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Success
through
S HARED
Services
Figure 1: Success rates for shared services
Sources: Harris Interactive, A.T. Kearney
Expected benefits
Achieved benefits
Difference
Higher
satisfaction from
internal clients
Increased
collaboration
and teamwork
Better functional
technology
Increased
productivity
Performance
improvement
Cost reduction
89%
72%
91%
66%
90%
68%
74%
69%
73%
70%
60%
44%
16% 3% 5% 22% 25% 17%
xonrn axrnica
Higher
satisfaction from
internal clients
Increased
collaboration
and teamwork
Better functional
technology
Increased
productivity
Performance
improvement
Cost reduction
85%
62%
78%
67%
60%
42%
46%
66%
37%
45% 45%
38%
7% +8% +20% 18% 11% 23%
runovr
oionai
11% +2% +7% 20% 19% 20%
Higher
satisfaction from
internal clients
Increased
collaboration
and teamwork
Better functional
technology
Increased
productivity
Performance
improvement
Cost reduction
87%
67%
85%
66%
76%
56%
61%
68%
56%
58%
53%
42%
Introduction
If you think the book has already been written on shared services, think again. With the renewed
emphasis in recent years on profitability as the key corporate metric, forgotten functions such as
finance, human resources, procurement and IT are back in the spotlight. They are not only being
viewed as sources of cost efficiency, which has been the traditional focus, but also as tools for
corporate strategy and competitive advantage.
But turning these functions into strategic value drivers can be as difficult as spinning straw into gold.
Indeed, companies have adopted a variety of approaches, from simple cost reduction and consoli-
dation to discrete outsourcing and offshore strategies. Inconsistent approaches, however, have led to
equally inconsistent results. Benefits are available, but, in many instances, they are less than ideal and
frequently short lived.
Despite the difficulties, many global corporations are moving toward shared services, which is the
centralized management of activities for multiple users. An A.T. Kearney survey conducted by Harris
Interactive reveals that, on average, companies share the services of nearly six departments, and most
are willing to invest the time and money necessary to make a complete transformation. We also
found that companies with shared services organizations are highly sophisticatedmany use service
level agreements and charge-back systems, and either have or are considering outsourcing strategies.
Additionally, 70 percent of senior executives rank their shared services efforts as successful citing
benefits that range from reduced costs and improved productivity to superior employees.
However, some expectations are not being met. For example, although executives in 85 percent of
companies expected performance to improve through shared services, only 66 percent believe they
have achieved improvement (see figure 1). Similarly, 76 percent expected increased productivity, but
only 56 percent have realized this goal. Finally, whereas 53 percent of companies expected improved
internal client satisfaction, only 42 percent report success in this area. Clearly, shared services have
potential, and have delivered value, but there is still room for improvement.
In this paper, we highlight why shared services are a proven method to deliver value in the support
services field. We explore the factors that are currently driving this renewed focus on back-office
functions, explain the key to creating a successful shared services program, and discuss how to steer
clear of common pitfalls. Finally, we peer into our crystal ball and forecast the back office of the
future and the next generation of shared services.
Success Through Shared Services
:
a . r. x i a i xi \
snanrn srnvi crs ronas
Companies have been experimenting with
shared services since the late 1980s (see sidebar:
Fundamental Truths of Shared Services). Shared
services, at best, offered companies a way to cut
costs, improve quality and encourage teamwork
among their employees. In the 1980s, however,
many executives doubted that shared services
were viable, believing that the implementation
costs and risks would outweigh the benefits.
Since then, a number of external and
internal forces have merged to propel shared
services, and their benefits, forward (see sidebar:
The Three Pillars). For example, the pressure
to improve shareholder value and new regulatory
requirements has combined with shifting
business dynamics. Advances in technology
including the internet and broadbandmean
that companies are better able to pull together
business processes and policies across the
organization and across the globe. And with
more capable service providers in the market,
companies have more choices in outsourcing
an array of functions.
Together, these forces are driving companies
to focus on front-line performance and customer
satisfaction, not on internal machinations.
Our survey findings reveal a clear picture
of just how prevalent shared services are today
(see sidebar: About the Study). The most popular
support functions to target for shared services
are IT and human resources: each has adop-
tion rates in excess of 85 percent (see figure 2).
Regionally, human resources is the number
one shared function in North America (95
percent); IT tops the list in Europe (97 percent).
Additionally, these centralized functions
provide broad-based support. Roughly 80
percent of respondents in North America
indicate their support functions serve the
Sources: Harris Interactive, A.T. Kearney
Figure 2: Top functions for shared services
Average number
of departments
considering
shared services
cunnrxr
IT
8%
IT
87%
Legal
4%
Legal
53%
Office services
7%
Office services
54%
61%
Procurement
14%
Procurement
77%
Finance
16%
Finance
coxsinrn
Human
resources
8%
Human
resources
85%
5.2
1.7
Success Through Shared Services
,
a . r. x i a i xi \
entire company; in Europe the number is
closer to 75 percent.
Globally, 70 percent of executives report their
shared services as either successful or extremely
successful; 75 percent in North America and 63
percent in Europe share that view. This dis-
crepancy occurs primarily because European
executives must overcome more barriers
regulatory variations, along with social, cultural
and linguistic differenceswhen implementing
shared services than their North American peers.
European leaders also have more realistic
expectations about the promise of shared services.
In almost all performance dimensions, from
productivity and functional technology to team
collaboration and internal customer satisfac-
tion, the gap between expected performance
and achieved results is smaller among European
respondents than those in North America.
Once again, the reason for this difference is
because of the more complex European environ-
ment. Given the additional hurdles, European
managers are likely to be more careful when
setting up shared services.
As shared services have matured,
some fundamental truths have
emerged:
Decentralization of back-office
operations is dead. Decentralizing
support services is a luxury companies
can ill afford. Although geographi-
cally dispersed operations or trans-
action centers will not go the way of
the dinosaur, companies must design
and manage each support function
according to an integrated and,
when possible, standardized model.
This framework should allow for
necessary geographic, regulatory or
cultural variations, while ensuring
maximum control and management.
It must also achieve economies of
scale and leverage employee expertise.
Companies must adopt a broad,
strategic approach to their support
functions. Companies must take
a closer look at their support func-
tions to determine how strategic
or not each is. Human resources,
for example, includes strategic
activities such as leadership develop-
ment and compensation policy design,
as well as more routine, transaction-
type functions such as payroll and
benefits administration.
Companies must profession-
alize their support functions. This
means ensuring the support function
behaves as a professional, indepen-
dent, internal organizationone
that will be held accountable for
performance in the same way an
external service provider would be.
This is a key trait of progressive
shared services organizations: cen-
tralizing management for defined
support activities and tasks, and
transforming them into a client-
focused, specialized organization
that serves multiple business units
within a company. Although some
companies go further by turning
a support function into an indepen-
dent market-facing unit, most derive
the greatest benefit by stopping short
of this action.
Shared services organizations
make sound economic sense. Many
executives cling to the misconception
that shared services will result in
increased costs. Examples of com-
panies that tried shared services and
abandoned them because of higher
expenditures or increased operational
complexity are easy to come by. In
almost all cases, however, the problems
these companies faced was with
flawed implementation. Moving too
far, too fast, for example, will likely
result in more problems than benefits.
The key to avoiding unexpected costs
is to establish clear objectives, set a
realistic timeline and remain focused.
Fundamental Truths of Shared Services
Success Through Shared Services
is a registered mark of A.T. Kearney, Inc. A.T. Kearney, Inc., is an equal opportunity employer.
A.T. Kearney is an innovative, corporate-focused management consulting
firm known for high quality, tangible results and its working-partner style.
The firm was established in 1926 to provide management advice concerning
issues on the CEOs agenda. Today, we serve the largest global clients
in all major industries. A.T. Kearneys offices are located in major business
centers in 35 countries. A.T. Kearney is the management consulting
subsidiary of EDS, the leading global services company.
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