Shared services organizations

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1. Introduction

objectives

Many organizations consider shared services worthwhile since its elementary focus is being the concentration of transaction-orientated services that are insistent and clamant. Shared services treat each business sector as much the same as the others throughout as a whole in the organization. Broadly, the kinds of services included in a shared services model incorporates financial services integrated with both accounts payable and receivable , procurement, human resources including payroll, property and facilities management, and information technology operations. The implementation of shared services centre enables staffs to rivet on the highest-value work of the agency, and provide contented services with the available resources. Caerphilly county sorts out the needs and thirsts for these services accordingly and seeks for the refinement in the prevailing organized structure. Certainly this proactive measure will produce a vantage in resultants and as well as a more centralized way in outsourcing.

Background To Caerphilly

Transcending the 5th position among local authorities in Wales, Caerphilly County hires around 9,000 people making it the largest employer in the area and tops as 10th largest in Wales. It provides a good ambit of servicing units to 170,000 people in its region comprising fundamental departments such as education, social servicing activities, finance, consumer protection, etc.

In abidance to the Connecting South East Wales Board (CSEW), a Design team was nominated which works to cater a business case for implementing shared services by the Steering group .Orion partners was hired to assist the team and manifestly they brought in a model that widely teems with identification of costs, benefits and certain factors required for its implementation. Eventually a culmination report was received after its implementation, which apparently suggests an improvement in the existing model. This emphasizes on heightening of services and strengthening of operations especially in the fields of human resource, payroll and accounting

Issues leading to shared services

Though some problems have been encountered then and there, yet there seem some issues to be faced and are more likely to be an intermediate term in nature and more to do with letting the benefits out of shared services and some of them are clearly limned as in the following:

  • Apprehending that there may be a need for large-scale capital investment to get the right technological infrastructure.
  • Being deliberate in determining the best design and choice of operator including both in-house and outsourced.
  • Disregarding the importance of the knowledge and experience of incumbent and office holders like administrators in staffing new positions, and undervaluing their work.
  • Anticipating communication difficulties, especially where there are indefinite discrete activities that are organizationally separable.
  • Warding against a lack of effective accountability.
Internal reasons for the proposal

The local authority of Caerphilly borough council seeks for a new model in shared servicing in a view to abbreviate some of the complexities like:

  • To go for reduced expenditure that should implant betterment in cost rates every year.
  • To support functions such as Accounting, Payroll, Procurement, Human Resources, Facilities, and Information and Communications Technology, which all organizations need to support their core business and which are delivered to customers within the organization, rather than to the public.
  • To underpin front line services, Infrastructure to support those common operational processes.
  • To enhance the degree of specialization amongst the staff there by fostering their experience in specific field.
  • Needs restructuring of services and amending them may considerably prevent them from deteriorating since the budget being so critical.

External reasons for the proposal

There seem to be two main factors that an organization must consider as an impulse towards shared services and they are cost and quality. Through these means, an organization can reduce the cost effectively

  • Foreshortening the staff numbers, through achieving a reasonable growth in economy.
  • Abbreviating accommodation charges, either through popping off some offices or accommodating by cheaper means.
  • Reaching a greater efficiency through efficient streamlining and simplifying services, and this will include leading them to a consistent and accurate standard.

The second factor, the quality can be much improved if the following points are to be focused more clearly:

  • Maintaining professionalism there by attaining an effective consistency and a greater degree of accuracy.
  • Being well aware of internal and external best practices so as to use better processes for the completion of work.
  • Being time conscious with a skilled budget management.
  • Considering customer satisfaction primarily to that of the suppliers.
  • Becoming user friendly methods in a way that they can be preferred for longer time consumption.
  • Meliorating the products in abidance with the customer needs and demands.

2. Analysis (i)

Costs

During the last financial year the council spent over £32.5 million providing all mandatory services. Annually the cost of the Caerphilly council is £4.8 million out of which £2.2 million is spent for the recruitment external providers and training services. These costs expenditure could be considerably abbreviated to an optimized mean by implementing a new model as appraised by the council members. Also we can put forth some of the following financial considerations as they would better the design of shared services model.

  • The shared services model should be designed in such a way that it must satisfy the customers based on their working criteria.
  • It should enhance the financial stability, meets federal and state audit requirements.

Strategies in cost analysis

A coherent and a sheer cost-effective model is necessary to evaluate the costs of a newly proposed model which includes setup, transition and operation costs. Some of the key steps that could produce a reasonable, fair cost analysis are as follows:

  • Clearly illustrating the scope and character of the proposed shared service.
  • Understanding current service level volumes and clearly defining desired service level volumes for the analysis.
  • Defining cost components of providing the service clearly to ensure the costs are treated comparably in each alternative as like:

Benefits of shared services

The implementation of the shared services in the county strikes a remarkable advantage since the Caerphilly HR cost per employee in the CIPFA 2008 benchmarking survey is considerably minimal to the mean UK local organizational cost. The HR staffs are taking up more responsibilities to cater a good caliber in service so that the annual cost of Caerphilly council is £511 per employee. I would like to quote an example from the Marriott's shared service model which had identified its most benefits.

  • Pertaining to Marriott's shared service model, it seemed more appealed to Bill Shaw (CEO of Marriott Enterprises) not only because it invites opportunity to cut costs dramatically but also it could reposition Marriott's support organization as a service provider to the core business.
  • Created meaningful opportunities for many of the associates and staff to develop their new skills and to create new career paths. As well it integrates new or acquired units faster and eliminates barriers to continued growth.
  • The bar chart clearly witnesses the benefit of the organization right from 1998 to 2000.
  • Centralization is often seen as being remote and unresponsive to customers while decentralization can be seen as leading to higher costs, duplicated effort and variable standards. The shared services model, on the contrary, allows for business units to maintain control of decisions while delivering economies of scale through common business (Schulman and his colleagues, 1999).
  • By consolidating and improving the activities like organizing and supervising with most diligence, business managers can focus more fully on strategic activities and the delivery of core services.

Some organizations consider shared services to sought basic benefits that are represented as follows:

  • More efficient resourcing could be possible.
  • Betterment in coordination between customer needs and services offered enhances customer satisfaction ratings.
  • A higher unified approach to solve problems.
  • A more exclusive and strategic contribution from HR.
  • Amended cross-group learning, partly through having a common information base, accessible to all.
  • Better management information, provided more consistently across the organization as a whole
  • Better service specification and performance monitoring
  • Facilitation of corporate investment in computing and communications infrastructure by arguing the case on a collective basis.
  • Private sector can offer innovative and efficient working practices
  • Greater staff development opportunities in a larger or a specialist organization.
  • Effective grouping of scarce or expensive skills
  • Real economies of scale in staffing.
  • If adjuring for external work and income generation are strategic aims, may be no job losses and even job creation (Wakefield case study).
  • Staffs seconded to core servicing have more development opportunities (Walsh et.al, 2006).

Literature on shared services provisions/outsourcing

Shared Services is the normalization, re-engineering and integration of dispensable functions within an organization to abbreviate process germination or duplication while centralizing processes and controls. Rather than executing more essential administrative functions such as accounting, human resources, and information technology from multiple locations, they are completed at one central location. This credibly yields a company more control over the quality and productivity of their business processes, increasing efficiency and reducing operating costs and errors. Centralizing administrative processes allows staff at other locations to focus on what is most vital that enhances servicing customers (Walsh et.al, 2006).

To make the benefits of converting to shared services optimal, organizations should put through a solution called document and process management automation. This is commonly pertained to as Enterprise Content Management, and these oriented systems automate labor-intensive functions there by reducing costs and bettering conformity. The expenses of shared services are spread across the organization so that even a remote location maintains profit and loss accountability and the central processing unit can exemplify the value of their services. A chargeback rate is usually determined by actual transactional or unit cost. This process is known as Activity Based Management (ABM). Some organizations use their own unique chargeback system. Regardless of the method, charging back transactional costs to individual cost centers ensures that each location maintains a level of fiscal responsibility (Walsh et.al, 2006).

Since its inception in the 1980s many diverse organizational units have converted to a shared services model almost with mixed reviews. Resultants depend on the level of planning; the ability to render enterprise-wide employee buy-in and support; a complete discernment of business needs prior to enforcement; use of the proper technology and a commitment to the process. Almost half the count of the governances with hapless conversion experiences did not hire a document management integration partner to assist them with planning and implementation therefore the essential strategies must be prioritized effectively.

Shared services operations have greatly improved efficiencies for manufacturers, service providers and educational cum government entities. The potency for this model's application is confined only by vision of the establishments. With customer relationship management getting more and more attention, a shared services model becomes even more fair and reasonable. Coherent processes, improved response times, access to better customer information and fewer departmental transfers will result in heightened customer satisfaction and retention levels. (Walsh et.al, 2006).

Processes best suited for the shared services conversion

In Essentials of Shared Services, the author Bryan Bergeron specifies that the potential customer comparing competing companies will have three main factors. They are

  • Price
  • Quality
  • Timeliness (Keymark, 2008).

A well organized, properly mannered business should be able to provide a satisfactory customer service to both internal and external customers. By focusing on non indispensable business segments, organizations gain valuable insight and perfect perceptivity into the operating efficiencies of their units. Because of the complexities and intricacies involved, successful conversion to centralized shared services starts with implementation in a single sector. Hence, it has become a best practice to straighten up the changes of a single service at an instant. This certainly minimizes the overall impact to the company while providing savings, calibrating standards and process simplification. It also acts as a global arena for the wide implementation of enterprise (Keymark, 2008).

Designing a successful shared services conversion

Constructing a successful shared services operation does not merely encompass or embrace the physical consolidation of facilities or structuring a standardized, logical consolidated workflow. Initially a conversion plan must be developed which should remarkably put forth a clear vision, a workable situation with realistic goals and the areas best suited for such a conversion should be identified effectively (Keymark, 2008).

3. Analysis (ii)

Evaluation Of Decision

The following ideals will structure the design of a shared service as depicted in the prevailing model of Washington state governance which would enhance our evaluation of decision as to whether Caerphilly should join this venture.

v Shared services for centralization will be looked upon as support and secondary to core processes, and treat them in the provider organization as core processes themselves. This boosts up the resources in agencies to focus on their main mission. In turn, the shared service activities and staff receive high levels of support and management attention in the provider organization.

  • The business case model for each shared service must show how the deliberative benefits falls to each consumer, the provider, and to the organization altogether.
  • Each shared services appraisal should identify job enrichment and career opportunities for employees.
  • Remunerations and certain other incentives for providers and consumers will be negotiated and built into each shared service.
  • Shared service appraisals and designs will provide transparent service levels and rates. Hierarchical services and pricing should be negotiated, starting with a base level service that all consumers need at an attractive price.
  • For the business undertaking utility shared services, the assessment team will identify the agency adoption rate needed to produce targeted service improvements and benefits.
  • Benchmarking and performance measurement are vital ingredients to each shared service. Benchmarks help to enunciate the anticipated business value for each shared service and provide initial targets for performance, benefits and service improvement.
  • Routine communications must keep staff and stakeholders informed at each step (Washington state shared services, 2009).

Accordingly, the government of Washington encloses this shared service type of model where in the phases are Identification, Assessment, Design, Construction and Operation that could be considered as one of the successful shared service model. The governance structural organization ascertains the following strategies:

  • The most essential business decisions are made in a timely manner
  • To produce planned outcomes, the services are positioned appropriately
  • The requirements of consumer, providers, and other stakeholders are gratified by each corresponding service (Redman et.al, 2007).

This structure deployed is similar to those found in most public and private sector organizations. Apparently it consists of three tiers:

  • An overall Governing Board.
  • An Advisory Committee.
  • A User committee for each shared service (Washington state shared services, 2009).

An outline of the structural components comprised in the model:

Governing Board

This provides the strategy, funding, and leadership to approve shared services and ensure they are implemented in ways that achieve targeted benefits.

Advisory Committees

Each shared service encompasses an advisory unit and it is formed soon after an appraisal is passed by the governing board. It comprises the personnel from the

Provider and consumer agencies. It peruses the collaborative process to design, implement and

Operate a needed shared service.

User Committee

The User Committee caters consumer or user input to forefront the operation and to persist improvement of a given shared service. The committee insures that the collaborative trait of shared service thus sustaining the delivery processes during all facets of the shared service life cycle (Washington state shared services, 2009).

Success factors

This model covers the following crucial factors that certainly contribute to its success:

  • Retrospects and manifests the most recommended strategies and priorities for enterprise utility shared services.
  • Frames business decisions on enterprise utility shared service appraisals, business cases, and adoption progresses.
  • Furthers the state degree commitment to implant shared services.
  • Eradicates barriers and furnishes support to providers and consumers.
  • Retains the continuation of an experienced leader in the organization. Thus this expertise is essential to design and implement shared services in ways that achieve targeted benefits and facilitate successful transition.
  • An ample level of experienced support is available to managers and staff who lack fundamental capacity and skills to manage the change to shared services.
  • Initiatial funding is made available as approved in each shared service assessment. This enables development by the provider and transition to the new service for consumers (Washington state shared services, 2009).

Consequences of success factors

Shared services produce one or more of the following business outcomes:

  • Cost and efforts are met out thereby enhancing the services that even includes IT.
  • Gives value to line and support to a greater degree.
  • Staff in hierarchical structure have good source of information and tools to proceed their tasks.
  • Provides a strategic advantage towards the existing agency resources, data, and processes and this in turn avoids replication.
  • Considerably the risks involved are reduced.
  • Manages time effectively and invests it to market.
  • Time is much reduced for the resolution of existing problems.
  • Centralizations of the service require staff relocation and some staff unwilling or unable to relocate.
  • Multi centres or tele-working may solve the location issue but may complicate management, communications and team-building.
  • Job losses particularly from rural areas.
  • Loss of local control and democratic responsibility.
  • Tensions between local and national initiatives.
  • Competition to prevent large companies gaining control (Washington state shared services, 2009).

4. Conclusion

To conclude with, I would enunciate that Caerphilly council should go for the Shared Services project since the benefits of implementing them is handsome. Some of the recommendations which would support my views are as follows:

Recommendations

  • It should be noted that a user friendly cost comparison model must be developed which would help shared services providers and decision-makers analyze whether the proposed idea makes any financial sense.
  • An efficient management in budgeting is required to enhance the advantages of adopting the alternatives that would remarkably alleviate the problem of cost expenditure hardship.
  • In setting a price for the shared service, providers need to think about a price that meets key consumer criteria, provides financial stability, manageability, and continuous improvement, and to see to that it meets audit requirements.
  • Funding the shared service provider directly with a general fund appropriation possibly would eliminate the complexity of financial crisis in setting up the budget .An internal service fund could be considered, which is a type of account used by government entities providing services to other government entities in such a manner similar to those in the private establishments. Charge books play a more vital role hence providers may need guidance and assistance in how to set up a successful chargeback process.
  • Compliance to or update the business outcomes, principles, and the ideals.
  • Creation and allocation of the committees in the governance or in the administrative structure

5. References

Washington D.C (October 15, 2009) Washington State shared services Model, Washington, United States of America.

Redman, T, Snape, E, Wass, J, & Hamilton, P (2007) “Shared HR service models”,International Journal of Human Resource Management,18(8), 1486-1506.

Walsh, Peter and McGregor-Lowndes, Myles and Newton, Cameron (2006) “Shared Services: Lessons from the Public and Private Sectors for the Nonprofit Sector”, CPNS Working Paper No 34. Brisbane, Queensland.

Improvement and development agency (I&DEA), (2009),” shared service models: issues and opportunities”, [online], (cited 12th December 2009), available from

http://www.idea.gov.uk/idk/core/page.do?pageId=6210975

Keymark incorporation (2008), “Business process best suited for a Shared Service Conversion”, [online], (cited 14th December 2009), available from http://www.keymarkinc.com.

Accenture (2002), “Marriott redefines the shared services model”, [online], (cited 16th December 2009), available from http://www.accenture.com/NR/rdonlyres/E9EA5BDA-D8A2-4A5A-9C73-ED871B32EE92/0/Marriott.pdf .

Improvement and development agency (I&DEA), (2009),” Scoping the project for the HR service example”, [online], (cited 12th December 2009), available from http://www.idea.gov.uk/idk/core/page.do?pageId=6329032.

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