What’s Shared Service Centre? Benefits & Challenges

18/09/2024 Off By fintralead

What is Shared Service Centre?

Shared services streamline business operations by consolidating support functions and creating a separate business unit within the company. This approach allows for a well-defined infrastructure, enabling the delivery of higher-value services. These services typically include human resources, finance and accounting, information technology, supply chain management, Data Analytics and Reporting, and other crucial front and back-office functions.

By centralizing these services into a unified organization, businesses can unlock efficiencies and cost savings that would otherwise be challenging to achieve through fragmented operations. Shared services not only benefit the organization as a whole but also offer employees valuable career advancement opportunities and training.

By consolidating and standardizing business functions, SSCs enable organizations to focus on core activities, drive growth, and improve overall performance.

The goal of an SSC is to:

Improve efficiency: Streamline processes and reduce duplication of efforts.
Reduce costs: Consolidate resources and leverage economies of scale.
Enhance quality: Develop specialized expertise and deliver high-quality services.
Increase scalability: Flexibly adapt to changing business needs.

What are the SSC models:

There are several SSC (Shared Service Centre) models, including:

In-house: A centralized team within the organization, providing services to internal stakeholders
Outsourced: A third-party provider delivers SSC services, often with specialized expertise and economies of scale
Hybrid: A Combination of in-house and outsourced SSC models, balancing control and expertise
Global Business Services (GBS): A centralized SSC model serving multiple regions and business units
Virtual SSC: A decentralized, remote-based SSC model, leveraging technology and flexible work arrangements
Centers of Excellence: Specialized SSCs focusing on specific functions or industries
Partnership SSC: Collaborative SSC models between organizations, sharing resources and expertise
Cloud-Based SSC: SSCs leveraging cloud technology for scalability, flexibility, and cost saving
Automation-First SSC: SSCs prioritizing automation and AI to drive efficiency and innovation
Hub-and-spoke SSC: A centralized hub with decentralized spokes, balancing controls and local presence
Multi-Functional SSC: SSCs providing a range of services across multiple functions
Regional SSC: SSCs serving specific geographic regions or markets
Industry-Specific SSC: SSCs catering to unique NEEDS OF SPECIFIC INDUSTRIES
Joint Venture SSC: SSCs formed through partnerships between organization
Captives SSC: Wholly owned subsidiaries serving as SSCs for parent companies

The Benefits of Using Shared Services

Shared-services implementation could help a company standardize processes and technology platforms in every region, making it easier for executives to connect the dots across the organization. Such an implementation could also lead to a more rapid rollout of policies, creation of value-added services, and better controls. In the business world, adopting a shared services delivery model offers numerous advantages.

Enhance efficiency by centralizing and reduce cost by eliminating repetitive efforts
Standardizing its processes
Employees’ productivity can be increased since the service is centralized
Cost reduction and distribution
Personalized services to the client
Enhanced quality through streamlined processes
Increased scalability and agility
Better communication
Speed in carrying out operations
Helps in decision making and strategic planning
Improved efficiency through streamlined processes
Better Internal controls
Improved internal customer satisfaction

The Challenges of Using Shared Services

When integrating shared services, it is imperative to carefully select the appropriate technology for facilitating communication and processing. Initial operations of shared service centers may not yield optimal efficiency, necessitating a dedicated allocation of time and effort to establish processes that align with the requirements of both business leaders and the shared service center.

In such circumstances, an expeditious approach may result in inaccuracies and deficiencies. Some significant challenges of SSCs include:

Change Management: Transitioning to a new service delivery model can be difficult for employees and customers.
Integration Complexity: Integrating disparate systems, processes, and cultures can be challenging.
Resistance to Change: Stakeholders may resist changes to traditional service delivery models.
Quality and Consistency: Ensuring consistent quality and service levels can be difficult.
Communication and Transparency: Maintaining open communication and transparency can be challenging.
Measuring Success: Defining and measuring key performance indicators (KPIs) can be difficult.
Technology and Infrastructure: Implementing and maintaining necessary technology and infrastructure can be costly and complex.
Talent Management: Attracting and retaining specialized talent can be challenging.
Scalability and Flexibility: Balancing scalability and flexibility with standardization and efficiency can be difficult.
Continuous Improvement: Encouraging a culture of continuous improvement and innovation can be challenging.
Risk Management: Managing risks associated with centralized service delivery can be challenging.
Compliance and Regulatory Issues: Ensuring compliance with regulatory requirements can be challenging.
Customer Satisfaction: Managing customer expectations and satisfaction can be challenging.
Cost Management: Managing costs and ensuring cost savings can be challenging.
Vendor Management: Managing vendor relationships and contracts can be challenging.
Data Security and Privacy: Ensuring data security and privacy can be challenging.
Business Continuity: Ensuring business continuity and disaster recovery can be challenging.
Stakeholder Management: Managing stakeholder expectations and engagement can be challenging.
Visibility: The executive team requires real-time access to operations
Control Risk: When consolidating multiple accounting groups into one central unit, there’s a risk of losing control.
Risk of Error: The potential for errors increases with the volume of work a shared services center must handle.

Why do Shared Services Fail?

To achieve a successful implementation, it is essential to prioritize clarity, communication, and commitment from the top. These three areas are critical during prelaunch and ongoing operations. Insufficient internal promotion often leads to the failure of Shared Services. Crafting a convincing value proposition requires prioritizing the stakeholders’ and senior management’s “what’s in it for me” message.

And always keep in mind that launching a project is just the beginning. Support post-launch and continuous training are essential for long-term success. These efforts are crucial to overcome challenges and ensure the initiative’s success.

Here are some common reasons why Shared Service Centers (SSCs) fail:

Lack of clear objectives and strategy: Unclear or misaligned goals can lead to confusion and ineffective service delivery.
Insufficient stakeholders buy-in: Failure to engage and involve stakeholders can result in resistance and lack of support.
Poor process design and standardization: Inefficient or non-standardized processes can lead to errors, delays, and frustration.
Inadequate training and development: Failure to equip staff with necessary skills and knowledge can lead to poor performance and low morale.
Ineffective technology and infrastructure: Outdated or inadequate technology can hinder efficiency and productivity.
Inadequate metrics and monitoring: Lack of clear metrics and monitoring can make it difficult to measure performance and identify areas for improvement.
Resistance to change: Failure to address and manage resistance to change can lead to slow adoption and limited success.
Lack of continuous improvement: Failure to regularly assess and improve processes and services can lead to stagnation and decline.
Inadequate leadership and governance: Weak leadership and governance can lead to lack of direction, accountability, and decision-making.
Unrealistic expectations and timelines: Overly ambitious goals and timelines can lead to disappointment and burnout.
Inadequate communication and transparency: Poor communication and lack of transparency can lead to mistrust and dissatisfaction.
Failure to address cultural and organizational differences: Ignoring cultural and organizational differences can lead to integration challenges and limited success.
Inadequate risk management: Failure to identify and mitigate risks can lead to unexpected problems and failures.
Lack of flexibility and adaptability: Failure to adapt to changing circumstances and needs can lead to obsolescence and irrelevance.
Inadequate funding and resources: Insufficient funding and resources can limit the ability to invest in necessary technology, training, and staff.

Neglecting any of the mentioned factors could result in Shared Services failure. Internal resistance, lack of stakeholder collaboration, and business unit pushback pose significant threats that can diminish the benefits outlined in the business case.

Given the immense potential in unexplored service lines and processes within enterprises and organizations worldwide, there is a remarkable opportunity for those ready to embrace the challenge and potential of Shared Services, and then endure the journey.

By understanding these common pitfalls, organizations can proactively address and mitigate risks to ensure the success of their Shared Service Center initiatives.

What is the Future of Shared Services?

The future is here, with technological advancements like automation solutions such as robotic process automation and data automation leading to more analytical decision-making across businesses.

When you harness all your data within a centralized software solution, you unlock the potential for deeper and more timely insights. These tools process data and transform it into visualization-ready information through customizable reports.

Here’s a suggested framework to explain the future of Shared Services:

Trends:

Digital Transformation: Increased automation, AI, and machine learning to enhance efficiency and accuracy.
Cloud-Based Services: Greater adoption of cloud-based technologies for scalability and flexibility.
Globalization: Shared Services expanding globally, with a focus on nearshoring and offshore locations.
Personalization: Tailored services and experiences for customers and employees.
Data-Driven Decision Making: Advanced analytics and data insights to inform business decisions.

Emerging Technologies:

Artificial Intelligence (AI): Automating complex processes and enhancing customer experiences.
Robotic Process Automation (RPA): Streamlining repetitive tasks and increasing efficiency.
Blockchain: Enhancing security, transparency, and data management.
Internet of Things (IoT): Integrating smart devices and sensors for real-time data and insights.

Future Operating Model:

Hybrid Model: Combining insourced and outsourced services for flexibility and cost-effectiveness.
Service Integration: Integrating multiple services and functions for seamless delivery.
Customer-Centric: Focusing on customer experience and satisfaction.
Agile and Adaptive: Embracing agile methodologies for rapid response to changing business needs.

Skills and Talent:

Digital Literacy: Developing skills in emerging technologies and digital tools.
Data Analytics: Building expertise in data analysis and interpretation.
Customer Experience: Focusing on customer-centric skills and training.
Collaboration and Communication: Enhancing soft skills for effective teamwork and stakeholder engagement.

No matter the location of your processes, you will have instant access to essential information to make informed decisions that drive your business forward. The synergy between Shared Services and automation tools is pivotal in today’s data-rich business environment.

The future of Shared Services is characterized by digital transformation, emerging technologies, and a focus on customer experience. To succeed, organizations must adopt a hybrid operating model, develop new skills and talent, and embrace agile methodologies. By doing so, Shared Services can drive business value, innovation, and growth.

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