3 Reasons to use shared services to increase your company profits

As the company grows, CEOs and business owners need to reconsider their company’s organization structure.  Many companies and groups of companies grow organically from small companies to big companies and from one company to many companies without specifically design the company. 

As the company grows from one business unit to many business units and from one small company to much bigger companies as well as from one company to group of companies, the organization structure must be reevaluated to take into account the scale and the benefit of big companies can have.

With the existing organization structures whereby there are many duplicates of independent company, CEOs and business owners face with

  • too many peoples as there are many duplication of work
  • difficulty in looking for qualified people for each business unit as the competence requirement is high.
  • difficulty in managing control as there are too many entities and functions to control

What solutions to the above problems do we have?

Shared services is one solution to the problems.  Shared services is also one tool I used in increasing company profits massively and turnaround company. In our HRS systems, shared services is one tool we use as an option for a solution.

What is shared services?

Shared services is a function in a company which serves all business units within a company or group of companies.  There are commonality in some functions such as Finance, Accounting, Tax, Procurement, IT, HR etc, in many cases termed as “back-office”.  These functions serve all business units in the company, called shared services.

Good definition of shared services from https://searchcio.techtarget.com/definition/Shared-services.

“Shared services is the consolidation of business operations that are used by multiple parts of the same organization.”

In some companies shared services is mostly done on the back office but this is not necessarily always the case.  Shared services can also be formed for the front end such as marketing, customer service etc. 

The main reason of having shared services will be discussed below.

Why do CEOs and Business Owners need to consider having shared services?

The objective of All CEOs and Business Owners is to manage their business with ease, clear visibility and efficiently, shared services can provide all of these.

There are 3 reasons to use shared services to increase your company profits:

Reason #1: Easier to manage business – one command center, more focus

One command center:  Instead of spreading out the functions all over the business units, by having shared services, CEOs and Business Owners have one command center.  It’s a lot easier to implement policy and internal control.  This leads to increase in internal control, visibility of business operation and easier to manage the business.

Having shared services allow a much easier way of managing business. The Business Unit or Division Head focus its activities that support the business unit business goals.    The head of business units focus on how to grow the business and not bogged down by supporting functions technicality.

Reason #2: Economy of scale – reduce or eliminate redundancy

By having shared services, CEOs and Business Owners utilizing economy of scale in its operation as it reduces or eliminate redundancy.  The company does not need many managers to handle each business unit operation such as Finance, Accounting etc. as one manager can handle many business units.

Furthermore, the number of staff can also be reduced and eliminate redundancy. This will lead to increase efficiency, better internal control and increase company profits.

Reason #3: Easier to manage human resources requirement

With many companies or business units/division, if each of division head has to be in charge of all  function of a company with its marketing, operation, finance, accounting, tax, HR, IT etc, the CEOs need a division head with high competence and skill to manage all of these function, like mini CEOs. 

However, by having the work functions divided into several areas, the division head now will only focus to the business grow.  It’s much easier to find people with specific skills instead of broad skill with capability of overseeing all aspects of business unit operation.

What are the benefits CEOs and Business Owners get by having shared services?

Benefit #1:  Increase internal control

Shared services is one tool I used to increase company profits massively.  With Shared services, accountability and internal control is well established.  Some people considered as centralized services, there is some truth in it but not completely. 

Because all of the work related to certain functions such as Finance, Accounting, Tax, HR, IT is done for all business units, this can be considered centralized but it does not mean that the business units do not have authority.  As approval still made by the business units for transactions related to the business units, the business units have authority to approve or not approve the transactions depending on the limit of authority.  The shared services can also be considered as a processing center.

Benefit #2: Increase uniformity in business process – standardized

Also by having shared services, uniformity in business process is easily enforced and followed.  Before shared services is established, one company/business unit finance dept. might each has different policy.  For example:  the same vendors supply to many business units, when they submit their request for payment, one business unit finance accepts the documents but another business unit finance still requires more documents, the vendors got confused.  This is a real life example, happens all the time with many finance department for each business unit, each has different policy and practice.

Therefore, having shared services increase uniformity in business process and create certainty and clarity for all stakeholders.

Benefit #3: Increase efficiency

As explained on the reason to have shared services above, shared services take benefit of economy of scale.  It increases efficiency by having an organization which is slim and efficient.  Shared services can handle the same number of transactions with less people, less managers and supervisor.

Shared services is one organization structure which needs to be considered for CEOs and Business Owners as the company is getting bigger and more business units and division.  It’s a tool to increase internal control, efficiency and uniformity in business process.  The successful implementation of shared services will reduce cost, increase internal control and subsequently increase company profits massively.

Case study

In one company I worked for, there are more than 20 companies divided into 5 regions.  Each region is considered independent entity with its own back office functions such as Finance, Accounting, Tax, HR, IT.  Although the head office supervises these functions, the daily operation is run at the unit and region levels.  Internal control is weak.

I restructured the organization structure so that the company uses shared services for its Supply Chain Management, Finance, Accounting, Tax, HR, IT etc. The company started to turnaround after 4 months and increasing profits by about $30 million in one year. 

However, please note, in increasing profits massively and turnaround company, this is one tool I used but I used many other tools.  Therefore, although shared services is the main tool I used to increase profits massively in this company, there are many other tools I use in combination with shared services to make the turnaround successful.

Summary

Shared services is one important tool I use in increasing company profits massively and turnaround company. 

There are 3 reasons why you need to utilize shared services for your company:

Reason #1: Easier to manage business – one command center, more focus

Reason #2: Economy of scale – reduce or eliminate redundancy

Reason #3: Easier to manage human resources requirement

The benefits CEOs and Business Owners get by having shared services

Benefit #1:  Increase internal control

Benefit #2: Increase uniformity in business process – standardized

Benefit #3: Increase efficiency

Shared services can be an effective tool in increasing your company profits massively and turnaround you company.  This tool has to be combined with other tools to get optimal benefit.

Wish you success.

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Shared Services FAQ

What is shared services?

Shared services is a function in a company which serves all business units within a company or group of companies.  There are commonality in some functions such as Finance, Accounting, Tax, Procurement, IT, HR etc, in many cases termed as “back-office”.  These functions serve all business units in the company, called shared services.

What are the reasons to use shared services?

Reason #1: Easier to manage business – one command center, more focus.
Reason #2: Economy of scale – reduce or eliminate redundancy Reason #3: Easier to manage human resources requirement

What are the benefits of shared services?

Benefit #1:  Increase internal control
Benefit #2: Increase uniformity in business process – standardized
Benefit #3: Increase efficiency