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Tuesday, April 17, 2007

Oversight Systems Financial Executive Survey Finds More Than Half of Shared Services Centers Fall Short of Operational Goals

ATLANTA (April, 2007): Shared service centers have yet to show their full potential for many companies according to the 2006 Oversight Systems Executive Report on Shared Service Centers. The national survey of financial executives found that more than half of respondents report their shared service centers (SSCs) are well short of achieving their operational goals. First implemented in the 1990s by many large enterprises, the SSC model allows companies to consolidate client-facing functions in an attempt to reduce costs. However, the report released today finds that 52 percent of executives report their SSC are only meeting half or fewer of their business goals. The free report is available to download at "Companies adopted shared service centers for the immediate cost savings, but executives are now struggling to continually improve their operations," said Patrick Taylor, CEO of Oversight Systems. "This survey shows that shared service centers must develop strategies and implement systems that support ongoing improvement."

Reflecting the recent development of most shared service centers, more than half of executives (59 percent) report that their SSCs have been in operation for less than five years. Regardless of the youth of the concept, companies are putting much stock into these centers. Most executives (85 percent) report their SSCs serve four or more business units with 40 percent reporting to serve 10 or more. Although the C-suite goals are clear, achieving them is often met with adversity.

The most prevalent challenges to ongoing SSC operations were maintaining continuous improvement (61 percent), skepticism from business units (59 percent), employee retention/turnover issues (43 percent), meeting customer service level agreements (26 percent) and threats of outsourcing business processes (13 percent).

The Real Measure of Performance When it comes to shared service centers there is no measure of performance more important than cost savings and that is the silver lining in this report. Nearly three-quarters of executives (73 percent) classify their SSC as “world class” or “average to above average.” As such it comes as no surprise that nearly the same number of respondents (71 percent) report having almost reached, reached or exceeded their cost savings expectations. In fact, the study found that 85 percent of executives were prompted to embrace the SSC model in an attempt to reduce and control operating costs. Although cost was the driving factor for implementing an SSC model it was not the only reason. Other reason included:

* Improve quality (69 percent)
* Improve their customer focus (63 percent)
* Free up resources for other purposes (49 percent) and
* Improve company focus and reduce risks (34 percent).

Goals for 2006 Beyond the central goal of reducing costs, executives do have other goals for their shared service centers. Topping the list of 2006 goals with 52 percent support is to improve on service level agreements or SLAs. Other popular goals include: re-engineer business processes (51 percent), increase transaction throughput and capacity (40 percent), expand business offerings (39 percent), and reduce aggregate error rates (35 percent). Less frequently cited goals include: increasing the percentage of one-touch transactions (30 percent), implementation of Six Sigma programs (23 percent), and automation of Sarbanes-Oxley compliance (20 percent).

Regardless of the hurdles that are faced with implementation and operations of shared service centers, 97 percent of executive point to sustainable benefits of SSCs as opposed to traditional outsourcing of business processes. When compared to outsourcing, executives say SSCs offer benefits such as:

* Improved level of service and quality (81 percent)
* Better responsiveness to customer demands (68 percent)
* Greater flexibility in adapting to evolving business needs (62 percent)
* Lower aggregate costs of operations (51 percent).

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