Shared services, an organizational structure that consolidates delivery of one or more support functions, is designed to achieve cost reductions, economies of scale, and improved service. At many large, multilocation, and global organizations, shared services is showing explosive growth. Training is an important success factor for achieving intended goals.
Typically implemented within functions such as finance, IT, procurement, and human resource, the goal is to enable the revenue-producing side of organizations to be more efficient and focused on key business issues.
As Jeffrey Jacobson, vice president of finance-global accounting operations at Pitney Bowes says, "We were seeing the need to build in greater efficiency and productivity" as key drivers for shared services. "To manage our costs and deliver more value in a holistic way, shared services enables us to look across the organization for opportunities to optimize work and partner with our customers. Our approach enables the business to focus on strategy and top-line growth, while shared services provides enhanced control and compliance. This has allowed us to become more standardized in many areas where we previously had very diverse processes."
At the Hershey Company, positive successes with its Asia shared services center, along with globalization plans, have propelled an expansion of shared services into other parts of the organization. Jeff Kemmerer, vice president global shared services, says, "We recognized an opportunity to build cost-effective, sustainable, end-to-end business processes that support Hershey's global growth and improve our overall competitiveness."
More than just centralization or consolidation of similar activities in one location, shared services organizations (SSOs) are run like a business, delivering services to internal customers at a cost, quality, and timeliness that is competitive with alternatives. In fact, the cost savings can be dramatic, as evidenced by the experience at the Kellogg Company.
"As an overhead function, we have to be flat or down in our costs each year," explains John Gayda, senior director of Kellogg North America Financial Service Center. "Standardization and automation have enabled us to achieve greater efficiencies. As an example, in our accounts payable [department], we had 40 people in 2005, and we have since had five acquisitions and now handle the process for 18 additional plants with half the people."
Significant results have been realized at Pitney Bowes as well. "We continue to increase our productivity over 10 percent per year," Jacobson reports.
Implementing shared services
A large-scale cultural and process transformation is often required as part of the shared services implementation. With goals to increase innovation, reduce inefficiencies, and promote greater collaboration on behalf of customers, successful execution requires organizational change. Helping key stakeholders to understand what the change will look like and what it means to them personally is essential.
"Don't underestimate the selling that needs to take place for this transformation to shared services to be adopted successfully," cautions Jacobson. "Use metrics instead of an emotional discussion, and build in open communications throughout the process. Make sure that your key clients will be part of the journey and not just watching from the sidelines."
At Campbell Soup, which is in the beginning stages of a shared services implementation focusing on finance and accounting, there is recognition of the need to set the stage for change. Elaine Lee Payne, HR manager, says, "With any change, people can sometimes initially be uneasy about what this new approach will mean for them. Therefore, our approach is to be transparent about the changes, focus on what's best for the organization, and keep levels of engagement and productivity high."
SSO success factors
Moving to an SSO is not without risks (Sidebar 1). The case against it includes the potential for service disruptions; concerns about losing customer intimacy as the SSO work migrates to a central location, and fears that handoffs will not be managed effectively, resulting in rework and duplication. These challenges must be managed through systematic processes. One important element to ensure clarity regarding outcomes is through service-level agreements, which formalize the new working relationships, mutual expectations, and deliverables (Sidebar 2). These will also include the fees associated with the service, if there is a charge back.
However, every organization approaches this issue differently, to adapt to its unique requirements, culture, and business objectives. Some organizations find that their SSO may be effective without the formality of service-level agreements.
At the Kellogg Company, says Gayda, "Initially we did work with service-level agreements, but this has become less critical over time. We have the relationships and credibility with our internal clients. Our shared services and business units are here in Battle Creek, so there is ongoing interaction that occurs naturally as a result of proximity."
Standardization, innovation, and measurement
With SSOs, there is an inherent tension between the need to standardize, which is where the initial cost savings are realized, and the ongoing need for continuous improvements. Anticipating where the business is headed; finding ways to continue to add value; and benchmarking with best-in-class peers is essential for long-term success.
Pitney Bowes applies an interesting philosophy to these dual requirements. "We start with innovation?by looking at what's best-in-class,?applying this across the breadth of work, and then standardizing to this level," says Jacobson. "If you only standardize, you may lose the creativity [needed] for your team to innovate."
Benchmarking can be used to drive performance improvements, including strategic and tactical metrics that help focus SSOs on delivering the highest levels of performance better than peer groups.
Measurement is a requirement. According to Gayda, this is an ongoing process. "We developed a scorecard three years ago for financial shared services. We sent a survey of possible metrics out to CFOs across the businesses and collected information to develop the scorecard based on what was most important to them." Emphasizing simplicity, Gayda uses a two-page document that internal customers have confirmed measures the right things. "We track how we are performing on a monthly basis against agreed-to metrics," he says.
Skill requirements and training implications
To be successful, SSOs need training at the "go live" stage and throughout execution. Ongoing training is needed to ensure that the employees are being developed and are engaged. The success of the SSO is largely dependent upon resident talent. According to Accenture's white paper, "Achieving High Performance through Shared services: Lessons from the Masters," results from an online global survey of 275 respondents with responsibility for managing shared services revealed that more formalized training is one of a number of key differentiators that separate "masters" from others.
A needs assessment of required SSO skills and organizational gaps should be undertaken to ensure that the training is targeted on the right competencies. Having a clear idea of what "good looks like" is essential (Sidebar 3).
At launch, training may be used to clarify roles, responsibilities, and service expectations. The implementation launch at the Hershey Company includes a "Welcome Aboard" program. "This program covered everything associated with the new work environment. It was important that we prepare everyone to work together in a new open office environment, including leaders who needed to embrace moving out of their offices," reports Kemmerer. The Hershey Company's approach to shared services training incorporates multiple learning methodologies. "In addition to instructor-led training sessions, a training and communications team developed a full global shared services guide that was made available through the company intranet," he says. "The guide created a 'one-stop-shop' where team members had quick access to all of the information they needed. It included short videos on office etiquette, conference room numbers, printers, copiers, and fax machine numbers, as well as news and upcoming events."
To address the organizational structure changes, Kemmerer says, "Employees moving into the global SSO attended a change-leadership class." The goal of this two-day workshop at Hershey Company was for, "GSS employees to recognize that each team member will personally lead change. Everyone was encouraged to be open to the opportunities that were possible as a result of the new organization and to be open to working in new and improved ways."
The Kellogg Company sees training in shared services as a component to building the leadership pipeline. "We train consistently and focus on building our bench strength in shared services," Gayda says. "We use competency models as a basis for training and professional development. We provide training to people as they come into the organization, as well as update them on our systems and processes and encourage people to obtain degrees. We have career development systems to ensure we have the right people in the right place."
Competency models, which define the knowledge skills and attitudes required for high performance, also are an important part of the training conducted at Kellogg. "Our employees conduct self-assessments of their leadership competencies against the Kellogg business leadership model competencies and then compare this with their managers' assessment. This combined information is used to create an individual development plan."
Leadership and management training helps ensure that the SSO leadership can build, inspire, and lead high-performing teams. At Campbell Soup, new manager training was recently rolled out and is designed, "to help former individual contributors who have become managers to learn our people processes and how to resolve conflict and develop people," Payne says.
Centralization may enhance talent management processes - a benefit that has been proven at Pitney Bowes. "Shared services enables us to manage talent more effectively, because we have all of the functions sitting in one organization - this provides us with great visibility of our people and talent. We can be more empowered to take whatever actions are necessary to improve work processes," says Jacobson.
When large organizations migrate to shared services, they often have existing training curricula that may be leveraged for the SSO, but it is likely that there will be learning gaps that must be addressed through customized training solutions targeted to the specific needs this organizational structure requires.
Once built, SSO training curricula must stay attuned to the changing landscape and anticipate emerging business needs, so that training solutions address what is needed not only for today, but also for the near-term future. "To achieve our vision," Kemmerer says, training programs at the Hershey Company, "needed to focus on shared services team members as well as our internal customers and business partners." This approach to target a broad population is designed to, "ensure that everyone had the information, knowledge, and skills necessary to make The Hershey Company successful," says Kemmerer.
A thoughtful, systematic learning design is needed, but it should be balanced with some flexibility. According to Jacobson, Pitney Bowes has learned what works through some experimentation, and the SSO affords a consolidated view of learning needs.
"We have tried many different approaches to training over time, including both formal and informal. We have on-the-job training and have found our structure creates development opportunities that may not have been as visible before, because we are centralized and can look across the SSO for the most appropriate ways to address employees' learning needs," Jacobson says.
What's next for shared services?
Once shared services functions have successfully standardized processes, the challenge remains to foster continuous innovation and keep service levels high. Failure to do so will result in internal customers finding alternate ways to obtain the excellent service they need, resulting in a proliferation of functions. Some organizations find that they need to move to "hybrid" organizational design or transfer the transactional processes to outsourcing arrangements over time.
Just as businesses must continually innovate to stay competitive and keep pace with the changing requirements and aspirations of their external customers, so too must SSOs focus on innovation. Effective SSOs push the boundaries of the familiar and avoid staying within a restricted menu of services, so they may address the changing needs of the businesses they serve.
A key insight that many organizations have learned the hard way is that shared services will not be successful delivering on the promise if the focus is on cost alone; instead, the enterprise-wide processes should be leveraged as a source of business insight that centralization affords, expanding managements' line of sight to uncover additional opportunities to add value and focus on process excellence (Sidebar 4).
Gayda says he has learned several key lessons. "You can't impact what you don't measure, that's number one. And number two, you have to have the support of senior management to make this work. At Kellogg, our business units do not have the choice to 'opt-out' of shared services. Finally, make sure that you focus on continuous improvement."
When properly implemented, the SSO model can demonstrate dramatic results. "There will be more globalization and expansion from a regional model with common shared practices," Jacobson says. "Over time, we will fold more functional responsibilities in the shared services model because it's been successful and proven its value over time."
Regardless of where an organization is on this journey, training helps fuel the shared services goal of improved organizational performance overall.