Leadership Foundation

The Shared Services Approach

The model of ‘shared services’ involves transferring responsibility for certain (usually non-strategic and administrative) activities from within an organisation to a separate ‘shared services unit’ which also manages similar activities for other organisations or teams. As the unit focuses specifically on a few narrow areas of responsibility, and is able to pool resources across the activities from a number of organisations or teams - it should be able to deliver them efficiently and competitively.

Organisations can share services (or parts of services more commonly) with other similar organisations through newly created shared services units, organisations can commission commercial ‘shared service’ organisations to take responsibility for certain aspects of a service or services can be shared across different departments in a single organisation. This model is thought to be an increasingly useful tool for leaders due to the current business climate:

The conventional wisdom of today is that the potential for Shared Services is increasing due to the increasing costs of changing systems and business requirements and also in implementing and running information systems.
(Yee, Tan Ter Chian and Chan - see below)

Literature suggests that the main benefits of shared services can be cost savings, efficiency (of time and resources – through eliminating duplication of activity and sharing costs across organisations), agility (the dedicated unit is able to respond quickly to changes and new demands as it is semi-autonomous), improving overall service and the opportunity to share learning, technology and innovation.

However, moving to a shared services model has not proved an easy option for many organisations – significant challenges have been encountered and organisations can be put off by high start up costs, some loss of control over the services being shared and in the more collaborative models working with others can offer its own challenges. Shared services can also be very unpopular with existing staff, especially initially – some individuals may find their job no longer exists, where individuals are relocated into the new business unit they may experience a significant culture change and lines of accountability can become confusing. Gaining buy-in and investing thought into the HR implications of the shared services model will be valuable for those undertaking such a move.

The separation of services from the central organisation in the shared services model aims to address a key concern in relation to alternative models of efficiency. In centralisation, for example, similar services are taken out of departments but placed in one central department. Evidence suggests centralising can fail in relation to tailoring services to different departments’ needs, being responsive and updating its offerings to include new types of activity or new technologies fast enough, and often the time and cost taken to complete services (when there is no competitive pressure) does not offer benefits or value to the departments served.

For more information about the Knowledge Resouces contact:

Eleni Stamou, Research Manager