In this era of cutting and controlling costs, agencies and contractors alike are turning to shared services organizations. Here are critical insights to getting the most out of this strategy.
Decreased federal government spending over the past few years has affected government organizations as well as companies that serve the public sector.
Faced with substantial budget cuts and revenue shortfalls, these enterprises are focusing on various cost cutting initiatives. One popular method is the adoption of a shared services organizational model.
In a shared services model, all the back office services in an enterprise, such as procurement, finance, human resources, and IT, are consolidated into one centralized unit that services the enterprise as a whole.
The goal of a shared services model is to increase efficiencies, save money, and increase customer service. However, enterprises transitioning to a shared services model often fail to achieve these goals, primarily due to two reasons: 1) internal versus external customer service focus and 2) failure to identify true baseline costs.
Internal versus external customer service focus
Many shared services organizations place detailed service level agreements with numerous metrics around customer service.
The organization is managed with the goal of measuring and improving things that are internal to the shared services organization. The focus is primarily on internal efficiency — starting from the moment a customer requests something from the organization. These metrics help in measuring how well the organization reacts to a request, but they fail to capture the customer experience of placing a request to the shared services organization.
In a conventional setup, making a request can be as easy as walking down the hall and asking for what’s needed. With a shared services model, a customer might have to spend a significant amount of time searching for phone numbers and navigating successfully through an automated phone menu to get to the correct person who can take the request. This is especially true in large decentralized organizations such as the federal government or large government contracting companies. In fact, many customer organizations set up “shadow staff” to do many of the same tasks as the shared service organizations. The shadow staff create a redundant operation that is counterproductive to the cost savings goals of the enterprise.
To combat the demand for “shadow staff”, shared service organizations must strive to streamline the entry process and make it as easy and lean as possible for the customer.
Shared services organizations must make it easy for customers to find, reach, and interact with them through phone, email, text, or instant message. By simplifying and streamlining the process of discovery and entry, enterprises can improve the adoption of shared services among staff and reduce the demand for “shadow staff”.
Failure to identify true baseline costs
Reducing costs is one of the most important drivers for implementing a shared services organization. Often, enterprises assume that contracting out shared services or moving them to a lower cost location will automatically result in cost savings. Fact is, realizing committed cost savings can be really difficult without knowing the true baseline costs.
Many enterprises fail to measure actual savings after implementing a shared services model due to lack of understanding of true baseline costs of their legacy processes.
Clearly defining, publicizing, and gaining stakeholder agreement on what people, processes, material, and technology are associated with the legacy activities the shared service organization will be absorbing is necessary to calculate the true baseline costs.
Even though this seems like a simple step, it is often very complicated to gather this information and even more complicated getting all stakeholders to agree on the baseline costs. Once the baseline costs are known, it’s easy to compare the new costs and capture any savings achieved after the implementation of the new shared services model.
Large enterprises such as government agencies and federal contractors can achieve significant cost savings by adopting a shared services organization model. By adopting a holistic approach towards customer service and knowing true baseline costs of current people, processes, material, and technology executing legacy shared services activities, enterprises implementing a shared services model can achieve better business results and drive more cost savings across the board.