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Shared Services are more than just centralisation or consolidation of similar activities in one location. Shared Services mean running these service activities like a business and delivering services to internal customers at a cost, quality and timeliness that is competitive with alternatives, such as Outsourcing . COMMERCIAL STRUCTURES A Shared Service can take a variety of different Commercial Structures . The six basic Commercial Structures include: Unitary - A single organisation consolidating and centralising a business service Lead department - An organisation consolidating and centralising a business service that will be shared by other organisations Joint Initiatives (Internal) – Agreement between two or more organisations to set up and operate Shared Services Strategic Partnerships (External) – Contractual arrangement with third party provider for a range of services which include Shared Services Joint Venture (JV) – Joint Venture legal entity between organisation and third party provider Outsourcing – Third party provider takes full responsibility for managing and operating the service LOCATION VARIATIONS There are three basic location variations for a Shared Service including: On-shore – Work is carried out in the same country but at a different location Near-shore – Work is carried out in a close location (e.g. Europe to the UK) Off-shore – Work is carried out anywhere in the world that is not on-shore or near-shore This is not just to take advantage of wage arbitrage but to appreciate the talents of particular economies in delivering specific service offerings. BENCHMARKING AND MEASUREMENT In establishing and running a Shared Service Benchmarking and Measurement is a necessity. Benchmarking is the comparison of the service provision usually against Best In Class . The measurement occurs using agreed Key Performance Indicators (KPIs). Although the amount of KPIs chosen differs greatly it is generally accepted that less than 10 carefully chosen KPIs will deliver the best results. Benchmarking can be used to achieve different goals including: 1. To drive performance improvements using benchmarks as a means for setting performance targets that are met either through incremental performance improvements or transformational change. - Strategic: with a focus on a long term horizon; and - Tactical: with a focus on the short and medium term 2. To focus an organisation on becoming world class with processes that deliver the highest levels of performance that are better than those of its peer group. SHARED SERVICES IN THE PRIVATE SECTOR The Private Sector has been moving towards Shared Services since the beginning of the 1990’s. Large organisations such as Bristol Myers Squibb , the BBC , Rolls-Royce , Ford , GE , Pfizer , HP and BP have used them with great success. According to the English Institute of Chartered Accountants, more than 30% of U.S. Fortune 500 companies have implemented a shared service centre, and are reporting cost savings in their general accounting functions of up to 45%. SHARED SERVICES IN THE PUBLIC SECTOR The Public Sector has taken note of the benefits derived in the Private Sector and continues to strive for Best Practice. The United States and Australia among others have had Shared Services in government since the late 1990’s. The UK government under a central drive to efficiency following from the Gershon Review are working to an overall plan for realising the benefits of Shared Services. The Cabinet Office has established a team specifically tasked with the role of accelerating the take up and developing the strategy for all government departments to converge and consolidate. This enables not only the benefits from within the departments but also for the synergies between departments to be realised. As part of this structured meetings for all departments to communicate to each other their operations and what is Best in Class are being conducted. The UK move to Shared Services not only works with Public Sector departments but also the Private and Provider Sectors to gain the greatest input from the most diverse groups of stakeholders and experts. The savings potential of this transformation in the UK is estimated at being up to £40bn over ten years if HR and Finance alone were implemented optimally (Shared Services Forum and Advisory Group). Shared Services Best Practice Guidelines |
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