A recent study published by Auxis, A Deeper Exploration of Shared Services in Latin America, provides some insights into the opportunities for performance improvement that exist in Shared Service Centers.
According to the survey, the organizations surveyed realized an average of 27% performance improvement in their back office operations, with 72% of the companies surveyed seeing efficiency gains of greater than 20%.
These dramatic performance improvements come from a range of organizations, including regional, mid-sized companies and large, global enterprises.
Back office performance improvement is achievable for any type of organization, but too often companies got lost in the “forest of day-to-day operations” and are unable to see the “trees of opportunity.”
One of the quickest ways to achieve back office performance improvement is to automate manual processes, but this same survey indicated that there was a relatively low level of new technology adoption, including very limited use of some of the “hottest” tools available, such as robotics, automated reconciliations and even cloud solutions.
Clearly, standardizing and simplifying transactional activities will result in significant operational performance improvements. But this is not always that simple or feasible for some organizations, for various reasons.
I have seen marginally integrated organizations running multiple ERP systems gain significant performance improvements just by bringing disparate operations under one roof.
The easy “consultant” answer is to standardize on one ERP platform, eliminate redundancy and reduce operational complexity. But the “easy answer” generally comes with a price tag of hundreds of thousands, if not millions, of dollars, often with no clear return on investment. It’s not quite, “If it ain’t broke, don’t fix it;” it’s more like, “It ain’t broke enough, so live with it.”
Consolidating highly decentralized operations will accomplish several things. You can eliminate operational redundancy that will clearly exist when multiple locations are essentially doing the same work. Eliminating redundancy and consolidating operations increases the focus of the organization on performing these activities. Increasing the focus raises operational visibility and enforces operational discipline, resulting in increased operational performance. Over the years, we have seen efficiency gains of 20-30%, echoing the results of the survey, simply by raising the focus on heretofore disparate operations.
But bringing a decentralized function together isn’t enough. There needs to be a focus on improving the function and its activities. One of the main differences between a centralized operation and a shared service center is the establishment of a customer service orientation within the center. A true shared service center will establish and maintain service levels, and monitor its performance against these service levels.
Just by establishing performance metrics, you change the dynamics of the organization doing the work. The organization will have goals that they are accountable for, and a focus on achieving these goals. As important, you have a way to identify and target performance improvements. Whether your goals are greater efficiency, lower cost, higher quality or increased scalability, you can set a goal and strive to achieve it. You can more easily identify where the performance improvement opportunities are and what you will need to do to achieve them. This can often be done by “tweaking” operational processes, rather than making “wholesale” changes that require “retail” systems and investments.
Standardizing common activities, adjusting roles and responsibilities and realigning organizations and management, will allow you to become more efficient and revise the focus of the organization from mostly transactional work to include higher value activities. These revisions change the whole perspective of the organization and its staff, both internally and externally.
These changes start by understanding your back office processes, truly digging into the operations and challenging why things are done the way they are. Back office operations often take on a life of their own, with certain activities existing because they….exist.
Change the way functions are being performed, organizations are structured, and roles are defined. Eliminate the sacred cows and push your employees to think and act differently. There are many good people out there, often with very good ideas, but they are not being asked to change. Make them a part of the solution, but if they are resistant to change, don’t be afraid to act.
There is no reason to live with poorly performing operations, and many reasons to make changes. Often, these changes can be accomplished without significant financial investments. But transformation does require a willingness to make these changes happen. This represents another kind of investment, a personal and professional investment that can be very rewarding.