Everything you need to know about Shared Services

Shared services are becoming more prominent in businesses today, but a lot of people don't understand fully what they are or how they work. So, I thought I'd put together a helpful and easily digestible guide on all you need to know about shared services.

When did shared services begin?

The concept of shared services began in the 1980s. Large organisations, with multiple business units, began finding alternative ways to reduce or eliminate business administration costs.

 What does a shared service centre do?

A shared service centre is usually a centralised function of an organisation, where all back-office responsibilities are managed for different business divisions or subsidiaries. It provides support services typically with 'none-core' activities and resources. By consolidating multiple business operations, it allows each division or business unit, to focus its time and resource on the business' vision or goals.

 What is included in shared services?

The most popular functions are Finance, followed by HR, but also can include Payroll, Procurement, Engineering, Master data, Compliance, IT and Legal. Other areas such as Customer Service, Fleet and Master data are becoming more and more popular in shared service functions too.

 What is the difference between shared services and outsourcing?

A shared service is usually an internal function of a business, ran by company employees. An outsourced provider is usually an external business that manages these tasks on your behalf. There is also a term known as the 'hybrid model' which, as you can probably expect by the name, incorporates both. Outsourcing tends to have an agreement or contract in place, where the external provider will agree defined SLA's and performance metrics. However, outsourcing isn't to be confused with offshoring.

 What is an offshore shared service?

An offshore shared service is still an internal function of an organisation. Offshoring simply is setting up a shared service in a remote location abroad. Organisations choose this model as there tend to be larger talent pools, cheaper labour costs and the ability to create centres of excellence. Popular offshore locations include The Philippines, India, Eastern Europe and Costa Rica.

 What are the benefits of shared services?

The benefits of shared services can include cost-effectiveness, improved service levels, higher quality and reliability, standardised processes and best practices, not to mention the customer satisfaction element. Most of the benefits are achieved by consolidation of systems, redefined processes and advanced technology. A shared service model frees up time and resource so each business unit can focus on driving performance, improvements, or even service levels, whatever their vision may be.

 What is a shared service delivery model?

A shared service delivery model is the design of an operating model. This is usually the shared service centre's vision, strategy and process. This isn't just designed to benefit the shared service, but more to factor in the customers, suppliers and end user's needs. Usually, an SSC delivery model is designed to adapt the end user's needs, so that the function can add value and ensure future growth and scalability.

What are finance shared services?

Shared services across finance usually include Purchase/Procure to Pay (P2P), Order to Cash (O2C), and Record to Report (R2R).

R2R can usually include FP&A, compliance, regulatory reporting, and general ledger. Essentially, an R2R function provides strategic, financial and operational feedback, to show how a business is performing.

P2P is the process in which goods are purchased and paid for by the business, and the whole supply chain is managed from the order through to payment.

O2C is the opposite of P2P, whereby a company manages it's end-to-end sales order process, right through to collecting the payment from the customer.

 What are the HR shared services?

An HR shared service function is usually responsible for processing administrative tasks such as HR Support Desk, Learning & Development, Recruitment, Talent Management, Payroll (sometimes sits under finance) Reward, HR Data and Analytics and more.

 What is Global Business Services?

Global business services are where one organisation provides all support services to business worldwide and integrates all processes and practices of shared service and outsourcing activities into one function. This is also known as a GBS model.

A GBS model is typically a more mature model than shared services, and a GBS tends to deliver higher value-adding functions. GBS models are typically multifunctional and provide transactional, consulting and analytical services to an organisation globally.

 What qualifications are specific to shared services or GBS (global business services)?

There aren't many qualifications that are specific to the SSC/GBS functions. Typically, you will see Finance, HR, and IT employees utilising their professional qualification, however, there is a specific qualification about GBS, which has been developed by The Hackett Group.

 The Hackett Group offer a Diploma and an Advanced Diploma in Global Business Services, which enhance skills, knowledge and capabilities. You can find more information about this here, but keep an eye out for my updates, as this is something I'm currently pursuing.

 If you would like to discuss anything to do with shared services, you can email me at [email protected].

You can view more about Sam Perry our Shared Services Executive Search expert here.

Why won't top-performing shared service professions join your business? And what to do about it. Download our free eBook here.