Transitioning to a shared service model has a huge impact on local business units. Though the aims of such a transition typically include centralizing common services, reducing costs and avoiding duplication of services, it is often met with resistance by local business units. If not handled well, switching to a shared service model can end up impacting the organization adversely instead of helping the bottom line.
Change of any kind usually faces resistance. This resistance is fueled by fear, fear of being negatively impacted by the change. Depending on the dynamics of the interaction between local business units and the central headquarters, local units can be put in an uncomfortable situation and feel threatened by talk of moving to a shared service model.
Why the Resistance to Shared Services?
Roy Barden, founding Director of Loxley Resources Ltd, who has experience implementing and operating both in-house shared services and BPO, explained some of the primary reasons local business units may be skeptical or fearful towards adopting shared services, “Local units, and specifically local unit business managers, are always going to ask ‘what is in it for me?’ They are nervous because:
Shared services will mean that their performance is more visible to the center. The center will see their numbers at the same time they do.
Shared services may reduce their autonomy. Areas of discretionary judgment are more likely to be harmonized across business units or even become driven by centralized rules.
Shared services moves where work is done. ‘My local team will shrink.’ The local leaders may fear losing face and the number of people working in the local business unit will shrink.”
Any large change, especially at this scale, needs to benefit the organization as a whole, and not just the headquarters operations.
Richa Dubey, director of human resources at Praxair, shared her insights on managing global interactions across business units. “Issues crop up when the sole focus of the organization is on the cost savings and scaling of operations. A hard-handed approach that forces a shared service model can create discontent. If not done properly, it can disrupt the flow of services, lengthen work processes, create duplication (which it was meant to reduce in the first place) and on the whole, create a negative impact on the quality of work delivered.”
Addressing Local Concerns
Instead of forcing local business units to adapt to a shared service model, it works better when the organization takes an inclusive approach and includes the local business units in the evaluation and decision making for such a transition. A collaborative approach helps alleviate the local business unit’s fears and make them more open to at least considering the shared model. “I think a more disciplined approach towards defining the processes before adopting a shared service model in very important. The organization needs to have buy-in from all stake holders, including local business units, in this process rather than imposing it. Creating cost efficiency for all stakeholders and working on the efficacy of the defined model on a regular basis will help people be more accepting of the system,” stated Dubey.
Barden believes that explicitly recognizing that the concerns of the local business units are valid will help the organization take steps towards addressing those concerns. “First, develop good communications to ensure these concerns are made explicit and not allowed to fester,” he said. He then went on to describe some measures by which organizations can do so: “Allow some empowerment to local business units to influence, where possible, the design of the solution, and more importantly how and when it is implemented. Offer local benefits: show lower cost for same level of service, or show better service. In addition, allow local business units to re-invest their savings where they are needed, for example re-investing back office savings in income generating / front line services.”
Creating Value for All
A local business unit is after all, an internal customer. Treating a local business unit with a similar level of consideration as an external customer goes a long way. As with external customers, the focus should be on creating value for the local business unit, even in a transition to shared services. Local business leaders need to be involved in the early stages of such evaluations and decision making. While many local business units may feel threatened by the move, those that are strong and play a core role in the organization may actually welcome the move, since it frees them up from handling support services so that they can focus on their core strengths and deliver what they are better at.
However, sometimes local leaders will not buy in. Barden suggests taking a different approach all together, “One option is to change the game and adjust local business unit accountabilities in line with the new strategy. A number of organizations (Diageo, for example) have changed the scope of the role of local business unit leadership and moved to a regional and/or product based model.”
Any large change, especially at this scale, needs to benefit the organization as a whole, and not just the headquarters operations. Switching to a shared service model needs careful deliberation from executive leadership, including adequate representation from all local business units that are likely to be impacted, with a focus on creating value for all.