humane winter school 2005 how to organize for high quality services: shared service centres prof....

HUMANE Winter School 2005

How to Organize for High Quality Services:

Shared Service Centres

Prof. Dr. J. Strikwerda

Business School – University of Amsterdam

Nolan Norton Institute

[email protected]

11 November 2005

16-03-05 J. Strikwerda 2

Topics of this Key Note

What is a shared service centre?

How to organize shared service centres within the organization of a university?

The governance of shared service centres

What is quality of services?

Change management


What is a shared service centre?

• A SSC is an accountable entity in the internal organization of a firm tasked to provide specialized services to operational entities (divisions, business units) on basis of a service level agreement and full charge out of costs on basis of a transfer price

• Specialized services: e.g. Accounting services, HRM-

transactions, IT, purchasing, both supportive and part of a

value chain

• Other examples :

- E-Bridge (Randstad)

- Counting House Maastricht (DHL)

- Werkgeversdiensten (SFB)

- Purchasing (DSM)

- HR Services (Accenture, KPN)

- Many others (SSC’s are known in the USA for over ten

years)

Examples of SSC’s

Service centers for o.a. Mortgage administration, insurance, imdemnity insurance

A SSC Finance & Accounting in Poland for Europe (CE)

A SSC for support and facilities for the armed forces

US Army SSC

Accounting Plaza (service firm)

Rabofacet (avant la lettre)


Contribution of SSC’s to firm performance, types of effects

Cost reduction (20-30% on costs of processes, ~ 1% of turnover)

- Increased labor productivity former staff departments- Reductions of costs of IT

Higher level quality internal services

Increased transparency, improved management control

Achievement of synergy: sharing of knowledge and experience

Flexibility: lower exit and entry costs to restructure portfolio

Organization form responsive to higher level of professionalism of workers

Providing higher quality of services at large low scale costs, whilst maintaining local identity and policy discretion of small counties, institutions etc.

Operational

Strategic

HRM

Public and non-profit domain


Shared service centers and the costs of organization

• ICT lowers costs of communication and

coordination

• Increasing informational, non material

nature of products

• SSC’s + ICT lower the costs of

organization whilst preserving the

advantages of the M-form:

• Market orientation of value creating

activities• Internal capital marketType of operational model

FinancialHolding

Functionalform

Costs

A

A’B

B’

C

M-form

Total costs of organisationC’

Costs due to duplication of functions

Lower costs of coordination due to ICTA”

Coordination costs

B”

Ssc’s


CEO

StaffServices

BU BU BU

CEO

StaffServices

} ssc’s

BU BU BU

CEO

StaffServices

BU BU BU

Acc Mgt X

Acc Mgt Y

CEO

Staff

BU BU BU

ssc A

ssc B

ssc C

p

r

1

1

1

c

p

1

1

1

p

r

ijijij

ijijij

ijijij

c

p

jkjkjk

jkjkjk

jkjkjk

BO+

FO

rpc

R = resources / processesP = products / servicesC = customers

c. Shared-service - model d. Infrastructure - model

b. Accountmanagement - modela. M-form - model

Ssc-activitys are generic,, are not business specific

SSC are part of a generic unbundling in the economy, but (Drucker) knowledge firms will be organized like

universities, not the other way around


Multiple options exist where to place ssc’s in the organization, but options differ in value

Shared Service Center (b)

Board

Faculty Faculty Research Institute

Staff dept.Central

service (c)

Shared Service Center (a)

(d)

Legal organization

(50%)

Joint Venture (e)

Service Firm (f) Plug & Play Infrastructure

For statutory tasks and compiance

only

Conflict between staff culture and service culture

Non-stable options

For selected services only

Strikwerda, J. 2003. Shared Service Centers: van kostenbesparing naar waardecreatie. Assen: Van Gorcum - Stichting Management Studies


Example:

http://www.uva.nl/organisatie/

SSC

• University Library• Safety, Environment and Security• IT-Services• Administrative Centre • Facility Services • Student Affairs• Communication• UvA-services

• Office of Alumni Relations and University Fund • Documentary Information Services• Human Resource Services• Legal Services• Liaison Office• Project Organisation Building Development and Renovation• Shared Planning and Resource Management Services ( Bedrijfsbureau)• Office of University Doctors• Registrar's Office • Office of Doctoral Degrees• Project Cooperation UvA-HvA

Office of the Rector


Human Asset

Human Asset

The perception of the modern academic and student of the organisation of the university

Human Asset

Intellectual challenge

Decorum for life

Social safety (tolerance)

Knowledge and IT infrastructures

Amenities Infrastructure

Administrative infrastructures


The task of the Board of the university: to facilitate students and faculty with proper infrastructures

Board

Staff

F F F

Infrastructure A

Infrastructure B

Infrastructure C

Therefore:

The mission of ssc’s in universities is not to provide high quality services, but to help students and faculty to excel


Shared service centers are an effective tool to introduce the value of efficiency in the organization of a university, but keeping this separate from the academic values and maintaining the proper hierarchy of values

Discover and ExtractCommodities

Develop and MakeGoods

Devise and DeliverServices

Determineand Guide

Transformations

Depict and StageExperiences

Adapted from: Pine, B. J., & Gilmore, J. H. 1999.

30103A.08

Traditional enterprisesSupportive services by ssc’s

(transactions)

Religion, education, Bildungcare

(interaction)

Theatre, theme parks, the experience of education (collective memories, social

patterns)(access)

Academic values

Efficiency


The most critical success factor for shared service centres: its governance

Before making a SSC operation is has to be decided:

To whom the manager of a SSC reports, who sets by which procedure the budget

Who is or are authorized to decided which services will be delivered, at what quality and what prices whether there will be a user board, degree of differentiation of services, responsiveness to different needs of different academic departments, etc.

What type of service level agreements wil be used, system and basis of transfer prices

Whether services are mandatory

Process for conflict resolution

Board

Fac Fac Fac

Corporation

User Board

External organisation

SSC

Shared Service Center

Internal organisaton

Inte

rna

l gov

ern

ance

Staff dept.


A difference between firms and universities

Firms

Through SSC’s business managers are forced to be more conscious to optimize alternative use of their budgets to optimize their performance, which is financial

ABC, TQM and process engineering allow precise SLA’s at low cost (and defining quality at each process step)

Due to IT contract policing is automatic Support processes often are by IT linked to

core processes

BU-managers thus are required to be explicit on what they want from ssc’s and to spend time on this, they see the use of this

Universities

In universities academics want to focus on research, teaching, writing

Academic work results in difficult to measure outcome

Top-academics will vote with their feet if a university does not provide adequate facilities and move to another university

Academics often want to have a say on type and quality of services they expect, but don’t want to spend time on it

Service Level Agreements are hardly used in universities*

Therefore it is the task of the Board to define a set of service infrastructures that helps to attrack and to retain top academics

* Dove, C. S. 2004. The Shared Service Center: A Model for University Efficiency? Dissertation, University of Pennsylvania.


What is quality of service? “Do Not Advertise Service Quality: Deliver It!”*

Firms

High quality service is defined as service delivered according to agreed parameters and meeting other expectations, with low costs of coordination, souple resolution of conflicts and which is responsive to needs for innovation

Quality (and costs) is benchmarked against ssc’s in other firms and that of independent service firms

Universities

The met-expectations-model of service quality is too sterile and too rational with respect to academic values

The Board, managers of shared service centers should anticipate what services to offer, based on the mission of the university and on basis of the principle of penser le client

Faculty and students always should be provided opportunities to express their wishes with respect to services rendered

*Schneider & Bowen, Winning the Service Game, 1995


The Difference between Customer Expectations and Customer Needs: Quality Starts with Gratifying Needs

Conscious

Specific

Surface

Short-term

Desired outcomes from

“service encounters”

(e.g., service with less

than a five-minute wait)

If you dissatisfy

customers by not

meeting their

expectations,

you can still recover

Unconscious

Global

Deep

Long-term

Desired outcomes from

“human existence”

(e.g., maintenance of

self-esteem)

If you dissatisfy

customers by not

meeting their

basic needs,

you will lose them

EXPECTATIONS NEEDS

NEEDS:

1. Security

2. Esteem

3. Justice

Schneider & Bowen, Winning the Service Game, 1995


Generic services, as defined in a process between Board, management of SSC’s and deans

Customized services, as agreed between dean and SSC and approved by the Board

Costs: Charge-back or Show-back?*

Generic (mandatory) services better should not be charged out, as faculties often are expense centers, funding is by the Board

Most important is that ssc’s report to faculties and institutions what services they have provided in a past period

However when faculties or institutions have income from third parties (grants, contract research), a reasonable percentage of that should be paid to co-fund the generic services

Always provide the option for customized services on the principles that all costs incurred by customization are charged to the customer (mainly for psychological reasons)

* Dove, C. S. 2004

Charge-back

Show-back

Costs of services


Should SSC’s be outsourced? Be careful, low prices now may be vendor lock-in in a

couple of years, consider sharing with other educational institutions

Market transaction Market transaction Market transaction

ContractContract or vertical

integrationContract or vertical

integration

ContractContract or vertical

integrationVertical integration

Uncertainty

Low Medium High

Low

Medium

High

Ass

et S

pec

ific

ity

Brickley, J. A., Smith, C. W., & Zimmerman, J. L. 2001. Managerial Economics and Organizational Architecture (second ed.). Boston: McGraw-Hill, p. 477


Change Management

The implementation of SSC’s: change management at the level of internal governance first

1. Awareness that existing business model no longer is adequate and that introducing a ssc is a solution to the

problem

1. Awareness that existing business model no longer is adequate and that introducing a ssc is a solution to the

problem

2. Deciding new business model: new rol BUs, place and role SSC's

2. Deciding new business model: new rol BUs, place and role SSC's

3. Deciding new governance model: control of BUs in connection with

control of ssc’s, accountability Mgr SSC's, new Planning & Control

cycle, conflict resolution procedure

3. Deciding new governance model: control of BUs in connection with

control of ssc’s, accountability Mgr SSC's, new Planning & Control

cycle, conflict resolution procedure

4. Appointment of managers on the accountable entities: BUs + SSC's

4. Appointment of managers on the accountable entities: BUs + SSC's

5. Defining tasks, allocation of resources: to BUs en SSC’s

5. Defining tasks, allocation of resources: to BUs en SSC’s

6. Managers of BUs and SSC’s organise human resources,

operational processes

6. Managers of BUs and SSC’s organise human resources,

operational processes

7. Performance control7. Performance control


Identity: A critical issue in staffing a ssc

Identification is an important mechanisme through which the individual commits himself to the organization

The negative impact of working in a ssc on identification was not noticed Problems with motivation, higher turnover, lower quality of work

Negative: lower skill levels, individuals who’s identity is not defined by a profession

Negative: for professionals who prefer to identify themselves preferably with products and brands instead with their profession

Positive: skilled workers who prefer to concentrate themselves on their métier Effect: some professionals (esp. HRM) react negatively to ssc, because ssc’s

expose the limitation in their competences and what they really are doing


Ssc and standardization: what is needed

Definition of data elements

Accounting standards

Work methods

Quality requirements

Methods and concepts for capacity planning

(labour conditions, HRM sets)

Modules of products and services

Software applications

Operating platforms

Technical standardsNecessarily preceding implementation of ssc’s

Dependend per situation, preceding or during implementaion


The most critical factor for success: the commitment of the Board, and the Board understanding its roles

Operational

StrategicPlans

Strategic Guidelines

Financial

Stand- Shared/ Shared Singlealone similar business business

skills system system

HoldingCompany

StrategicArchitect

StrategicController

Operator

Ty

pe

of

co

ntr

ol

Type of business system

With respect to infra-structure ssc’s

With respect to

the university

humane winter school 2005 how to organize for high quality services: shared service centres prof....

Documents

accounting services

costs of processes

entry costs

costs of communication

costs of organization

higher quality of services

products services c

high quality services