Companies, in their quest to reduce costs and boost efficiency, implement shared services. So how is it that often the eventual results often fail to match up to the projected or desired ones? If companies would only invest in some time to see the bigger picture and plan for the future, be wary of the possible dangers or pitfalls and hire consultants who are experienced in these matters, they could easily push up their chances of success. So, what are these potential pitfalls companies need to watch out for?
Lack of foresight
Andrew Bartolini, Chief Research Officer at Ardent Partners, a Boston-based research and advisory firm, says, “Design the center with the end goal in mind. SSCs often begin with IT and eventually expand to certain business process areas like procurement, accounts payable, and HR. Leaders should anticipate what the business will need over the next five to eight years so that it can design the initiative with the long-term scope in mind.” The importance of good planning cannot be overstated especially when it comes to shared service centers (SSCs). The transition phase will be much smoother in the presence of a detailed and precise implementation plan. The lack of it can be potentially disastrous.
Bypassing Executive Sponsorship
Christian Lanng is the CEO and co-founder of Tradeshift, a firm that connects companies with their suppliers and simplifies vendor relationships. His advice is “bring as many relevant people as possible into the purchasing decision.” When companies are trying to move to a procure-to-pay (P2P) type shared service center, they need to first garner support at the strategic level during the testing phase. Lanng adds, “Give AP, Procurement and Accounting team members a chance to test and explore the technology. Since they will be using it daily, they may be able to ask the most relevant questions.” After that, companies need to ensure they do not bypass executive sponsorship. If a project is not integral to an enterprise’s overall strategy, there’s a big chance of the benefits of shared services being delayed. By linking the project’s success to executives’ rewards/bonuses, such support from the top tier employees is more likely.
Ignoring expert advice
When saving money and reducing potential risks are at the top of the priority list, companies should not hesitate to approach professional help from people who have proven their expertise in the shared services area. These professionals could be peers from other companies or professional consultants. They are the people who know the best practices to follow while helping a company make the transition to shared services.
Having narrow vision
When certain services are moved to the SSC, it affects processes throughout the organization. According to Lanng, “the best strategy to adopt is an ‘all-in’ approach. Your business will see the best results a new P2P technology has to offer when all suppliers are integrated and all relevant staff is trained on how to use the technology correctly.” SSC implementation does not mean that the other parts of the company need to be changed but they need to be reviewed thoroughly to reveal potential upgrades and opportunities to reengineer processes. Not performing this review can leave potential cost savings and operational efficiency gains on the table and unrealized.
Not exploiting available technology
If a company is not utilizing the best available technologies, its rivals are. For example, Bank of America Merrill Lynch’s trademarked platform CashPro, allows various client companies to re-configure their P2P systems to their own unique needs, something that could be daunting in the past. Lanng also recommends leveraging cloud technology. “Consider the cloud. Cloud-based P2P technologies allow easier access and more data security.” Moreover, it is also imperative that well-defined expectations regarding technology are discussed with vendors before initiating a project.
Not leveraging geo-political advantages
Bartolini’s mantra when it comes to labor arbitrage is “location, location, location“. He says, “Location of the centers can be an incredibly important decision from a legal standpoint as well as from a talent and cost standpoint. Make sure that the tradeoffs of the different locations are properly evaluated.” Since cost reduction is one of the main causes behind procure-to-pay implementations, CEOs cannot afford to miss out on the advantages different locations offer in terms of deregulation, data privacy, labor laws, etc. Closing their eyes to these potential game-changers can often prevent companies from raking in huge profits and/or cost cutting opportunities.
Shared services platform implementations are very common among companies these days even though they are quite complex in nature. Observing and learning from each other’s mistakes and experiences can go a long way in achieving desired results.