The Journey Toward Shared Services

If you have implemented a shared-services organization or contemplated doing so, you are not alone. Most companies have. If you’ve been less than ecstatic with the results, you are not alone, either.

Enough benefits have flowed from centralizing the provision of human resources, finance and accounting, property management, business technology and many other services, however, that using shared services has become standard operating procedure almost everywhere. The trend today is toward multiple services from a single internal organization.

A shared-services organization offers an ideal way to reduce costs through consolidation and standardization, but outsourcing might well be the answer if that is your only goal. Leading companies see shared services as a key player at the strategic level of the enterprise.

These firms survive the tumult of ever-shifting, global, technology-driven knowledge economies by continuously transforming themselves through three broad behaviors that I call the “transformation triangle.” These companies constantly reassess themselves and 1) eliminate activities that are no longer working to advance the strategy, 2) refine activities they choose to keep to optimize their efficiency, and 3) use the resulting savings to fund new products, business processes and business models.

This is how they become adaptive, i.e., ready to seize opportunities and respond to threats. This is the petri dish of innovation. The place of shared services in the triangle becomes obvious. Eighty-eight percent of respondents in an Accenture survey reported moderate or major costs savings, but 96 percent described moderate or major acceleration in transformation and response to change.

At the heart of the three transformation activities is the customer; all three must be carried out in the customer’s interest, and presenting a consistent service delivery face to the customer is indeed one benefit companies experience with shared services. When a shared-services unit produces standardized technologies and processes, external connections to suppliers and customers are obviously more productive.

This has become quite real for the grocery customers of Tesco, the third-largest retailer in the world. What’s worse than waiting in line at a grocery store?

A few years ago, U.K.-based Tesco created its HSC (Hindustan Service Centre), a shared-services group in Bangalore, India. Among other things, the HSC explores new technologies, such as “I Don’t Q” software. The technology, which uses a thermal sensor, counts the number of people lined up at the checkouts and suggests to store personnel that additional checkouts be opened when lines get too long. The information is also displayed on electronic panels so shoppers can find the shortest line.

Tesco set up the HSC, which now employs more than 2,000, as a fully owned subsidiary because it handles critical business processes and software. But Tesco also outsources less critical services to other Indian companies.