Is this really the future of shared services?
By Tim Casserley and Akos Csernus
A couple of years ago one of us found himself advocating the adoption of shared services to the newly appointed HR Director of a large technology company. The HR Director was a seasoned tech industry player - no stranger to the world of shared services and digital transformation. Her scepticism was palpable. She did not share her predecessor’s belief that it was a ‘no brainer’. She was unmoved by arguments about economies of scale and cost efficiency. She had three areas of concern. Would the prospective shared services programme provide her team with informed analysis and enable it to deliver a more effective, innovative, better quality service - in the short to medium term? Would the costs in time, money, process dislocation and erosion of social capital be worth the investment? Given the loosely federated nature of the company, would this not disrupt already fragile relationships at a time when they needed to be pulled together? Far from the programme achieving its stated aims of globalising and integrating the organisation, she felt it would serve to polarise and separate. Her doubts proved well founded.
In our last article[i] we referred to shared services (as it was originally intended) as akin to the fable of the Emperor’s new clothes, “No one believes, but everyone believes that everyone else believes”. In calling this out, the HR Director helped to dissolve the phenomenon, by pointing to the importance of service quality and innovation over cost reduction, customer focus over process efficiency, and local, human interaction over self-defeating fantasies of control. If the shared services approach has any kind of future - in our opinion, it is a big if - we believe it will be by addressing the pressing organisational issues of innovation and quality and customer responsiveness while creating workplaces fit for human endeavour and collaboration.
This is somewhat different from the future envisaged by most of the shared services community and the big consultancies. They imagine a future in which the command and control, cost focused, industrial design aspects of the original shared services model are combined with an aspiration to become digital innovators, and a new breed of “talent, trained and skilled in deriving insights from data…[and]...predicting customer needs” change “the ‘hearts and minds’ of customers...”[ii] It is a truly frightening prospect. A Matrix like future in which humans are enslaved by machines in order to pursue ever greater cost efficiency, while living a simulated reality of being innovative, insightful and empathetic. If there is a future for shared services, surely we can imagine one that is more generative, more fertile for the human spirit than this dystopian nightmare?
Prevailing views about the future of shared services and why they are (largely) misled
The mainstream view of the future of shared services can be summarised under five broad headings. The first of these is the only one with which we agree. The others look to us like wishful thinking on the part of the shared services community - where they would like to see themselves - rather than where their mother companies would like to see them.
Robotic Process Automation will take over the bulk of shared services work
Most commentators agree that the majority of transactional activities - the stuff that makes up the bulk of shared services work - will be taken over by robotic process automation (or intelligent automation to use a broader term) over the next few years. Respondents in Deloitte’s 2019 global shared services survey results, for instance, expect an increased use of robotics over the next 3 to 5 years (88%). 63% have implemented at least one end-to-end process automation. Single instance ERPs are seen as a further, significant enabler of automation and related transaction cost savings. This is despite the high failure rate of mega IT projects. Given the above, we think this is a valid prediction, although whether it will happen in the next three to five years or the next five to seven is a moot point.
SSO’s will focus on analytics and delivering proactive insights
Broadly speaking the story goes like this. Since technology will render transactional activities redundant, SSO’s will shift their focus to the provision of higher value services such as analytics. This will be enabled by the rapid adoption of digital capabilities that will enable a personalised yet consistent customer experience available 24/7 and across multiple channels. As a consequence, SSO’s will evolve from being a provider of “doing what they ask for” to become a “central hub” delivering proactive insights based on the big data to which they have access. These personalised insights will be generated as a result of improved data and information availability that will help to understand patterns, anticipate needs and feed into proactive decision making and service innovation. All of this will contribute to greater customer centricity.
There’s a couple of problems here. The first is the failure to recognise that generating insightful data to aid customer decision making requires both joint inquiry and sense making. Without this, it is impossible to develop and validate findings and any conclusions are likely to be erroneous.
The second is a show-stopper. It is highly probable that a significant portion of straight forward analytics work (such as variance, gap and comparative analysis) will be taken over by artificial intelligence over the next five to ten years. Only analysis based on deeper insights from a more layered understanding of the customer’s context will likely remain the domain of humans.
Global SSO’s will become incubators for enterprise-wide digital & operating model transformation
Several commentators believe that the cross functional, global and hyper digitalised nature of global shared services organisations will make them ideal incubators for enterprise-wide digital and operating model transformation. For example, Deloitte imagines a future in which global business services organisations could, “truly be at centre stage in enabling a digital eco-system and operating model…Could we not reimagine GBS ― a cross-functional, cross-regional, and multi-business structure ― as the catalyst for transforming our operating models? Could GBS evolve from simply supporting transactions in functions/ businesses and “providing them what they ask for” to being the central hub, delivering proactive insights, enabling consistent experience for end customers, providing a testing ground for innovation, and being a strategic asset to enable the digital ecosystem?”[iii]
This grand and breathless vision is let down by its aim of driving down cost to fuel growth. Apparently, it’s all about value extraction and short term profit, rather than long-term value creation. The new, digital enterprise looks suspiciously like the old one with a digital makeover.
‘Digital maturity’,[iv] according to this perspective, is concerned with tools, business models and structures, rather than practices, assumptions and beliefs. If, as suggested by Deloitte, we define ‘Digital’ in terms of impact, the focus must surely be on human experience and interaction (both customer and employee) rather than on business outcomes. The first leads to the second, rather than vice versa. It is self-defeating to focus on business outcomes without understanding they are the product of the human adoption of digital technology. This is the fundamental lesson learned from the success of many of today’s digital ventures.
Finally, the failure to recognise that all of this requires a deep understanding of the customer and the business, particularly the customer experience journey and end to end value chain, as well as the nuances within the relationship, is a bit of an oversight, to say the least.
The picture emerging is that of the old, industrial thinking of consumers as opportunities to exploit and employees as cogs in a machine. This is amplified by the Shared Services and Outsourcing Network’s (SSON) Market Survey’s image of a partly human, partly robotic (dubbed ‘digital’) workforce, in which robots are given names in order to humanise them. The dystopian future of the Matrix looms.
A new kind of talent and culture will be needed
According to the big consultancies, the brave new world of shared services will mean hiring a new type of talent to build the culture required, “It takes a different kind of talent, trained and skilled in deriving insights from data vs. transaction processing, predicting customer needs vs. waiting to be told, and changing the “hearts and minds” of its customers (internal and external).”[v] And yet, as brave and new as this culture will be, it will be one that still requires formal mechanisms to govern client interactions and the ownership of key initiatives.
The idea that the current, typically millennial, highly educated, multilingual, tech-savvy SSO workforce will not cut it in this brave new world of digital transformation is, for us, an abomination. It smacks of a certain breed of metropolitan, cultural elitism particularly prevalent among the big professional services firms. It is not the talent that needs changing. It is the prevailing top down, command and control mindset that constrains and disempowers the talent that needs to change. Remove this stifling legacy and you liberate the workforce and allow it to flourish. Retain it – and impose new bureaucratic control mechanisms – and you put the robot back into the human.
(Global) Shared services will evolve from back office to centre office
Some commentators believe global shared services will move to the centre of organisations as a result of enabling digital eco-system and operating model[vi]. This is a seductive if overblown vision which is punctured by the continued focus on cost reduction as the key focus for most global business services organisations. SSO’s might be increasingly global, complex and digital, but the benefits are still primarily measured in terms of cost saving - typically, 30% upfront and 10% annually thereafter. Anything else is regarded as secondary. Business Cases are still built around headcount reduction with expectations of a payback in one to three years. Parent organisation expectations are focused primarily on the cost of service and responsiveness to business requirements. We are not entirely clear how the second supports the transition from being a provider of what they ask for to becoming a contributor of added value.
While they dream, can SSOs break free of the M-A-T-R-I-X?
Far from being positioned as future oriented, strategic investments, SSO’s are tightly held within the same old, tired paradigm of cost saving and command and control driven productivity and payback. Would the adoption of digital technology change the game? It is unlikely unless corporate leaders fundamentally change their perspective about SSO’s and begin to nurture them as potential centres of innovation, rather than seeing them as back office factories from which every last cent is squeezed. It is not the adoption of new technology, but rather a fundamental shift in the mindset of corporate executives that is required. Without such a reframing, new ways of being and working will be repeatedly frustrated by the prevailing culture of the wider organisation.
Is there a future for shared services? Possibly. Fundamentally it depends on the executive team’s capacity to reframe its thinking about the organisation and the purpose of shared services. That starts, so we believe, with looking at organisations in a different way, building on some of the unintended consequences of establishing SSO’s, and to follow the implications that flow from this. We’ll be exploring this in our next article.
[i] Casserly, T and Csernus, A (2019), ‘It’s time to challenge the ideology of shared services’
[ii] ‘GBS as a catalyst for Enterprise-wide Digital Transformation’, Deloitte, October 2018. Many of these trends are echoed by SSON’s Shared Services Market Report, 2019.
[iii] ‘GBS as a catalyst for Enterprise-wide Digital Transformation’, Deloitte, October 2018.
[iv] Kane, GC, Palmer D, Phillips, AN, Kiron, D, Buckley, N (2017) ‘ Achieving Digital Maturity: Adapting your company to a changing world’, MIT Sloan Management Review June 13
[vi] ‘GBS as a catalyst for Enterprise-wide Digital Transformation’, Deloitte, October 2018.