The classical benefits associated with a shared services business case are: cost savings through labor rate arbitrage, increasing productivity by streamlining and consolidating work processes, and improving the quality of services performed. In the early years of the program’s life, the focus is on transition and realizing these target benefits, but as service centers mature, organizations accrue additional benefits, which were perhaps not anticipated. These include, but are not limited to: the effect that structured metrics and measures have on people’s performance; changes in organizational behaviors (both within the SSO and among the client base), and the development of new skills within the SSO (e.g. change management, project management, etc.).
One often overlooked advantage to developing an SSO is that the program can be used as a vehicle for developing people with the potential to move into other parts of the organization. They foster the growth of people who have valuable, transferable skills and a knowledge of the company; making them instantly productive in line organizations which may not have the time or capabilities to take on the learning curves of new-hires. Given a pro-active approach, a shared services center can become the "farm team" for the rest of the company. Finding prospects with potential; training and developing that talent; infusing them with the organization’s principles and values; and grooming people for promotion to the "big leagues," (e.g. line organizations or corporate specialist positions) can serve to transform the efficacy of an organization.
Managing the Labor Curve
Mature shared services centers have well defined labor profiles and targets. While this varies according to functional and geographic circumstances, a common SSC hiring profile is:
- Young employee (age 25-27)
- Has one or two previous job experiences
- Looking for the elusive three to five years experience to fill out their résumé
- Seeking the experience of working for a larger corporation
- Atttracted by the challenge of the SSC environment and the potential for enhancing their career prospects
SSCs also want to hold down labor costs and need to contain wage inflation, so typically the wage scales in the center will be a mix of fixed and variable compensation that top out after five to seven years seniority. This yields a 12%- 15% annual turnover target of employees who reach their earning and experience ceilings, and who are motivated to move on.
Because the SSC organization structure is very flat, there are limited supervisory or specialist positions that you can justify to retain the best people. This creates a quandary: attracting good people and motivating them to high performance levels, versus the reality that making a long career out of shared services will be tough.
Recognizing and anticipating this pattern takes a more enlightened approach. Rotate the problem. Can we not make this natural turnover work in our favor? Instead of trying to hold on to people for as long as you possibly can, embrace the human resource challenge of developing and releasing people into new positions elsewhere in the company. What do new hires seek in joining our SSC? To gain experience and skills, and make themselves more attractive for higher-level jobs. Ideally, the SSC wants to be seen as an "employer of choice;" with a track record of people being developed and moving on.
One key to this is structuring the training and development of staff to build desirable and marketable skills in areas of projected need. Another key is creating a back-end "demand pipeline" for staff who are topping out after five-to-seven years by making jobs available via three avenues: limited higher positions within the SSC itself; feeder to other jobs within the company; and acting as an outplacement source in the community where experienced people are coveted by other companies. Finally, there is the benefit of constructing the mindset among your managers that their priority is to "develop and release" their employees rather than to "train and hold" them.
Let’s examine each of these three elements with the practicalities that we have to deal with.
Developing marketable people
Within the SSC there will be job descriptions for entry level positions and key processing staff. Usually, there is a three to six months learning curve allowance, followed by a period of full productivity, which is enhanced by the variable compensation portion of the pay scale. The most effective variable schemes are quarterly bonuses to staff, so that the reward associated with their efforts is immediate and is aligned with customers’ SLA targets (which are typically quarterly based).
As the employee gains experience and skill in their assigned job, the next step is to promote cross-training into other process areas or job responsibilities. In doing so, the SSO gains flexibility by increasing the pool of staff qualified to perform certain work. For example, a person who has achieved full competence in A/P or A/R processing might be cross-trained to the in-bound Call Center. This would allow SSC management to shift people quickly to the Call Center in peak periods (e.g. signup periods for benefits or end-of-month call
peaks from suppliers). The compensation system needs to be tailored so that employees with these "secondary certifications" are rewarded as they become more valuable to the organization. This also serves the larger SSO goal of agility and flexibility.
The third phase of employee development is to identify senior staff capable of both acquiring the skills that a growing company needs and developing training programs to satisfy those needs. A large component of this stage is working with the HR and recruiting functions to identify skill areas of need and specific line organizations with hiring plans for the coming year. Part of the annual HR staffing plan for the organization could be providing the SSC with a target list of likely job openings and profiles. Further down the line, this could be built into SSC training plans and manager measurements (more on that later).
One other key point in the SSC developing marketable staff is that a high performing SSC employee is going to have exhibited and excelled in customer service attributes. They have already been indoctrinated into alignment with company values and desired behaviors. In this respect, they can be extremely attractive to other company functions and organizations because of their "plug and play" compatibility.
Building the Demand Pipeline
Simultaneous with developing people who have value beyond their SSC roles, the center management has to anticipate and create demand for that staff. This requires SSO management to build out a complete staffing
plan for each year. The plan will include projections of areas of likely turnover and identify employees who are topping out (i.e. the "leavers list"). That group of likely leaving candidates must then be divided into three groups:
- High potential candidates who the SSO would like to keep for the limited SSO specialist or supervisory positions
- Strong performers who can fit other company needs in positions anticipated for the coming year;
- All other likely leavers, who have good work performance records but for whom promotional opportunities within the company are unlikely. (Note: We assume that poor performers would have been weeded out of the organization through adherence to a strong performance management and employee evaluation program.)
Internal SSO jobs to be filled are easily identified and should be part of the SSO’s staffing plan adjunct to the annual financial plan. To identify other internal positions projected within the company as a whole requires significant effort by the SSO HR Director. This includes compiling a projected job opening listing matched to the "leavers list". That is shared with SSC managers who have employees on the projection, so those managers can actively work with the employees to secure placement. SSC HR support staff must also track projected job openings with line organization recruiters and HR managers, anticipating formal postings. SSC supervisors should actively work with targeted employees to prepare them for interviews and applications as part of their employee counseling responsibilities.
A third component to the pipeline can be somewhat controversial. Recognizing that you are likely to have more exiting employees than jobs in the SSO and the company at large, another demand source is to work with companies and recruiters in the region, consciously placing people outside of your organization. The logic and motivation for this course is tied to a long term view of staffing and management. If your goal is to attract motivated people looking for that initial experience and to be seen as an "employer of choice," you want to cultivate a reputation that successful SSO staff will be rewarded for their time in the organization and the chances of getting placed into a follow-on job are good. You also will be seen as a strong corporate citizen. Working with local development and commerce agencies, as well as some companies directly through their HR functions, is a typical strategy. Other ancillary tactics include maintaining "alumni lists" to assist in tracking and placing people.
Not every employee is going to be part of this process. Some will leave of their on volition. Some employees will choose to stay on in their jobs, even though their compensation will be capped, which is also fine if they perform well. What is important, though, is that staff know that if they do a good job, every effort will be made by the SSC to "do the right thing" in finding their next job, if they so desire.
Motivating the Managers
SSC managers have a pivotal role. Their ability to identify, develop and release employees to new positions is critical. It places a premium on actively counseling staff, not just going through the motions with the annual manage their area’s turnover. Components of measuring their effectiveness should include:
- Accuracy in predicting overall turnover, and probable leavers
- Ability to manage the turnover sequence and stay within a turnover target range
- Ensure turnover does not adversely impact service performance
- Score the number of placements. If four people leave, did all four secure new jobs (either inside or outside the organization).
If yes, full marks. If no, a deduction from their bonus target. The object here is to have managers actively promoting their employees, working with the employee to acquire necessary skills, getting their résumés in order, preparing for interviews, offering references, etc. Good SSC managers will be working with their stakeholders and customers throughout the company to promote and place their own people.
Note that this is a particularly effective strategy if you have a reduction in force, whereby employees are being let go.(Don’t underestimate the collateral effect on employees who remain, and see that staff moving on are treated with respect and supported.)
One other more sophisticated tactic is to keep track of the employees you place outside of the SSC. Following-up with how they perform downstream (e.g. annual performance rankings, compensation growth, promotions, citations, etc.) will give you a good handle on managers who are good at developing long term performers and who are not passing on "problem" performers. This creates an "Amway" type pyramid, where an SSC manager can be measured on how many of the people they developed have downstream success. The more successful his progeny are, the better that should reflect on the manager’s long-term contribution to the company’s success. These statistics will also convince line organizations of your ability to develop and place qualified candidates, spreading your reputation as a "supplier of choice," internally.
Managing the Farm Team
This approach is not suited for everyone. Some SSOs desire retaining staff for long periods of time rather than force turnover cycles that keep labor costs in check. Clearly, this is introducing a new set of management challenges. Instead of fighting a war of attrition with turnover, embrace the reality and take to the high ground.
The benefits can be compelling. The ambitions of the maturing employee are aligned with the manager’s motivation to place employees. Managers are rewarded for promoting employees and not passing on problems. The organization creates a great deal of "good will" with employees, company management, and customer organizations. Staff see the center management as acting responsibly and with sincerity. Also, by creating an atmosphere of "controlled attrition,"transitions are thought through. Managers and employees are compelled to ensure desk procedures are in order, knowledge management is retained, and successor lists are up-to-date and effective.
Finally, employees and managers alike take pride in the fact that SSO personnel policies and their own actions occupy the high moral ground.
The methods described may or may not work for your company but the principals apply to everyone. As noted by Ralph Waldo Emerson, "If you learn only methods, you’ll be tied to your methods, but if you learn principles you can devise your own methods".
About the Author
Paul Nicolaisen has designed, built, and run SSOs in Europe, North & South America, and Asia for Unisys, McDonald’s and CSC. He has also served as a consultant for organizations engaged in enterprise transformation initiatives such as shared services, outsourcing, and ERP integration programs. Paul has over 25 years of functional expertise in finance, IT, HR, treasury, and procurement and currently works as an independent consultant .