When to create a Shared Service Center (SSC) is just as important as why you implement one. By analyzing your operational activities, services and culture you can reap the internal and external benefits of an SSC.
It's never too early to talk to your bank about SSCs, trends and best practices. If you wait to consider an SSC, your company may miss out on opportunities to increase efficiency. Regardless of where you are today, understanding preconditions can help you plan for the future. For example, an account payable SSC may not be necessary today—but if you have several locations performing accounts payable or acquire an organization with multiple locations, you may want to consolidate those operations.
To help you determine when you may be ready to implement an SSC, analyze your company activities in eight areas.
8-step precondition analysis
1. Noncore business function distribution
If multiple teams across your company work on the same noncore business functions, you could be missing chances to become more efficient. Start your evaluation by examining your geographic footprint, taking a close look at each department and team’s work. Document any teams performing the same noncore functions. Evaluate any third parties you use for auxiliary functions, including what’s working well and what isn’t.
An SSC can enable local management to focus on external customers and strategic issues, redirecting local resources away from noncore and toward decision support and analysis.
2. Data sources and use
Establish a single source of truth and develop a process to streamline data management and reporting. But first, you should look at how your business generates and uses data. Ask questions such as:
- Are you using the same database across the business? Or does each business unit maintain its own records?
- Are you providing the desired level of customer service to your clients and internal stakeholders?
Creating fully consolidated, “golden” records requires integration and standardization across data production, compilation, storage and use.
SSC in action: Healthcare practices with multiple clinic locations could centralize billing and patient management at an SSC. The center could distribute information to each site.
3. Technology harmonization and globalization
Assess your company’s technology standards and architecture, including your ERP and credit management and purchasing systems. It’s OK to have multiple platforms—the key is that your technology supports the delivery of business strategy and risk and control guidelines. To ensure your business is making the best use of technology, evaluate your in-house and third-party systems. Ask questions such as:
- Do your systems address current needs? Are you using their full functionality?
- How many business units use third-party systems or portals?
- Are there any systems that increase your tech debt?
Moving toward a synchronized infrastructure managed by a central strategic team increases the value to the enterprise.
4. Mindset and culture
Successful organizations embrace collaboration and change. That starts with leadership. As you evaluate your company culture, think about who drives it and how change impacts your company. Consider:
- Does your company emphasize cross-functional learning and problem-solving? Does its current structure support those efforts?
- Is your company willing to relocate talent or switch employees’ roles?
- Is there a culture of growth? What kind of professional development do you offer employees?
- Do you have a change management framework that handles businesswide communications, including encouraging and measuring growth?
If your company is resistant to change, you’ll need to develop a particularly strategic and thoughtful approach when considering an SSC.
5. Autonomous decision-making
Think about who makes the decisions at your organization, what that process looks like and who is held accountable. For example:
- Is decision-making collaborative, or does the C-suite dictate most decisions?
- Does each individual business location or subsidiary decide on its vendors? Or are other decisionmakers involved?
- How can support and front-line personnel better communicate?
- Is your procurement team involved in decisions, decentralized or siloed away?
The success of your SSC requires collaboration and flexibility across the C-suite, headquarters, regions and business units.
SSC in action: Midsize and large businesses may benefit from using an SSC for technology teams, making it easier to roll out new hardware and software across the enterprise.
6. Investment culture
When considering an SSC, you want stakeholders across teams and locations to think beyond earnings and annual revenue toward longer term goals. To help determine the feasibility of an SSC, ask:
- What transformational changes have produced returns after two to three years?
- Is now the right time for your company to invest on a longer term horizon?
If your company isn’t willing to embrace an investment culture, it will be challenging to move forward with an SSC.
7. Working capital and metrics
One of the biggest benefits an SSC can provide is working capital efficiency. Compare your company’s cash conversion cycle to industry benchmarks, which can help you find areas for improvement. Calculate whether sales outstanding and days payable outstanding could impact underperforming areas. Your leadership’s dedication to improving key performance indicators (KPIs) will also have a major impact.
Establishing an SSC can help drive consistent monitoring and measuring of processes that impact working capital.
SSC in action: As startups develop future plans, thinking about SSCs can provide a foundation for scaling the enterprise.
8. Controls environment
Your controls environment includes cash flow management, fraud protection and data security.
Business resiliency planning is also key and should be top of mind. Your organization needs to evaluate what is possible. Look at how reliable and standardized your processes and controls are and ask questions such as:
- Has a lack of controls ever produced a negative outcome, such as a loss of money or clients?
- Do you use the same bank globally?
- Do you understand your various banking relationships and the functions of each of your accounts?
Centralization allows for a more unified approach to managing activities. It can also make monitoring controls easier.
Next steps toward an SSC
An SSC is a long-term investment, and it will take time to educate and obtain buy-in from all impacted stakeholders. Start early, and meet with your treasury team and banker for an in-depth discussion of your company and its goals, and how an SSC may help you achieve them.
We’re here to help
The J.P. Morgan Corporate Treasury Consulting team can help you and your company determine the best time to implement a Shared Service Center.
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