In the second instalment in our two-part series, Susie West looks at six more areas that you should consider when making your shared-services plans for 2011. Read part one.
7/ Charge
When you go shopping, how often do you find yourself choosing between two similar items and feeling compelled to buy the more expensive one? The human psyche tells us that free items have little or no value. Attach a price tag, and it becomes valuable and desirable. The same holds true for shared services operations. Below are three key reasons why charging for your activities is a must:
a/ Free services are taken for granted. If you are not charging today, ask yourself why not? Many people argue that the longer you offer free services, the longer their role in the company’s machinery will not be fully appreciated.
b/ Charging will change customer behaviour. One of the best examples I can think is when a food and beverage company started rolling out e-invoicing. It charged its customers €35 for a paper invoice, an invoice without a purchase order, and €1.50 for an electronic PO invoice. Business-unit leaders had full transparency of what the charges were and at the end of the period the numbers were publicised on a league table. Because the leaders’ bonuses (and egos...) were tied to their position on the table, they were very keen to change behaviours and improve their ranking.
c/ When your customers realise the costs attached to the activities they consume, they work harder to help you reduce the charges incurred, which helps the overall company reduce costs. Charging is a great cost-reduction mechanism.
The most effective charging model itemises activities, rewards good behaviour and punishes bad. It may seem laborious to administer this approach, but once the system is in place, most shared services would argue it’s worth the effort.
8/ Sell and be commercial
Successful shared services leaders are, in the main, the ones who can sell a concept and secure people’s buy in. And once the shared services centre is live and you have proved the concept, the sales process doesn’t end there.
Scrutinise other activities excluded from the pilot and, if the business case stacks up, lobby to bring them into scope. Increasingly, finance shared services are taking on more activities and are reaching a wider geography.
A common complaint I hear from shared services leaders is that business units just don’t listen to what they’re saying. One rule in sales is to stop talking and start asking, so if you feel resistance to your shared services’ growth, go into sales mode and ask what the customer wants. It’s worth reading some sales books. Think Like Your Customer by Bill Stinnett is a good place to start. The more you run your shared services operation as a commercial business, the better it will perform.
9/ Add value
As you extend the scope of your shared-services activities and work with more territories, why not move away from solely processing transactions and start catering for the business’ more strategic needs? Increasingly, a finance shared service automates and electrifies its transaction flow. It is then left with clean, timely and accurate financial data.
The resource you used to input, crunch and correct data can now be used to analyse it, spot trends and advise on improvements. We are seeing centres of excellence (CofEs) emerge where finance teams are using this data to generate better management information and consult on what it should do as a result.
CofEs now cover areas like planning, pricing and budgeting. In addition, finance, procurement and treasury are becoming more aligned and working more intelligently on the company’s working capital, looking at improving the way it manages days paid outstanding and days sales outstanding better. Simple changes can have a significant impact. Standardising payment terms across a region can release significant cash to the business. By reducing payment runs to twice a month, interest gained on retained cash can help fund new shared-services initiatives and help bolster the company’s balance sheet.
10/ Go global
If you have domestic or regional shared services and they operate as individual entities, now is the time to synchronise them. We are seeing a shift towards companies having global process owners who own the purchase-to-pay (P2) process globally, from end to end. All purchase-to-pay or order-to-cash activities report into their respective process owner and must be signed off by this individual.
A global approach allows you to aim for process standardisation right across the business. You will deliver global metrics and KPIs, and truly benchmark various accounts payable (AP) teams against each other to help drive improvements. It will give you a clearer view of where problems exist and where your high performers reside.
11/ Finance and procurement: uneasy bed fellows
Accounts payable leaders have realised that they cannot resolve many problems if finance and procurement continue to work in isolation. Many issues that arise in AP are a result of non-compliant behaviour that exists upstream when orders are incorrectly made. By treating purchase to pay as an end-to-end process rather than two separate activities, you will see your performance significantly improve.
This may seem like a daunting task for some individuals as finance and procurement are not the easiest of bed fellows. Finance likes numbers and reports, procurement likes deal brokering and contract negotiation. Peter Loughlin from Orange Business Services recently spoke about the importance and advantages of having procurement people strongly represented in a P2P team that reports to finance, and vice versa if your P2P team reports to procurement.
Joining up P2P will deliver significant benefits to both functions. Focusing on forging common goals, speaking the same language, and collaborating on documentation and policies may be the single thing you do this year that has the biggest impact.
12/ Develop relations and get feedback
How do you know your shared-services activities are doing a good job? Perhaps the best way is to ask your customer what a perfect service would look like. Each customer will have a different view of perfection or success.
SouthWestern, a company that provides business-process services, has suggested that you should have a list of 30 clear deliverables to present to your customers. Then ask them which five are the most important to them (they will each select a different set of five). These are the ones you should focus on and collect feedback on.
Simply put, it is dangerous to assume you are doing a good job, but you don’t actually know if you are until you get feedback from your client. Mike Wood, COO of NHS Shared Business Services, uses formal and informal feedback arrangements. He calls or visits clients when there isn’t a problem to ask how things are going, and also meets for more formal reviews.
As Mike says, the sound of success in shared services is silence, which can be saddening for those of us who like to have our backs stroked. So make sure you know what success looks like, and then celebrate it with your shared services team.
Looking back, it’s likely that not all of these check-list items are applicable to you right now. You should, however, keep them to hand and refer back to them regularly as they will help keep your activities on track and ensure you meet your long-term objectives.
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