Financial Shared Services: Governance, Structure, and Scope
A Discussion of Key Findings Related to How Shared Services are Structured and the Scope of Services
In January of 2019, ScottMadden’s Brad DeMent and Trey Robinson delivered a webinar to discuss the results of the latest finance shared services benchmarking study. The study was designed by ScottMadden and surveys were administered by APQC over four cycles: spring/summer 2014; spring/summer 2015; summer/fall 2016; and spring/summer 2018. The scope of the study covers the following topics for an in-depth analysis of financial shared service centers (SSCs): Delivery model, scope of services, staffing, location, performance, and technologies leveraged.
This article highlights the study key findings regarding SSC governance, structure, and scope. The most recent data from the study gives a compelling snapshot of how shared service centers are currently structured and governed; the key financial processes that are increasingly moving into the scope of SSCs; and how advances in automation are driving substantive improvements in customer care within SSCs. As they explained the data, DeMent and Robinson noted key areas in which top performers differentiate themselves to work more efficiently and generate more savings for their organizations. The top performer peer group was a group of organizations in the study that consistently led the way across key cost, staffing, and performance metrics.
Access the complete article series here.
Governance and Structure
For top performers and the comparison group alike, SSCs are generally managed by the finance function. “Often, the finance function is saddled with the task of saving cost across the entire organization,” DeMent explained. “Shared services is a key tool for saving cost, not only in finance but also in HR, supply chain, IT, and other functions.” Figure 1 shows that while the majority of SSCs in both groups report to the organization’s finance executive, more top performers do so than the comparison group (77 percent versus 52 percent).
Figure 1: To Whom Does Your Shared Services Center Report?
Figure 2 illustrates that for global process governance, top performers leverage the global process owner role (74 percent) and service level agreements (76 percent) more than other governance models and do so in greater numbers than the comparison group. For DeMent, these numbers are indicative of stronger relationships between top-performing SSCs and the business unit: “There’s less reliance now on top-down leadership councils and more trust in shared services operations to deal, on a daily basis, with the business units, service level agreements, and through the global process owners.”
Figure 2: SSC Governance Models
Organizations are increasingly moving to end-to-end processes to improve organizational agility, link processes and work to customer value, and create sustainable process improvements. Moving process ownership and governance out of functional silos or departments can be hard work, DeMent noted, “but we noticed that end-to-end processes were delivering a lot of non-labor savings for organizations. Beyond reducing work, these processes translate to fewer errors, reduced penalties, more discounts from vendors, and even lower audit fees as things become more centralized.”
Figure 3 shows that top-performing SSCs have end-to-end processes for procure-to-pay, order-to-cash, and record-to-report in greater numbers than the comparison group, especially when it comes to record-to-report. These higher adoption rates translate to much higher non-labor related savings among top performers, depicted in Figure 4. While top performers generate greater savings in the top, median, and bottom quartiles than the comparison group, the top performers in the top quartile save twice the amount of non-labor savings against the comparison group.
Figure 3: Percentage of SSCs with the Following E2E Processes in Scope
Figure 4: Amount of Non-labor Savings Generated from E2E Processes in the Finance SSC per $1 Billion Revenue
Non-labor savings from the implementation of end-to-end processes is nearly twice as high as labor savings (in the form of staff reductions or salary reductions, for example). For DeMent, these figures offer new and powerful evidence for those who wish to make a business case for adopting and implementing end-to-end processes: “Top-quartile leaders of the pack are getting over a million dollars in savings for a billion-dollar company. Those savings have traditionally been difficult to quantify in business cases, but this is a statistically significant survey. If you’re looking to build a business case for end-to-end processes, you might consider using these numbers to prove out the case.”
Scope of Shared Services
The most common services provided by SSCs, shown in Figure 5, include high-volume transactional processes like accounts payable (AP), general accounting, accounts receivable (AR), and customer billing, all of which make an appearance in four out of every five SSCs. Further down the list is payroll, which Robinson said is increasingly coming under the scope of finance SSCs. “Payroll is included in the scope of 62 percent of finance SSCs, and we think that number is probably understated. While this figure suggests that payroll is not scoped 38 percent of the time, we believe that it’s likely fitting in HR shared services, so it’s really in shared services overall, whether in finance or HR,” Robinson explained.
Figure 5: Which of the Following Processes are In-scope for Your SSC?
High-value analytical services have made a significant appearance in this year’s survey: Processes like planning, budgeting, and forecasting; development/management of pricing; and developing a tax strategy/plan are increasingly moving from their traditional locations in centers of expertise to SSCs. “When we think about the overall shared services model,” Robinson explained, “we don’t just include the business transactions but also consider centers of expertise as part of the broader group. We believe that we’ll continue to see more of these analytical processes being drawn into the scope as the shared services models evolve.”
Business Process Outsourcing
Data from this year’s survey also reveals the top processes for outsourcing by SSCs. “In general, we’re seeing a mixed bag with respect to outsourcing,” Robinson noted. “Clients with strong BPO partnerships are often looking to outsource more of their processes and leverage that relationship to a greater extent, while companies who have not typically outsourced in the past are looking to automation first as a way to reduce cost before looking to outsource.” The top processes for outsourcing include:
- Expense reimbursements (39 percent)
- Collections (35 percent)
- General accounting (26 percent)
- Accounts receivable (18 percent)
- Accounts payable (15 percent)
“When it comes to centralization,” Robinson said, “our clients tend to look for global approaches for the most transactional processes.” This centralization is reflected in the survey data, shown in Figure 6. While processes like AP, AR, and general accounting tend to have a high degree of centralization, highly analytical processes like planning, budgeting, and forecasting are the least centralized. “We often see these types of processes included in centers of expertise, and they are typically located much closer to their end customers,” Robinson said.
Figure 6: Process Centralization within SSCs
Most SSCs have one or more teams that answer questions from employees, vendors, and other stakeholders. These teams are typically regionalized to be closer to end customers and to accommodate local languages, time zones, and cultures. This year’s survey data shows a trajectory of improvement in the quality of customer care over the last four years, Robinson noted.
The median first contact resolution rate is 80 percent, while SSCs in the top quartile resolve 84 percent of cases during first contact (Figure 7). “In our 2014 survey,” Robinson said, “the numbers were 75 percent for the median and 80 percent for the top quartile, so it’s clear that there continues to be improvement in this area.”
Figure 7: First Contact Resolution Rate for SSCs
While resolution rates are increasing, the size of customer care teams is steadily decreasing and “is another area where we’re seeing significant gains relative to prior surveys,” Robinson said. Data from this year’s survey shows that the median shared services organization dedicates 11 percent of its employees to customer care, a figure that is down from 18 percent in 2014. For Robinson, advances in technology account for much of this improvement: Customer self-service portals, automation, and virtual agents are allowing SSCs to do the same amount of customer care work with fewer staff.
Data and analysis from the finance shared services benchmarking study shows that:
- Top performing SSCs are more likely than the comparison group to report to their organization’s finance executive
- Top performers leverage the global process owner role and service-level agreements for global process governance
- Top performers adopt end-to-end processes at higher rates than the comparison group and generate more money in savings as a result
- High-value processes like planning, budgeting, and forecasting are increasingly moving into shared services as part of centers of expertise
- While some organizations continue to outsource expense reimbursements and other transactional processes, others are looking to automation to reduce costs before outsourcing.
- Major financial processes like AP, AR, and general accounting are highly centralized within SSCs, while high-value analytical processes like planning, budgeting, and forecasting remain largely decentralized
- Advances in automation and AI are driving substantive improvements and more efficiency for SSC customer care teams
The study population is robust and diverse, with 468 organizations participating. While 64 percent of participating organizations are from the US and Canada, respondents also included organizations from Europe (26 percent), Asia-Pacific (8 percent), and Central and South America (2 percent). Company size is balanced across the revenue profile, with median revenue of $7.8 billion. Most organizations (89 percent) have been operating for more than three years, and more than half have been operating for longer than five years.
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