Governance Capability in Shared Services
Shared Service Centre Operations are in a cycle on continuous comparison and assessment. Comparison with older operating models before the SSC transformation, assessment against other SSC’s within the organisation, or outside, comparison with outsourced models and other transformations. There is a constant need to demonstrate value, improvement, flexibility in meeting the changing needs of the organization and in satisfying a broad, demanding and perhaps self-interested set of stakeholders.
It is the proposition of this paper that governance, properly understood and implemented can be a driver of SSC value to the enterprise and that there is a direct link between governance capability and business value.
What is governance? Literally it means to steer. We should thank Plato for the metaphorical concept as in steering or giving direction to an entity: a nation, an enterprise, a project or relationship. It is decisions that define expectations, grant power, and verify performance. In business terms it is thought of as a process and structures relating to consistent management, cohesive policies, guidance, and decision rights within a given responsibility area. It is not mere compliance, adhering to a set of rigid and inflexible rules, just following instruction. This crude and narrow understanding of governance is sometimes highlighted, and assumed to fully capture the concept, used to explain why, for enterprises, governance has traditionally been seen as a chore, a thing people would prefer to avoid, ignore, and certainly not spend time and money on.
Governance should be seen for what it correctly is, a critical element in helping enterprises make the best decisions it can and thereby realise the greatest value.
Governance is a capability. It is a capability that can be learned, measured and managed for and organisations, specifically shared services organizations, with the highest capability realise the greatest value from their governance process.
This is of crucial importance for Shared Service Centre Operations in managing stakeholder relationships. It is precisely because the shared service centre is part of the same enterprise as the stakeholder groups that these relationships are so important. Mutual confidence is fostered by strong communications, clear commitments, transparent measures of performance against those commitments and shared objectives. Strong governance capability is a crucial agent in driving value in those relationships. SSC operations that focus on developing and driving constant improvement in that capability will identify themselves as best in class and be recognised by their stakeholders as delivering value to the enterprise.
An approach to governance that is focused on value and performance will enable those relationships be built on confidence. It will also demonstrate to the enterprise that an investment in governance capability is an investment in business value.
Governance capability is an evolution, and can be represented as curve with capability maturing through cycles and adding greater business value the higher up the curve the SSC sits.
Governance Capability Curve
Excellence is each stage is required for the highest levels of governance capability and a progression through the various stages is the expectation. It should not be understood that there is an end point, the curve moves continuously upwards and as an SSC evolves different areas will be at different capability levels though over time the progression should become quicker.
Early stage Governance capability
The key elements to address at the beginning of the governance journey are around service level definition and performance management. Unless the SSC has effective systems for understanding the key measures of performance its ability to manage operations and deliver on targets and expectations is fatally compromised. Measuring performance against key indicators and expectations of service delivery is the foundation of governance capability. There may or may not be a formal SLA in place for the SSC and the teams across the enterprise it supports. But it is certain that SSC stakeholders will be very clear in their assessment of whether the SSC is delivering value.
It is essential therefore not just to measure and build a body of evidence on service delivery but to do so in a way that is consistent, robust, complete, and is stored as a record over time and allows for comparisons with previous periods, different centres perhaps, and allows for an aggregated review of that evidence across services, territories or any other dimension required by the enterprise.
The measures of governance capability will be that there is no manual entry problem which compromises the robustness and rigour around evidence collection; that there is no reservation on the integrity or availability for analysis of that evidence; and that the required aggregated multi-dimensional analysis can be completed routinely.
Addressing these key requirements is required to build that early stage governance capability. The questions the SSC needs to ask itself are: do I know the things I need to measure? Are those metrics understood, agreed and visible to all stakeholders? Is my methodology for gathering that evidence, solid, robust, protected from human error to the extent possible? Is that evidence available as an historical record and available for comparison? Is that evidence rigorously analysed? Am I comparing against other centres, best class, benchmarks? Am I basing decisions on the results of that analysis? If yes is the answer to all of these questions then the SSC is clearly demonstrating that it is operating at a level of governance capability that stands up to scrutiny and comparison.
It is easy to measure the SSC against these capability requirements and establish to what capability level the SSC is operating, and say the rights things being done to begin to move up the capability curve or there is more to do.
Business Value
Developing the approach, process, and adopting the appropriate toolset to deliver that level of governance capability is not an end in itself. This will be done in order to realise direct business value. If these steps do not deliver that value it is unlikely they will happen.
The business value drivers in early stage governance capability are in cost reduction, process improvement, performance improvement, overall effectiveness and efficiency.
Developing Governance Capability
Measuring performance against formal SLA prescribed outcomes or more informally defined service delivery expectations is not governance by itself. They are just one dimension of a multi-faceted domain. As the governance capability of the enterprise develops they will begin to incorporate details on all issues encountered in the course of service delivery, and the steps in their resolution. They will also assess potential risks to service delivery and the possible mitigation actions that can be taken to protect the enterprise, the SSC and its stakeholders from those risks. They will seek to understand stakeholder satisfaction on an on-going basis and that factors that impact that satisfaction positively or negatively. They may additionally seek to incorporate a perspective on measures of value or drivers of cost.
In focusing on these additional elements the SSC is demonstrating that they understand that the range of factors that should impact decisions and direction for the SSC and stakeholders are diverse, varied and multi-dimensioned. They are presenting a richer and more holistic view of the elements that inform the governance process. They are demonstrating a higher level of capability.
It is important to note that these elements should be evidence driven just as measures on performance and SLA tracking should be. Details on issues, risks, satisfaction need to be tracked with the same rigour and precision as performance metrics. Even where they are dealing with an essentially subjective aspect like satisfaction it is important that the approach be as scientific and consistent as possible. Simply repeating subjective impression is not enough. Satisfaction must be related directly to issues, risks, resolution, and performance metrics and there should be clear accountability and responsibility within the process.
Assessing current capability against the characteristics outlined here is relatively straightforward. If it is possible to draw a direct line between identified issues, their path to resolution and the associated timing intervals with performance metrics on service delivery then the SSC is in a position to begin to present the expected holistic view. Adding as association with risk, and customer satisfaction, then overall relationship health and the complete set of elements influencing governance is transparently being captured and used in directing the governance process. If the SSC is not able to present that level of analysis and demonstrate that it is used to inform the governance process and direct operations it is not yet at the developing governance capability stage.
Business Value
The direct business value that comes with this level of governance capability is in enhancing potential margins, adding revenue opportunity, avoiding issues or resolving them rapidly, reducing potential risk to service delivery. These will obviously improve satisfaction with the SSC and ensure the value perception to the enterprise is enhanced.
Mature Governance Capability
The measures of the most mature governance capability in an SSC will assess how the SSC is incorporating a future oriented dimension into the governance process. What future outcomes are desirable and how can the SSC map a path to those outcomes and measure progress towards them. The desirable future outcomes will be defined by the business imperatives of the enterprise. The SSC governance process will ensure the direction of service delivery function is driven by those imperatives. Those future outcomes may be qualitative or quantitative, and will illustrate how highly focused on supporting enterprise strategy and therefore stakeholder the SSC is.
Business Value
The business value that accrues through achieving this level of governance capability will be in service transformation; highly responsive, flexible operations constantly reposition to meets the changing and future demands of the enterprise. They will reflect opportunity maximisation and an organisation in continuous search for new and improved operations. The SSC will measure itself in driving business value and stakeholder will rely on the SSC as an agent in driving change in service delivery requirements to better meet the strategic needs of the enterprise.
Tools
It’s clear that these respective governance capabilities are not sufficient independent of each other. Achieving a future oriented dimension focused on business imperatives and driving change is useless if all the elements impacting governance are not being captured in one holistic view. Understanding risks, issues and satisfaction is not possible unless they are connected directly to service delivery and performance measures based on objective validated evidence. None of these work together without connected collaborative workflow and the right toolset. Too often Enterprises rely on spread sheets and the commitment of individuals as the platform for their governance process. If there is no highly capable toolset, governance capability is weakened. Effective tools do not have to be expensive or very complex implementations. They do need to help the enterprise measure current governance capability and highlight the path to improvement.
Why focus on Governance capability
The SSC delivering value through its governance capability in this transparent and collaborative manner is driving positive stakeholder engagement and developing robust long term relationships founded on value and trust.
Because governance capability drives business value and an SSC driving business value for the enterprise is demonstrating a strategic focus that is stakeholder driven and can compete with best in class outsourcing, SSC’s operating in different cost jurisdictions, and organisational suspicion of the aggregation of key business support functions.
The SSC will focus on governance capability and strive to improve that capability as a key competitive differentiator.