Top tips for setting up a shared service centre
The establishment of an internal shared service centre (SSC) – or the transfer of functions to a BPO, for that matter – is not a decision that can be taken lightly and with the mind-set that money can be saved and headcount reduced.
Frequently, SSCs struggle and don’t fulfil their potential because many basics are overlooked and assumptions made.
Even just taking Central and Eastern Europe alone, with more than 600 SSCs and countless supporting consultants, it is not easy to understand why so many avoidable problems continue to be encountered.
Why is there a reluctance to share experience and best practice? Here are a few tips and pitfalls to avoid when setting up an internal SSC.
Avoid short-term thinking
Like dogs an SSC is for life. It is an integral part of your business taking on essential responsibilities such Accounts Payable, General Ledger and Accounts Receivable. (In my view Accounts Receivable includes the entire Order-to-Cash stream including pre-order risk management.)
When considering setting up an SSC it is critically important to avoid thinking it is just about saving money on salaries and headcount.
Successful centres will forward plan considering a range of eventualities……
With at least 600 other centres in the CEE region alone and a good number of consultants and associations there is abundance of experience out there to draw upon. Most centre heads will be pleased to offer advice.
Set high standards for the SSC
Your SSC should become a Centre of Excellence and policymaker within three years.
Planning of the SSC should include a clear and definite timeline of responsibility transfer and the scope of work which is to be agreed with all stakeholders prior to kick-off and the phasing over the next three years.
Avoid allowing the parent business unit to dictate policy and what is to be transferred – that way leads to a disjointed and inconsistent set of responsibilities in the SSC. For example, one BU will allow calling customers and another won’t. I have personally witnessed situations where an SSC Cash Allocation team could not call a client to ask for a remittance advice! They wasted nearly an hour contacting the sales manager who contacted the client – the same company that was a keen advocate of lean processes!
It is important that the plan includes a very definite objective that the SSC will be the process owner and rewrite policy and SLAs as experience is gained.
How can SSC management develop effective KPIs if their teams don’t have the same responsibilities?
The same applies to measurement formulae. It is not uncommon to see more than ten versions of DSO calculation!
Strive for standard processes and measures at all stages: wherever a difference appears, deal with it.
Each local business can maintain historic methodologies if they choose but senior management must insist that the SSC will become the lead.
Different ERPs are not a barrier
Business units on different systems are often used as a barrier to integration but 21st century technology provides broad solutions that not only incorporate but enhance and improve efficiency.
For example when AP ledgers are consolidated, common suppliers will be identified.
When different BU buying from one supplier is identified, Purchasing can negotiate reduced rates. In AR, when customers are linked you can identify and negotiate standard payment terms, payment methods and credit lines.
It is important that technology is reviewed at same time as transition. Too often the lazy way is to just replace one for one headcount. Do you need 12 Cash Allocation clerks when technology can automate at least 50% of the process? The same principle applies with e-invoicing and e-collections: the ROI on these solutions is very attractive.
Unenlightened management will spill out the same tired old resistance: “Our customers will reject it and go to the competition.” Nonsense! A quick reference check with a few other operational managers will quickly dispel these rumours and enhance the business case.
The next hurdle is not to allow approval processes to be slowed down with unnecessary RFIs and RFPs. Be bold, and make a decision: act like a small business.
Developing a career path
A Centre of Competence or Excellence can only be achieved if the SSC teams are fully connected with the business and from the time of induction are connected to the whole business.
It is possible to develop career paths for everyone: starting as an AP clerk or Cash Allocation is the first rung on the career ladder and the progression must be thought through. There is often a lack of appreciation and understanding of AP and AR but there are very interesting career paths to be had.
Poor communication with the parent is a regular event and causes misunderstanding and mistrust, and impacts development throughout the business.
It requires a large amount of hard work, focus and investment of time and money but a reasonable amount of the following are important:
Pre-employment training: explain basics of the company and job applied for.
Induction courses – to introduce company products, markets and ethos.
Don’t be tight with training!
Arrange factory visits: staff must know what they are selling. If it is not possible to send all staff then set up a video tour via Skype or other video links.
Arrange client visits: staff need to see where the product goes; if not all staff then team leaders as a minimum. View it as part of the training and development.
Regular visits from Head Office: it means a lot to the remote teams.
Confidence in the SSC grows with consistency and consistency can only be achieved if staff turnover is kept to a minimum.
One of the attractions of regions such as CEE is the high number of graduates that fluently speak a second language. However, avoid being vulnerable and only having one person speak a certain language. Don’t transfer a function that only requires one person. Where absence occurs through holiday, sickness or resignation then continuity and confidence is reduced.
Research into language proliferation and also competition is essential at the planning stage.
Understand the local culture
When relocating to another country spend time getting to understand the culture and history. Do not assume that what is regular business practice where you come from is the same the world over: it isn’t.
Things like dress code, meal times, timezones and working hours may be different.
Outsource has partnered with ACCEE for the Credit Matters III conference, in Brno, Czech Republic, November 13 & 14 2014. For information on “How to achieve world-class Order-to-Cash” and much more, click here.
About the Author