The Mythical Benefits of Shared Services

As companies start out they typically only have one product. Think of Ford with the Model T, "any color you want as long as it is black". In this stage all functions are working together to produce the right product to meet the customer’s needs.

The diagram below illustrates how the people are operating at this stage.

Everyone is looking at the outcome they are working to achieve. The main goal is delivering that outcome.

Over time the company becomes successful and they add more products. The diagram now becomes;


And along comes the efficiency drive. Some clever consultants or manager decide to create a shared services department and where better to start than marketing. Our diagram now becomes;


And before long the marketing department is focused on their reporting line.


The goal becomes one of being a good marketing department. The measurements change from the outcome to internal measures of a marketing group.

Perceived short term cost savings encourage further expansion of the shared services approach and the Delivery team is now included in the restructure.

Before we know it our company is organised by function and no one even notices that the outcomes we once were focused on are now changing. Our customers and markets are changing in front of our eyes and no one is watching.

The goals now are all internal, how to be the best Sales, Service, Development, Marketing, Production or Delivery team. The world outside is changing but no one is noticing.

How are your budgets set, by internal functions or deliverable outcomes? Are your budgets aligned to customers, market segments? Do you know your costs by outcome, by customer?

Even if someone notices the market is changing the path to get a decision made is now torturous without a clear objective to base it on. Decisions are no longer based on gaining a better outcome but improving your own individual departments’ internal measures.

What does it take to get a decision in your organization? Are there multiple people who can say no but you need to get two, three, four or more people to all say yes before you can proceed? Does the fragmented budgeting across multiple functional departments get in the way?

Personal motivation also suffers, instead of the intrinsic reward of achieving an outcome, making a customer happy, delivering a great solution or just simply making a difference coming to work feels like you are jumping up and down on the one spot. Not surprising because often in a shared services world that is exactly what you are doing.

If you want to see how this happens in real life situations read “The Efficiency Myth” and “The Myth of Control”.

Shared services approach is adopted so that we can gain greater skills in our functional areas. The trade off is swapping hard line reporting focused on the outcome (customers) to hard line reporting to the functional area. With the latest technologies enabling social networking, wikis and the like we can now have both. We can share information around the world let alone through departmental walls.

But which way to organize, by function or by customer. What I have found is that people who work in the same function will naturally seek each other out. Sales people, service, production, etc. But sales people won't naturally seek out production people or development people. Therefore the best way to organize is by the outcome you are trying to achieve. Putting sales, service, delivery, production, etc people all together in the same reporting line. you can now create knowledge sharing along functional lines using techniques such as technology (social networking for business) and conferences to get people together.

Within your organization do you hang out with people doing the same sort people from a totally different department?

Is your organization structured around shared services?