Over the last decade or so, finance shared services have become a vital part of the finance function for most large multinational organizations. The increase in SSCs investment has been driven mainly by business leaders looking for simpler, leaner internal structures that allow the organization to focus on its core competencies as well as ensure finance makes a real contribution to the business decisions.
Most routine transactional processes are now run from these SSCs freeing resources for finance to focus on core issues such as strategy, risk management, business process improvement, financial planning & forecasting, performance measurement, performance management and other value-adding activities.
Despite increasingly popularity of SSCs over the past years, research has revealed that the majority of these centres are still struggling to deliver the promised benefits. Unfortunately, for many organizations, the initial zeal that accompanied their introduction has ebbed leaving centres to stagnate or even decline. Although not an exhaustive list, below are some of the reasons attributed to this poor performance and what must be done to improve SSCs performance:
- Poor processes and lack of standardization across systems. Despite setting up and maintaining SSCs, some processes are run and maintained at a local level instead of at regional or global level. In order to deliver the promised benefits, SSCs must encompass global processes, systems and data as this helps the business to leverage its extent.
- Lack of investment in technology which often leads to many business improvement programs failing to fulfil their potential. Technology is an important enabler to driving standardization and improving quality. For example, instead of limit its use to certain basic tasks such as document scanning and workflow, SSCs can make greater use of technology and extend its use to tasks such as issue management, calls and skills routing, CRM, electronic invoicing and master data entry.
- Poor investment in people. The lack of career opportunities for employees in SSCs is one of the chief reasons for higher turnover rates. When employees feel they are not part of the business, quality will be compromised and people will leave. It is therefore important that the SSC is viewed as an integral part of the business. Furthermore, management must introduce succession planning programs within the SSCs and rotate staff into the broader finance community. External training in process improvement should also be made a priority
- Inadequate performance measurement systems for the SSC. The “us and them” culture often leads to poor interaction of the SSC with the rest of the business leading to poor service quality. In most organizations, there is no dialogue between the customer (business) and the SSC. Senior executives must support the SSC model, interact with the business regularly and drive continuous improvement to service quality. There is need to put in place a series of KPIs to measure the effectiveness of the specific SSC. It is therefore important for organizations to shift their thinking on how they evaluate the success and failure of the SSC. Getting regular feedback on service performance and responsiveness is vital if SSCs are to deliver their promised results.
- Geographic and language constraints. Although many organizations have set up SSCs in low cost locations such as India, for the long term success, SSCs must move beyond cost reduction to deriving value from efficiencies and service quality. It is important that that management periodically reviews its sourcing strategy, such as the most appropriate location. A certain location might initially appear as low-cost but then the limited track record of most of its service providers might prove expensive in the long run. Geographic location also has a bearing on the time zone. This difference in the working time zones has to be considered as well if the SSC is to deliver benefits otherwise a relocation to a time-friendly zone might be required which in turn might also prove expensive.
Improving SSCs performance is all about centralizing processes, standardizing them and then continuously improving them. On a regular basis, it helps to send SSC employees into the operations to get a feel of how the operations are doing and what is critical. If the SSC team lacks the understanding and knowledge of how the business and its processes work, then it will fail to perform well since the team will only be focused on a certain portion of the business.
Once the processes are working well, management must start looking at other areas across the organization where the SSC may deliver additional value.
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