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December 6, 2011 Experture /RFG Executive Technology Services ETS 11-12-03 Shared Services …experts on demand Our client has been directed to take a disparate organization and implement Shared Services. The Shared-Services Model Executives should consider adopting a shared-services model, especially if many potential commoditized services are too decentralized. By centralizing and standardizing these functions, reassigning headcount, reducing the number of vendors and associated contracts; negotiating with vendors for bulk discounts, significant savings can be realized. Methodology and Project Plan A successful move to a Shared Service Center model requires a carefully planned and managed transition. The basic methodology is to perform a gap analysis whereby potential shared services are identified and then a migration plan for each of these services is developed and carefully executed. One note before continuing - shared services does not necessarily mean to totally centralize each service. In many cases, global organizations have special regional/cultural considerations that need to be taken into account. Step One - Identify Potential Shared Services Shared service candidates have a few characteristics in common: Commoditized Services – these are service/activities are commonly performed to support basic business/administrative services. Examples are: Purchasing/Vendor Management – typical cost savings result from volume purchase agreements and centralized vendor negotiation; Human Resources – savings result from reduced headcount as well as enhancing enforcement of enterprise-wide policies, procedures and processes; Finance/Accounting – savings result from reduced headcount as well as enhancing enforcement of enterprise-wide policies, procedures and processes. Specific areas within finance include accounts payable, accounts receivable and/or payroll; Information Technology – reduced headcount, enhanced service delivery, enhanced business support; Printing/Postal – reduced headcount, enhanced service delivery and reduced hardware maintenance costs; Copyright © 2004-2011 Experture and Robert Frances Group, all rights reserved 649 Fairfield Beach Road, Fairfield, CT. 06824; (203) 5574 0856; http://www.experture.com/; Contact: [email protected] December 6, 2011 Executive Technology Services ETS 11-12-03 Specialized Skills and Resource Services – these are specialized services that are used throughout the enterprise sporadically, but when they are needed the skills and experience are critical and time-dependent. Typically referred to Centers of Excellence (CoE) or Competency/Capability Centers. Examples are: Business Analytics – this includes advanced statistical analysis and financial/business modeling; Communications – this includes external as well as internal marketing; Process Reengineering – administrative and business process improvement scope. Includes metrics and measures; Project Management Office – typical cost savings result from reduced project implementation timeframes, enforced governance and accountability, efficient use of resources; Risk and Compliance - reduced headcount, enhanced governance procedures, enhanced service delivery. Note that global organizations may need to have regional legal teams to monitor local/regional laws and regulations; Note, that when an activity requires specific knowledge of a vertical business activity, then it is NOT a candidate for shared services. Step Two – Assess Potential Savings/Enhancements After the list of shared service candidates have been picked, each one should be evaluated from a business perspective. In other words, what shared services would produce the greatest value. Value is determined using the following criteria: Accountability – is the change of command more clearly established? Does everyone in the enterprise know what shared services are available and who to go to when they need support? Measurement – survey to make sure that the information is communicated accurately. Agility/Flexibility – can the business be more proactive? Can the business respond more quickly to changes in the business environment? Measurement – time to deploy; time to respond; Communication – does the pooled resources and centralized service enhance communication and/or eliminate communication break Measurement – survey to make sure that the information is communicated in a timely fashion. Cost Savings – how much money would be saved by pooling resources and capabilities? Measurement – salary/benefits; headcount; Enhanced Service Delivery – how would product/service quality improve? Copyright © 2004-2011 Experture and Robert Frances Group, all rights reserved 649 Fairfield Beach Road, Fairfield, CT. 06824; (203) 5574 0856; http://www.experture.com/; Contact: [email protected] December 6, 2011 Executive Technology Services ETS 11-12-03 Measurement - reduction in defects; reduction in delivery/response time; Improved Capabilities – does the availability of new internal resources/capabilities open up new opportunities for business growth and/or expansion? Measurement – survey business units to see what impact shared services has had on their capabilities; Manageability – is the support service easier to manage? Measurement – shared service employee satisfaction; reduction in management team without negative impact on quality and/or service delivery; Risk/Regulatory – does the shared service reduce risk due to standardization, centralized management, etc.? Measurement – perform periodic risk audits – measuring compliance with regulatory/legislative rulings as well as business risk (sanctions/litigation/impaired professional reputation); Stability – does the service consistency and enhanced availability eliminate variations due to resource/capability limitations? Measurement – measure consistent performance, using many of the measures identified above, but from a holistic view; Step Three – Pick One Shared Service and Conduct Trial After determining which shared service will have the best return, perform some preliminary tasks to reduce risk and reduce transition effort: Standardize Existing Processes – at a high-level, change processes scattered throughout the enterprise so that they more closely match the projected enterprisewide process; Review Personnel Resources – determine who will be moved to the shared service and who will have to be retrained or released; Pick New Location(s) – it is unlikely that any one existing location will be sufficient to support a shared service. Existing locations will have to be reviewed for expansion and appropriateness to support a shared service model; Review Equipment/Systems – existing equipment and/or systems will have to be inventoried and reviewed to determine what is to be used in the new shared service model; Using information from the preliminary tasks, build a shared service pilot plan. Depending on the scope and geographic distribution of the shared service candidate, a pilot might consist of either an enterprise-level, regional-level or partial implementation. The new/enhanced shared service location should be outfitted with whatever is needed to conduct the pilot and then a parallel service should be run for two-weeks to a month. The length of time is dependent on business/demand cycles. Copyright © 2004-2011 Experture and Robert Frances Group, all rights reserved 649 Fairfield Beach Road, Fairfield, CT. 06824; (203) 5574 0856; http://www.experture.com/; Contact: [email protected] December 6, 2011 Executive Technology Services ETS 11-12-03 Step Four – Evaluate and Continue After completion of the pilot, an evaluation of the transition should be performed. This information is to be used to enhance the completion of the transition of this particular shared service as well as the other targeted shared services. After changes to the transition process are put into effect, the remainder of the decentralized service components should be transitioned into the shared service. Note, that the realization of savings/benefits will take at least three months before results will be measureable. Depending on the enterprise’s timeframe, additional pilots can be started with the other shared service candidates. The Bottom Line – the difficulty in implementation of shared services lies at the beginning of the selection process. On element that needs to be considered is the chance of success. There are many potential shared service candidates that have a reduced chance of success when compared to less potentially valuable services. This implementation risk should be applied as well. Copyright © 2004-2011 Experture and Robert Frances Group, all rights reserved 649 Fairfield Beach Road, Fairfield, CT. 06824; (203) 5574 0856; http://www.experture.com/; Contact: [email protected]