Cost reduction and customer satisfaction are top of mind for shared services leaders as they work to support their businesses through the recession, according to a new study presented by Deloitte today at the 13th Annual Shared Services Week in Orlando, Florida.
Deloitte surveyed 265 shared services leaders around the world who provided data on 733 individual shared services facilities. Participants came from companies in all major industry groups. The median annual revenue of responding companies was approximately $10.5 billion.
Shared services are defined as the practice of shifting support processes out of a company's business units or divisions and into a separate service-focused organization. The 2009 survey marks the fifth in Deloitte's continuing series of research studies about shared services organizations (SSOs).
"Across the globe, organizations are trying to minimize their overall structural costs, so it is not surprising that cost control was one of the most prominent themes in this year's results," said Susan Hogan, principal with Deloitte Consulting LLP and leader of Deloitte's shared services practices. "Even though cost reduction has always been a primary goal of shared services organizations [SSOs], it's obvious that the recession has increased the sense of urgency around delivering financial savings to the bottom line."
Cost reduction was the most frequently cited driver for a number of planned shared services initiatives, including:
• Shared services center relocation. Among respondents who planned to relocate one or more of their shared services facilities, 92 percent reported that cost reduction was an important reason for the anticipated relocation.
• Changing the number of shared services centers. Forty-eight percent of respondents planned to increase the number of shared services facilities over the next five years; of these, 46 percent reported that cost reduction was the main driver of the increase. Of the 16 percent of respondents who reported they planned to decrease the number of shared services facilities over the next five years, 71 percent cited cost reduction as the main driver of the reduction.
Driving incremental value. Seventy-two percent of respondents reported that cost reduction was one of their top three priorities for driving incremental value from their SSOs in the next two years. In addition, 62 percent reported that improving processes - a vital contribution to cost reduction - was among their top three priorities.
Survey respondents are also placing greater emphasis on customer satisfaction than they did in 2007. "In a tough economy, shared services leaders know that they have to not only deliver value, but strengthen relationships with their customers and with corporate to work effectively," says Hogan.
In this year's study, maintaining high customer service levels displaced output quality as the most frequently cited people challenge, with 27 percent of the 2009 respondents identifying it as an "extremely significant" challenge. Forty-three percent of the 2009 respondents also reported that increasing customer satisfaction would be a top priority over the next two years. The concern with cost has also not kept SSOs from striving to increase their value to the business. SSOs continue to expand into advisory services, a trend that was especially noticeable in areas that have historically been slower to migrate into shared services, including facility management, fleet management, engineering, marketing, R&D, and production planning. Fifty-seven percent of the 2009 respondents reported they planned to increase the number of advisory processes in their SSOs, up from 47 percent in 2007.
Respondents had a very positive view of the impact of their SSOs on the business. Ninety-one percent of respondents reported that their SSOs had improved process efficiency, and 91 percent reported shared services had improved process quality. Eighty-six percent reported that their SSOs had had a positive impact on cost reduction, and 85 percent reported that shared services had improved service levels. In addition, more than 90 percent of respondents reported that their SSOs had achieved consistent annual productivity improvements.
As in previous surveys, internal controls and compliance continue to be one important area in which SSOs reduce costs. 79 percent of respondents reported that their SSOs lowered the cost of maintaining and complying with internal control requirements (such as the Sarbanes-Oxley Act of 2002). Additionally, 85 percent believe that their SSOs will play an active role in the adoption of International Financial Reporting Standards.
Talent is another area in which SSOs deliver business value. Sixty-three percent of respondents reported that SSO employees "sometimes" (51 percent) or "very often" (12 percent) move to positions in the business, suggesting that many companies are coming to view SSOs as a breeding ground for talent.