{"id":1093,"date":"2012-10-16T12:42:39","date_gmt":"2012-10-16T11:42:39","guid":{"rendered":"http:\/\/design4services.com\/?page_id=1093"},"modified":"2023-12-30T22:10:21","modified_gmt":"2023-12-30T22:10:21","slug":"shared-services","status":"publish","type":"page","link":"https:\/\/design4services.com\/practice\/shared-services\/","title":{"rendered":"Shared Services"},"content":{"rendered":"

\"Foxes<\/a>Shared services are where internal services,\u00a0that\u00a0exist\u00a0in multiple parts of the same organisation, or across a partner\u00a0network, are combined into a single consolidated service, delivered by a single part of the organisation, or network, to achieve\u00a0collaborative advantage<\/em><\/a>.<\/p>\n

Services are shared for a wide\u00a0range of stated reasons and perceived benefits (direct and indirect), but the\u00a0main underlying\u00a0drivers are\u00a0typically to reduce costs through economies of scale;<\/em> and to achieve operational efficiencies by standardising practices across the different parts of the organisation, or network.<\/p>\n

Shared services are frequently confused with outsourcing<\/em>; and the terms\u00a0are frequently used interchangably.\u00a0 But outsourcing is a separate and distinct form of delivery model.<\/p>\n

Within the private sector,\u00a0shared services are\u00a0mainly associated with large corporations and multi-nationals, where corporate (also referred to as\u00a0support<\/em> or back office<\/em>) services, such as finance, Human Resource Management and Information Technology, are consolidated across operating divisions, often into\u00a0free-standing Shared Service Centres (SSCs).<\/p>\n

Core (end-customer) services may also be shared.\u00a0 Common elements of the core service are combined and then delivered as a shared service.\u00a0 Call Centres are an\u00a0example of this.<\/p>\n

In the public sector, the use of shared services is less well established, but Governments have become\u00a0increasingly keen on the idea over the last\u00a010 years or so.\u00a0 In the UK,\u00a0the sharing of corporate services are\u00a0now effectively mandated for central government departments.<\/p>\n

It is rare for an entire service to be shared.\u00a0 Often, strategic, mission critical\u00a0or more complex\u00a0aspects of the service\u00a0are retained within the individual business unit.<\/p>\n

Shared Services Centres (SSC) are increasingly being run as stand-alone business divisions, supplying to\u00a0the internal market and sometimes beyond; and competing with external Business Process Outsourcing (BPO) providers.\u00a0 There are even cases where the SSC is sold off and then supplies back into the organisation, as an external supplier.<\/p>\n

Economies of Scale<\/h1>\n

This is the main justification for the sharing of services.\u00a0 Economies of scale can be achieved by sharing the fixed costs<\/em> of the service, e.g. buildings\u00a0and IT.\u00a0 These are reduced by\u00a0eliminating duplication and sharing the investment in, maintenance of; and refresh of a\u00a0common, shared\u00a0infrastructure.<\/p>\n

In the case of small operating divisions or organisations, variable costs<\/em> may also be reduced, due to improved resource utilisation and greater buying power.\u00a0 But this is unlikely to be a major factor for larger organisations – all other things being equal, e.g. wages and staff terms and conditions.<\/p>\n

Economies of scale can also come through improved access to capabilities, not present in the individual organisations themselves, e.g. service expertise and\/or access to new technology.<\/p>\n

Diseconomies of Scale<\/h1>\n

As ever with these things, there is a flip side to the economies of scale.\u00a0 The bigger something is, the harder it is to manage and the less responsive it may be.\u00a0 The benefits of a shared service can be outweighed by the downside of creating a lack of\u00a0connection\u00a0with the\u00a0business activities, that the shared service is there to support.<\/p>\n

The economist E.F. Schumacher addressed this question very well in his seminal book “Small is Beautiful”:<\/p>\n

For his different purposes man needs many different structures, both small ones and large ones, some exclusive and some comprehensive….what is needed in all these matters is to discriminate…For every activity there is a certain appropriate scale…What scale is appropriate?\u00a0 It depends on what we are trying to do.<\/p><\/blockquote>\n

Ultimately, the sharing of services with other organisations is a design judgement to be made, based on the particular circumstances of the business\u00a0– it is not something that can be prescribed.<\/p>\n

Avoiding the Elephant Traps<\/h1>\n

There are a number of traps that organisations frequently\u00a0fall into when implementing shared services:<\/p>\n

‘EasyShare’.<\/strong>\u00a0 The shared service is\u00a0implemented around a shrinked-wrapped<\/em> offering – pre-specified, standardised infrastructure and services.\u00a0 This takes little account of the variation in demand within and across the participating organisations.\u00a0 This is the budget airlines<\/em> approach to shared services.<\/p>\n

What’s right for us, is right for everyone else.\u00a0<\/strong> Organisation ‘A’ re-designs a service, with the view\u00a0to then offering it\u00a0as a shared service to others.<\/p>\n

Although the service is right for them, it does not take into account the nature of the demand\u00a0for the other organisations.\u00a0 Worse, if the re-design has been poorly executed, then the service will still have significant losses, or waste<\/em>, in the system, associated with organisation ‘A’.\u00a0 For the other organisations, the negative impact of this waste is likely to be multiplied.<\/p>\n

Single, cost perspective.\u00a0\u00a0<\/strong> The shared service is designed purely around unit costs, at the expense of service quality, i.e. delivering the customer’s nominal value<\/a>.\u00a0 Unit costs are minimised, but total costs increase due to poor service quality and increased failure demand<\/a>.<\/p>\n

In all these examples, cost is effectively transferred across to the participating organisations, through the sub-optimisation of their businesses, by using the shared service.\u00a0 Viewed in isolation, the performance of the shared service may be seen to have improved, but this is a classic case of the ‘optimisation’ of part of a system, at the expense of the system as a whole.<\/p>\n

Making a Success of Shared Services<\/h1>\n

As for any service, the golden rule for implementing a shared service is to design the service\u00a0within the context of the overall system to which\u00a0it forms a part.\u00a0 In creating a shared service, the boundaries of this system\u00a0need to\u00a0incorporate all the participating organisations.\u00a0 As discussed under Systems Thinking<\/a>, the objective\u00a0is to optimise the system as a whole,\u00a0not the individual parts.<\/p>\n

Collaboration<\/h2>\n

The ability to collaborate is essential for a shared service to work.\u00a0 If the participating organisations do not have a deep culture of collaboration<\/a>, it is unlikely that a shared service will prove successful.<\/p>\n

Given that this lack of collaborative capability will almost certainly be impacting other areas of the business, addressing this issue first should be the priority, not the sharing of services.<\/p>\n

Understanding the Nature of Demand<\/h2>\n

The next essential is for the nature of demand across the participating organisations\u00a0to be\u00a0similar, both\u00a0in terms of infrastructure and delivered services.\u00a0 Just because every organisation has a Human Resources department, does not mean that the needs for that service are the same.\u00a0 The organisation’s values, polices, procedures and behaviours need to be similar for this to be the case.<\/p>\n

Localisation<\/h2>\n

Assuming there is a strong collaborative capability and a good alignment of demand, the next, more detailed\u00a0essential, is to design the shared service around those elements of the demand that are common,\u00a0whilst accomodating\u00a0those elements that\u00a0need to be\u00a0different, e.g. due to the nature of business, geography, demographics, culture (both internal and external), language, legislative rules, etc.\u00a0\u00a0This is a\u00a0process of normalisation, <\/em>or same with difference.<\/em><\/p>\n

Governance<\/h2>\n

A final key essential is appropriate Governance.\u00a0\u00a0 By its very nature, a shared service is a federal\u00a0entity – created and run for the benefit of all, not for any one participating organisation, or the corporate centre.<\/p>\n

It is essential that a shared service is run independently of the participating organisations, but under their collective governance.<\/p>\n

There has to be a strong element of federalised control and ownership over the service being delivered.\u00a0 If a shared service beats to its own drum, then it is no longer a shared service.\u00a0 It is simply a service being supplied by an external supplier, to a number of organisations, who just happen to be related.<\/p>\n

Further Reading….<\/em><\/h5>\n

E.F. Schumacher, “Small Is Beautiful: A Study of Economics as if People Mattered”<\/p>\n

You might consider this a bit left-of-field.\u00a0 But in terms of fuelling\u00a0your thoughts and ideas about service design, definitely one to read.\u00a0 It might also change your outlook\u00a0on life more generally.\u00a0 It did mine.<\/em><\/p>\n

More….<\/em><\/h5>\n

Shared Services in the Public Sector<\/a><\/p>\n

My blog post, on the use of shared services in the public sector, published in October 2012.<\/p>\n

First Published:\u00a0 26\/11\/2012\nLast Updated: 01\/01\/2019<\/pre>\n","protected":false},"excerpt":{"rendered":"
Shared services are where internal services,\u00a0that\u00a0exist\u00a0in multiple parts of the same organisation, or across a partner\u00a0network, are combined into a single consolidated service, delivered by a single part of the organisation, or network, to achieve\u00a0collaborative advantage. Services are shared for a wide\u00a0range of stated reasons and perceived benefits (direct and indirect), but the\u00a0main underlying\u00a0drivers are\u00a0typically […]<\/p>\n","protected":false},"author":1,"featured_media":1307,"parent":519,"menu_order":1,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"class_list":{"0":"post-1093","1":"page","2":"type-page","3":"status-publish","4":"has-post-thumbnail","6":"entry"},"_links":{"self":[{"href":"https:\/\/design4services.com\/wp-json\/wp\/v2\/pages\/1093","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/design4services.com\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/design4services.com\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/design4services.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/design4services.com\/wp-json\/wp\/v2\/comments?post=1093"}],"version-history":[{"count":183,"href":"https:\/\/design4services.com\/wp-json\/wp\/v2\/pages\/1093\/revisions"}],"predecessor-version":[{"id":4664,"href":"https:\/\/design4services.com\/wp-json\/wp\/v2\/pages\/1093\/revisions\/4664"}],"up":[{"embeddable":true,"href":"https:\/\/design4services.com\/wp-json\/wp\/v2\/pages\/519"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/design4services.com\/wp-json\/wp\/v2\/media\/1307"}],"wp:attachment":[{"href":"https:\/\/design4services.com\/wp-json\/wp\/v2\/media?parent=1093"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}