Why shared services? – Because we need a common language

January 24, 2010

The idea of shared services is quite simple: they are expected to serve several entities belonging to a corporation and to provide cost savings and qualitative benefits. That requires a high level of standardization and harmonization, which actually means – a common global language (not just in a linguistic sense).

Lorenzo H. Zambrano, Chairman of the Board and CEO of CEMEX S.A. de C.V. has expressed a (brilliant) opinion about a common platform for his corporation: “We grew from being a Mexico based company that had sales of $1.3 billion and operating cash flow of $300 million to a multinational with operations in 30 countries, sales of $5.6 billion, and operating cash flow of $2 billion. (…)A successful global organization like CEMEX needs to standardize as many processes as possible not only to manage its costs, but to realize the synergies of operating around the world. Running a company that is operating in countries as diverse as Egypt, the Philippines, Costa Rica and the United States clearly requires a common language. Not just English, which is our operating language. But common reports, common systems, common practices, and common technology platforms – if only so we can talk to each other effectively and efficiently.”

why shared services
That expression was given a few years ago, but it still holds true. Especially in the era of speeding globalization processes where corporations search for new solutions to improve their operations – to simplify, standardize and harmonize them. And a shared services organization (SSO) is here a good offer.

If properly implemented, an SSO is able to offer benefits in the two dimensions: quality and quantity. The quantitative ones (cost savings) are achieved due to consolidation (economies of scale, greater level of specialization), standardization causing reduction in operational costs, automation and process improvements implying reduction in cost of quality. And the qualitative benefits are as follows: management focus on business and less time needed to invest in back-office functions, increased scalability, flexibility, accountability and transparency, customer and service focus, easier technology and training rollouts.

That looks nice but the implementation as such can take a long period of time (depending on the project scope and other factors), requires additional capacities and bears many risks on its way. Also running a shared service center is not as easy as it can seem to be. Therefore it is crucial to use experiences and lessons learned by other corporations. Let me briefly list lessons learned at Infineon Technologies AG, (a spin-off of Siemens):

• Communication is crucial,
• It is essential to achieve a high level of automation,
• Standardized processes are absolutely a must,
• It is important to measure performance using KPIs,
• Customer satisfaction surveys are necessary,
• A description of procedures and routines should be given in manuals,
• Avoid fluctuation via individual development plans and job rotation,
• Permanent training on the job is important,
• Find the right balance between serving customers individually and standardized processes,
• Replace culture of blame by constructive discussions (Marlies Schneider, KPIs Measurement of SSO’s performance, presentation in Berlin on 09 May 2007).

Magdalena Szarafin
http://www.szarafin.info


Comments

3 Responses to “Why shared services? – Because we need a common language”

  1. Business Process Standardization on January 26th, 2010 7:35 am

    Business Process Standardization is not always good. Some business processes like customer support should not be standardized. Business process standardization works well where the input and output to the process is same and predictable. If it is not then neither Standardization nor mass customization would work. These processes (often known as artistic processes) should be executed with proper judgment. Google for artistic processes and you’ll see good references on this topic

  2. Tweets that mention Why shared services? - Because we need a common language | Outsource Portfolio -- Topsy.com on January 27th, 2010 3:04 am

    […] This post was mentioned on Twitter by Lynne Tarter, Magdalena Szarafin. Magdalena Szarafin said: Why shared services? – Because we need a common language http://outsourceportfolio.com/shared-services-common-language/ […]

  3. Standardiziation is not good? on February 2nd, 2010 9:53 pm

    Not sure what the previous commenter is talking about? Do you mean to say six-sigma, CMM standardizations are bad? I don’t think so. You always need standardization in business process. Checkout the article http://outsourceportfolio.com/outsourcing-and-business-process-standardization/ that explained clearly the need for standardization in business processes.

    -Mark

Got something to say?