Uk Consulting Shared Services Survey

7/31/2019 Uk Consulting Shared Services Survey

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Shared services: From if to howInsights from Deloittes 2011global shared services survey


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2 Shared services: From i to how Insights rom Deloittes 2011 global shared services survey


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Shared services: From i to how Insights rom Deloittes 2011 global shared services survey 1

Contents

Foreword: The more things change 2

Managing culture and change is even harder than most people think 3

The sequence o change can aect the eectiveness o change 8

Governance mechanisms should complement organizational structure 10

Global deployment models are on the rise 12

Tax adds more value early 18

Shared services oers multiple internal control improvement opportunities 20

Managing shared services talent is an art unto itsel 21

Aterword: Everyone is unique 25

Appendix 1: Respondent demographics 26

Appendix 2: Functions and processes in shared services 28

Contacts 32

U.S. and global contacts 32

Europe, Middle East, and Arica contacts 32

Contributors 33


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the more they stay the same. Or do they? Theres little

doubt that todays shared services organizations (SSOs)

operate in a world very dierent rom the one that rst

gave rise to the concept some 30 years ago. Where North

America and Western Europe were once the only viable

locations or shared services centers (SSCs), companies today

can nd suitable talent and inrastructure or shared services

in virtually every corner o the world. Formerly, an SSO

only needed to outperorm relatively high-cost local service

providers to satisy its customers; now, the maturity o the

large-scale business process outsourcing (BPO) industry puts

tremendous pressure on captive SSOs to excel or be replaced.The enabling technology or shared services has gone rom

rotary-dial phones and heat-sensitive axes to wireless data

capture, global enterprise resource planning (ERP) systems,

and the cloud. Meanwhile, an increasingly stringent regulatory

environment is putting all types o unctional enabling

processes under the microscope processes that more

companies than ever are placing in shared services.

What hasnt changed, however, is the core set o challenges

involved in creating and maintaining an eective SSO. Then

as now, the business case or shared services almost always

revolves around cost. Then as now, the extent o customer

buy-in can make or break the outcome. SSO sta may hail

rom a wider range o cultures, but keeping them motivated

and productive is as important as ever. Disparate unctional

and business-unit stakeholders still need to collaborate to

eectively align shared services with business needs. And

getting an enterprise to do all this, and to do it well, is still an

enormous challenge.

There is one signicant dierence between 30 years ago

and now, however, that works in the shared services

communitys avor. Shared services is no longer a radical new

idea, but a mainstream business strategy that has repeatedly

demonstrated its value i a company gets it right. As a

result, todays leaders can not only have greater condence

in the model, but also draw on almost 30 years worth o

collective knowledge and experience to guide their ownorganizations shared services journey. And or many o these

leaders, the question beore them is not ithey should pursue

shared services, but how.

What ollows is an exploration o the how as described by

respondents to Deloittes 2011 global shared services survey,

accompanied by our own views developed through our

experience working with organizations at all stages o the

shared services journey. We hope you nd it useul in helping

your own organization pursue its shared services goals.

Foreword:The more things change

As used in this document, Deloitte means Deloitte & Touche LLP, Deloitte Tax LLP, Deloitte Consulting LLP,

and Deloitte Financial Advisory Ser vices LLP, which are separate subsidiaries o Deloitte LLP. Please see w ww.

deloitte.com/us/about or a detailed description o the legal structure o Deloitte LLP and its subsidiaries.

About the survey

Two hundred seventy executives representing 718 individual SSCs responded to an online survey in December 2010 and

January 2011. The online survey results were supplemented with telephone interviews with a subset o respondents.

Participant organizations were distributed across all major industry groups. Their annual revenue ranged rom less than

$500 million to more than $25 billion U.S., with a median annual revenue o approximately $12 billion U.S. See Appendix 1

or additional demographic inormation.


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An eective shared services implementation requires signicant

changes in both the way people work and the way they think.

The challenges o bringing about these behavioral and cultural

shits, according to this years survey, are oten even greater

than leaders anticipate.

Communication and cultural implications topped the

list o areas in which respondents elt their companies

underestimated the level o eort required to implement

shared services (Figure 1), outranking even such notoriously

problematic areas as technology and benets tracking. Fity-

nine percent o respondents also said that increasing change

management would have improved their shared services

journey (Figure 2). In conversations, respondents underscored

the importance o addressing culture and change issues

among SSO sta as well as with internal customers, reinorcing

the need to consider both sides o the people equation.

Managing culture and change iseven harder than most people think

Figure 1. Areas in which respondents indicated that their organizations underestimated the level o eort

required or shared services implementation

Figure 2. What changes would you have made in your shared services journey based upon your experience to date?

59%

52%

46%

42%

40%

32%

% of respondents

Respondents were allowed to select multiple options.

0% 10% 20% 30% 40% 50% 60%

Better reporting

Faster decision making/issue resolution

Stronger governance

Stronger executivesupport/alignment

Better alignment between processchange and technology change

Increased changemanagement

47%

44%

36%

36%

30%

30%

29%

27%

26%

26%

25%

17%

0% 10% 20% 30% 40% 50%

Physical consolidation

Organization design

External implementation support

Workforce transition

Implementation approach

Recruiting

Executive alignment

Benefits tracking

Technology

Training

Cultural implications

Communication

% of respondents

People/change management-related areas

Percentages represent the percentage of respondents.


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The customer side

To judge rom our respondents comments, almost every

shared services initiative meets with some degree o

resistance rom the SSOs uture customers (the business

units and/or divisions). Yet an SSOs perormance depends

so greatly on its customers support that companies can ill

aord to leave customer buy-in to chance. Even at companies

that mandate shared services use, as did 77 percent o the

organizations in our survey, the strength o customers

commitment to the idea can make a tangible dierence to

the outcome. Business leaders who genuinely support shared

services are more likely to enorce required behavior changeswithin their operations and engage in governance to set

appropriate mutual expectations, resolve issues, and improve

processes. They are also more likely to ollow through with

reducing headcount in their local support organizations as

specied by the shared services business case, as well as less

likely to subsequently create shadow organizations o local

support sta.

To help gain customers buy-in, respondents overwhelmingly

stressed the importance o sitting down one-on-one with

the customers, listening to what they are saying, and showing

them what you are doing, as one respondent put it. Its

important to choose the right person to represent the

SSO as liaison in these conversations, as the ability to inspire

trust and develop strong personal relationships is critical

to achieving the desired results. In addition to excellent

interpersonal skills, an eective liaison will have the authority

to make commitments on the SSOs behal and drive needed

changes. He or she should also have enough organizational

stature and/or previous shared services experience to

command customers respect.

Whoever assumes the role o liaison, his or her basic goal

should be to understand what a successul relationship would

look like rom the customers perspective and collaboratively

develop plans to help realize that vision. A ormally named

shared services leader, assuming he or she has the requisiteinterpersonal skills, may be a natural choice or the role. Even

companies that have not created a ormal shared services

leader role can likely identiy one or more appropriate

individuals among the executives involved in the shared

services eort.

Figure 3. What are the reasons and/or perceptions

that lead business units/segments to opt out o

shared services?

Our experience suggests that reaching out to customers

during the shared services development process, well

beore the SSO goes live, can smooth the buy-in process

enormously. Proactive outreach can give customers a sense

o ownership in shared services; equally important, it can

allow the implementation team to consider customer input

when developing shared services policies and processes.

Early and requent communication can also help address

common concerns that may lead business units to opt out o

using the SSO i given the choice (Figure 3). As identied in

our survey, these concerns oten include a perceived inability

o shared services to support customers remotely, lack oresponsiveness, poor service quality, and higher costs.

48%

35%

28%

28%

17%

30%

% of respondents


0% 10% 20% 30% 40% 50%

Other

Inability to controlSSC operations

Higher costs

Poor quality

Lack of serviceresponsiveness

Inability for an SSC

to support thebusiness remotely


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A key point to remember is that sharedservices can affect people outside thefunction(s) being moved to sharedservices as well as those within it.

Connecting with customers continues to be essential ater

the SSO goes live, when the ocus shits rom gaining

initial acceptance to managing ongoing perormance.

Several respondents noted that reaching agreement

on key perormance indicators (KPIs) or both service

cost and service quality can set the stage or productive

uture conversations with customers. KPIs can help ocus

discussions on specic issues and possible solutions rather

than on broad-brush statements that shared services

isnt working, in the words o one respondent. KPIs can

also be invaluable in demonstrating that shared services

is perorming up to expectations, which can help gaincustomers condence: Once customers realize that the

trends o the metrics are going in the right direction, it quiets

them down very quickly, said a respondent.

Support rom customer leaders can be a key actor in

encouraging appropriate behavior among shared services

users. One SSO, or example, was able to dramatically

increase users compliance with standard procedures by

implementing a rule o three escalation process (They get

three warnings beore we escalate the issue to their boss

and it can go all the way up to the regional vice president o

nance.) Another company used a top-down approach to

pursue the same goal: At every monthly meeting with our

customers CFOs, we tell them about the bad inputs we get,

and they push the message down to their operations.

However, an SSO shouldnt rely solely on leaders to drive

behavior change. The most eective transitions we have

seen target customer stakeholders at all levels rom

CxOs down to end users with ocused communications,

training, and alignment eorts designed to help them

understand how shared services will aect their own

tasks and responsibilities. A key point to remember is that

shared services can aect people outside the unction(s)

being moved to shared services as well as those within it.

Identiying and addressing these non-obvious stakeholders

rom the start can ease the transition as well as improve the

SSOs long-term eectiveness.


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The shared services side

While the challenges o gaining customer support are well

known, some companies may underestimate the need to

address culture and change issues among SSO sta as well

and that can be a costly mistake. To begin with, companies

that sta their SSOs with redeployed local support personnel

may run the risk that culture shock among the reassigned

sta may lead to unwanted attrition and/or substandard

perormance. Adjusting to a shared services environment can

be especially dicult or people who eel highly aliated with

the business and/or who value ace-to-ace contact with

their customers. When youre at a site, youre tuned in towhats going on, and you eel like part o the team making the

product thats generating the revenue, said one respondent.

Here [in the SSC], it can eel more like an academic setting

that is somewhat disconnected rom the business. To counter

eelings o disengagement, this respondent encourages SSO

sta to go to the ront line to see what the processes are,

meet the people, and get that sense o ownership.

Companies moving legacy local sta to shared services may also

have diculty changing the way that SSO personnel interact with

their ormer colleagues in the retained local support groups. One

respondent recalled: I someone needed a piece o inormation

or a reconciliation, or instance, theyd call their ormer colleague

in the business unit who is now their customer and askor it instead o looking it up in the system. We had many

inappropriate requests going back and orth, and nothing was

documented, which slowed things down tremendously. To

address these issues, leaders started to measure indicators o

service, such as turnaround time, as part o a larger eort to

develop a service culture within the SSO. We started telling

people that they were being measured on these indicators

and that the results would aect their recognition and their

development. Partly as a result, the respondent said, weve cut

the time to process an invoice in hal.

That said, rigorous perormance measurement and

management can be a double-edged sword. A metrics-driven

culture can be o-putting to people accustomed to a less

exacting local service environment. Moreover, measuring

and rewarding the wrong things can lead to unanticipated

problems even among experienced shared services sta.

One respondent, or instance, cited the human element

as a reason behind the increased error rates the company

experienced ater moving accounts payable to shared services.

When people are under time pressure to yield a certain

number o outputs every day, she explained, theyre going to

make more mistakes than people in the [business units], whoarent in that kind o production environment.

A nal change management consideration mentioned by

many o our respondents was to keep the magnitude and

speed o change to a level that people can handle. You cant

implement a new ERP, move to shared services, and restructure

the company as a whole all at the same time, said one

respondent. Echoed another, We made the decision to go to

shared services our months beore our new ERP went live. This

was nowhere near enough time or a smooth transition, and

we are still suering rom it 10 years later.

Our view is that it is oten saer to err on the side o caution

when deciding how much change is too much. As onerespondent said, We kind o bought into the assumption that

it would be easy to move accounts payable Oh, well just

move everyone to one building, no problem. I would denitely

do it dierently now.

The above discussion draws upon insights provided by

Kimberly Betts, Ken Kunkleman, Daniel McHugh, Peter Moller,

Abbey Seaboyer, and Hugo Walkinshaw.

Our view is that it is often safer to err on the side ofcaution when deciding how much change is too much.


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Spotlight: Getting a grip on change

An eective change management program usually requires considerable behind the scenes work to determine whom the

change aects, how to reach them, and what messages to convey. To prepare an organizations people or shared services,

the change team should consider the ollowing steps:

Perorm a change readiness assessment. Rigorous survey techniques can help leaders quantiy the level o willingness

and ability to execute the shared services vision in dierent parts o the organization. This inormation can help leaders

decide whether to implement shared services in the rst place, as well as help inorm the change management program i

the decision is to move orward.

Obtain top leadership support. Infuential leaders who can aect the shared services eort may include unctionalexecutives, budgetary committee members, business-unit and/or corporate CxOs, and so on. Regular communication

can help garner their support, as can e orts to engage them in planning and even executing the shared services

implementation (e.g., by encouraging their people to use the SSO).

Drill down into shared services specifc impacts. The change team should clearly identiy which groups and roles will

be aected by shared services and understand the specic changes that shared services will require in their day-to-day

jobs. The results o a systematic change impact assessment can guide the development o a communications plan and/or

training strategy specically tailored to various stakeholders needs.

Establish a change advocate network. Representatives rom the business should be involved throughout the

development and execution o the change management program. Input rom people on the ground can help a company

customize messaging tactics and content to dierent stakeholder audiences. Once the change management program is

underway, ongoing eedback rom representatives can help leaders determine how well the program is working and how it

might be improved. In addition, the knowledge that they are represented in the change management process can in itsel

help increase stakeholders commitment to shared services.

Measure user adoption on an ongoing basis. A company should develop measurable criteria or what healthy SSO

usage looks like and regularly track the companys progress toward the desired goals. This inormation can not only help

identiy areas or intervention (e.g., increased communication, more eective training, or changes to processes), but also

give leaders another way to measure overall SSO eectiveness and communicate progress to stakeholders.

Emphasize customer service skills among customer-acing SSO personnel. Because customer perceptions are shaped

by both the substance and the style o service delivery, its vital that customer-acing SSO sta both be able to deliver high-

quality service and deliver it in a way that cultivates customer support.

Build personal connections through site visits. Site visits, both by customers to an SSC and by SSC personnel to

customer locations, can be a straightorward and surprisingly eective way to increase business-leader condence in

the shared services model, develop productive relationships between customers and shared services employees, and

demonstrate leadership support or shared services. In act, our survey ound that site visits were the most commonly

used mechanism or keeping SSCs connected with their customers, with 85 percent o our respondents rating site visits as

eective or very eective or that purpose.


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The sequence of change can affect theeffectiveness of change

In a shared services implementation, leaders must decide

not only how but when to consolidate work, standardize

processes, and implement supporting technology. Should

they lit and shit? Change everything at once? Or ollow

another one o the nine possible paths? Its not a trivial

question, as the sequence o change can have a noticeable

impact on the ease and eectiveness o the transition.

In our view, the choice o when to do what depends on several

actors, including the timing o any concurrent or planned

technology initiatives, the extent to which processes and

technologies are currently standardized, and the companysculture. Within these parameters, leaders can also strive to

sequence people, process, and technology changes so that they

reinorce each other in pursuing the desired outcomes.

Table 1 gives the breakdown o how our respondents

organizations approached the three dimensions o people,

process, and technology change. As in previous surveys,

the most widely used approach was the lit and shit

(consolidating work into an SSO beore standardizing

processes and implementing technology). One obvious

attraction o this approach is that it can allow companies to

realize labor- and scale-related cost savings relatively quickly.

Another potential advantage is that it restricts immediate

change to a single dimension, which can be useul rom a

change management standpoint. Its hard enough to get

people to hand over their processes without telling them, at

the same time, that their processes werent so great in the

rst place, explained one respondent. Companies that are

relatively decentralized, as are many that have developed

their businesses quickly across multiple diverse geographies,

may nd that a lit and shit approach can make later

process and technology changes easier or the businesses

to accept. When we go back to change a process [ater

its in shared services], said the respondent quoted above,

the customers arent as dicult to persuade because its no

longer their process. The advantages o owning a process

beore changing it may be one reason that 51 percent o

our respondents waited to standardize processes until ater

moving them to shared services, regardless o when they

implemented the supporting technology.

Technology change itsel can sometimes help catalyze

process change, whether serendipitously or through

leadership intent. Now that the company is preparing or an

ERP rollout, it gives us a burning platorm or standardizing

processes, said one respondent. However, this dynamic may

not apply at other companies with dierent cultures. We

spent millions on a single instance o [ERP], but we still had

over 500 dierent ways o processing an invoice, said one

respondent. The culture in the centers was that, i a specic

customer wanted to put an asterisk in a certain eld, wed

go ahead and congure it just or them. Fortunately, the

respondent said, customers have been responding positively

to more recent standardization eorts. When we talk to

a customer, we can usually resolve 30 or 40 percent o the

exceptions right o the bat. Theyll tell us that they dont

need it any more, or that they didnt know someone had

requested it, or that they wouldnt have asked or it i theyd

known the impact it would have.

Table 1. Respondents approach to sequence o process change, technology

change, and physical/organizational move to shared services

Technology change

Beore move During move Ater move Totals

Process

change Beore move 8% 6% 5% 19%

During move 5% 17% 8% 30%

Ater move 9% 13% 29% 51%

Totals 22% 36% 42% 100%

Percentages represent the percent o respondents.


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The major disadvantage o a li t and shit, as several

respondents pointed out, is the diculty o driving eciency

and continuous improvement in a disparate process and/or

technology environment. Common sense suggests, and our

experience conrms, that high process and/or technological

variation makes an SSO more cumbersome to operate and

more rustrating to improve than SSOs with less variation.

Because o this, companies with greatly disparate processes

and/or technologies may want to consider options other

than a pure lit and shit. Even i the desired changes are

not necessarily complicated, they can still take time. We

could have saved ourselves six years o pain i wed done theenabling technology rst, said one respondent. It wasnt

hard, and it wasnt that expensive. It just wasnt done.

Ater lit and shit, the next most widespread

implementation approach was to simultaneously move,

standardize, and technologically enable shared processes

(17 percent), while the third most popular approach was

to implement technology and move to shared services at

the same time, then standardize processes (13 percent).

Respondents varied in their assessments o the e ectiveness

o these approaches; some were pleased with their outcomes,

while others reported diculties. One respondent noted that

implementing ERP concurrently with shared services may

have undeservedly tarnished the SSOs reputation: People

lumped any problems they were having with the ERP into

their perception o shared services. An unexpected additional

outcome o doing both at the same time, he added, was

the negative impact o the project on some members o

the implementation team. A great deal was asked o a ew

people, and as a result, those people are burning out, he said.

Some o them have actually let the company.

No matter what the sequence o change, the respondents we

spoke with universally stressed the importance o achieving

an eective t among shared services people, process,

and technology elements. Processes and technology, in

particular, should be designed in tandem and in a way thattakes appropriate advantage o the capabilities o both. The

experience o one respondent highlights the value o close

process-technology alignment. When the SSOs processes

were rst developed, they tried to replicate the legacy

processes within [our new ERP system], which is absolutely

the wrong thing to do, he said. I you have a world-class

system, you should go to world-class processes, not mimic the

processes you used to have. Subsequent extensive rework

has resulted in an excellent t between processes and

technology today and an SSO that meets or exceeds all o its

perormance targets.

The above discussion draws upon insights provided by Jessica

Golden, John Haughey, Susan Hogan, Peter Moller, and

Aprajita Rathore.

Spotlight: The human actor in technological enablement

In theory, developing the technology to enable a process is a straightorward matter

o dening the business requirements, translating them into code, and voil! improved

eciencies all around. But as anyone who has ever participated in such an eort can

describe, it hardly ever works that way. The programmers grumble about unclear or

extravagant business requirements. The businesspeople complain that the tool ails to

perorm as expected. Meanwhile, the process continues to clunk along on a manual or

legacy-system basis, rustrating users and potentially sabotaging the SSOs KPIs to boot.

Why is the tool development process oten such a painul one? In a phrase, the human

actor. Frequent, timely communication between the businesspeople and the programmers

is crucial to eective technological enablement and not every company has the culture

or the collaborative mechanisms to support the needed communication. The resulting

diculties and delays may be even more damaging to shared services than to the rest

o the enterprise, since so much o the business case or shared services may depend on

technology-driven enhancements to service.

Improving communication between the business and the inormation technology (IT) team

begins with building in touch points at all organizational levels throughout the enablement

project. The team selecting the technology, or instance, should talk to users beorehand to

understand what the tool should be able to do; otherwise, the chosen technology platorm

may struggle with (or, in the worst case, completely lack) unctionalities needed or ecient

process execution. Conversely, the process design team should understand the capabilities

and limitations o the available technology so that they can more eectively take advantage

o the ormer and work around the latter. To the extent that the business requirements leave

room or interpretation, mechanisms should exist or the IT team to raise questions anddiscuss alternate solutions with the business team. And allowing enough time or multiple

rounds o testing and eedback is always desirable i not always easible.


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Governance mechanisms shouldcomplement organizational structure

Companies have two primary mechanisms or managing

shared services strategy and operations. One is organizational

structure: An SSOs priorities and activities will naturally

be colored by where and to whom it reports. The other is

governance: Companies can institute a variety o processes,

policies, and procedures, collectively known as governance

mechanisms, to help give stakeholders an appropriate say in

shared services management (Figure 4).

Fundamentally, organizational structure and governance

mechanisms are complementary means to the same end

aligning shared services strategy and operations with business

needs. On a practical level, however, very ew companies

we know o design their SSOs organizational structure and

governance mechanisms to work as a cohesive system romthe outset. Fundamentally, organizational structure and

governance mechanisms are complementary means to the

same end aligning shared services strategy and operations

with business needs. On a practical level, however, very ew

companies we know o design their SSOs organizational

structure and governance mechanisms to work as a cohesive

system rom the outset. We nd that the common tendency

is or business leaders, especially i they are new to shared

services, to overestimate the impact o organizational structure

on shared services eectiveness and underestimate the need

or additional processes and policies to plug the gaps. A great

deal o eort goes into creating organizational charts and

debating whom to put in charge; correspondingly less eort

is invested in developing the governance structure, with

the choice o governance mechanisms oten depending on

leading practices rather than the SSOs specic oversight

needs. The requent result is a costly learning curve in

which leaders make repeated adjustments to both the SSOs

reporting relationships and its governance mechanisms as

undesirable incidents occur.

It may be understandable or leaders used to other business

environments to ocus on organizational structure as the way

to get things done. However, much o the value that shared

services adds beyond simple corporate centralization comes

rom two distinctive aspects o the shared services model that

can be hard to enable with organizational structure alone.

First, unlike many other parts o a business, an SSO has the

explicit mandate to benet the enterprise as a whole rather

than any particular unction, business unit, or geography. This

means that the SSO may sometimes need to reconcile or

even override conficts o interest among dierent organiza-

tional silos. At many companies, the usual strategy or aligning

silos that may otherwise work at cross-purposes is to either

change the organizational structure to have them report to asingle individual, or change the compensation and goal system

to support common objectives. But while these approaches

can be helpul or shared services, many SSOs deliver such a

breadth o services and have so many dierent stakeholders

that a pure organization- or goal-based solution is impractical.

Adding appropriate governance mechanisms to the mix can

help manage the risk that the SSO will inadvertently benet

some parts o the company more than others.

Second, the shared services model makes the undamental

assumption that an SSO must consider its stakeholders views

in order to understand the interests o the enterprise as a

whole and determine how to pursue them. These stakeholders

may include business units, geographies, unctions, andcorporate, as well as the SSO itsel. However, the process o

gathering and reconciling input rom disparate stakeholder

groups typically requires dierent corporate silos to collaborate

ar more closely with each other than they are likely to have

done in the past. The right organizational structure may

acilitate such collaboration to a certain extent, but leaders

should be alert to the need to supplement the organizational

structure with governance mechanisms that help stake-

holders eectively share inormation, coordinate investments,

negotiate priorities, and reach balanced decisions.

Figure 4. Which elements are part o the

governance structure or your SSCs?

78%

76%

60%

44%

41%

37%

28%

26%

23%

24%

17%

13%

6%

% of respondents


0% 10%20% 30%40%50%60%70% 80%

Other

Country governanceboard(s)

Regional governanceboard(s)

Process governanceboard(s)

Knowledge management/data governance group

Global governance board

Customer councils

Regional process owners

Global process owners

Project prioritizationcommittees/boards

Customer satisfactionsurveys

Service-level agreements

Performance metrics


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The benets o eective cross-silo collaboration, however

accomplished, were clearly appreciated by many o our

respondents. Even though our three regional SSCs reported

centrally to the corporate controller, he didnt have the

bandwidth to coordinate them, which meant that they were

able to operate pretty much autonomously, said one. As

a result, the SSCs not only ailed to standardize processes

across the enterprise, but also made a lot o investments in

[tools] that could have been avoided i we had rst agreed on

what to use. The x, currently underway, includes multiple

elements: a movement toward global process ownership;

regular meetings among the SSCs general managers andglobal process owners; and, most importantly, the creation

o the respondents role to oversee the global shared services

eort. [My role] was the missing link, said the respondent.

When compromise doesnt happen, I have been given the

authority to make the decision.

The lesson here, we think, is threeold. First, companies should

develop their shared services governance model with the

same care they typically devote to deciding where the SSO

should report. Second, companies should deliberately design

the shared services organizational structure and governance

model to complement each other in driving cross-stakeholder

communication and collaboration. And third, in developing

and rening their approach, companies should strive to keep

pace with or even a step ahead o their SSOs growing

maturity. When we were small, governance was not top

o mind, but its become more important as weve grown,

said one respondent. We havent put ourselves in a terribleposition, but we do have some housekeeping to do. Its really

amazing what a huge improvement [some o our changes]

have made.


Susan Hogan, Peter Miller, Peter Moller, Richard Sarkissian,

Gina Schaeer, and Hugo Walkinshaw.

Spotlight: Process ownership gains in popularity

This years survey saw a rise in the use o both regional and

global process ownership among our respondents (Figure 5).

Our impression rom the eld is that global process

ownership, in particular, seems to be gaining ground as

a way to pursue greater standardization, eciency, and

eectiveness.

As the phrase implies, process ownership places each shared

process under the oversight o a single owner whose

responsibility or the process cross-cuts organizational

and geographic lines. Within this basic model, a variety

o implementation approaches exist. At some SSOs, the

sta executing each process report to the process owner

outright; at others, the process owner has an advisory role

with no direct authority over execution. Similarly, some

companies process owners sit in the SSO, reporting to the

shared services leader or equivalent, while other companies

may house process owners at corporate or even within one

o the businesses.

A process owners responsibilities typically include

maintaining and improving process quality and eciency,

enhancing standardization, and monitoring and enorcing

adherence to controls. By making a single individual

responsible or the entire process regardless o where the

component activities take place, a company can reduce

the risk that multiple minor changes across process steps

will compound over time and compromise perormance.

The potential benets can include improved process

eciency and eectiveness, enhanced control, greater

data consistency, more eective data governance, reduced

organizational complexity, and streamlined decision making

around process improvement initiatives. By helping tostandardize processes across SSCs, global process ownership

can also help companies more eectively consolidate

centers and/or prepare to outsource a process.

Figure 5. Percentage o respondents indicating the

use o process ownership, 2011 and 2009 surveys

37%

31%

41%

35%

% of respondents

0% 10% 20% 30% 40% 50%

Global process owners

Regional process owners

2011 2009


14/36

Global deployment modelsare on the rise

The basic drivers o companies shared services location

choices can be summarized in a sentence: Cost determines

whether to create or move SSC operations, and talent shapes

the decision o where to go. Although these drivers have, i

anything, become more clear-cut over the years, the specic

choices around strategy and execution how many centers

to have, where to put them, and how to organize their

services remain complex.

A considerable uptick in new SSC activity has been taking

place: More than one-third o the SSCs in our survey were

established within the past three years. Consistent withour observations o the marketplace, much o this growth

has been in the emerging markets o Latin America and

Asia-Pacic (APAC). Meanwhile, SSC presence has declined

in more mature, higher-cost markets, particularly Western

Europe and Australia/New Zealand (Table 2). As a ootnote

to these observations, we believe that the relatively low

percentage o SSCs in India refects the dominance o the

BPO industry in that country. Companies determined to

source services rom India oten nd it aster, easier, and

more cost-eective to hire a BPO provider than to create a

captive center there, while many companies that want to

create captive centers preer to go elsewhere rather than

make the considerable up-ront investment that would likely

be needed to compete with BPOs in India.

Table 2. Regional distribution o respondents SSCs,

2007 and 2011 surveys

Figure 6. Regional distribution o SSCs by age o center

Figure 6, which compares the regional distribution o the newer

SSCs in this years survey (operating or less than three years)

with the more mature centers (operating or three years or

more), highlights the relatively lower percentage o newer

SSCs in Western Europe and North America and the increasing

popularity o APAC (excluding Australia/New Zealand), Central

and Eastern Europe (CEE), and Latin America. Latin America,

APAC, and CEE were the most requently named regionsas potential locations among respondents who planned to

relocate one or more SSCs (Figure 7).

2007 survey 2011 survey

U.S./Canada 28% 29%

Western Europe* 36% 24%

Latin America 10% 17%

Asia-Pacifc (excluding Australia,

New Zealand, and India)11% 13%

Australia/New Zealand 4% 2%

Central and Eastern Europe 4% 5%

India 5% 8%

Other** 2% 2%

Percentages represent the percent o ind ividual SSCs in each location.

* For this table and all charts in this section, the countries represented in Western Europe include

Austria (2011 only), Belgium (2007 only), Denmark, Finland, France, Germany, Ireland, Italy, the

Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.

For this table and all charts in this section, the countries represented in Latin America include

Argentina, Brazil, Chile, Colombia, Costa Rica, El Salvador (2011 only), Guatemala (2011 only),

Honduras (2011 only), Jamaica, Mexico, Netherlands Antilles (2011 only), Panama (2011 only),

and Peru (2011 only).

For this table and all charts in this section, the countries represented in Asia-Pacic include China,

Japan, Malaysia, Pakistan (2011 only), Philippines, Singapore, South Korea, and Thailand.

For this table and all charts in this section, the countries represented in Central and Eastern

Europe include Bulgaria (2011 only), the Czech Republic, Estonia (2007 only), Hungary, Lithuania

(2007 only), Poland, Romania (2011 only), Russia (2011 only), Slovakia (2011 only), and the

Ukraine (2011 only).

** For this table and all charts in this section, the countries represented in Other include Egypt

(2011 only), Kenya (2007 only), Mauritius (2011 only), South Arica (2011 only), and the United

Arab Emirates.

"Mature" SSCs (established three or more years ago)

(459 centers)

15%

10%

5%

6%

31%

28%

2% 2%

Latin America

Asia-Pacific (excluding Australia/New Zealand)

Central and Eastern EuropeIndia

U.S./Canada

Western Europe

Other

Australia/New Zealand

"New" SSCs (established within past three years)

(235 centers)

20%

20%

9%7%

25%

17%

2%

1%



15/36


Our results on SSC geographic service area and deployment

models refect what we believe is a growing drive to

increase economies o scale and better leverage the global

geography. More than a third o our respondents said that

they had adopted a hub-and-spoke deployment approach in

which a hub center (either a captive SSC or an outsourced

service provider) perorms location-agnostic, transactional

processes or the global enterprise, while regional spoke

centers deliver other processes deemed less suitable or less

ready or global standardization and/or consolidation (Figure8). Further suggesting a movement toward global hub-and-

spoke deployment models, 20 percent o the SSCs in this

years survey served three continents or more (Figure 9), up

rom 14 percent in 2009; another 45 percent o this years

SSCs served one or two continents, as is characteristic o

regional centers.

Figure 8. What is the predominant geographic

deployment model or your SSCs?

Figure 9. How many geographies do your SSCs serve?

Figure 7. Location options or SSCs being relocated

26%

20%

15%

13%

9%

13%

4% 2%

Latin America

Asia-Pacific (excluding Australia/New Zealand)

Central and Eastern Europe

India

U.S./Canada

Western Europe

Other

Australia/New Zealand

Percentages represent the percent of a total of 112 locationsidentified by respondents as potential sites for a relocated SSC.Respondents were asked to name up to three possible locations.

15%

48%

37%

Decentralized (SSCs located within countries)

Regional (SSCs located within regions)

Hub and spoke (one global SSC with add itional regional centers)

Percentages represent the percent of respondents.

35%

33%

20%

12%

Within a single country only

Across countries, but within a single continent only

Across two continents

Across three or more continents

Percentages represent the percent of ind ividual SSCs in each category.


16/36


Compared with a purely regional approach, in which processes

may be duplicated in dierent regional centers, the attraction

o a global hub-and-spoke model is its potential to yield greater

cost reductions through a combination o labor arbitrage and

economies o scale. We anticipate that the next ew years

will see more companies moving rom a regional to a hub-

and-spoke approach or exactly that reason. In addition to

perorming region-specic services, we nd that the regional

centers tend to unction as incubators or new shared

processes, which may later migrate to the global hub as the

business gains greater comort with their placement in shared

services.

Sixty-one percent o our respondents indicated that they

planned to increase the number o advisory processes in shared

services (Figure 10; see Appendix 2 or additional results on

process and unctional scope). From a location standpoint, the

adoption o a shared model or advisory services may translate

into the increasingly requent use o Centers o Expertise

(CoEs) that we have observed in recent years. While a CoE, like

a transactional SSO, consolidates skills into a single internal

organization that serves multiple customers, its value lies more

in giving the business access to specialized competencies rather

than in reducing costs through scale, labor arbitrage, and

process eciencies.

We see CoEs developing along two main geographic models:

Regional CoEs that are physically close to the customers they

serve, oten located on-site with current company operations

and ocused on region-specic issues, and global CoEs that

serve the entire enterprise, located in high-talent areas where

the required skills are readily available. A third model the

virtual CoE, which centrally coordinates remote service

delivery by a geographically dispersed team is also emerging,

driven by a combination o talent availability patterns and alter-

native workplace innovations. A virtual model may be especially

appropriate or CoEs that require hard-to-nd skills, which

can make it challenging and/or costly to either nd enough

qualied employees in a particular location or relocate qualied

employees rom multiple places to a single site.

One striking nding in this years survey is that companies

appear to be more willing to physically separate their SSCs

rom their other operations than in the past. Only 9 percent

o this years respondents rated proximity to operations as an

extremely important location driver, down rom 22 percent in

2009. Similarly, only 8 percent o this years respondents rated

proximity to headquarters as at extremely important location

driver (Figure 11). The growth in the number o viable SSC

locations around the world, coupled with a potential greater

willingness to go arther aeld, implies that companies shouldconsider both more cities and dierent cities or their SSCs

than they might have several years ago. To eectively capi-

talize on the available opportunities, leaders should be careul

not to allow their perceptions to lag behind their options. For

some types o operations, a location need not be especially

well known or even especially sophisticated to be a potential

SSC site.

Figure 10. How do you expect your organization to

change its use o shared services over the next three

to fve years?

82%

76%

66%

61%

% of respondents

0% 20% 40% 60% 80% 100%

Increase number of advisory

processes in SSCs

Increase number of geographies/regions served by SSCs

Increase number of businessunits served by SSCs

Increase number of transactionalprocesses in SSCs


17/36


For companies developing their shared services location

strategy, we recommend an iterative process that considers

location and deployment options in tandem with strategies

or the SSOs unctional scope and customer ootprint. We

nd it eective to rst develop a provisional operating model

that species the desired geographic deployment model, thecountries to be served by each SSC, and the unctions and

processes to be placed in shared services, as well as any other

high-level requirements or constraints (e.g., cost objectives or

tax considerations that point strongly toward or away rom

a particular country). Once the provisional operating model

is in place, a company can begin to investigate the pros and

cons o specic locations and combinations o locations,

with a particular eye toward labor actors and total costs o

ownership. The site selection process should begin with a

comprehensive study o potential locations that draws upon

diverse, disinterested sources o inormation. Thorough due

diligence o the short-listed locations, including visits to

each, can then help guide an eective decision. Importantly,

we encourage leaders to be receptive to new inormation

that may surace during this process, remaining open to the

possibility o revisiting the operating model in light o their

ndings.

Above all, we strongly advise leaders to map out eachSSCs long-term labor needs based on actors such as the

anticipated unctional and geographic scope, the scale o

operations, and the nature o the skills required to meet

business needs to guide its shared services location

strategy and site selection approach. Without such a long

view, a company may nd that they have placed an SSC in

a location that lacks a sucient talent pool to meet labor

needs over time.


Donal Graham, Elias van Herwaarden, Mark Klender, and

Hugo Walkinshaw.

Figure 11. How important were the ollowing actors in selecting the organizations current SSC location(s)?

% of respondents

0% 10% 20% 30% 40% 50% 60% 70% 80%

Tax impacts/advantages

Risk profile (political, social, etc.)

Regulatory/legal

Close proximity to headquarters

Close proximity to current operations

Sustainability

Language skills

External labor availability

Labor cost

Availability of existing labor pool

Labor quality 28% 47%

21% 41%

21% 37%

19% 35%

18% 34%

9% 40%

9% 31%

8% 21%

6% 25%

6% 35%

6% 20%

Extremely important Very important


18/36


Spotlight: Regional highlights

Europe/Middle East/Arica (EMEA)

Shared services activity in the EMEA region has increased

in the past two years, with companies creating centers in

both established and pioneering cities. Although many

companies continue to choose less well-known cities or their

SSCs, several actors related to the downturn including

higher unemployment rates, a leveling-o o wage increases,

and greater available oce space has driven down costs

in established locations in Western Europe and CEE as well,making them more attractive rom a shared services standpoint.

However, the temporary nature o these drivers may still

discourage companies rom placing large transactional centers

in well-established locations. Our experience suggests that

many o the new centers in Western Europe may be CoEs,

which tend to be located where the company already has a

nucleus o like operations. In addition, we have witnessed a

clear strategy among larger companies to locate their language-

and culture-sensitive shared processes in EMEA, paralleled

by a transition o transactional English-language processes to

low-cost locations in the APAC region.

While countries east o the European Unions border have seenrelatively little shared services activity, the Central European

countries o the Czech Republic, Hungary, Poland, Bulgaria,

and Romania continue to be hot shared services destinations

or companies searching or lower-cost alternatives to the

increasingly competitive talent markets in major Western

European cities. Besides low labor costs, Central Europes

attractions include many cities with large labor pools and stable

inrastructures; breadth o skills, particularly language skills;

an enthusiastic, highly motivated workorce; and, in some

cases, physical and cultural proximity to the markets and/or

operations an SSC would serve. We have seen some companies

take advantage o Central Europes strength in languages to

biurcate their shared services operations along linguistic lines,

with one SSC in a secondary or even tertiary Central European

city (e.g. Lublin [Poland] or Varna [Bulgaria]) to support the more

widespread European languages, and the other in a larger city

(e.g., Budapest [Hungary] or Warsaw [Poland]) to accommodate

less common languages such as Dutch, Danish, and Portuguese.

A potential but likely temporary disadvantage o putting an

SSC in Central Europe may be a reduced level o governmental

incentives, since some Central European countries are

deemphasizing eorts to attract oreign investment in avor o

supporting domestic companies that suered signicantly in the

nancial crisis. Longer-term drawbacks include the possibility o

rising attrition rates and/or higher labor costs as Central

European cities grow to become economic centers in their own

right, able to oer workers a wider range o more rewarding

job opportunities.

An additional development concerns the way companies

are conguring their SSCs to serve operations in the Middle

East and Arica. The prevailing model has been to centralize

European- and generic Arabic-language service delivery in a

regional SSC, which would be located in Central Europe toaccommodate its European language needs. The regional

SSCs services would be complemented by in-country support

in Middle East and Arica. Recently, however, there have been

signs o companies seeking to consolidate service delivery

across the Middle East and Arica as well, establishing SSCs in

cities such as Istanbul, Rabat, Tunis, and Cairo. The Arab Spring

and the resulting uncertainty about many Middle Eastern

countries political outlook have put a halt to this development.

It remains to be seen whether the trend will pick up where it let

o i and when the political situation stabilizes.

APAC, Australia/New Zealand, and India

The APAC region has also seen a great deal o shared servicesactivity in the past two years. Ongoing global economic

struggles have prompted some companies to transer their

shared services operations rom Europe and/or the United

States to lower-cost cities in APAC, while low labor costs

and the large pools o skilled talent in many APAC cities are

also making APAC attractive to companies establishing shared

services or the rst time. As well, companies aggressive

pursuit o both organic and inorganic growth in the region

has increased the demand or support services, which in

turn has led some companies to adopt shared services as a

platorm or growth.

As in EMEA and Latin America, the number o shared services

destinations in APAC continues to grow. In India, or example,

companies are establishing SSCs in satellite locations close to

major cities that already have a strong shared services presence,

as well as in newer cities such as Kolkata. Some cities in Chinas

western provinces, such as Chengdu, are also emerging as

destinations or both captive SSCs and outsourcing hubs. One

challenge companies may ace in both China and India is that

location incentives tend to be oered at the state or provincial

level rather than by a coordinated national program. This may

make it more complicated to negotiate terms than in countries

with a national-level incentive structure, such as the Philippines,

Malaysia, and Singapore.

(continued on page 17)


19/36


(continued rom page 16)

The countries served by SSCs located in APAC are also

starting to shit. In particular, Japan, which has historically

not oshored work, is starting to establish shared services

hubs elsewhere in Asia. In addition, some organizations

are beginning to serve operations in Arica and the Middle

East rom APAC, partly to align with changing geographical

business groupings, but also as a consequence o increasing

costs and risks in key Middle East locations.

Organizations headquartered in Australia and New Zealand

have also been establishing and/or expanding their shared

services operations. Greater interest in shared services by state

governments, especially in New South Wales, has led to the

creation or expansion o a number o in-country SSCs, while

a growing number o private companies, both mid-sized and

large, are creating SSCs oshore, mainly to support IT and

nance.

Although much o APAC is still the preerred low-cost

location or shared services, the regions growing demand

or business support capabilities has put increasing pressure

on the labor pools in markets that contain a large number ocenters, including China, India, the Philippines, Malaysia, and

Singapore. As a result, labor costs are rising: Organizations are

looking to ramp up their shared operations quickly, orcing

them to acquire the needed capabilities at a price premium

rather than developing untrained workers. We expect that this

phenomenon, in addition to the regions anticipated economic

growth and subsequent increase in average earnings, will

continue to narrow the gap on current levels o wage arbitrage

relative to other regions.

Americas

The shared services landscape in the Americas region contains

two distinct blocs: North America (the U.S., Canada, and

Puerto Rico) and Latin America (everything else to the south),

each with its own characteristic pattern o shared services

activity. Over the last year, we are seeing the blocs become

increasingly intertwined. Many North American companies

have established or are considering establishing SSCs in Latin

America, and both North American companies and global

multinationals headquartered outside the Americas are coming

to view Latin America as a location rom which to serve the

entire Americas region. The U.S. in particular, home to many

multinationals and possessing some o the worlds highest

operating costs, remains a primary source o shared services

activity in Latin America and worldwide.

Historically, companies have rst gravitated toward low-cost

locations within North America or SSCs serving North

American operations. More and more companies today,

however, are looking to Latin America, with its range o

options at substantially lower costs, as a potential site or

SSCs serving both North America and Latin America. The

increasing interest in Latin America is being ueled by several

actors, including the desire or a low-cost platorm to serve

the regions ast-growing markets, incremental or M&A-driven

growth by companies operating in various Latin Americancountries, and a shit in ocus by companies that have tackled

shared services in the more mature North American and EMEA

markets.

Companies investigating potential SSC sites in Latin America

oten ace a trade-o that pits operating costs against talent

availability, language skills, and risk. The cost o labor in tier

1 locations, generally the larger metropolitan areas, may run

between 40 to 80 percent o U.S. labor costs substantially

higher than the 30 to 40 percent o U.S. labor costs that

companies may nd at tier 2 or tier 3 sites. On the other

hand, tier 1 locations oer deeper talent pools, broader

language capabilities, and lower geopolitical risk thantier 2 or tier 3 locations, which generally have smaller,

predominantly Spanish- or Portuguese-speaking populations.

Tier 1 sites also tend to have a higher number o SSCs

already operating there, which can give a company greater

condence in the physical inrastructure as well as access to

an already trained labor pool although it may also expose

an SSC to greater competition or talent. An SSCs projected

language needs can be a critical actor in determining viable

location options. An SSC that requires only Spanish has many

more location choices than one that requires additional

capability in English, Portuguese, or both.

As in EMEA and APAC, increasing activity in Latin America

coupled with a ollow the herd mentality are leading to

labor stress in some markets. For instance, we know o

one city, a avorite beore the global economic downturn

and home to ve SSCs at the time o this writing, in which

companies are trying to ll more than 2,000 nance shared

services positions in a relatively small labor market. We predict

considerable wage infation, increased turnover, and a blip

in productivity as the Latin American shared services market

becomes more crowded.


20/36


Tax adds more value early

Most companies, in our experience, are well aware

that shared services may generate both tax risks and

opportunities. In this years survey, 76 percent o

respondents considered at least one o the tax areas listed

in Figure 12 as part o their shared services eort. However,

only a minority o respondents (31 percent) elt that shared

services had a positive or signicantly positive tax impact on

their business (Figure 13). This percentage seems somewhat

low, given the large proportion o respondents who

recognized that shared services could have tax implications.

Conversations with respondents revealed a possible reasonor the gap between respondents tax awareness and

their companies realization o tax benets. While all o

the respondents we spoke with knew o shared services

potential tax implications, their companies appetite to

pursue shared services-related tax incentives varied greatly.

Focus and priority, along with time, seemed to be the

determining actors. We were so ocused on cutting

costs quickly that we didnt have the luxury o pursuing

tax incentives, said one respondent. Said another: For

our rst [oshore] center, we chose not to ocus on tax

because we were much more concerned about putting it

in the right place to nd talent, which was a big reason or

going oshore in the rst place. However, now that were

bigger and more established, we will absolutely pursue tax

incentives or our other locations [there].

One way companies may be able to increase the time and

ocus available or tax in a shared services project can be to

involve the tax team rom the very beginning even beore

developing the ormal business case. The earlier a company

consults tax leaders about a possible or planned shared

services project, the more time the tax proessionals will

have to research relevant issues, evaluate dierent scenarios,

and identiy resources to assist the shared services team at

the appropriate times. This, in turn, can help the company

create and evaluate the shared services business case on

an ater-tax basis, helping to reduce the risk o leavingvalue unrealized, inadvertently incurring penalties, and/or

unnecessarily complicating compliance. Early tax involvement

can also improve a companys ability to execute its planned

tax initiatives, since the appropriate specialists are more likely

to be notied in advance instead o being pulled in at the last

minute.

Figure 12. What tax considerations were taken

into account prior to or in connection with the

ormation o your SSCs?

Figure 13. What were the tax impacts o moving to

shared services?

44%

33%

23%

20%

19%

14%

11%

7%

2%

7%

% of respondents


0% 10% 20% 30% 40% 50%

Other

Unclaimed property

VAT considerations

Other federal, state, orinternational

Accounting methods

Strategies to reduceeffective tax rate

Employee benefits

Federal/state/local creditsand incentives

Legal entity type

Location of SSC

4%

27%

2%

66%

Significantly positive

Positive

Neutral/no impact

Negative

Percentages represent the percent of respondents.


21/36


Executives may want to explore questions like these with the

tax team when planning a shared services project in order to

identiy and prioritize its tax-related eorts:1

How does shared services ft into our global tax

planning? Especially at U.S.-headquartered multinationals,

a companys global tax planning can both infuence and

be infuenced by decisions related to shared services. For

instance, the establishment o an SSC can help support a

companys assertion o business purpose.

Are there any tax reasons to und the shared services

initiative rom a certain country or countries? Issuesrelated to intellectual property ownership, repatriation

o earnings, and other considerations may play into a

companys decision o how to und part or all o a shared

services project.

What tax implications should we consider when

determining an SSCs location? Many countries oer

tax incentives or locating operations in their jurisdictions.

Beyond this, an SSCs location can aect whether its

services are subject to value-added tax (VAT) and how

much VAT it must pay. Locating an SSC in a jurisdiction

that imposes VAT could lead to VAT compliance

requirements and require the SSC to build VAT costs into

the transer prices it charges or its services.

What legal entity structure should an SSC adopt?

Because jurisdictions oten tax corporate branches

dierently rom separate corporate entities, leaders should

consider the tax consequences o alternative structures

when selecting an SSCs legal entity.

How might tax considerations aect the timing o

certain implementation steps? In some cases, the tax

impact o when a decision is made or announced can be

as great as or greater than the substance o the decision

itsel. Announcing denite plans to build a center in a

certain location, or instance, may aect a companys

bargaining position with the selected local government

around potential tax incentives.

Who will be responsible or local-country tax

compliance ater in-country headcount is rationalized?

In-country nance unction personnel are oten

responsible or local tax compliance as well as or statutory

reporting. I the shared services eort includes nance

processes, the local nance unctions should take care to

rationalize headcount in a way that preserves coverage

or these responsibilities. Alternatively, a company may

wish to consider using a shared services model, or at least

drawing on nance data an SSC collects, to execute certain

country-specic tax activities (see sidebar, Spotlight:

Tax as a potential shared service). Or the company may

choose to outsource its local tax compliance obligations,

which can enhance access to in-depth local tax knowledge

as well as help clariy the cost o tax compliance.

What are the potential tax drawbacks, i any, to

moving operations out o a particular jurisdiction?

Some jurisdictions may impose clawbacks in an eort

to recapture the value o tax credits, deductions, or otherincentives provided to a company that moves operations

out o a jurisdiction beore it has completed its obligations

pertaining to the incentives. Identiying such jurisdictions

and any potential oreitures up ront can help companies

avoid unexpected additional costs o moving local

operations to an SSC.


Raf Markarian, Alan Mickelson, Peter Moller, and Hugo

Walkinshaw.

1 For additional questions to raise with the tax team, see page 8

o Service delivery transormation: 10 ways to get more rom

your service delivery organization (Deloitte Development LLC,

2009), available online at http://www.deloitte.com/view/en_US/us/Services/additional-services/Service-Delivery-Transormation/

e24b4009b3cb210VgnVCM3000001c5600aRCRD.htm.

Spotlight: Tax as a potential shared service

Companies with nance processes in shared services may have good reason to consider

putting at least some tax activities in shared services as well. While some might

argue that variation among local-country tax laws makes tax processes inherently

unsuitable or shared services, our respondents experience may suggest otherwise.

At least one company in this years survey has been able to place VAT reporting and

compliance activities, as well as income tax lings, in its SSO. Even i some specialized

tax lings must be prepared locally, there may be others that are similar enough across

jurisdictions or that require little enough specialized knowledge to be consolidated.

One reason to consider transerring local tax activities to shared services can be to help

acilitate reductions in local nance headcount. I a local resources knowledge o tax

compliance processes is the only reason to retain him or her ater the nance part o

the job is moved to shared services, reproducing that knowledge in an SSO can allow

additional personnel realignments and potential cost savings. Moreover, because manytax lings depend heavily on data produced by nance processes, placing tax resources

in a nance SSO may potentially help improve access to the required inormation.

Companies exploring the idea o putting tax in shared services should take care that

the SSOs nance processes collect and appropriately organize the data needed or the

tax activities the SSO will support.


22/36


Shared services offers multiple internalcontrol improvement opportunities

Shared services oten has a positive impact on a companys

level o controls, a benet experienced by 85 percent o this

years respondents (Figure 14). Going to a single location

with a single process has reduced complexity, increased

consistency, and simplied oversight, said one respondent.

In the long run, it will also reduce oversight costs. However,

while consolidating processes may make control easier and less

burdensome, our experience suggests that such improvements

may sometimes be an unintended avorable outcome (as one

respondent said) rather than the result o a deliberate eort.

We have urther noted that companies that explicitly address

risk management as part o their shared services eort mayexperience greater benets than those that do not.

We see at least three opportunities or companies to use shared

services to strengthen internal controls beyond the baseline

gains that may accrue simply because o the standardization,

consolidation, and automation that shared services oten

entails. The rst opportunity can arise whenever a process is

being redesigned or placement in shared services. An eective

process redesign eort can be one o the ew occasions that

a company systematically examines a process rom end to

end. While the main ocus o the redesign will likely be on

standardizing and improving the process itsel, the project can

give risk and control specialists the opportunity to inspect,

standardize, and improve the associated controls as well.

The second opportunity lies in the possibility o using the

consolidated, enterprise-wide data housed in an SSO to

conduct analytics. A broad-based view o the companys

nancial transactions, or example, can help risk managers

identiy control gaps and weaknesses that could be dicult

to recognize without access to the data on an enterprise level.

Although an SSO may not accumulate the necessary volume o

data until it has been up and running or some time, risk and

control specialists can advise a shared services implementation

team on what data the SSO should collect and how that data

should be organized to support the desired analyses.

The third opportunity, exemplied by one responding

companys nance SSO, is to leverage shared services personnel

as another deense against breakdowns in control. Risk is

part o everyones job description, said the respondent. As

you embed risk awareness into the makeup o peoples jobresponsibilities, they become more proactive in looking at the

little things, and those are oten where the biggest risks can

be. This respondents SSC also includes a risk and controls

group that regularly monitors the controls and processes

executed by nance personnel as well as the SSOs sel-testing,

sel-reporting controls.


John Haughey, David Hodgson, and Hugo Walkinshaw.

Figure 14. To what extent have your organizations SSCs had a positive or negative impact in the ollowing areas?

Spotlight: The case or sharing internal control and risk management capabilities

An SSO may be a logical home or some internal control and risk management capabilities.For instance, a company may be able to improve the eciency and eectiveness o certain

control activities by putting them in shared services alongside the processes they address.

With respect to risk management, giving risk managers access to the broad data set collected

by an SSO, as opposed to purely local data, can allow them to use more powerul technology

tools or activities such as risk assessments and compliance monitoring. A risk analytics

capability might also be placed in or be associated with an SSO or the same reason.

% of respondents

0% 20% 40% 60% 80% 100%

Tax benefits

Developing new talent

Working capital

Service levels

Acquisition/M&A synergies

Cross-organization comparability

Removal of distractions from core business

Improved service levels

Process quality

Ability to sustain/control compliance requirements

Data visibility

Platform to support growth/scalability

Process efficiency

Level of controls

Cost reduction 29% 62%

26% 59%

22% 65%

20% 63%

20% 63%

19% 57%

18% 63%

15% 63%

15% 51%

12% 62%

11%

11%

9%

8%

3%

31%

57%

43%

55%

25%

Significant posi tive impact Pos it ive impact


23/36


Managing shared services talentis an art unto itself

As SSOs continue to mature and evolve, a growing number

o companies are realizing the signicant role that shared

services talent plays in meeting business objectives. Leaders

should not view shared services positions as low-skill

jobs with limited upward mobility, or underestimate the

challenges o managing talent in an SSO especially one that

supports dierent countries and regions.

How do leading SSOs make the grade when it comes to

overcoming people-related challenges such as those listed

in Figure 15? Forward-thinking SSOs are implementing an

integrated talent strategy that recognizes that nding highlyskilled talent is only the rst step. An eective talent strategy

provides a comprehensive view o the talent requirements

needed to support the delivery o the SSOs services. It should

address the ollowing critical dimensions o talent management:

Attracting,sourcing,andselection

Engagementandretention

Training,coaching,anddevelopment

Performancemanagement

Rewardsandrecognition

Attraction, sourcing, and selection. An SSO can use leading

recruitment practices such as developing a value proposition

and brand, accurately describing roles and career paths to

applicants, using a roundtable approach to interviewing

applicants and making hiring decisions, and using psychological

assessments in the candidate selection and evaluation process.

I do detailed psychological testing on everyone both

when they apply, and ater theyre hired so that we can put

development plans in place, said one respondent. He stressed

the importance o evaluating candidates or temperament and

character not just [technical] skills.

Its also important to clearly dene the competencies and

skills required or each role within the SSO to help hire the

right people into the right roles. These competencies

and skills should refect, not just each roles technical, sot,

and language skills, but also the type o culture leaders

want to build in the SSO. Eective supervisory skills are

particularly essential, as study ater study has ound that

an employees supervisor has a direct impact on his or her

job satisaction. Leadership skills such as dependability, the

ability to motivate others, and the ability to lead by example

are also valuable. As one respondent put it: Leadership is o

utmost importance in shared services. One o the key reasons

my perormance levels are high is that I surround mysel with

people who could take over rom me someday.

Figure 15. How signifcant are the ollowing people-related challenges within your organizations SSC(s)?

% of respondents

0% 20% 40% 60% 80% 100%

Recruiting and retaining clerical staff

Maintaining desired capability levels

Career planning and progression

Recruiting and retaining management staff

Maintaining strong morale

Maintaining high process efficiency

Maintaining high quality

Maintaining high customer service levels 38% 43%

37% 43%

34% 45%

27% 44%

26% 41%

22%

22%

20%

47%

44%

34%

Very significant Significant


24/36


Additionally, dont underestimate the power o telling

applicants about the ormal and/or inormal retention

programs oered by an SSO. This inormation may tip the

scales or a recruit who has the opportunity to choose

among several jobs with comparable pay.

Engagement and retention. As shown in Figure 16,

81 percent o the SSOs represented in this years survey

experienced an annual turnover rate o 15 percent or less.

This low turnover rate, however, may be due to the economic

downturn o the past ew years. I so, some SSO leaders may

see turnover rates increase when the economy improvesand dissatised employees seize the opportunity to seek

employment elsewhere. Ways to monitor and help address

this risk include regularly surveying SSO employees to measure

engagement and diagnose issues; perorming exit interviews

to identiy and address possible drivers o turnover; and

developing ormal retention programs, especially or critical

workorce segments. Once leaders understand what actors

may underlie turnover, they can apply tactics such as those

listed in Figure 17 to address these areas. Many o these tactics

such as providing opportunities or advancement, oering

monetary and non-monetary awards and recognition, creating

ormal and inormal career paths, and maintaining an appealing

work environment can help bolster an SSOs overall image as

an attractive career destination, which can aid in sourcing and

attraction as well as urther support engagement and retention.

Training, coaching, and development. Training received

multiple mentions rom respondents as a way to oster

high perormance in both task execution and sot skills.

One respondent, or instance, described a shared services

curriculum that included courses on topics such as emotional

intelligence and infuencing skills as well as core technical

competencies. The reason we have courses in soter areas

is because shared services is very much about building trust

at every level o the organization, said the respondent.

An accounts payable clerk should know more than how

to process accounts payable; he or she should also be able

to connect with customers. Formal assessment tools canhelp SSOs identiy organizational and individual capability

gaps, connect learning strategies with career paths

and perormance management, and reward leaders or

developing their teams.

Perormance management. As shown in Figure 15, a large

majority o our respondents reported very signicant

or signicant challenges in maintaining high customer

service levels (81 percent), high quality (80 percent), and

high process eciency (79 percent). To address these areas,

many respondents emphasized the need or a disciplined

approach to measuring perormance and holding people

accountable or it at the team or even the individual level.

We have built a can-do culture where people are measured

individually, said one respondent. They understand that

i they perorm and do the work, we will put eort into

developing them. But they also understand that i they dont

perorm, we wont hesitate to get someone else.

Perormance metrics are typically divided into and reported

by categories based o

Uk Consulting Shared Services Survey

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