Peter Boggis and Peter Turgoose discuss 10 factors that influence the service quality and value delivered by Shared Service organisations. The factors have been developed based on over 20 years of experience of working with and improving Shared Service models. If lasting improvement is to be embedded into the Shared Service organisation, these factors should not be addressed in isolation as they are closely interrelated. Furthermore, before Shared Service improvement efforts begin, an assessment of all of the factors must be conducted and the findings used to develop a holistic, prioritised change plan, which delivers lasting improvement.
Shared Services are not new, they have been around for decades and we all rely on them to varying degrees. While the most common examples include IT, HR, Finance, Facilities Management and Procurement, other services are increasingly being shared across the enterprise: for example Legal, PR and Communications, and Business Intelligence. This trend towards the horizontally integrated enterprise was the topic of a recent Formicio article, where our colleague David Trafford discussed the challenges of moving to this type of organisational model. In this article we focus on the service agenda, and argue that a number of factors need to be assessed and then addressed if Shared Services are to fulfil their service promise in an affordable way.
In the majority of cases the rationale for moving to Shared Services is to reduce operating costs. This is underpinned by the argument that to ‘centralise’ resources into one dedicated Shared Service organisation, which delivers services through standardised processes and systems, must be cheaper than individual business units doing it themselves. A second, less tangible argument is that by centralising expertise, service quality will also improve. Many organisations have taken this cost-driven thinking further by choosing to outsource all or part of their Shared Service operation to external providers, many of whom operate off-shore. Shared Services are now an established part of our organisational landscape, and they will continue to evolve as the requirements of its users change and new sourcing strategies emerge. But how can we ensure that the focus is not solely on cost, but also on higher levels of service quality?
Factors that determine service quality
Over the past 20 years, the body of knowledge on Shared Services has significantly increased, and during this time we have developed a point of view on the factors that influence service quality and value. We believe there are 10 of these factors and they are described below. It’s important to note that these factors cannot be addressed in isolation as they are very closely interrelated. An holistic approach therefore needs to be taken to developing a change plan, which considers how changes to one factor will result in changes having to be made to others. We believe that people are fundamental when it comes to service quality; what we’ve described below are the factors that create an environment and context within which people are able to deliver their best.
- The value proposition, operating model and mindset need to be aligned
Essentially the value proposition is a product of the business strategy and defines what the Shared Service organisation must deliver to the customers they serve and the added value the customers get. The operating model defines how services get delivered, and the mindset defines how people should perceive their role. If these are out of alignment – for example if the proposition is to provide superior customer service and the mindset of people (shaped by their experience) is to close service requests as quickly as possible – it’s most unlikely that customers’ expectations will be met.
- An operating model comprises a number of facets
The operating model of a Shared Service organisation is complex as it comprises a number of facets including processes, structure, measurement systems, services portfolio, governance and external suppliers, all of which must work together as a well-tuned machine. Furthermore the outcomes that an operating model delivers must be aligned with the value proposition.
- Demand and supply mature over time
Organisations, like individuals, mature over time; what was normal practice yesterday may not be acceptable tomorrow. In a Shared Service context, customers (the demand side of the relationship) will expect colleagues in Shared Services to deliver greater value, for the services they provide to be more integrated, and ultimately for them to become true business partners in that they enable innovation and new business possibilities through the services they provide. If the leaders of Shared Services (the supply side of the relationship) don’t recognise this trend and stay focused only on providing low-cost transactional services, the relationship will break down as customers look elsewhere for the products and services they need to deliver their strategy and plans.
- ‘One size does not fit all’ – authentic differences must be accommodated
A challenge that has been present throughout the development of Shared Services is how best to handle authentic differences. If all users require exactly the same services and service levels, then the delivery of these services would be relatively straightforward; the services could be defined, introduced and continually improved. The reality is that while a lot of the services or service levels required by users are common there is also a need for services or service levels that are authentically different. These differences are determined by factors that have a direct impact on the success of the businesses being served, and examples include market conditions, country-specific regulations and business unit strategies. These differences inevitably create a degree of complexity within a Shared Service organisation, which in turn could drive up cost and compromise service quality. The challenge is therefore keeping the number of authentic differences to a minimum whilst maintaining a high degree of common and shared services.
- Best practice frameworks are useful but have limitations
Best practice frameworks like ITIL in IT service management and Dave Ulrich’s 3-box model for HR are useful sources of information and ideas, but their application inevitably brings risk. Essentially, they are predicated on a ‘one-size-fit-all’ philosophy where it is assumed that the practices advocated can be applied successfully in all situations. In reality each organisation and its context are unique, whether due to its size, culture, technology or process maturity. As a result, it is dangerous to apply these frameworks without first understanding the context in which they are applied or the strategic and operational outcomes the organisation aims to achieve.
- Behavioural change is more difficult than process change
Establishing the value proposition, introducing best principles and changing the operating model alone will not deliver service quality and value; it is the people with the right mindset that ultimately makes the difference. A mindset is a set of assumptions, methods or systems held by one or more people or groups of people. They are usually so established that they create a powerful incentive to continue to adopt or accept prior behaviours, choices or tools. Changing well‐established and often deep‐rooted mindsets is much more difficult and takes longer than changes to underlying cost bases, operating models, structures and processes. Changing mindsets to ones that are service-focused is possible, but it is neither quick nor easy. However, it is impossible if you don’t know the drivers of the current mindset. The challenge of changing mindsets is discussed in a recent Formicio article entitled Sustained Change Requires Mindset Change.
- The role of leaders is to put in place the conditions for success
Often leaders perceive their role as coming up with the answer rather than creating the conditions where others – who are often much closer to the issues – are allowed to use their own creativity and judgement. The role of leaders should be to identify and then establish the necessary conditions for success.
One of the best ways of describing what is meant by conditions for success is to draw upon a gardening analogy. Those of you who know about gardening will understand that certain conditions need to be in place in order for a garden to flourish, fertile soil being the most obvious. The more successful gardeners know that some of these conditions can be controlled and others cannot. For example, they know that soil quality can be improved and that particular plants will never do well in certain types of soil. They also know that some plants need to be pruned in spring and others in autumn. If these conditions are not understood, or are ignored, gardening can be a costly and disappointing pastime. The challenge of establishing the conditions for change success is discussed further in a recent Formicio article.
- Leaders should focus on introducing operating principles not practices
It’s widely accepted that operating principles can be successfully transferred across different organisations, while practices on the whole cannot; it’s the application of a principle in a specific context (ie within a specific organisation) that establishes the practice. If the context is different across organisations, then the application of operating principles will lead to different practices. It is for this reason that it is always dangerous to import best practices rather than apply best principles.
- Organisational clarity drives productivity
As Shared Service organisations become more complex, both in terms of the services they provide and the number and variety of external service providers they use, it is important that the organisation maintains organisational clarity around how and why it is doing what for whom. A way of defining what is meant by organisational clarity is to use the rowing boat racing analogy. When all the rowers are in perfect harmony and staying on course, there is enormous power in the boat. If the coxswain loses focus, or the rowers don’t remain aligned and in harmony, chaos occurs and the boat slows down or goes way off course. Shared Service organisations that lack organisational clarity become that slow boat or, even worse, the fast boat heading in the wrong direction!
- Collaboration across boundaries drives engagement and continuous improvement
Since Adam Smith published his seminal book The Wealth of Nations in 1776 we have sought to organise our resources based around specific capabilities, which inevitably creates boundaries that need to be managed. Organisational boundaries are inevitably a source of delays and errors as work passes across them. However, irrespective of what criteria we use to design our organisation, there will always be boundaries. The challenge is to minimise the friction between them and manage them in a way that does not impede performance. Collaboration between people across boundaries, between functional areas and organisational units is imperative if they are to share ideas and deliver to a common purpose. Unfortunately, experience tells us that organisations tend to be more successful in building boundaries between functional silos than building collaborative cultures.
A framework for continual improvement
Our point of view is that the 10 factors described above ultimately determine the service quality and value delivered by Shared Service organisations. An assessment of each of these factors, in terms of the extent to which they are in place, is a powerful leading indicator of future performance, unlike customer satisfaction surveys that are lagging indicators.
Their assessment can therefore be used as a framework for the planning of continual improvement and change. As previously discussed, it’s important to remember that these factors cannot be addressed in isolation as they are very closely interrelated. An holistic approach therefore needs to be taken, which considers how changes to one factor will result in changes having to be made to others.
A further value of such an assessment tool is that it can be used to measure progress towards the goal.
We welcome your thoughts.