Transformation in Shared Service Centres - when and why to do it?
Continuous efficiency improvement, reduction of the cost base, inertia of the organization in implementing changes, low level of process standardization, and employee attrition rate - these are the most common challenges faced by Shared Service Centers. Managers seeking to transform into long-term effects and continuous growth often make mistakes that actually could be avoided. Lean strategy is effective and structured support for them. How to use it practically to affect the productivity and profitability of shared service centers?
THE BIGGEST CHALLENGES OF SHARED SERVICES CENTERS
The popularity of Shared Services Centers (SSC) on the Polish market has been growing for years. Despite such a dynamic development of enterprises of that kind, these organizations are facing challenges that determine their competitiveness on the market.
Service portfolio increase and the related increase in revenues with simultaneous cost reduction, keeping pace with market changes (including technological ones), and the reduction of employee attrition rate – this is the basis for building the competitiveness of every company. Implementing these assumptions may be much more difficult for SSC due to the dispersion of competences across different regions and countries, as well as the scale of operation of Shared Services Centers and the number of employees.
WHAT ARE THE MOST COMMON MISTAKES THAT MAKE IT DIFFICULT FOR MANAGERS TO ACHIEVE THEIR GOALS?
As we observed the companies we used to cooperate over the years while building conditions for being more competitive (based on the 5 steps of the Lean Strategy), we used to meet some related problems.
Insufficient communication. An important factor negatively impacting the SSC efficiency is primarily a lack of understanding of end to end processes. As the teams receive the list of duties, they cannot see it against the background of the whole process and responsibilities of other cooperating teams. Most often they are able to tell who is the supplier of requests, orders, or financial documents without having knowledge of the later steps of the process and the problems other employees struggle with there. Although procedures are developed for each project of transferring new responsibilities, decisions on the final scope of services are taken by the top management. They are then implemented for individual departments or teams without definition of the mutual process goals. Therefore, in the absence of proper communication between teams and under the pressure of continuous increase in efficiency, minor improvements and minor automation of the process are made. However, they are implemented within closed silos, which implies the emergence of problems in its subsequent stages.
Lack of time kills the initiative for improvement. This state of affairs and the struggle against fighting everyday fires leads to the loss of initiative to challenge the status quo and signal problems. This practice negatively affects the productivity of processes and, as a result, customer satisfaction. Employees, not being aware of how they could liaise and that they sometimes generate additional, unnecessary work to each other, instead of solving problems and making work smarter, in the short term they simply focus on completing tasks on time. Resistance to eliminating problems is then not a sign of bad will, but a force of habit and focus on the piece of work that they just want to complete.
Automation and robotization of processes carried out at the wrong time. In Shared Services Centers strong pressure on process automation is also noticeable, which is perceived as a means to improve work, eliminate errors and reduce costs. Too often, we forget about the fact that for automation to bring the expected results, it should be applied to standardized and properly functioning processes. The problem arises when automation is subjected to unstructured, disorderly ones – then it brings more chaos than expected benefits. Therefore, before we automate any process, we should always start with ordering and standardizing it, and then reach for the tools, never the other way around!
High employee turnover reducing efficiency and profitability. Another important factor that directly increases operational costs, as well as increases a risk for the quality of processes is a high rate of employees attrition. The SSC management team struggling with the pressure of continuous cost reduction gets the opposite effect as a bonus – additional costs of recruitment, training, on boarding in the company and processes. The natural answer is that we must keep employees from leaving. How to do it? The solutions seem to be high salary and attractive social packages. Research, however, indicates that employee expectations are centered around other aspects and often very different factors affect their satisfaction and commitment.
Disregarding the importance of continuous development of line managers. As it turns out, line managers have the most significant impact on the level of employee attrition (according to the principle: “People come to work and leave the boss”). In the first places on the list of employees’ expectations of the line manager appear: respect, the ability to create conditions for open talking about problems and in solving them together, as well as building a sense of affiliation to the company, clearly setting goals and priorities, and supporting the development of competences.
Although every leader works the best he/ she can, still very common problems are:
- no management standard,
- no time to observe processes,
- making decisions based on opinions not hard facts.
Lack of development of line managers in the field of leadership has an impact on the entire team, thus decreasing satisfaction, commitment, efficiency, adaptability, and at the same time increasing the number of overtime and employee attrition.
TRANSFORMATION OF THE ORGANIZATION – MANAGEMENT AND EMPLOYEES PERSPECTIVE
The answer to these challenges and the basis for building sustainable growth of the company is the change in the organization’s work culture. While the Management Board deciding on such a transformation understands its purposefulness, it is not necessarily aware of the challenges and responsibilities associated with it. The transformation plan often raises the belief that it is the line managers and employees who will carry out this “transformation project” themselves, without too much involvement of the team of managers. Meanwhile, the opposite is true.
At the same time, employees initially perceive the transformation as another project that will luckily pass, like many others. At the moment when they begin to understand that this is a change, which will affect their work, they often begin to demonstrate resistance and dislike supported by very rational argumentation. Sustainability of transformation depends on the awareness of the process of going through change, appropriate stakeholder management, the right pace and proportion of the mentor and coach, as well as the ability to involve all employees and managers in it.
TRANSFORMATION IN SSC IN ACCORDANCE WITH THE LEAN STRATEGY – STEP BY STEP
Successful transformation leads to longlasting effects, not short-term spurt. In order to achieve such an effect, it is necessary to involve all company employees in constant problem solving. In other words, making improvement become part of their daily routine.
For example, in Shared Services Centers, it takes a relatively long time to search for information and correct errors, i.e. activities that are considered typical wastes (in Japanese: muda). Lean focuses on identifying and eliminating muda in processes and increasing the value added for the client. At Lean company, employees report a problem whenever they encounter waste, and the Team Leader immediately takes action, as well as decisions to identify the root cause and eliminate it.
Leanpassion’s many years of experience shows that for a successful transformation, it is essential to eliminate 5 obstacles to creating Lean work culture, called 5 business deviations. The method to eliminate them can be 5 steps of the Lean Strategy. The strategic transformation based on the 5 steps of the Lean Strategy first assumes that 100% of managers know, understand and support the company’s mission, vision and strategic goals. The second step is to build a sense of affiliation and commitment of employees in the fulfilment of the strategic goals by inviting them to co-create the company and empower them to activities which they have influence on and for which they feel responsible. Next, it is necessary to ensure that the stakeholders of the process agree on its current state and that this consensus is based on real, factual data. When we achieve this, it is time to develop a leadership standard and eliminate improvisation in favor of a conscious management model in force in the company. It is a way to create such conditions for the functioning of the company in which improvement is part of everyday work and aims to support the main business. The 5 steps of the Lean Strategy are a way for SSC to win, and in the same time an opportunity to meet the requirements they face with a smile on their face.
Author: Tymoteusz Myśliwiec, Transformation Manager, Leanpassion
