Seminar Institute Internal Auditors

Report
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
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
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2
What is a shared service centre?
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)
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• 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, HRMtransactions, IT, purchasing, both supportive and part of a
value chain
• Other examples :
-
J. Strikwerda
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)
3
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.
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J. Strikwerda
Operational
Strategic
HRM
Public and non-profit
domain
4
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:
A’
Coordination costs
B
C
Costs
C’
•
Total costs of organisation
Lower costs of
coordination due to ICT
A”
B”
Ssc’s
Costs due to
duplication of functions
B’
A
Financial
Holding
M-form
Functional
form
•
•
Type of operational model
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Market orientation of value creating
activities
Internal capital market
5
SSC are part of a generic unbundling in the economy, but
(Drucker) knowledge firms will be organized like
universities, not the other way around
CEO
BU
CEO
Staff
Services
BU
Staff
BU
p
  ij  ij  ij 


r   ij  ij  ij 
   
ij
ij 
 ij
BU
BU
BU
BO
+
FO
ssc C
} ssc’s
ssc B
ssc A
c. Shared-service - model
Ssc-activitys are
generic,, are not
business specific
d. Infrastructure - model
CEO
BU
Staff
Services
Staff
Services
CEO
BU
BU
Acc Mgt X
p
1



r 1 

1 

R = resources / processes
P = products / services
C = customers
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BU
BU
Acc Mgt Y
BU
r
p
c
a. M-form - model
c
1




p 1 

1 

J. Strikwerda
b. Accountmanagement - model
  jk

p   jk

 jk
c
 jk  jk 

 jk  jk 
 jk  jk 
6
Multiple options exist where to place ssc’s in the
organization, but options differ in value
Legal organization
Board
(50%)
Joint Venture (e)
For statutory
tasks and
compiance
only
Faculty
Central
service (c)
Staff dept.
Faculty
Conflict between
staff culture and
service culture
Research
Institute
Shared Service Center (b)
Plug & Play Infrastructure
Service Firm (f)
For selected
services only
(d)
Non-stable
options
Shared Service Center (a)
Strikwerda, J. 2003. Shared Service Centers: van kostenbesparing naar waardecreatie. Assen: Van Gorcum - Stichting Management Studies
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Example:
SSC
• University Library
• Safety, Environment and Security
• IT-Services
• Administrative Centre
• Facility Services
• Student Affairs
• Communication
• UvA-services
http://www.uva.nl/organisatie/
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•
•
•
•
•
•
•
•
•
•
•
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
Office of the Rector
Project Cooperation UvA-HvA
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8
The perception of the modern academic and student of the
organisation of the university
Intellectual challenge
Decorum for life
Social safety (tolerance)
Human
Human
Human
Asset
Asset
Asset
Knowledge and IT infrastructures
Amenities Infrastructure
Administrative infrastructures
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The task of the Board of the university: to facilitate
students and faculty with proper infrastructures
Board
Staff
F
F
F
The mission of ssc’s in
universities is not to provide
high quality services, but to help
students and faculty to excel
Infrastructure C
Infrastructure B
Infrastructure A
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Therefore:
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10
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
Religion, education, Bildung
care
(interaction)
Theatre, theme parks, the experience of
education (collective memories, social
patterns)
(access)
Traditional enterprises
Supportive services by ssc’s
Determine
and Guide
Transformations
Academic values
Depict and Stage
Experiences
Devise and Deliver
Services
Efficiency
(transactions)
Develop and Make
Goods
Discover and Extract
Commodities
Adapted from: Pine, B. J., & Gilmore, J. H. 1999.
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30103A.08
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
Corporation
External
organisation
SSC
Staff dept.
User
Board
Fac
Fac
Fac
Internal
organisaton
Shared
Service
Center
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Internal governance
Board
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12
A difference between firms and universities
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

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.
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What is quality of service?
“Do Not Advertise Service Quality: Deliver It!”*
Firms


Universities
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

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
Quality (and costs) is benchmarked against ssc’s
in other firms and that of independent service
firms
*Schneider & Bowen, Winning the Service Game, 1995
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The Difference between Customer Expectations and
Customer Needs: Quality Starts with Gratifying Needs
EXPECTATIONS
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
NEEDS
Unconscious
Global
Deep
Long-term
NEEDS:
Desired outcomes from
“human existence”
(e.g., maintenance of
self-esteem)
3. Justice
1. Security
2. Esteem
If you dissatisfy
customers by not
meeting their
basic needs,
you will lose them
Schneider & Bowen, Winning the Service Game, 1995
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Costs: Charge-back or Show-back?*
Customized services, as
agreed between dean
and SSC and approved
by the Board
Generic services, as
defined in a process
between Board,
management of SSC’s
and deans

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 cofund 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)
Charge-back
Show-back
Costs of services
* Dove, C. S. 2004
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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
Uncertainty
Low
Asset Specificity
Low
Medium
High
Market transaction
Market transaction
Market transaction
Medium
Contract
Contract or vertical
integration
Contract or vertical
integration
High
Contract
Contract or vertical
integration
Vertical integration
Brickley, J. A., Smith, C. W., & Zimmerman, J. L. 2001. Managerial Economics and Organizational Architecture (second ed.). Boston: McGraw-Hill, p. 477
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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
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
Change
Management
4. Appointment of managers on the
accountable entities: BUs + 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
7. Performance control
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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




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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
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Ssc and standardization: what is needed
 Definition of data elements
 Accounting standards
 Work methods
 Quality requirements
 Methods and concepts for capacity planning
Dependend per
situation,
preceding or
during
implementaion
 (labour conditions, HRM sets)
 Modules of products and services
 Software applications
Necessarily
preceding
implementation of
ssc’s
 Operating platforms
 Technical standards
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The most critical factor for success: the commitment of the
Board, and the Board understanding its roles
With
respect to
the
university
Type of control
Operational
With
respect
to infrastructur
e ssc’s
Strategic
Controller
Strategic
Plans
Strategic
Architect
Strategic
Guidelines
Financial
Operator
Holding
Company
Standalone
Shared/
similar
skills
Shared
business
system
Single
business
system
Type of business system
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