FSN: Shared services – the road to hell?

Shared services – the road to hell?

19th June 2006
We all know what the road to Hell is paved with: so it is with shared services. The decision to consolidate administrative or support functions from several departments or agencies into a single, stand-alone entity, can be driven by a various good intentions. But regardless of the drivers, all shared services projects have something in common: they require a clear vision, strategy, well defined operating parameters and service level agreements, plus plenty of stamina, says Lesley Meall, FSN contributing editor.

We all know what the road to Hell is paved with: so it is with shared services. The decision to consolidate administrative or support functions from several departments or agencies into a single, stand-alone entity, can be driven by a various good intentions.

Some, such as the complying with the growing burden of regulations such as Basel II, IFRS and SOX, can be specific to the function in question, as with finance. Others, such as the drive to simplify processes and provide services as efficiently and effectively as possible can be behind all types of shared services initiatives, ranging from finance through human resources and information technology to procurement and beyond.

But regardless of the drivers, all shared services projects have something in common: they require a clear vision, strategy, well defined operating parameters and service level agreements, plus plenty of stamina. ‘Implementing shared services is a complex, demanding and challenging project,' says Debra Maxwell, head of shared services with Surrey County Council and it takes time. ‘You can't establish a shared services centre overnight,' says Russell Cullens, the finance director for EMEA and AsiaPac with Extensity, and he should know. Before its recent acquisition by Extensity, he was involved in the development of a shared service centre for the finance function within Geac.

The software company has spent four years centralising and consolidating its finance systems and it is still only 80 per cent along the road to shared services. ‘It's very difficult to centralise everything,' says Cullens, ‘so the move towards shared services has to be undertaken in stages, even if you are just focussing on the finance function.'

Historically, the organisation staggered its world-wide transition on a regional basis, starting in the US , followed by Europe , then moving on to Australia . ‘We're all at slightly different stages,' he explains, with Sydney at the implementation stage, Birmingham at the more stable post-implementation stage and Atlanta working its way through the business planning process. How the projects progress within Extensity remains to be seen. ‘Personally, I still think the shared services model is the right approach,' says Cullens, but with so much upheaval (Extensity recently announced its intention to acquire Systems Union too) speculation seems neither prudent nor professional.

The shared services project at Surrey Council is significantly less complex and on a much smaller scale, but it has also been a long slow process. Although the initial business case was approved in July 2002, the final service roll-out only took place this year. Between times, the council needed to put together a draft business case, agree the contract, install the SAP system that underpins its shared services centre, and prepare staff for the transition.

‘Effective communication is vital,' says Maxwell, if you want to get buy-in from everyone involved, because people need help adjusting to change. ‘The change to working practices means less freedom for individuals to work in their own way,' says Maxwell, and some of those affected see the changes as negative. ‘You have to address head-on the fears of job losses and changes to ways of working,' she adds, and carefully manage people's expectations.

‘Do not underestimate the cultural change required to deliver such a complex and challenging project,' she cautions. If you do, you may find it taking a little longer than planned. As Robert Younghusband discovered when Bausch & Lomb, the eye care specialists, replaced dozens of national finance functions with a shared service centre. ‘Some country managers resisted every step of the way,' he recalls, often completely ignoring instructions and burying their heads in the sand. ‘A lot of people were hell bent on protecting their turf,' he says, ‘and that really did slow things down.'

Their resistance is hardly surprising. After all, the spread of shared services is decimating the power base of those who are used to running their own financial fiefdoms. What is surprising is how meekly the finance profession has accepted a trend which seems to threaten the current jobs and future careers of so many accountants.

‘I see an initial “Centres of Excellence” approach,' says Maxwell, but there will eventually be collaboration between public sector bodies such as local authorities, health trusts and government departments. ‘I expect this will lead to a reduced number of “super” shared services over time,' she adds. The prospects don't look much better in the private sector, where the shared service centre is often a way-point on the long and winding road to outsourcing, which promises even more consolidation and centralisation. ‘It's hard to predict how things will look ten years from now,' says Cullens, ‘I wouldn't like to speculate.' Road to hell, anyone?

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