As the determinants of cost and value shift – how do we adjust our measure of Business Services?

Every Shared Services Centre (SSC), whether in-house or part of a providers outsourcing solution, knows that monitoring, measuring and tracking of productivity is vital for success.

Productivity, at its most basic, is the value produced, divided by the cost required to produce that value. In most shared services operations, productivity is expressed as a ratio of work done (e.g. payslips produced) divided by the labour or time required to do the work (e.g. FTE’s per 1000 payslips).

These productivity measures are then used to make comparisons. Continuing the payroll example, the comparison of one payroll processing agent to another; one payroll team to another; and one shared services centre to another. And for the standard productivity measures used across a specific discipline, there are external benchmarks that help to indicate how efficient one centre is compared to another. Several organisations, such as Hackett and SSON, help organisations compare service operations through benchmarking.

Things are changing, however, both on the value side of production, and the cost side, driven by innovations such as automation, robotics, analytics and the types of workers we use across our delivery organisations.

So: Is it time to re-think how we measure and report productivity?

Value Produced

If you use a chatbot to answer first line queries versus a person answering the phone or even typing an answer, are you creating the same, more, or less value? If you deliver a set of applicants for a specific position that has been screened through AI versus a person reading CVs, are you offering more or less value to a customer? Does the definition of value need to be assessed? At what level do you measure value? At an individual step in the process? Or the total end-to-end process? Or for a collection of processes that support an end deliverable, such as enhanced talent acquisition? How value is defined, and the unit of measure for delivering that value (person, process, or centre), needs to be reassessed and potentially changed.

The Cost to Produce Value

The cost to produce a specific unit of value has changed and will continue to evolve. Historically, the costs were labour (hours x rate per hour) with overheads (including systems and tools). Recently, the cost picture has changed dramatically, for example: -

• Chatbots – the cost of establishing the base infrastructure offering is similar to a one time cost you would have from any software implementation. What is different is the level of service and maintenance. As chatbots “learn” they need to have new content and routines, which represents a different type of service and maintenance compared to an ERP. And the cost needs to be “flexible” as it will not necessarily be the same over any given period and significant changes could occur, such as moving from chatbots to humans (and vice versa) doing the work.
• Artificial Intelligence (AI) – as AI “learns” is the cost going up or down? Does the learning allow more complicated processes to be completed or does it reduce the cost of less complex ones?
• Types of labour – with the increase in choices of labour types to create value and the ability to swap between labour types (contractors, permanent, virtual, freelance) the input costs will vary and so will the productivity ratio.

Productivity Ratio

The definition of productivity will change as the definition of what is in the numerator and denominator changes. Determining the level at which the ratio is calculated and compared also needs to be reviewed. Is assessing productivity at the individual, team, process, service centre or some other level the most relevant to drive the desire improvements and change? And what are the new standards to facilitate internal and external benchmarking?

As RPA and different ways of delivering value change – so will our need to assess, measure, report and take actions to drive continuous improvement, both regarding price and service.

Across all process areas and for both captive and outsourced SSCs there is a need to critically assess the productivity measures we have today and ensure we have the right measures and targets for the future.

Further Reading : 

The Impact of Robots on Productivity, Employment and Jobs– A positioning paper by the International Federation of Robotics, April 2017 

The Fight for Focus: Successful Strategies for Getting Things Done

10 Ways Manual Tasks are Costing Your Business