Heavenly designed Service Centres are no earthly good

By David Marsh

Date 19 October 2010 Tags

In the scramble to save costs, claims made for ‘Shared Service Centres’ (SSCs) and ‘Utilities’ continue to entice. We’ve suggested in the past you look at these with a certain scepticism and it’s now time to explore our concerns.

We’re absolutely not denying that SSCs can produce dramatic improvements in process consistency, reduce error rates, and all at lower costs; there are many fine examples here and abroad that vendors will invite you to see.

But while you may be impressed by the destination, what you should know is that the journey can be no fun at all.

Many of the hard won lessons we’re going to lay out will seem counter-intuitive at first glance – think about what you are leaving behind, not what you are building; worry about technology, not people or process; concern yourself with migration more than destination.

Sounds odd? To find out what we are talking about, and for some thoughts on how to survive the SSC experience

There are six rules of thumb that you should ponder on long and hard before embarking on the journey to a Shared Service Centre (SSC).

The strength of the Business Case is independent of the SCC design – focus on the remaining roles and the management structure in the SSC.

It’s all too easy to make a fetish of the direct ‘cost per transaction’ (CPT). But what is crucial is the cost structure of the total organisation and this is dominated by the SSC overheads and the costs that remain behind in the organisation. Don’t let attractive direct CPT reductions blind you to the total cost of the new organization.

The design of the transition is more critical than the design of the SSC, because business needs to go on.

The most important and challenging design task is to ensure that the business will operate effectively during the migration. It sounds obvious but the old and the new will have to co-exist for a while (sometimes quite a while). And things won’t stay still as other initiatives are rolled out. So while your final design may be a stable, all-singing, all-dancing thing of beauty, you may just find that you never quite get there. Many have got bogged down in countless revisions to interfaces and processes at the expense of progress to their target.

Favour speed of transition over design purity and accept a “good-enough” design in order to accelerate implementation

Speed mitigates the three biggest risks: the best people leave because of the uncertainty; the complexity of the transition becomes unmanageable; the business is de-stabilised as roles and people transition. Speed delivers earlier benefits, hard and soft, so transition first and then improve what you have.

The impact of technology is more critical than the process or the people.

How so? Because full time staff under the right management can make average processes work tolerably well but nothing will work without the appropriate technology support. So the selection of the supporting technology is an early and key decision, and heaven help you if you get it wrong, because almost nothing will save you.

The design of the interfaces is more critical than the design of the SSC processes.

A new SSC should have well designed processes but it is hard to control how information arrives. Poor interface design leads to complex manipulations at the interface, delays in processing and inaccurate reporting. Worse, centralisation can actually lead to deterioration in data quality entering the process from other parts of the business. Why? Because other staff have little incentive or inclination to learn the new processes, and the effect of immediate feedback by management or peers is missing. So make sure the design includes interface controls and validations, and make sure the implementation plan addresses training across the board.

Cost saving may not be the most important outcome.

OK, you’ll want to see some cost savings, but more important to the long term success of the business is the process consistency that increases efficiency, reduces errors and rework, and improves controls. Codifying existing services and introducing SLAs supports continuous service improvement, and enables subsequent outsourcing or re-engineering initiatives. So make sure the design includes service as well as cost metrics.

Follow these rules of thumb and you are much more likely to successfully manage the transition to a functioning SSC that can deliver your benefits as you hone it at leisure. Shoot for the stars and you may well fall back to earth with a crash.

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