Implementing Shared Services means moving from a model in which each entity or business unit has entirely its own resources to a model where these resources are pooled and subject to a charge-back.
When properly implemented, Shared Services make the organization more efficient: the service improves and its cost is reduced. However, this means that good governance, management, and pricing mechanisms should be implemented with 'client' entities.
Below are some potential pitfalls:
- The confusion of pooling and centralization: entities do not become involved in decisions regarding the structuring of Shared Services development
- Opaque performance of Shared Services: lack of transparency of quality indicators, user satisfaction and efficiency
- Unfair charge-back: some entities benefit whereas others are penalized; this can even create undesirable behavior.
It is possible to avoid these pitfalls by defining the right governance, management and charge-back system with Shared Services 'client' entities. This system needs to evolve over time to become increasingly efficient.
1. How should Shared Services governance be organized?
- As a strategic or operational committee? With which tasks? With what kind of representation? How often should it meet?
- Should a multi-functional Shared Services organization be created? If so, with what role? Should each function (e.g. infrastructure, recruitment, etc.) receive support? Should you go one step further by managing the transformation and performance of Shared Services?
2. Which management system should be used?
Once the governance principles have been established and the committees are in place, it is good practice to formalize the roles and responsibilities pooled between Shared Services and 'client' entities. This will be pointless if it is not accompanied by the definition of management indicators relating to service quality and efficiency. Shared Services and 'client' entities must be in total agreement on these measures to prevent any subsequent disputes.
3. At what price?
Tax issues must be separated from managerial issues. From a managerial perspective, pricing must be simple, transparent and fair; it must be based on the right cost KPIs.
How can Argon Consulting help you?
Argon Consulting not only provides models and examples of governance, and management and pricing KPIs, but also has the ability to make decision-makers converge towards the right system.