Wednesday, July 28, 2010

What Are You Waiting For?

By Bill Frech, Co-Founder, CandidAdvisors

Are you under pressure from management and the board to cut costs but not cut service, you may even have to increase service or support new offerings. What can you do?

Have you thought about implementing shared services, or if you already have shared services, should you expand the scope and remit?

The Shared Services concept has been around as a business solution for reducing costs, improving performance and providing better information to businesses since the mid-80’s (For a definition of Shared Services see the blog post entitled Defining Shared Services, Enabling a Capability to do More With Less). However, there are a number of companies who have not implemented shared services or taken full advantage of their shared service operation. They are either agonizing over the wisdom of doing so and/or are still battling the politics that encumber any change.

If you stop and think about what is entailed in undertaking the implementation of a shared services strategy it is much less costly, faster and less contentious than an ERP implementation… AND the benefits are achieved faster and the cost savings can be truly significant, often quoted at greater than a 30% cost reduction. As a matter of fact, it is often the move to Shared Services and not the ERP implementation that drives the majority of the savings.

Politics aside for the moment, how do you know determine if shared services is a viable solution for your company? Let us start by asking; does you company have any of the following indicators?
  • Redundant staff or functions in the business units/divisions/etc.
  • Multiple ERP systems or instances of ERP systems
  • No data standards
  • Difficulty in answering questions like:
- How many employees do we have?
- How much do I spend on travel?
- What does Finance, HR, or IT cost me?
- Are my outsourcing contracts delivering the value promised?
- Can I get a business case to see how this new acquisition might fit into with my other businesses?
Outsourcing contracts are managed by various groups, business units, etc. with no standards and minimal leverage between arrangements

If these indicators ring a bell or you are under pressure to reduce cost while keeping up performance, you should consider implementing shared services as part of your business optimization strategy.

An easy way to get started and verify if this is the right strategy for your organization is to perform an assessment. An assessment involves gathering the costs associated with the operation of the area(s) you are considering for shared services. Envision how the shared service will operate and what your staffing needs would be and then compare current to future state costs. You should also consider what the costs would be to move to your new operating model and what some of the non-financial benefits will be. This should give you an indication as to whether you should consider implementing shared services.

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