The costs of support functions are often measured globally and allocated to the profit centers in proportion to the analytical rules, which may be different for each function.

 

This heterogeneity of arbitrary rules does not meet the need for transparency and increased cost monitoring that we are seeing more and more. It also hinders the implementation of tools to control the efficiency of operations.

 

The shared services approach transforms support functions into internal suppliers, billing the real consumption of other customer departments. The company's costs become transparent and comparable.

 

Shared services enable the company's support functions, usually considered as cost centers, to be transformed into internal service providers.

 

Each of these internal providers has a list of available services, and each of these services has a metric, with an associated unit price.

 

Internal customers are then billed according to their actual consumption of each of the services offered, and the terms of a service agreement signed beforehand.

 

As opposed to an analytical distribution of costs to profit centers, the shared services organization allows central functions to optimize their processes and expenses, to achieve economies of scale through standardization, and to remain competitive with the outside world since unit prices provide tangible elements for comparison.

 

For their part, profit centers have a better vision of their profitability and an increased capacity for budget forecasting.

 

 

Depending on the initial situation, setting up a shared services organization can lead to more or less significant changes.

 

A SSO is built around two main processes:

 

 

We are therefore entering into a real client-supplier relationship, and for it to be efficient, a SSO requires the creation of three key functions:

 

 

The objective is to set up a truly customer-oriented organization.

 

 

The benefits of moving to SSO mode are multi-faceted.

 

First, a SSO allows the company to improve the management of its internal service offers, by defining standardized offers, setting up consumption capture and forecasting tools, and introducing a commercial dimension to exchanges between suppliers and internal customers.

 

Secondly, a SSO makes it possible to improve the company's budget management. Indeed, the annual calculation of unit prices requires a budget modeling, such as Activity-based Costing (ABC). In addition, the implementation of budget management tools, at the monitoring and forecasting levels, and the invoicing of departments according to their actual consumption, are all elements that enable a better analysis of the profitability of these departments or business lines.

 

Finally, a SSO pushes the support functions to improve their performance, in particular through the implementation of indicators (KPIs) and the increased possibility of optimizing its processes, using for example Lean and Six Sigma methodologies.

 

 

A shared services organization is part of a logic of operational efficiency and continuous improvement, the objective of which is to offer more transparency to internal customers and a better understanding of their needs by internal suppliers.

 

 

Indeed, implementing a shared services organization is a major step forward compared to a traditional analytical model, but is not an end. The model is a real open door to the optimization of its operations and is completely scalable.

 

A SSO can evolve towards process optimization, including automation projects, straight-through processing (STP), performance management, and the launch of Lean or Six Sigma programs, in order to increase efficiency.

 

Cost optimization is also possible, for example by reviewing procurement policies to renegotiate with external suppliers. And the ability to compare with outside suppliers can open opportunities for third-party application management or outsourcing/offshoring.

 

Finally, it is possible to increase the scope of a SSO, or to revise its legal structure in order to leverage tax incentives, or to outsource it.