Shared Services Organization

 Shared Services Organizations (SSOs) have emerged as a strategic imperative for businesses seeking to digitize and streamline similar business  functions to derive maximum efficiency. SSOs provide technical and administrative support across the company, handling functions like finance and accounting, human resource management, and information technology. 

What is a Shared Service Organization 

This is a delivery model that centralizes specific business functions into a new and independent unit to boost efficiency and service. SSOs function as self-sufficient business units that deliver specialized services. Here are two examples of the functions that enterprises usually outsource to a shared services organization:

Human Resources

A common practice is to centralize HR functions, allowing businesses to streamline different processes. These may include employee onboarding, benefits administration, and payroll, leading to increased efficiency and cost savings.

Finance

Another popular approach is to consolidate financial operations within a shared service model. This reduces expenses and enhances performance in areas such as accounting and other financial processes.

As a service-delivery model, Shared Service Organizations consolidate various business support functions into a new, centralized unit that functions independently. Commonly outsourced functions include Human Resources, where businesses can streamline processes like employee onboarding, benefits administration, and payroll, driving cost savings and operational efficiency. Finance is another area often consolidated within shared service centers, enabling companies to reduce expenses and improve performance in accounting and other financial operations.

Structure & Model

Most businesses focus on the flexibility in shared services organization structure. They may seek to adopt a mix of different models, emphasizing adaptability to changing environments and needs. The following remain two of the most widely utilized structures:

Functional Shared Services Model 

The function-based model of shared service delivery focuses on centralizing specific functions such as HR, finance, or IT into separate, function-based units, with each unit operating independently. This model aims to optimize efficiency within each function by standardizing processes and reducing costs. 

Integrated Shared Services Model

The integrated model of shared services delivery unifies multiple business functions under one umbrella, fostering cross-functional collaboration and end-to-end service delivery. This integrated approach breaks down silos, enhancing efficiency, innovation, and scalability across the enterprise. It often leverages advanced technology and data analytics to streamline operations and improve overall organizational performance.

Transformation Insights

The digital landscape presents a unique opportunity for a shared services organization to evolve and enhance its value proposition. This can help businesses drive changes and transform shared service organizations.

• Digital Transformation Planning: SSOs collaborate with business units early in the digital transformation process to identify automation opportunities and set clear performance expectations. Implementing digital transformation elements is phased based on the SSO’s capabilities and the company’s strategic objectives.

• • Process and Workflow Optimization: SSOs identify areas suitable for automation and robotics by systematically scanning back-office activities and processes. Implementing real-time management information systems enables better measurement, resource allocation, and service delivery.

• Talent Development and Skill Enhancement: SSOs redefine core competencies to support a digital business, moving away from a traditional pyramid structure. Establishing domains of expertise and forming cross-functional teams of technology and user-experience experts is crucial in this respect.

Case Study

A leading US retailer leveraged an SSO in Bengaluru, India, to build digital capabilities to drive omnichannel retail experiences. Powering a diverse range of  functions including marketing, supply chain, product development, technology, stores, internal/external branding, and data science. As a result, the company experienced a massive 30% improvement in search relevancy for guests on their  website, and the organization’s valuable inputs even led to 6 patent contributions and 400+ store remodels

Global Perspective

Global shared service organizations have emerged as a unified model that helps enterprises streamline processes, improve collaboration, and achieve strategic business goals worldwide. 

This framework fosters enhanced efficiency, cost savings, improved service quality, and increased innovation. 

• Enhanced Efficiency: By opting for centralized operations, companies can streamline processes, reduce redundancies, and improve productivity
• Cost Savings: Economies of scale, standardization, and shared resources of SSOsresult in significant cost reductions
• Improved Service Quality: Consistent standards, centralized knowledge, and specialized expertise enhances service delivery
• Cost Optimization: Centralizing functions leads to economies of scale, reducing operational costs by standardizing processes and consolidating resources.
• Increased Efficiency: Shared services streamline workflows, eliminate redundancies, and enhance productivity through automation and optimized processes.
• Improved Service Quality: By focusing on specific functions, shared services can deliver higher levels of expertise and consistent service quality.
• Scalability: The model allows organizations to easily scale operations as they grow, adapting to evolving business needs.
• Enhanced Control and Compliance: Centralized governance helps ensure better control over compliance, risk management, and policy enforcement across the organization.

Challenges

Implementing global capabilities can be complex, requiring careful planning and overcoming cultural, regulatory, and technological challenges. Common challenges include:

• Overcoming cultural barriers and ensuring effective communication across diverse teams spread across the globe
• Navigating complex regulatory environments in different regions, which can often be time-consuming and financially  draining
• Integrating systems and data across multiple locations, which can be technically complex and resource-intensive for organizations with multiple locations and legacy systems.
• Finding and retaining skilled talent for the SSC, especially in niche or specialized areas.
• Substantial cost of initial setup, including technology infrastructure, recruitment, and training.

Best Practices

SSOs can deliver significant value to businesses when implemented effectively. Some of the shared services organization best practices used across the globe include:

• • Clear Vision: Defining a clear vision and business case for the SSC, including objectives like cost reduction, efficiency gains, and service quality improvements, helps companies align the objectives of the SSC with overall business goals.
  • Thinking Globally from the Outset: Instead of starting locally and expanding later, companies should establish global policies and structures to ensure consistent operations worldwide and easy global scalability

• Prioritising Employee Development: Successful SSOs understand that investing in employee training and upskilling is  a strategic investment. Thorough Process Standardization: Standardizing  processes across functions and locations before moving to an SSC model to ensures consistency, efficiency, and scalability.

• Invest in Technology: Leveraging advanced technologies like automation, data analytics, and cloud solutions enables companies to streamline operations, increase efficiency, and deliver high-quality services.

• Service Level Agreements (SLAs): Establishing clear SLAs with defined metrics to measure performance and ensure accountability, transparency, and alignment with business units’ expectations.

• Regulatory Compliance: Ensuring the SSC adheres to all relevant legal and regulatory requirements across different regions, particularly in areas like data security, tax, and labor laws.

Shared Services Organizations have become critical for businesses seeking to thrive in today’s dynamic business landscape. Their impact extends beyond financial efficacy, , fostering efficiency, improved service quality, and increased agility. By outsourcing non-core functions to an SSO, businesses can concentrate on core competencies. This leads to increased innovation and helps build a competitive advantage.

As digital transformation continues to reshape industries, SSOs have a unique opportunity to evolve and contribute even more to overall business success. 

To explore if setting up an SSO is the right move for your company, get in touch with ANSR’s team of experts. From defining the value proposition to establishing and launching an SSO, we ensure seamless alignment with your business goals.