Agenda

• Introduction to ScottMadden
• Shared Services Value Proposition
• Fundamentals for Designing, Building, and Implementing Shared Services
  • Critical Success Factors for Your Business Case
  • Top Ten Implementation Challenges
  • Three Keys to Start-up Success
• Faculty Contact Information

 

Introduction to Shared Services

Shared Services is when a business consolidates its support functions to serve the corporation and its business units, operating as a business within a business, utilizing a well-defined infrastructure to enable higher-value service delivery.  

Approach to Implementing Shared Services

• Decide
  • Strategy development and integration
  • Benchmarking
  • High-level business case
  • Change management
• Design
  • Service delivery model
  • Detailed current state, future state, and business case
  • Sourcing model
  • Organizational design and staffing
  • Change management
• Build
  • Project planning and management
  • Service/transaction center
  • Process redesign
  • Technology design, selection, and support
  • Change management
• Improve
  • Process improvement/cost reduction
  • Operations/ technology assessment
  • M&A integration
  • Benchmarking
  • Customer and employee surveys
  • Change management

 

Benefits of Shared Services – “Soft” Dollar Savings

Typically, a new service delivery framework yields soft-dollar benefits in addition to hard-dollar savings.

• Reduced turnover
• Reduced cycle times of critical processes
• Improved customer satisfaction
• Reduced risks related to compliance or potential litigation
• Improved scalability and nimbleness
• Better and faster decisions based on company-wide metrics

 

Approach for Developing a Business Case

The development of the business case in a shared services engagement will most often follow a common set of steps regardless of the client or functional area of study.

• Assessing the Current State
  • Understand current processes, activities, and technology used
  • Analyze time activity information to understand headcounts, FTEs, and costs for current processes and activities
  • Collect volume metrics to benchmark and assess current productivity in area of study
• Developing the Future State
  • Identify areas of opportunity for process efficiencies
  • Analyze results of assumed process efficiencies on headcounts, FTEs, and costs
  • Understand future uses of technology (current and new)
  • Develop range of possible sites for future shared services location
• Creating the Resulting Business Case
  • Leverage current state and future state headcount and FTE analysis to identify labor changes
  • Use baseline of sites to evaluate future labor cost structures and potential site costs
  • Create baseline implementation timeline
  • Collect technology cost data for both current and new technology
  • Assess range of potential implementation results

Elements Required for Success

The use of interviews can often support data collection efforts by providing context and details that will enable (1) better assessment of the appropriate benchmarks to use and (2) interpretation of the data.

• Data Collection: Collect costs across key areas to obtain headcount and benchmark information and enable process and service comparisons across business units. Specifically collecting:
  • Activity data by person
  • Transaction volumetrics
  • Organizational cost and budget
• Interview Conduction: Interviews conducted with subject matter experts over the course of several days permits one to:
  • Develop context to interpret the data
  • Understand key business drivers of the business that might impact benchmark comparisons
  • Review in detail processes and structure
• Current State Assessment: Using a quantitative, data-driven approach combined with the qualitative interviews, the current state assessment can ensure objective analyses are done while still retaining a broader understanding of the business drivers for the organization.

Headcount Activity Results – Example Typical analysis includes FTE and labor cost summaries by functional area, type of work, and position. Collecting and analyzing the data is important for understanding current state, highlighting areas for further focus, and creating a baseline from which improvements can be measured.

Quantifying the Benefits

In quantifying the benefits the organization can receive from implementing shared services projects, the reduction in headcount is often the largest and most important. Headcount Benefits (Labor)

• Headcount savings should include all labor-related savings
  • Savings in base salary
  • Savings in bonuses or incentive compensation
  • Savings in fringe benefits
• Labor arbitrage opportunities

Orther Quantifiable benefits can include:

• Technology
  • Savings associated with sunset of older or unused technology
  • Savings driven by reduction in licenses required for given technology
• Vendors
  • Savings associated with consolidation and optimization of contracts across the organization
• Site
  • Savings associated with departure from a building or lease of a floor

Benchmarking Results

Using benchmarks for labor reductions maintains an unbiased and transparent approach for the project.

Showcasing Soft Benefits

Beyond quantifiable benefits, there are also a number of intangible benefits that should be reinforced even if they cannot be included in the business case itself. Increases customer orientation

• Provides strong customer service with a balance of human interaction and self-service tools
• Improves accountability for service and facilitates continuous improvement through the use of metrics and dashboards
• Improves customer satisfaction among recipients of service
• Creates a “one-stop shop” for customers with improved accessibility

Improves controls

• Introduces more accurate and predictable costs for the function
• Incorporates more consistent internal controls across the business
• Reduces risks and increases transparency and compliance in processes

Enables strategic decision-making

• Allows business partners to perform more strategic work
• Improves scalability and nimbleness for acquisitions and major change
• Accelerates the adoption of leading practices
• Permits better and faster decisions based on company-wide metrics

Enables further, indirect efficiency

• Eliminates redundancies among different business units
• Reduces cycle times of transactional processes, potentially impacting external stakeholders (e.g., suppliers)
• Reduces overall operating costs while improving accuracy and speed of service
• Reduces potential employee training for new hires or transitions

Once the business case has been approved, the projected benefits and costs should be measured and tracked to ensure that the estimated savings are actually achieved.  

Calculating Costs

As with benefits, labor can get a significant amount of attention when calculating costs for the business case. However, unlike the benefits, costs are more evenly spread among the different areas. Headcount Costs (Labor)

• Labor costs are impacted by, and should therefore consider:
  • New hire salaries, by position
  • Retention rates of current staff, by position
  • Timing of hires and termination
  • Cost to hire and severance
  • Transfers in and out
  • Internal project team costs and composition

Other costs can include:

• Technology
  • One-time implementation or setup costs
  • On-going maintenance and service costs
  • License or hosted costs
• Consulting and Project Team
  • Support for design and implementation
• Marketing and Training
  • Development and execution costs
• Site
  • Leasing and renovation costs
  • Furniture, fixture, and equipment costs
  • Site selection travel costs

Creating Sensitivity Analysis

Developing comprehensive sensitivities for the business case, enables the project team to sell the concept internally in the organization by showing the range of possible results from the initiative.

• It is easier to disagree and dispute a single dollar-value result, and much harder to dispute a range
• Sensitivities ensure ranges can be calculated and reviewed to understand the largest areas of risk and gauge what it would take for the business case to no longer be appealing
• Intent is not to give the appearance that all the variables have been figured out, but that there may still be areas of change

Creating Sensitivity Analysis (Cont’d)

By illustrating the impact of key sensitivities the project team can instill comfort in the outcome even if the precise details of implementation are not yet finalized.

• Sensitivities provide “guard rails” on outcome
• Analysis clearly identifies those variables that will have the largest impact, and therefore will require most of the attention and focus during implementation

 

Introduction – Top Ten Implementation Challenges

Implementing a shared services organization is complex and requires thoughtful preparation and execution. We will discuss the top ten implementation challenges that organizations typically face.

1. Obtaining and Maintaining Sponsorship
2. Planning the Implementation
3. Staffing the Project
4. Integrating Technology
5. Getting and Sticking to Decisions
6. Avoiding Surprises and Mitigating Risks
7. Selecting the Right Staff
8. Preparing Customers and Stakeholders
9. Preparing Staff
10. Testing Launch Readiness

 

1. Obtaining and Maintaining Sponsorship

   Assess Leadership Capabilities

What is the project sponsor willing to do? Sit down and discuss the required leadership activity with a sponsor and determine the type of support you will receive from the sponsor.

• Build on the strengths of the executive sponsor
• Assemble and leverage a coalition that supplements your executive sponsor

Assess Stakeholder Support Example Stakeholder Assessment The opinion of key stakeholders must be known throughout the implementation process. Meet with stakeholders early to obtain their views. It is important to know who is supportive, resistant, and neutral to the desired change or to some aspect of the change. Build their support or opposition into your change plans and check back with them often during implementation.  

2. Planning the Implementation

   Determine Level of Effort Required
   • Design your implementation plan to include major processes, activities, tasks, and durations while factoring in internal dependencies and external constraints
     • Consider business lifecycle activities that will be impacted, align the project calendar with external initiatives, and highlight dependencies
   • Determine level of effort by month and by task. Resource loading is critical for staffing and managing the project
     • Determine availability of internal resources (full or part-time)
     • If using external support, ensure the project team is heavily loaded toward client team members in order to foster knowledge transfer (client team members often transition from participating on the project team to managing the shared services center)

 

3. Staffing the Project

   Sub-Team Skill Requirements

• Service Delivery Scope
  • Understanding of the new service delivery model
  • Ability to differentiate between transactional, strategic, and specialist services
  • Understanding of services critical to the business
• Policy Harmonization
  • Strong content knowledge
  • Ability to facilitate consensus amongt stakeholders
  • Ability to identify policies critical to the business/financial impacts
• Facility
  • Strong project management skills
• Organization
  • Strong understanding of people’s skill sets
  • Ability to adequately assess required position skill set versus employee strengths
• Process
  • Strong operational knowledge
  • Ability to identify improvement opportunities based on feedback and analytics
  • Knowledge of process redesign principles
• Technology and Knowledgebase
  • Strong project management skills
  • Understanding of future state processes and system functionality
• Infrastructure
  • Strong project management skills
• Training
  • Strong communication skills
  • Functional and system knowledge
• Communications, Marketing, and Change Management
  • Strong communication skills

 

4. Integrating Technology

Leaping Over the Technology Hurdles Late decisions on technology requirements

• Understand supporting tools is one of the long poles
• Conduct iterative planning—high-level quick plans that are iterated in parallel with functional design

IT claim of insufficient resources/lead time

• Establish as an IT project
• Involve IT from the start (two-in-a-box)
• Conduct resource analysis early in planning

Lack of IT expertise in shared services technologies

• Hire reps that are experienced with technologies
• Visit other companies/organizations

IT control of requirements

• Appoint tech-savvy functional lead to write functional specifications; set up functional management review

Late delivery of technologies jeopardizing completion of documentation and training

• Publicize key milestones and define what the milestones mean
• Insist on progress reviews

IT claim that requirements are unclear (frequent claim to cover for internal deficiencies)

• Write thorough functional specifications
• Review specifications with IT including those who will configure/program

Delivered functionality falls short of requirements

• Have IT build early prototypes
• Conduct periodic design reviews
• Manage change control

Vendors do not deliver

• Establish escalation points during contracting phase
• Set expectations during negotiations

 

5. Getting and Sticking to Decisions

Decision-Making Process Getting accurate, timely decisions requires planning and discipline and is key to maintaining project traction. Endless meetings, endless discussions on tough issues

• Take time to develop a process for making decisions ahead of time and refer back to the process to push decisions
• Clearly identify who will make decisions
• Set deadlines for the big decisions in the plan
• Set clear agendas for meetings with objectives for decisions to be made

Unquenchable thirst for information to get to decisions

• Make assumptions as needed to continue planning
• Revisit assumptions when information is available
• Make decisions at a high level and iterate the decisions to lower levels as project progresses

Frequent revisiting of decisions

• Document decisions to be made
• Document decision, date, and decision maker as decisions are made
• Set up change control process
• Use sponsor to communicate decisions

New information unsettles decisions

• Collect, organize, and document information for decisions
• Use sponsor to communicate decisions
• Set up change control process at point in project where design and decisions are complete
• Defer changes to point in future that will not impact implementation schedule

 

6. Avoiding Surprises and Mitigating Risks

Effective Risk Management Shared services implementations face a multitude of risks including task underestimation or schedule slippage due to a variety of reasons. Strong risk planning will help mitigate:

• Resource issues
• Defiance
• Processes and policies
• Delays

It is important to identify potential risks during project scoping and build actionable plans to alleviate them. These risks should be monitored and additional risks added during implementation. A disciplined approach needs to be followed to review, report, and complete actions to eliminate or reduce the impact of risks.  

7. Selecting the Right Staff

Planning and Selection Process Staff selection should not be based on tenure at corporation or existing relationships, but rather a structured, equitable approach. Shared services most often requires customer-oriented employees who are comfortable using technologies and are flexible problem solvers.

• Define core competencies required by position
• Determine staff selection options
• Develop job descriptions, evaluate positions at market rates, and post job openings, as applicable

 

8. Preparing Customers and Stakeholders

Change Management Planning and Execution (Cont’d) Keep the list of change activities aligned and on track through a consolidated list of actionable items. Organize activities by the project milestone they support. Additionally, provide clarity on changing roles and responsibilities to customers and stakeholders using a Stop/Start/Continue matrix to assist in acceptance and adherence to the new delivery model.  

9. Preparing Staff

Training Assessment and Plan Assess individual training needs by curriculum. Develop a detailed training plan and schedule by module.  

10. Testing Launch Readiness

Conduct a Business Simulation Issues will inevitably materialize in the first few weeks after an official project launch, despite vigilant planning and execution. To mitigate impact, plan and execute a business simulation, or “dress rehearsal,” that evaluates people, processes, and technologies integrated into a realistic operational environment.  

Three Keys to Start-up Success

1. Establishing and Enforcing Governance

Governance Board

• Shared services governance board characteristics
  • Comprised of executives from key business units, the head of shared services organization, and representatives from critical support organizations (e.g., IT, HR, etc.)
  • Accountable for the shared services vision and ensuring strategies are aligned to achieve success
  • Provides direction to the operational team and serves as a point of escalation for the resolution of critical business decisions
• Key Benefits
  • Provides representation for the shared services organization among senior management
  • Allows customers to strongly influence the direction of shared services and ensure that shared services are responsive to business unit needs
  • Creates an additional layer of accountability for the shared services organization
  • Creates a formal process to control spending and prioritize initiatives
  • Ensures integration with other business initiatives

 

2. Managing Performance

   Service Level Agreements

A service level agreement (SLA) is between the provider of a service and a customer that quantifies the target quantity, quality, and cost of services to be provided in a future period. Dialogue, planning, and continuous improvement are outcomes that will drive your organization’s success.  

3. Enabling Continuous Improvement

   Overview of an Effective Program

Continuous improvement uses performance measures to drive the implementation of an organization’s strategy.

• A continuous improvement program enables a service organization to:
  • Clarify customer requirements
  • Define service priorities
  • Evaluate internal performance
  • Educate and motivate customers and employees
  • Manage costs and improve service quality
  • Change proactively based on customer needs and/or the market