is what is going to cost you guess what the other person said, Well, of course, it was taste too expensive, but actually didn't cost you anything before what you need your head testing, don't you as a business person to think that something you got before was for free, and now you're having to pay for it. The reality is, even before you startyour shared service center, it might be a good idea to find out what it actually costs today to deliver those same services. So you can then go back and say, Now is going to cost you $110, that particular service in the old days when you didn't even see what it costs, because it was hidden somewhere was costing $150. So today, whether you accept that or not, you are getting the service at a low cost. And you got it before. And by the way, the quality is just as good because we actually care about whether you want to have that particular service or not. And by the way, if you don't need that particular service, we're not going to provide it. It's not only about delivering service that people need a value, but not delivering those that people don't want is an important part of the whole sequence. wonderful examples of this on there, particularly in things like HR shared services, where HR knows best, and we've always wanted training in that particular area. Therefore we'll put that training right across our company does the whole company needed, does it value it or the business people bear to pay, we don't care because we know what's best in HR. Well, that is no longer acceptable within a shared services context, there is another side to it, of course, and it isn't just about giving the customer what he wants. It's also about making sure that you can deliver that at a cost and quality that's competitive. So it often means not doing some things, you know, when you bring up Dell. And remember Dells business model is we'll give you these very basic things. And we'll give it to you at the best possible price. Right? What happens if you want to another printer other than the one that's in the Dell catalog, you bring up Dell and you say Dell, very nice, I love those printers in your catalog, but what I really want is a squiggly jig Zema, where they say, Well, I'm sorry, but we don't do squiggly with Zimmer's, I'm sorry, we're not prepared to sell you that please go somewhere else. And why is because it keeps Dells business model intact. So do not do stuff in your shared services centers that completely disfigured that center cause you to take on additional work that you are not fit to do or no longer wish to do. Because it disrupts your business model and have your customer buy from somewhere else if they're absolutely willing to pay the price. Alternatively, say if you want that service from me, I can provide it for you. But it's going to cost you 10 times more than the normal day to day stuff that you want to buy. So these are just basic business principles aren't there. So maintaining that is absolutely key in the kind of things you deliver and the kind of things you don't deliver. That means establishing relationships with your clients. Where exactly is your client relationship manager here. Now I'm not suggesting a fleet of client relationship managers, but somebody somewhere in that unit that you have has to take responsibility for managing relationship with a particular client or a group of clients. That's also part of building an effective Shared Services Center.