Shared services center
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A shared services center (SSC) is an organizational unit that provides services to multiple divisions of a business or government agency. It is generally established to reduce costs and improve efficiency by centralizing a variety of administrative services, such as payroll, accounting, human resources, IT, and procurement. By centralizing services, SSCs can offer a higher level of expertise and resources than each division could achieve on its own.
The primary benefits of a shared services center include:
- Cost savings: By consolidating administrative services, organizations can reduce costs associated with redundancy and duplication of processes.
- Improved efficiency: By reducing the need for manual processes, SSCs can help organizations increase efficiency by streamlining processes such as invoice processing and payroll.
- Increased expertise: By consolidating services, SSCs can provide a more comprehensive range of services than individual divisions could achieve on their own.
- Enhanced customer service: By automating processes, SSCs can provide a higher level of customer service and responsiveness.
A good example of a shared services center is the U.S. Department of Defense's Logistics and Sustainment Support Center (LSCC). The LSCC is a centralized support center that provides a range of logistics and sustainment services to all branches of the military, including maintenance, supply chain management, and acquisition support. By consolidating these services under one roof, the LSCC is able to offer a higher level of expertise and resources than each branch of the military could achieve on its own, resulting in cost savings and improved efficiency.
Shared services centers are useful in a wide range of industries including manufacturing, healthcare, financial services, government, and non-profit organizations. They can be used to streamline processes, reduce costs, and increase efficiency. However, there are several factors to consider when deciding whether or not to implement an SSC:
- Cost: The cost of implementing and maintaining an SSC must be weighed against the potential cost savings that it could provide.
- Complexity: An SSC may require complex technology and processes, so organizations must ensure that they have the resources to properly implement and manage it.
- Quality: Organizations must ensure that the services provided by an SSC are of the highest quality.
There are four main types of shared services centers:
- Outsourced SSC: An outsourced SSC is a third-party service provider that contracts with an organization to provide administrative services.
- Internal SSC: An internal SSC is an organizational unit within a company that provides administrative services.
- Hybrid SSC: A hybrid SSC combines elements of both outsourced and internal SSCs.
- Global SSC: A global SSC is an organizational unit that provides services to multiple divisions in multiple geographic locations.
The steps of establishing a shared services center include:
- Defining the scope of services: This involves defining the services that will be offered, such as payroll, accounting, human resources, IT, and procurement.
- Developing a business case: This involves analyzing the potential benefits of establishing a shared services center, such as cost savings, increased efficiency, improved customer service, and increased expertise.
- Establishing a governance structure: This involves establishing a governance structure to oversee the operations of the SSC, such as a board of directors or executive committee.
- Implementing the technology: This involves implementing the necessary technology to support the SSC, such as enterprise resource planning (ERP) systems and customer relationship management (CRM) systems.
- Training personnel: This involves training personnel in the use of the technology and processes.
Advantages of Shared services center include cost savings, improved efficiency, increased expertise, and enhanced customer service.
Although setting up a shared services center can offer many advantages, there are also some potential drawbacks. These include:
- High upfront costs: Setting up a SSC typically requires a significant upfront investment in infrastructure and technology.
- Difficulty integrating services: Merging different processes, systems, and cultures from multiple departments can be a challenge.
- Loss of control: By centralizing services, each individual division may lose some control over the services they receive.
culty integrating services, and a loss of control for individual divisions.
- Outsourcing: By outsourcing certain services to external vendors, organizations can reduce costs and increase efficiency.
- Automation: By automating certain processes, organizations can reduce the need for manual labor and increase efficiency.
- Shared resources: By sharing resources and personnel between divisions, organizations can reduce costs associated with duplication and redundancy.
Suggested literature
- Cooke, F. L. (2006). Modeling an Hr shared services center: Experience of an Mnc in the United Kingdom. Human Resource Management: Published in Cooperation with the School of Business Administration, The University of Michigan and in alliance with the Society of Human Resources Management, 45(2), 211-227.
- Corradini, F., Forastieri, L., Polzonetti, A., Riganelli, O., & Sergiacomi, A. (2018). Shared Services Center for E-Government Policy. arXiv preprint arXiv:1802.07982.
