Contrary to common belief, the primary catalyst for shared services is process quality, not labor cost arbitrage. Companies start shared services to standardize fragmented processes, centralize duplicate operations, and improve results; labor cost savings are a secondary — though welcome — benefit.
It’s important not to tackle everything at once. Solving for the 80 percent of processes and activities that can be standardized now, and addressing the 20 percent of exceptions later, is a key design principle for shared services. It’s also important not to standardize (or outsource) a bad process in the name of efficiency.
Shared services create inherent tension among agility, flexibility, and enterprise resilience. Standardization and excellence in core areas give enterprises the ability to experiment in other areas, but operating units can remain reluctant to give up control and governance over core processes.
Talent is a key dynamic in managing shared services. Shared service operations have become too important to be led by the second string. At the same time, one of the key benefits of shared services is to release talent to move their focus to other critical areas of corporate growth.
Shared services are expanding from standardizing execution of repetitive tasks into providing business insights and enabling corporate centers of excellence. Centralized data for reporting and analytics is combining with automation and AI to deliver business intelligence that gives shared services increasingly strategic roles, and could even help drive P&L expansion.