Many finance managers believe that the trend towards amalgamating accounting roles or purchasing departments into shared service centres (SSCs), which work for a large number of divisions, will accelerate throughout Europe as the single currency removes a barrier to their implementation. But one consultancy warns that SSCs are a reversal of the decades-old trend towards decentralised control and empowered managers. They may, warns Andrew Collinson of Manchester-based Collinson Grant, represent “a solution in search of a problem”. Collinson says that there is nothing intrinsically wrong with SSCs, “as long as they don’t damage the ability of an organisation’s managers to function properly.” An acid test is whether business unit managers have the right (after an initial period) to choose not to use the services offered by the corporate SSC, and to take that function back in-house or to buy the service from another provider. Typical problems surrounding SSCs include the fact that the centralised services are politically close to the corporate centre, partly because they are usually the brainchild of somebody there, says Collinson. This is ironic, given that standard practice is that such policy initiatives require top-level buy-in for them to succeed. Also, because of this political clout, subsidiary managers may be reluctant to criticise the SSC. Collinson advises that there should always be a series of internal service level agreements. “Profit managers should be able to openly make judgements about the quality, appropriateness and costs of the services that the SSC is delivering. Ultimately, I believe that they should have a choice as to whether they use them or not.” Without that ability to opt out, the SSC effectively becomes a monopoly supplier, Collinson says. SSCs may be “emotionally” as well as geographically distant from the divisions they serve: heavy-handed credit control management or failure by a central purchasing unit to organise delivery of supplies on time could obviously result in serious sales and production problems in the business unit. This return to “centralisation and corporatism” also takes away power that had once been devolved to business unit managers. That in itself may cause difficulties, particularly if there is a problem with the service provider. Moreover, there is a danger that business unit managers will, in effect, shrug their shoulders and blame the centralised service provider for problems that they once would have either taken the blame for or managed better. “There is a danger that you’re changing managers’ behaviour,” Collinson warns. The difficulty is in ensuring the right balance between reducing costs with SSCs and “maintaining the responsibilities and accountabilities that empowered managers have”.
View our archived webinar, including Oracle and a host of ‘Fast Data’ experts, to discover how financial professionals can help create a Fast Data business
Reinmoeller, professor of strategic management at Cranfield School of Management, has proposed an Eight Actions Model to help organisations increase margin and perform ahead of market expectations
When thinking about Iran as a potential market it’s important to go in with open eyes. This means being aware of some of the myths as well as being clear on the challenges
Third of UK companies with defined benefit pensions schemes are paying out more from their scheme in pensions than is being received in contributions