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A dozen years ago, pioneering companies began consolidating finance functions into "shared services" centers. They reasoned that handling all transactions in one place would save millions of dollars. They were right. Now these companies are moving beyond their original aims and are bringing in other functions like human resources and legal. They're also linking their centers into regional and global networks and leveraging their capabilities.
The centers create values that expand beyond administration to benefit the entire company and drive the growth of revenue and share value. Advisors can base recommendations on information that's standardized worldwide, and managers can use "apples to apples" comparisons to make better strategic decisions. Sixteen of the top 20 Fortune 500 companies use shared services centers. For example:
* Ford reduced its worldwide finance headcount from more than 14,000 to about 3,000. The center supports 300,000 Ford employees and $125 billion in sales.
* General Electric cut its U.S. transaction staff to one-fourth its original size. The smaller staff provides analytical insights as well as low-cost administrative work.
Almost all users report success, though poor planning and implementation can lead to squandered benefits. To make sure your company heads in the right direction, suggest that implementers follow these 12 steps. They're based on extensive personal experience and a just-completed global research project.
1 WIN MANAGEMENT SUPPORT
The corporate world now knows what success looks like, and it knows that success starts at the top. Companies that have tried to implement shared services with lukewarm management support report slower progress and more difficulty getting business units to cooperate. Success means crossing functional borders, and without management's support, such borders can become barriers.
How do advocates of shared services win management's mandate? They justify the investment by showing that savings will far outweigh the cost. And the savings can be impressive: Improvements in productivity typically reach 30% or more.
For best results, shared services should report to top management. In some companies, the center is a separate unit reporting directly to the CEO. In others, it reports functionally but with "dotted line" reporting to a steering committee or advisory board. Being "at the table" with business unit leaders gives tremendous visibility and helps win buy-in to strategic plans.
2 PLAN FOR SUCCESS