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Shared Services Value

In a sentence

A practical guide for corporate leaders on how to design, implement, and manage a shared services organization to reduce costs, improve service, and enable business units to focus on strategic growth.

In today's competitive landscape, large corporations are burdened by duplicative and inefficient support processes spread across multiple business units, driving up costs and distracting leaders from their core mission. 'Shared Services' provides a comprehensive blueprint for tackling this problem by consolidating non-strategic activities like finance, HR, and IT into a single, highly efficient internal organization run like a business. Written by leading PricewaterhouseCoopers consultants and the executive who spearheaded this transformation at Lucent Technologies, this book is a step-by-step guide through the entire journey—from assessing feasibility and building the business case to managing the complex implementation, navigating international challenges, and establishing metrics for continuous improvement. It's an essential resource for any leader looking to unlock significant value, create a 'one company' culture, and gain a lasting competitive advantage.

The four lenses

  • Science
  • Statistics
  • Systems
  • Strategy

The model

This model illustrates how the implementation of a shared services organization, characterized by the consolidation of non-core activities and a business-like partnership with internal units, leads to improved operational states such as process efficiency and strategic focus, ultimately resulting in enhanced corporate value through cost reduction and improved business unit performance. Executive sponsorship and enabling technology are key moderating conditions for success.

Shared Services Structuredesign lever

The degree to which a company consolidates non-strategic, transaction-oriented activities (e.g., finance, HR, IT) from multiple business units into a separate, semi-autonomous operating unit that runs these support processes as its core business.

Partnership Modeldesign lever

The extent to which the relationship between the shared services organization and the business units is defined by partnership, joint accountability, and market-based principles, as codified in Service Level Agreements (SLAs) and a clear pricing structure.

Process Standardization and Efficiencybehavioral pattern

The degree to which support processes are standardized, streamlined, and optimized for efficiency across the organization, leveraging economies of scale, technology, and process expertise, resulting in lower costs and faster cycle times.

Support Service Qualityoutcome metric

The quality, speed, and responsiveness of the services provided by the shared services organization to its internal business unit partners, as measured against agreed-upon service levels.

Business Unit Strategic Focuspsychological state

The extent to which business unit management and resources are freed from transactional, non-core activities, allowing them to concentrate on strategic, customer-facing processes that drive revenue and competitive advantage.

Corporate Value Enhancementoutcome metric

The overall improvement in corporate performance, reflected in tangible metrics such as reduced SG&A costs, improved working capital, and increased shareholder value, as well as intangible benefits like a 'one company' culture.

Executive Sponsorship and Visioncontextual condition

The degree of visible support, commitment, and clear strategic vision provided by top corporate leadership for the shared services initiative, which is critical for overcoming resistance and aligning the organization.

Enabling Technology Infrastructurecontextual condition

The extent to which the organization possesses a common, integrated technology platform, such as an ERP system, that enables process standardization, data consolidation, and efficient transaction processing necessary for shared services to succeed.

How they connect

  • shared services structure influences process standardization and efficiency
  • shared services structure influences business unit strategic focus
  • partnership model influences support service quality
  • process standardization and efficiency predicts corporate value enhancement
  • process standardization and efficiency influences support service quality
  • business unit strategic focus predicts corporate value enhancement
  • support service quality influences business unit strategic focus
  • executive sponsorship and vision moderates shared services structure
  • enabling technology infrastructure moderates process standardization and efficiency

A candidate measure

Shared Services Value — derived measurement candidates

Shared Services Structure

Number of functions formally consolidated into the SSO.; Percentage of total corporate SG&A budget managed by the SSO.; Number of distinct business units served by the SSO.

self-report suitability: low

Partnership Model

Existence and comprehensiveness score of Service Level Agreements (SLAs).; Use of a value-based or market-based chargeback model (vs. simple allocation).; Existence of a formal governance board with BU representation.

self-report suitability: medium

Process Standardization and Efficiency

Cost per transaction (e.g., per invoice, per payroll check).; End-to-end process cycle time (e.g., days to close the monthly books).; Number of transactions processed per full-time employee (FTE).; Error rate (e.g., percentage of invoices requiring correction).

self-report suitability: low

Support Service Quality

BU Partner Satisfaction Score (from a standardized survey).; Percentage of targets met in the Service Level Agreement.; First-call resolution rate at the SSO help desk/call center.

self-report suitability: high

Business Unit Strategic Focus

Percentage of BU leadership time allocated to strategic vs. administrative tasks (via survey or time study).; Perceived ability of the BU to focus on core activities (survey item).; Ratio of strategic initiatives to administrative projects launched by the BU.

self-report suitability: high

Corporate Value Enhancement

Sales, General & Administrative (SG&A) expense as a percentage of revenue.; Working capital improvements (e.g., reduction in Days Sales Outstanding).; Shareholder value metrics (e.g., stock performance relative to market index).

self-report suitability: none

Executive Sponsorship and Vision

Perception of leadership commitment (survey of middle managers).; Frequency of executive communications mentioning shared services.; Project sponsor's level in the organization.

self-report suitability: medium

Enabling Technology Infrastructure

Percentage of company revenue processed through a single ERP instance.; Number of separate general ledger systems in use.; Level of data standardization (e.g., single chart of accounts, single vendor master).

self-report suitability: low

Run the assessment

The story

The reader A corporate leader (e.g., CEO, CFO, CIO) or business unit executive in a large, complex organization with multiple divisions, who wants to increase shareholder value by improving efficiency and enabling their business units to focus on strategic, customer-facing activities.

External problem

Duplicative, costly, and inconsistent support processes (like finance, HR, and IT) are spread across various business units, increasing SG&A expenses and distracting management from core strategic goals.

Internal problem

They feel frustrated by the lack of control over rising administrative costs, the inconsistency of service levels across the company, and the inability to focus their teams on what truly matters—serving external customers and driving growth.

Philosophical problem

It's just plain wrong that essential but non-core activities should burden strategic business units, preventing the company from achieving its full potential for efficiency, growth, and profitability.

The plan

  1. Mobilize your effort by understanding the concept, building the compelling business reason, and assessing if shared services is right for you.
  2. Assess the relationship between shared services, process reengineering, and IT, and consider the alternative of outsourcing.
  3. Design the shared services organization by planning the approach, selecting a location, creating infrastructure, developing service-level agreements and pricing, and building a final business case.
  4. Implement the plan through structured project management, effective change management, and the establishment of performance measures for continuous improvement.

Success

  • Reduced SG&A costs, improved working capital, and enhanced shareholder value.
  • Business units are freed from transactional burdens and can fully concentrate on strategic, customer-facing activities that drive growth and competitive advantage.
  • A cohesive 'one company' culture emerges, with standardized best-practice processes and consistent, high-quality service levels across the entire organization.
  • The new shared services organization operates as an efficient, professional, and highly valued business partner within the enterprise.

At stake

  • Continued high and uncontrolled SG&A costs that erode profitability and disappoint shareholders.
  • Business unit leaders and their teams remain bogged down by administrative tasks, unable to focus sufficiently on customers, innovation, and strategic execution.
  • The company remains fragmented, with inconsistent processes and service levels that create internal friction and present a disjointed face to the market.
  • The organization misses a critical opportunity to unlock significant operational efficiencies and gain a lasting competitive advantage.

Questions this book answers

What are shared services and how do they differ from simple centralization?
How can a company determine if a shared services model is the right approach for its organization?
What is the step-by-step process for designing, implementing, and managing a successful shared services organization?
What are the key benefits, challenges, and risks associated with moving to a shared services model, particularly in a global context?
How do shared services interact with other major initiatives like business process reengineering and enterprise resource planning (ERP) systems?

Glossary

Shared Services Structure
The degree to which a company consolidates non-strategic, transaction-oriented activities (e.g., finance, HR, IT) from multiple business units into a separate, semi-autonomous operating unit that runs these support processes as its core business.
Partnership Model
The extent to which the relationship between the shared services organization and the business units is defined by partnership, joint accountability, and market-based principles, as codified in Service Level Agreements (SLAs) and a clear pricing structure.
Process Standardization and Efficiency
The degree to which support processes are standardized, streamlined, and optimized for efficiency across the organization, leveraging economies of scale, technology, and process expertise, resulting in lower costs and faster cycle times.
Support Service Quality
The quality, speed, and responsiveness of the services provided by the shared services organization to its internal business unit partners, as measured against agreed-upon service levels.
Business Unit Strategic Focus
The extent to which business unit management and resources are freed from transactional, non-core activities, allowing them to concentrate on strategic, customer-facing processes that drive revenue and competitive advantage.
Corporate Value Enhancement
The overall improvement in corporate performance, reflected in tangible metrics such as reduced SG&A costs, improved working capital, and increased shareholder value, as well as intangible benefits like a 'one company' culture.
Executive Sponsorship and Vision
The degree of visible support, commitment, and clear strategic vision provided by top corporate leadership for the shared services initiative, which is critical for overcoming resistance and aligning the organization.
Enabling Technology Infrastructure
The extent to which the organization possesses a common, integrated technology platform, such as an ERP system, that enables process standardization, data consolidation, and efficient transaction processing necessary for shared services to succeed.