Outlook Point of View, November 2008
Dan London is the managing director of the Accenture Finance & Performance Management service line.
Shared services—the standardization and consolidation of administrative or support functions into a single entity that provides common services—has become a powerful value creator for private- and public-sector organizations alike over the past couple of decades.
This management and organizational trend has helped enterprises deliver better service at agreed-to demand and cost levels. It has brought focus to technology investments and has driven process excellence across multiple functions and industries. Shared services has helped organizations leverage global operating models and establish new governance processes for global operations.
For all the success they have experienced with shared-services strategies, however, the question many executives are asking today is, "What's next?" Shared services has delivered impressive results for companies in terms of cost, quality, productivity, customer service and other key business metrics. But once organizations have realized the initial savings and productivity increases, how can they drive continuous value and ongoing competitive advantage?
Recent Accenture research has examined the practices and innovations being explored by shared-services leaders—those organizations whose shared-services approaches and strategies are leading them toward high performance.
Our research finds that high performers in shared services are pushing the boundaries, always exploring ways that shared services can deliver business value beyond cost savings and cost avoidance. Indeed, Accenture believes that a shared-services model, properly planned and deployed, can become a key driver of high performance in a global business environment.
Organization Trends
From an organizational standpoint, we find that progressive enterprises are structuring their shared-services organizations to run like a business, with active governance and process management discipline. This distinctive approach to organizational planning and execution involves the following specific structural capabilities:
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End-to-end management. High performers are applying shared services across an entire process, end-to-end, managed by a global process owner—an executive with the responsibility for driving standardization across the enterprise, measuring efficiencies and driving continuous improvement.
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Customer demand management. Ultimately, the business customers determine the fate of a shared-services organization. If you meet and exceed their expectations, you thrive; if you don't, you die. Rather than turning aside customer requests not covered in the menu of shared services, high performers are developing better customer demand management capabilities. They are becoming much more responsive and agile, looking at requests for new services and working either to meet those needs or to reengineer processes so that the need no longer exists.
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Cross-functional leadership. High performers are acutely aware that superior leadership in the shared-services organization is, in part, what gives them an edge. Consequently, successful leaders are being asked now to wear hats across functions. By extending management's line of sight across processes, organizations are finding new synergies and ways to increase overall business impact.
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Shared services as an independent entity. We are seeing an increasing number of shared-services groups being organized as separate, independent entities, providing the same kind of focus and professionalism that characterizes the operating units being served. As one shared-services executive told us recently, "Shared services is critical to the ability of our business units to focus on customers, markets and competitors. So to help the units achieve that focus, we need to organize and manage ourselves in close parallel with the way they are managed. That's a critical enabler in winning in our markets."
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Hybrid management skills. The model used to deliver and manage shared services is no longer monolithic. The previous generation of shared services might have led an executive to choose just a captive-center model, or an outsourcing model. Today, many models can co-exist, so leaders need a broader range of skills, including outsourcer management skills.
Geographic Trends
From a geographical management perspective, high performers are increasingly moving away from a regional model of shared-services management to one generally called a "hub-and-spoke" approach. It's a model that enables the shared-services organization to be both "super local" and "super global." That is, a hub-and-spoke approach simultaneously offers (1) scalability and the benefits of labor sourcing associated with a global model; and (2) the customer intimacy and superior customer experiences associated with a local model. It's an approach that is truly the best of both worlds.
Another important trend is the move to "greenfield" operations, meaning that executives no longer feel constricted by the need to set up the organization near any particular office or manufacturing facility. Given the ability to source and manage work globally, companies can set up a shared-services operation wherever it makes sense organizationally and financially. Our research finds that approximately 20 percent to 30 percent of new shared-services operations are being established as greenfield shops.
A related trend here is the development of emerging service-delivery markets around the world. In a multi-polar world, where talent can be sourced and managed wherever there are the right skills for the best value, we are seeing a much more globally diverse set of locations for shared-services centers than ever before. In many cases, global companies are deploying captive operations in locations which, in the past, were used primarily by outsourcers. So rather than trying to set up a new operation in India or the Philippines, for example, executives are saying, "Let's go to those same locations, because they are known and proven places to source talent and manage an operation."
Operating Model Trends
The most important trend to discuss in terms of new operating models is the move by high performers to establish multi-function shared services organizations. With that approach, two or more major functions are combined together in shared services with a common leader, a common service delivery model, and a common governance structure.
From a logical perspective, a multi-function approach is more compelling as an operating model. And, anecdotally, we are increasingly hearing about the success many enterprises are experiencing by combining multiple business functions under a common shared-services organization. But is there any hard evidence this model is more successful than a single-function model?
To get an answer to that important question, Accenture surveyed more than 300 organizations to explore their reasons for pursuing a multi-function approach, what results they have achieved and what major challenges they have encountered. Here's what we learned:
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The multi-function model is now more prevalent than the single-function model. Fifty-seven percent of our respondents said that they already had multi-function shared services in place. Of those not currently leveraging a multi-function model, almost two-thirds (64 percent) are nevertheless considering such an approach in the future.
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Those deploying a multi-function model are realizing significant benefits—in many cases, greater than originally anticipated. Lower costs is the most important benefit named, but about three-quarters of the executives surveyed also claim the following major benefits: the ability to more effectively leverage their existing service infrastructure and the ability to share leading practices across the organization.
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The biggest barriers to success named by our respondents include resistance to change and functional leads unwilling to relinquish control. Effective leadership is one important answer, increasing the trust levels of various stakeholders and helping them see the synergies available from a multi-function approach.
In general, the executives with whom we spoke voiced a common desire: They have put a lot of work into their service-delivery frameworks, governance models and performance reporting. They see the assets they have already created and they want to be able to leverage those assets across multiple functions of their organizations.
An Expanding Market for Shared Services
Accenture research and experience point to an expanding and evolving market for shared services. Globalization and the ever-shifting economic and talent environment of the multi-polar world are driving rapid change in how shared-services organizations are structured and located, and how they are staffed.
To achieve high performance, enterprises need to help their shared-services organizations move up the value chain, closer to the customer. They should focus on process excellence, performance management and continuous improvement. And they must leverage the talent and cost advantages of the global marketplace.
Many enterprises today are clearly leading the way toward new kinds of value and business impact from shared services. Those who expect to attain high performance in the future should be attuned to the example set by these trailblazing leaders.
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