Shared Services Business Model: Setting Up Your Business

The shared services business model has emerged as a game-changer in transforming business operations and driving efficiency. By centralizing certain functions, standardizing processes, and leveraging economies of scale, organizations can achieve significant cost savings and improve service quality. In this article, we will explore the benefits of the shared services model, discuss its implementation, and highlight best practices and trends in this rapidly evolving field.

Key Takeaways:

  • Implementing a shared services model can lead to cost savings and improved efficiency in business operations.
  • Shared services encompass various functions such as HR, finance, IT, procurement, and project management.
  • Centralizing services and standardizing processes can enhance organizational effectiveness and streamline operations.
  • Challenges may arise during the implementation of a shared services model, but they can be overcome with proper planning and collaboration.
  • The shared services model differs from outsourcing, as it involves centralizing functions within the organization rather than contracting with external parties.

What is Included in Shared Services?

Shared services encompass various functions that support the daily operations of different departments in an organization. By centralizing these functions, businesses can achieve cost savings, improve efficiency, and ensure standardized practices throughout the company.

Here are some key shared services functions:

  • Payroll: Shared services provide a centralized approach to payroll processing and management. This includes handling employee compensation, benefits administration, and tax compliance.
  • Inventory Management: Shared services can streamline inventory management processes, ensuring accurate tracking, efficient ordering, and optimal stock levels.
  • Hiring and Onboarding: Centralizing hiring and onboarding functions enables organizations to standardize recruitment processes, conduct background checks, and streamline the overall candidate experience.
  • Information Technology: Shared services often include IT support, helpdesk services, infrastructure management, and software/application support.

By consolidating these functions into a centralized hub, businesses can realize significant cost savings. Standardized practices also promote efficiency, minimize errors, and enhance the quality of service provided to internal stakeholders.



Shared Services Functions Benefits
Payroll Streamlined administration, accurate and timely processing
Inventory Management Optimized stock levels, efficient ordering process
Hiring and Onboarding Standardized recruitment, improved candidate experience
Information Technology Enhanced IT support, streamlined infrastructure management

By leveraging shared services functions, businesses can focus on core competencies while benefiting from centralized expertise and cost-effective practices.

The Shared Services HR Model

The shared services model is commonly applied to human resources departments. By implementing HR shared services, organizations can centralize their HR functions, prevent duplication of effort, and improve operational efficiency. This centralized approach allows for streamlined processes and enhanced service delivery.

Centralizing HR operations brings various benefits to businesses. It eliminates the duplication of effort that often occurs when different departments independently manage HR tasks. Instead, with a shared services HR model, all HR functions are consolidated under one centralized hub, minimizing redundancies and promoting consistency in processes and practices.

HR shared services can encompass a wide range of functions, including handling employee inquiries, managing employee records, payroll administration, recruitment and onboarding, performance management, and training and development. By centralizing these operations, organizations can standardize practices, reduce costs, and improve the efficiency and effectiveness of HR processes.

The Benefits of a Centralized HR Function

The centralized HR function within a shared services model offers several advantages. First, it enables organizations to allocate resources more efficiently by eliminating the duplication of HR activities across different departments. By consolidating these functions, businesses can optimize their workforce and reduce unnecessary costs.

Secondly, a centralized HR function promotes consistent and standardized practices. With a shared services approach, organizations can establish uniform policies, procedures, and systems, ensuring compliance and efficient service delivery. This consistency enhances the overall employee experience, fosters transparency, and mitigates the risk of errors or discrepancies.

Lastly, centralizing HR operations enhances communication and collaboration between HR professionals and other departments. With a shared services model, HR becomes a strategic partner to the organization, working closely with other business units to align HR practices with organizational goals. This alignment facilitates better decision-making, improves employee satisfaction, and supports overall business success.

Implementing a shared services HR model requires careful planning, stakeholder engagement, and proper change management. Organizations must assess their current HR processes, identify opportunities for consolidation, and develop a comprehensive transition plan. By leveraging automation, technology, and standardized practices, businesses can transform their HR function into a centralized and efficient operation.

In the next section, we will explore the implementation process of shared service models in more detail, highlighting key considerations and best practices for successful adoption.

Implementing Shared Service Models

Implementing shared service models involves transitioning from a decentralized to a centralized function within an organization. This shift allows businesses to streamline their operations, consolidate resources, and improve service delivery. The shared service unit functions as an internal customer service business, providing a range of services to various divisions and departments. By centralizing functions such as HR, finance, IT, and procurement, organizations can achieve greater efficiency, reduce costs, and enhance overall performance.

One key aspect of implementing shared service models is the establishment of service level agreements (SLAs). These agreements define the expectations, responsibilities, and metrics that govern the delivery of services. SLAs ensure that the shared service unit meets the needs of its internal customers in terms of cost, time, and quality. They provide a framework for measuring and monitoring performance, facilitating continuous improvement and accountability.

Benefits of Implementing Shared Service Models

Implementing shared service models offers several benefits for organizations. Some of the key advantages include:

  • Improved operational efficiency
  • Standardized processes and practices
  • Cost reduction through economies of scale
  • Enhanced quality and consistency of service delivery
  • Streamlined communication and collaboration between departments
  • Greater flexibility in resource allocation

By centralizing functions and leveraging standardized processes, organizations can optimize their operations and achieve greater cost savings and service excellence.

Benefits of Implementing Shared Service Models Description
Improved operational efficiency Centralizing functions leads to streamlined processes and improved productivity.
Standardized processes and practices Implementing shared service models ensures consistent practices and quality control across the organization.
Cost reduction through economies of scale By consolidating resources, organizations can achieve cost savings through economies of scale.
Enhanced quality and consistency of service delivery Shared service models enable organizations to provide standardized, high-quality services to internal customers.
Streamlined communication and collaboration between departments Centralizing functions improves communication and collaboration between different departments, fostering a more cohesive and efficient work environment.
Greater flexibility in resource allocation Shared service models offer greater flexibility in allocating resources, allowing organizations to adapt quickly to changing business needs.

Challenges of the Shared Service Delivery Model

Implementing the shared services model can present unique challenges for organizations, particularly when existing processes are already centralized and standardized. These challenges must be addressed to ensure the effectiveness of the shared service delivery model.

The Implementation Challenges

One of the key challenges of implementing shared services is the need to transition from traditional, decentralized processes to a centralized approach. This shift requires careful planning and execution to avoid disruptions to ongoing operations.

Organizations may also face resistance from employees who are accustomed to working in silos and are hesitant to adopt new ways of working. Change management strategies and effective communication are critical in managing this resistance and gaining buy-in from stakeholders.

Another challenge is ensuring the alignment between existing centralized processes and the shared service delivery model. Organizations must evaluate the effectiveness of these processes and modify them as necessary to fit the new model. This evaluation may involve assessing the efficiency, quality, and compliance of current processes.

Addressing the Challenges

To overcome the challenges of implementing the shared service delivery model, organizations can take several steps.

  1. Conduct a thorough assessment of existing processes to identify areas of misalignment and improvement opportunities.
  2. Develop a comprehensive change management plan that involves clear communication, training, and support for employees affected by the transition.
  3. Collaborate with key stakeholders to understand their concerns and address them proactively to build trust and engagement.
  4. Establish performance metrics and regularly monitor and evaluate the effectiveness of the shared service delivery model to identify areas for refinement.

By addressing these challenges head-on, organizations can ensure a successful implementation of the shared service delivery model, leading to enhanced efficiency, cost savings, and improved service quality.

Implementation Challenges Description
Transitioning from decentralized to centralized processes Requires careful planning and execution to avoid disruptions
Resistance to change from employees Change management strategies and effective communication are crucial
Aligning existing centralized processes with the shared service model Requires evaluation and modification of processes

Shared Services vs. Outsourcing

When it comes to optimizing operational efficiency and reducing costs, organizations have two main options: shared services and outsourcing. While both approaches aim to streamline business functions, they differ in their implementation and impact on in-house operations.

The Shared Services Approach

Shared services involve centralizing various functions within the organization. This model allows businesses to consolidate services and resources, resulting in improved operations and cost savings. By bringing services in-house, companies can maintain greater control over their operations and customize processes according to their unique needs.

Implementing shared services often entails establishing a centralized hub that caters to the different departments and divisions within the organization. This approach fosters collaboration, facilitates knowledge sharing, and promotes standardized practices for enhanced efficiency.

Shared Services Outsourcing
Centralizing functions within the organization. Contracting with third-party service providers.
Improved control and customization of processes. Reliance on external providers for service delivery.
Better integration with existing company culture. Dependency on external entities.
Opportunity for knowledge sharing and collaboration across departments. Potential for communication gaps and misalignment.
Potential for cost savings through resource consolidation. Reduced control over quality and service delivery.

The Outsourcing Approach

Outsourcing, on the other hand, involves partnering with third-party service providers to handle specific functions or business processes. While this can offer certain advantages, such as access to specialized expertise and scalability, it also entails relinquishing some control over the operations and quality of service delivery.

In contrast to shared services, outsourcing may result in communication gaps and challenges aligning the outsourced services with the organization’s culture. Although it can be a viable option for certain functions or projects, it may not provide the same level of integration and control as the shared services model.

Overall, the shared services approach allows organizations to retain close control over operations, while outsourcing offers the opportunity to leverage external expertise. Nevertheless, the decision between shared services and outsourcing depends on the specific needs and goals of the organization.

Benefits of Shared Services

Implementing a shared services model brings numerous advantages to businesses. Let’s explore the key benefits:

1. Cost Reduction

Shared services enable organizations to consolidate functions, eliminate duplications, and achieve economies of scale. By centralizing operations and leveraging standardized processes, companies can significantly reduce costs.

2. Improved Service

By streamlining and standardizing services, shared services enhance service delivery. When functions are consolidated, specialized teams can focus on delivering high-quality services, resulting in improved customer satisfaction.

3. Better Controls

Centralized shared service models provide better controls over processes, ensuring adherence to policies and standards. This leads to improved compliance, risk management, and governance throughout the organization.

4. Improved Communication

The collaborative nature of shared services promotes effective communication between different departments and divisions. This facilitates knowledge sharing, fosters cross-functional collaboration, and enhances overall organizational communication.

5. Greater Flexibility

Shared services offer flexibility by providing scalable solutions that can adapt to changing business needs. Organizations can easily reallocate resources, adjust service levels, and respond quickly to market demands.

6. Improved Productivity

Through standardized processes and optimized resource allocation, shared services enhance productivity across the organization. Eliminating duplications and streamlining workflows lead to increased efficiency and improved employee performance.

Overall, shared services enable businesses to achieve cost reduction, improved service, better controls, enhanced communication, greater flexibility, and improved productivity. These benefits contribute to the success and growth of organizations implementing shared service models.

Improved Productivity

Benefits of Shared Services Key Points
Cost Reduction Consolidation of functions and economies of scale lead to significant cost savings.
Improved Service Streamlined and standardized processes result in enhanced service delivery and customer satisfaction.
Better Controls Centralized shared services provide improved control over processes, compliance, and risk management.
Improved Communication Shared services foster effective communication and collaboration across departments and divisions.
Greater Flexibility Scalable solutions and resource reallocation enable organizations to adapt to changing business needs.
Improved Productivity Standardized processes and optimized resource allocation enhance overall organizational productivity.

Examples of Shared Services

Shared services can be applied to various functions within an organization, providing opportunities to achieve efficiencies, improve performance, and reduce costs. Let’s explore some examples of shared service models:

1. HR Shared Services

HR shared services centralize human resources functions, such as recruitment, employee support, and pensions. By consolidating these operations, organizations can streamline processes, standardize practices, and enhance service delivery.

2. Finance Shared Services

Finance shared services centralize financial functions, including accounting, payroll, and financial reporting. This approach allows businesses to achieve cost savings, improve financial controls, and standardize processes across departments.

3. IT Shared Services

IT shared services consolidate technology services, such as help desk support, network management, and software development. By pooling resources and expertise, organizations can enhance IT service delivery, ensure system reliability, and optimize technology investments.

4. Procurement Shared Services

Procurement shared services centralize the procurement function, including supplier management, sourcing, and contract management. This approach allows organizations to leverage economies of scale, negotiate better terms with suppliers, and drive cost savings.

5. Facilities Management Shared Services

Facilities management shared services consolidate facilities-related functions, such as maintenance, space planning, and security. By centralizing these operations, businesses can optimize resource allocation, improve service quality, and achieve cost efficiencies.

6. Communications and Marketing Shared Services

Communications and marketing shared services centralize marketing and communication functions, such as branding, advertising, and public relations. This approach enables consistent messaging, efficient campaign execution, and maximized marketing investments.

7. Project Management Shared Services

Project management shared services provide centralized project management expertise and resources. By standardizing project management methodologies, organizations can enhance project success, drive efficiency, and prioritize strategic initiatives.

8. Data Analytics Shared Services

Data analytics shared services consolidate data analysis functions, such as data visualization, predictive analytics, and statistical modeling. By centralizing these capabilities, organizations can leverage data-driven insights, drive decision-making, and enhance business performance.

These examples demonstrate the versatility and impact of shared services in various business functions. By implementing shared service models, organizations can tap into the benefits of centralized operations, standardized practices, and improved service delivery.

Shared Services Benefits for Your Business

Implementing a shared services model can provide several benefits to your business, including cost savings, improved service, better controls, enhanced communication, greater flexibility, and increased productivity. By centralizing functions and leveraging standardized processes, organizations can optimize efficiency and performance.

Cost Savings

One of the significant advantages of implementing a shared services model is the potential for cost savings. By consolidating functions and eliminating duplicative tasks, organizations can reduce operational expenses and achieve economies of scale.

Service Improvement

Implementing shared services allows businesses to deliver improved service to their internal clients. Centralizing functions and streamlining processes help ensure consistent and high-quality service delivery across the organization.

Better Controls

Shared services provide better controls by standardizing processes and implementing robust governance frameworks. This enables organizations to enhance compliance, minimize risks, and improve overall operational control.

Improved Communication

A shared services model promotes improved communication throughout the organization. By centralizing functions, teams can collaborate more effectively, share information, and align their efforts towards achieving common goals.

Flexibility

With shared services, organizations gain greater flexibility in managing their resources and adapting to changing business needs. The centralized function allows for resource optimization and the ability to scale services up or down as required.

Productivity Enhancement

Implementing shared services can lead to productivity enhancements within the organization. Standardized processes, streamlined workflows, and access to specialized expertise contribute to increased productivity and operational efficiency.

By leveraging the benefits of a shared services model, organizations can achieve cost savings, improve service delivery, enhance controls, foster better communication, increase flexibility, and boost productivity. These advantages position businesses for success in today’s dynamic and competitive market.

Implementing a Shared Services Model

When implementing a shared services model, organizations must follow a well-structured process to ensure a successful transition. This involves conducting a thorough analysis of the current state, developing a future state design, and creating a comprehensive business case. Throughout this process, several key elements should be considered, including shared services implementation, cost/benefit analysis, sensitivity analysis, and future state design.

Shared Services Implementation:

Implementing a shared services model requires careful planning and execution. It involves centralizing and standardizing various functions within the organization to achieve greater efficiency and cost savings. During implementation, organizations must define the scope of shared services, establish governance structures, and ensure clear communication and change management efforts.

Cost/Benefit Analysis:

A cost/benefit analysis is essential for evaluating the financial implications of implementing a shared services model. This analysis involves identifying the costs associated with the implementation and ongoing operation of shared services, as well as quantifying the potential benefits, such as cost savings, improved service levels, and enhanced productivity. Organizations should use this analysis to make informed decisions about the feasibility and expected returns of the shared services implementation.

Sensitivity Analysis:

In addition to the cost/benefit analysis, organizations should also perform a sensitivity analysis to assess the impact of different scenarios on the shared services model. This analysis helps identify potential risks and uncertainties that may affect the expected outcomes. By considering various sensitivities and exploring alternative strategies, organizations can develop contingency plans and make well-informed decisions to mitigate risks and maximize the benefits of shared services.

Future State Design:

In designing the future state of shared services, organizations must consider their long-term goals and strategic objectives. This involves defining the desired operating model, establishing service level agreements, determining performance metrics, and developing a roadmap for continuous improvement. The future state design should align with the overall business strategy and support the organization’s vision for shared services.

By implementing a shared services model, organizations can optimize their operations, streamline processes, and achieve significant cost savings. However, it is crucial to follow a structured approach that includes shared services implementation, cost/benefit analysis, sensitivity analysis, and future state design. With careful planning and execution, organizations can successfully transition to a shared services model and unlock the benefits of centralized services and standardized practices.

Conclusion

The implementation of a shared services business model presents numerous benefits for organizations, including cost savings, improved service delivery, better controls, and increased flexibility. By centralizing and standardizing operations, businesses can streamline their processes, drive efficiency, and optimize performance.

Shared services offer cost savings by consolidating functions and leveraging economies of scale. This centralized approach allows for the elimination of duplicate efforts and the optimization of resources. Additionally, shared services enable improved service delivery through standardized processes and enhanced internal collaboration.

Implementing a shared services model also provides better controls by establishing clear governance structures and performance metrics. This ensures accountability and transparency in operations. Furthermore, the centralized approach leads to increased flexibility, allowing organizations to quickly adapt and respond to changing business needs.

As with any significant change, the implementation of a shared services model comes with its own set of challenges. Organizations must carefully evaluate their current processes, consider the impact on stakeholders, and develop a comprehensive implementation plan. However, the benefits of shared services, such as cost savings, improved service quality, and increased efficiency, make it a compelling option for organizations looking to optimize their business model.

FAQ

What is a shared services business model?

The shared services model is a centralized approach where various departments within an organization share common services and resources to streamline operations and achieve cost savings.

What functions are included in shared services?

Shared services encompass various services such as human resources, finance, IT, procurement, facilities management, communications and marketing, project management, and data analytics.

How does the shared services model improve HR processes?

By centralizing HR functions, organizations can prevent duplication of effort, improve efficiency, and enhance service delivery. This includes tasks such as pensions, recruitment, and employee support.

How are shared service models implemented?

Shared service models are implemented by transitioning from a decentralized to a centralized function within an organization. The shared service unit operates as an internal customer service business, providing services to various divisions and departments.

What are the challenges of the shared service delivery model?

Implementing the shared services model can come with challenges, especially when dealing with existing centralized and standardized processes. Organizations must address these challenges by evaluating the effectiveness of these processes and ensuring they align with the shared service delivery model.

How does shared services differ from outsourcing?

Shared services involve centralizing functions within the organization, while outsourcing involves contracting with a third party for service delivery. Bringing services in-house through shared services can result in improved operations and cost savings.

What benefits do shared services offer to businesses?

Shared services offer benefits such as cost reduction, improved service, better controls, enhanced communication, greater flexibility, and improved productivity. By consolidating functions, organizations can achieve economies of scale, streamline processes, and enhance performance.

What are some examples of shared services?

Examples of shared services include human resources, finance, IT, procurement, facilities management, communications and marketing, project management, and data analytics. These shared service models help businesses achieve efficiencies, improve performance, and reduce costs.

How can shared services benefit my business?

Implementing a shared services model can provide several benefits to your business, including cost savings, improved service, better controls, enhanced communication, greater flexibility, and increased productivity. By centralizing functions and leveraging standardized processes, organizations can optimize efficiency and performance.

What is involved in implementing a shared services model?

When implementing a shared services model, it is essential to assess the current state, develop a future state design, and create a comprehensive business case. This involves analyzing benefits and costs, conducting cost/benefit and sensitivity analyses, and planning for the future state.