Shared services: friends, that is really not just about cost!

An old stereotype, common-known (in a new scenario of the global financial crisis): We implement BPO or shared services (SSC) solutions as we want to cut cost. And the global economic crisis would just support that way of thinking (and doing things). However, things are not as simple as they seem to be at first glance…

“Going up the value chain to knowledge-based services isn’t just about cost reduction; it allows you to create a lot of value for the organization.” (Shared services shines in challenging times: Insights from Deloitte’s global shared services survey, p. 8)

Good news for people perceiving F&A (F&A – finance and accounting) BPO and SSC operations in a long-term perspective, adding value for organization running them and developing also advisory services, not just transactional ones: corporations tend to recognize that quality is more important than quantity, although the latest one is obviously not unimportant.

While a few years ago the main reason for implementing a shared services organization was the cost aspect, it is not the most important reason any more. Why is it so? One reason is the increasing role of the F&A function for corporations. Professor Joe Lampel from the Cass Business School in London, describes the situation as follows: “Today (…) it’s much more difficult to obtain money, your own ratings have come under greater scrutiny, and bonds have to be carefully managed. All of these things have put a lot of pressure on the CFO.” No woner then that according to 70% of top performing corporations (according to KPMG methodology, refer to KPMG survey Thriving not just surviving: Insights from leading finance functions) the F&A has significant influence on core operations, for 61% of them the finance function has material influence on marketing, supply chain (55% of respondents) and IT (53%). That clearly means: F&A managers actively influence business leaders to make better decisions across all functions. Therefore timely reporting of business results, delivering accurate budgets and forecasts, and investor relations management are the priorities for the F&A function.

Timely reporting, accurate figures… – it is all about quality. Let’s briefly discuss the findings of some surveys undertaken in the past two years and showing the increasing role of qualitative aspects in the F&A function, incorporated in shared services organizations (SSOs).

Higher transparency, process quality and process security are the most important drivers to implement an SSO according to the study Shared Service Center – the 2nd Generation undertaken by PricewaterhouseCoopers (PwC) in 2008. These objectives are followed by decrease of error rates, increase of customer satisfaction – and cost reduction, expressed as less important than the previous objectives.

Service and quality improvement, accuracy and timeliness have been given as main reasons for having established or for establishing an SSO by 85% of world-class corporations identified by The Hackett Group in 2008. Service standardization was the next reason for 83% of them and about 80% said that cuts in administrative costs, headcount and salary/wages reduction are the most important drivers to implement a shared services organization.

The increasing role of F&A (which – as such – “just” represents back-office operations) and the supporting business processes performed by shared service centers make the F&A function and the SSO existing within this function even more important for corporations. Shared services become strategic influencers, offering corporations a tool to facilitate enterprise growth, improve focus on core business and enhance talent management.

(Source: Posted by Magdalena Szarafin on February 13, 2010, Website: http://www.szarafin.info/)

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