Four Best Practices for the Mature Shared Services Organization
By: Bill Huber, Director, CPO Services, TPI

Shared services results are intrinsically difficult to sustain over the long haul. Once the organization has achieved its initial objectives, the law of diminishing returns often applies.

Following are four techniques to keep the momentum alive in your organization.

Use benchmarking to drive improvement, not validate the organization

Benchmarking of shared services is, inherently, suspect. While many good sources of benchmarking data exist, comparability is a challenge. No two shared services organizations (SSOs) provide exactly the same services to their corporations, and these differences can have profound cost and productivity implications.

The only way to truly measure like-for-like cost and productivity is to document your internal environment in detail, develop a base case, and take the package to market. Doing this effectively requires considerable time and resources, and so should be infrequent, and only when it can be done with sufficient transparency and objectivity to ensure the effort will not be manipulated to support the status quo. Accordingly, use benchmarking judiciously to identify what others are doing better, and to assess opportunities to apply learnings to your own SSO.

Establish a multi-tiered governance structure

Properly designed governance ensures that the SSO continues to align with executive priorities, and provides a cross-functional forum to ensure the transparency and credibility of the organization. The governance agenda should specifically match the strategic objectives of the enterprise, and the composition of the governance committees should be designed to ensure creative tension. Our experience is that a two-tiered structure — one at the executive level and one representing middle to senior management peers of the shared services leadership, with a formal linkage between the two — works best to achieve these objectives.

Perpetually assess market developments to determine opportunities to exploit emerging capabilities

External service providers have a natural advantage over internal SSOs. Because their service offerings are by definition “front office” rather than “back office,” they can directly link their improved performance to increased profitability. Unlike internal SSOs, they are immediately vulnerable to market forces, and if they fail to stay at the top of their game, they very quickly fall by the wayside. Internal SSOs, which are somewhat buffered, can operate for an extended period before encountering a day of reckoning. Some sourcing advisors provide free, regular reports on these market trends, such as the quarterly TPI Index, which can help you keep abreast of these developments.

Establish one or more strategic relationships with outsourcing service providers

The best SSOs are hybrids, combining both internal and outsourced delivery capabilities under the overall management of the shared services leadership. A well-managed, flexible shared services design that incorporates both models drives greater flexibility and tends to yield more competitive performance by both the internal and sourced providers. Additionally, a flexible outsourced relationship allows the SSO to take advantage of variable global service delivery capabilities including higher-end “knowledge processes” such as market research, business analytics, or management reporting to augment internal resources.

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Following are excerpts from an interview SSON recently conducted with Simon Newton, Vice President North Atlantic Finance & Shared Services at Kimberly-Clark, on its past, current and future services delivery strategies.

SSON: Please briefly describe your initial services delivery strategy.

SN: From inception, our services delivery strategy was tightly tied to our business strategy. We launched our North American captive shared services center in Knoxville, Tennessee in the 1990’s, and our European captive center in Brighton, U.K. in 2001. We also have smaller centers in Latin America and Asia Pacific, but as they don’t yet fully operate as true shared services centers, I won’t focus on them here.

Until early 2006, our North American and European centers both had a linked but not centrally-dictated ERP strategy, and both used SAP, but there were separate instances. Further, the North American shared services strategy was based on a functional center of excellence model, whereas our European strategy was highly process-oriented with a pan-European focus. At that time, they really operated supporting separate regional businesses.

In 2006, we realized a compelling business imperative to innovate more quickly, shorten our go-to-market-cycles, and establish global branding by moving to a North Atlantic business organization. We collapsed our North American and European SSCs at the same time.

SSON: What is your current services delivery strategy?

SN: The establishment of a North Atlantic mega-region was one part of our global business strategy. At the same time, we embarked on outsourcing across a number of business support areas. This was intended to: 1) Free up funds to support North Atlantic business innovation and marketing; and 2) Enable us to focus our attention on driving new capabilities, harmonization, standardization and improvement within our retained captives. In early 2007, within a two month period, we entered into outsourcing agreements with five different outsourcers for IT infrastructure, application development, procurement, payroll and other HR processes, and parts of finance.

Although each of our outsourcing contracts are managed by four different functional leads, we are increasingly working closer together to share best practices, resources and approaches among the outsourced processes and our internal captives. Cohesively, the new services delivery organization is named the Business Support Delivery Group. And we now have a network of four centers – Knoxville, Brighton, India and Romania – to support our service delivery needs.

SSON: What is your future services delivery strategy?

SN: The preponderance of jargon aside, the key word in services delivery is services. For example, in finance, we manage cash, provide information, keep our business compliant, and are responsible for administration. That said, our future is about accelerating the provision of relevant, timely, accurate and – most importantly – integrated business information.

SSON: What ‘words to the wise’ would you offer to other mature services delivery organizations?

SN: Beyond the essential ‘align your services strategy to your business strategy’, the watchword is innovation to meet your real business needs. Outsourcers don’t innovate. So you must build your future services delivery strategy around lack of innovation in a third-party environment. While the boundaries of what is captive and what is outsourced will shift, the shared services concept will always be a hybrid. Whether through collaboration or direct-line reporting, you must build and allow for much stronger internal collaboration among various support functions. That’s where Kimberly-Clark is heading.

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