1. Scaling the Heights: the Imperative to Grow
Shared Services and Outsourcing
Deborah Kops
…‘build it better and
So you’ve dragged your organization kicking and screaming through a few
they will come’ is
transitions to a shared services and/or outsourced business model, and
never a viable
now it’s time to spread the wealth to the rest of the organization. You
approach to scaling
and your team might think that the next logical step is to focus inward,
shared services in
building up more process skills, identify opportunities to move up or
most organizations.
across the value chain, deepen governance and reporting, or search for
that Holy Grail called innovation. However, these vital efforts are merely
table stakes in the provisioning of shared services; ‘build it better and
they will come’ is never a viable approach to scaling shared services in
most organizations.
Particularly if the move to a shared services or outsourced model is not
mandatory, it’s imperative for the shared services or sourcing
organization to deliver growth. Without growth, shared services and
outsourcing are not much more than a corporate experiment at best, or a
hobby, as opposed to a real, sustainable change in the business model.
Global services organizations—whether comprised of some form of
shared services, or outsourcing –or both—must be held accountable to
scale.
The imperative to scale
Scaling is difficult for any business. And global services, as a business, is
no different; it can be viewed as” a company within a company” with an
imperative to grow. Some of the luckier organizations have a man or
woman at the top demanding that every function, geography or business
unit participate, alleviating the need to market, but most relegate the
responsibility to drive scale to their services organizations.
Our shared services and sourcing organizations are simply not designed
to aggressively scale. Most have been established with a “build it and
they will come” approach, based on the belief that the business lines and
enabling functions, with a minimal or modest level of communication,
will “get” the value proposition, and behave accordingly. Therefore,
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2. organizations are designed as “order takers” primarily focusing on
developing the right solution, ensuring operational excellence and
implementing the right governance structure to optimize relationships,
put in place the right controls, manage risk and make sure escalation and
response models work.
Achieving scale is
more than a reflection Without scale any services initiative has limited impact. Thinking about
of an organization’s most organizations, and what percentage of functions—enabling or
appetite to truly business operations-- are delivered through a global services initiative,
evolve the business the numbers in aggregate are still relatively small. With the Global 5000
model; it’s also critical employing on average of almost 30,000 employees, and European based
to deliver maximum companies on the list almost 50,000, 100 or 200 FTEs in a global delivery
benefit to model is not much more than an organizational experiment. If shared
stakeholders. services and outsourcing is being used to truly change the business
model, making it more global, or efficient, or nimble, scale is mandatory
for a range of reasons:
Critical to achieve maximum benefit for stakeholders Achieving scale is
more than a reflection of an organization’s appetite to truly evolve the
business model; it’s also critical to deliver maximum benefit to
stakeholders. Think about a smallish shared services operation, or a 50
FTE equivalent outsourcing relationship. Then remind yourself about the
extent of investment it took to staff the sourcing and transition functions,
fund consultants, develop the IP necessary to hone tools such as RFPs
and evaluation criteria, develop business cases and migration plans, and
redesign the organization. Think about the cost of implementing the
model—both in additional resources, and the time spent by the in-house
team. Consider the time spend in finding and training the right team to
operate and govern. It takes a substantial effort to get in gear to
implement and run a shared services or outsourcing operation.
Gets executive attention Let’s be honest—small corporate initiatives get
little executive attention. Why should a CXO use his organizational capital
to support a shared services or outsourcing initiative that stalls at a
fraction of his headcount? Many in the C-suite will look for leadership
from the shared services or sourcing function as a validation of his or her
mandate before investing time and effort persuading leadership to get
onto the bandwagon. And scale talks.
Creates momentum Don’t underestimate the persuasive power of
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3. momentum. How many of us want to visibly get on a corporate
bandwagon that appears to be moving very slowly? The herd instinct is
true in shared services and outsourcing scale; internal clients look around
the organization; if they see few of their peers getting onboard, they
think that they can continue to sit it out the game.
Scale…and only
scale… delivers ROI. Exploits synergies Without scale, there are limited synergies to offer
clients as a vital part of the value proposition. Shared services and
outsourcing, in their simplest forms, are about creating synergies by
bolting two or more processes or functions together to produce a result
not independently obtainable. For example, if a shared services operation
focuses on changing the delivery just one component of finance and
accounting, say accounts payable, the opportunity to derive more value
from bolting on procurement is lost. Or if recruitment is not linked with
talent management, value is lost.
Delivers return Lastly, scale…and only scale…delivers ROI. The total cost
of ownership of shared services and outsourcing is not always fully
tracked. Experience suggests that, in the early- to-mid stages of shared
services formation or outsourcing implementation, the cost of migration,
management and governance can be as much as one fourth of the cost of
a head in a sourced model, even more if the actual labor is provided in a
low cost location.
Organizational dynamics get in the way
But the challenge is that our shared services and sourcing organizations
are not designed to aggressively scale. Most have been established with a
“build it and they will come” order taker approach, based on the belief
that the business lines and enabling functions, with a minimal or modest
level of communication, will “get” the value proposition, and behave
accordingly. Therefore, they are designed as “order takers” primarily
focusing on developing the right solution, ensuring operational
excellence and implementing the right governance structure to optimize
relationships, put in place the right controls, manage risk and make sure
escalation and response models work.
What’s derailing scale from an organizational perspective? There are
several causes that confront almost every shared services or sourcing
team.
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4. Goes against the grain If the shared services unit’s charge is
consolidating, harmonizing and standardizing enabling functions such as
finance and accounting or HR, it is going against the grain of the
organization. Especially if it has historically embedded these functions
within a business unit or geographically led organization, it’s an
Any corporate change unwelcome and resisted structural change. Achieving shared services and
has to be marketed, outsourcing scale in a company that is not led from the center means
and shared services that the shared services or sourcing organization is fighting on a range of
and outsourcing are fronts, and has to persuade each corporate fiefdom to participate—when
no exception. they perceive shared services as a taking and loss of control.
Seen as “empire building” Shared services leadership, in particular, is
seen as ‘empire building’ at the expense of business line or geographic
needs and customer service. As a result, shared services is often seen as a
threat and a duplication of what’s already in place, often less effective,
not improved and sometimes costing more as a result of
standardization—all code for lack of control. If a function is transferred to
central management, it often means that the business line or geo can no
longer manipulate the budget or service standards to meet its own
needs.
Stalls naturally Scaling shared services is like trying to lose weight. After
a period of time, often two to three years, the shared services
organization, like other corporate initiatives, hits a natural plateau. There
are several contributors; fatigue on the part of the shared services or
sourcing team, or the “we’ve got it right” or the “enough is enough”
syndrome which is voiced or in the subconscious of the internal
customer. There’s often a sense that “we’ve contributed our fair share”
and that any further migration of the function’s processes cuts perilously
close to the core operations.
What’s the answer?
The key to scale...is marketing.
Any corporate change has to be marketed, and shared services and
outsourcing is no exception. One of the reasons many corporate
transformation programs fail is because the sponsors forgot that any
change needs to be actively, aggressively and consistently sold.
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5. Marketing shared services is not about slick and pushy salesmen, or fancy
brochures, or videos with a great soundtrack. Rather, it is a formal,
integrated process which is deployed across the shared services
organization to shape consistent, effective engagement with both
potential and existing customers, and respond to how they buy. It is the
Shared services underlying structure for business development, sales techniques, and
organizations are in communication, and is the process through which strong customer
effect internal relationships and enterprise value is created.
providers with the
right to grow an Shared services organizations are in effect internal providers with the
operations footprint right to grow an operations footprint within a captive market. Just as
within a captive outsourcing providers use marketing to fuel growth, investing in creating
market. messages that are memorable, and value propositions that differentiate
themselves, internal organizations must also market to scale, creating a
brand that resonates well within the company, targeting customers with
the greatest propensity to buy, and focusing investment on existing
organizations who can contribute growth.
Why do shared services organizations either ignore or disdain marketing?
Firstly, scale is rarely a metric that shared services leadership are held to;
few CXOs focus on scale in favor of being cost-neutral, or keeping noise
down. Second, organizations are positioned as facilitators, rather than
drivers of global delivery model growth. Third, prevailing best practice
does not promote bringing in staff with capabilities other than strategy,
solutioning, transition, operations and governance. Lastly, since most of
the team is very left brained, management generally believe the benefits
of globalizing services delivery speak for themselves, looking with disdain
on marketing as just so much fluff, not substance.
But marketing shared services and outsourcing is actually easier than one
might think. The lingua franca of the services industry is process—we
manage processes, we streamline processes, we improve processes, we
measure processes. Marketing is not an occasional communiqué, or a
pretty brochure, it is actually a process that, if designed properly, is
repeatable and measurable, just like any other. It is predictable—for
example, engage with a target successfully seven times, and there’s a
platform to start a substantive discussion.
Marketing has a line of sight. Once growth metrics are established, it’s
easy to track cause and effect. And with scale, the metrics are crystal
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6. clear; if more headcount or work content shifts to shared services or
outsourcing delivery, scale is being achieved.
If the table stakes measurements—meeting SLAs, reducing cost,
becoming more efficient and effective—are being met, the value
…internal proposition can be made obvious to target customers without much
organizations have ambiguity. And because the organization has internal customers to
the advantage of reference, existing clients are available to support the marketing process.
proximity.
Shared services organizations benefit from corporate intimacy, a critical
driver that no external provider can claim. Understanding the nuances of
the culture, knowing the corporate handshake, and where the proverbial
skeletons are buried is an immense advantage in the marketing process.
And last, internal organizations have the advantage of proximity—not
only regular interactions during the course of corporate life, but also at
every juncture during the services lifecycle, enabling the team to
continually look for opportunities to scale.
Scaling the heights of shared services and outsourcing is not easy, but it is
the best measure of corporate commitment to change the business
model. Given the amount of investment—both emotional and financial—
required to set up shared services and sourcing units, subscale operations
have little impact without growth. And left to chance, the attainment of
scale is highly unlikely, especially in organizations without a mandate
from the top of the house.
But marketing, a formal, integrated process which is deployed across the
shared services organization to shape consistent, effective engagement
with both potential and existing customers, and respond to how they
buy, is the likely answer.
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