Establishing Shared Services as a Strategic Partner in Business General Manager Dennis Farrell on Absa’s new operating model By: Dennis Farrell (Issue Details: Volume 7, Issue 1, March 2005). During the last decade, corporations have searched for ways to slice, dice and chop costs from their operating bud gets. One aspect that companies have been examining closely is how to consolidate and streamline various support services in order to gain efficiencies of scale and provide a higher level of service. Many organizations have found that it’s possible to reduce administrative costs by anywhere from 20% to 30% by identifying the most efficient way to deliver a particular service and then creating a customer-oriented mind-set. Absa set itselfon this path when it took shared services up as part of a new operating model.Sharing services is more than a method for cutting costs. The idea is to reduce inefficiency and save money, but also improve customer service. The question is: what is the most efficient way to get a task done, and how to understand the value and costs associated with it?Shared services are blowing apart the barriers that previously constrained organizations. When done right, shared services allow an organization to guarantee customers a specific service level, at a specific price, and find the least expensive way to deliver the services. In other words, shared services allow an organization to do the work where it should naturally be done.BackgroundAbsa People Management is in the process of building and embedding a new operating model, focusing delivery on “e-” as t he first choice, and the contact center as the second choice, of delivery and information sourcing (tier 1 and 2). This results in HR consulting being positioned at a more strategic level of business consulting. (HR is the term used if referring to generic issues; PM refers to the Absa context.) The new operating model facilitates the creation of a shared services function.Previously , customer awareness and satisfaction were alien concepts to internal service providers. Recognizing that these issues were rooted in the delivery ofstaff services, some major corporations have concluded that organizational change was needed.Global Models and Trends in Human ResourcesIn a rapidly changing business environment, HR has to cope with the following trends: o A radically different workforce.o An ever-changing workforce.o Globalization (mergers and acquisitions).o Downsizing.o Rapid technological advances.
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8/14/2019 Establishing Shared Services as a Strategic Partner in Business
An effort was made towards validation, by means of “triangulation,” which Stake
(1995) describes as:
o Data source triangulation – see if the phenomenon or case remains the same
at other times, in other spaces, or as persons interact differently.
o
Investigator triangulation – have other researchers take a look at the samescene or phenomena.
o Theory triangulation – by choosing coobservers, panelists, or reviewers from
alternative theoretical viewpoints.
To the extent they agree on its meaning, the interpretation is triangulated.
Although triangulation was applied at Absa, it should be done even more
extensively and in depth, in order to be able to draw accurate conclusions for the
future. In the study, the following process was followed:
o Data gathering – Interviews were conducted with Dennis Farrell, General
Manager, People Management Shared Services Absa; literature/document
reviews were done; several providers of HR outsourcing services presented
their cases to Absa management group; best practice trends were identified
and verified against the outcomes of the intervention. o Organizing the data gathering - a team effort between the consultant and the
project sponsor.
o Access and Permission - the author of the report signed confidentially
agreements not to disclose sensitive information to other bank groups.
o Observation – in the next step, after the case study is published, more
knowledge will be gained in terms of how people experience shared services.
ABSA: Migration to a Shared Services/ Business Process Outsourcing
model
According to Reilly and Williams, a key issue that will determine what you put in
your shared services, is how much you retain within PM/HR and how much you
devolve to line or pass to employees under a self-service system. In Absa, the
following services were identified as being used by the whole Absa group (all the
business units): payroll, People Management contact center, employee wellness,
management services, PM systems and processes and Centers for PM. The
decision to include an item or not was determined by whether the work was
deemed straightforward (transactional and repetitive?) and whether cost was a
primary concern.
Reilly and Williams also state that at a more detailed level, there are questions toanswer on the number of staff to be employed; and whether the roles you create
in a shared services structure are specialist or generalist in nature. They conclude
(2003, p. 30) that if you introduce shared services the constraints experienced
will vary from organization to organization. Namely, the outcome of the design is
likely to be affected by the following intent:
o Are you going to eventually sell your services externally?
o Are you going to offer them to other parts of the business, e.g.
internationally?
o Are you going to create SLAs with your business partners?
o Are you going to count PM costs as part of a corporate overhead?
8/14/2019 Establishing Shared Services as a Strategic Partner in Business
generalists, but to expect them to develop an expertise in one subject. This is one
method of balancing the generalism/specialism tension.
The Outsourcing Decision
The decision whether or not to outsource has to be taken. We had to settle notonly what to outsource, but also why and how to outsource a specific function.
The following should be taken into consideration when outsourcing:
o Determining the contract strategy - BEE (Black Economic Empowerment).
o How to manage the outsourcing process.
o Who is responsible for the tendering process - is there a tendering process?
o Who will assess the tendering process?
o Determining the contract length.
o Developing clear control procedures.
o
How will the transition process be managed? o How and who will manage the contract?
Appoint Staff
Once the overall design of the structure was in place and specific roles described,
staff members had to apply. Reilly and Williams highlight a number of factors to
be considered when appointing staff:
o How many posts could be filled internally with little prior training - in
other words: how many people could be placed in positions with their
current competencies?
o How many jobs could be filled with good internal candidates but
substantial training will be needed before they can be fully operational?
o How many jobs offer no choice but to appoint external staff?
o Personal computer literacy is vital.
o The employees were faced with the following options:
o Apply for your current post if it falls within the scope of the new
operating model.
o Apply for another job if you feel that you could acquire the necessary
competencies needed to perform the job.
o Apply for another job in Absa and be redeployed.
o Be retrenched.
The above statements applied to both the roles available in the new PM operating
model as well as for the intended shared services function. Absa PM wanted to
emphasize continuity in their service delivery as well as customer knowledge and
familiarity. Most employees were re-deployed and the retrenchments amounted to
only 16.2 percent in total. There is a risk in any new model that the service
quality is likely to decline before it improves. Keeping some form of continuity
helped smooth the process with the customers and to reassure staff that the
implementation process was still a work in progress. Line liked having a single
name to contact during the transition period and liked still being served by a
person that they knew.
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Since the start of this transition, there has been movement in the teams so as to
allow greater flexibility of deployment and to avoid too much narrowness in
attitude developing. The greatest movement was experienced in the shared
services function where a number of new appointments were made.
Reilly and Williams emphasize that the main aim is to ensure that, at the end of the process, you have the right people in the right places as far as possible. This
means that you should recognize the distinct skill sets for different roles – not
just a question of level, but of type of work. The main aim is to try and balance
the benefits of bringing fresh blood with new ideas and experience, with the need
for organizational continuity - the knowledge of the organization, how it works, its
culture and its people. Another angle to consider is creating flexibility in your
resourcing mix.
The shared services function achieved this by appointing a number of new staff
members as well as making use of the services of an external, independent
consultant who operates as part of the core team. Continuity is achieved by
having the original team members in key roles. The flexibility and innovativesolutions and views thus come from the new members in the team.
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