Creating a Successful Shared-Services Organization

Over the last several years, many businesses have adopted the concept of shared services as a means of controlling costs while improving the quality of internal services. The basic idea is to put the provision of these services on a more business-like “customer-supplier” basis, in which the using organization contracts with the shared-services organization for a given level of service at a competitive (market) price. Typical services in the shared-services portfolio include human resources, information technology, logistics and supply chain management, accounting, and environmental, health, and safety (EHS) management. Shared-services delivery is often referred to as “insourcing” to distinguish it from third-party “outsourcing.”

Does it work? Yes and no. In helping clients establish shared-services organizations and in evaluating organizations already in operation, we have found that while the concept is useful, many companies experience pitfalls in execution. As a result, users become frustrated, anticipated cost-reductions never materialize, and service frequently deteriorates. In this article, we describe some of the pitfalls companies have experienced in implementing shared-services organizations and recommend an approach for creating a successful sharedservices environment.

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