Hackett Research Alert: Shared Services Can Drive Dramatic Finance Cost Reductions, But Many Companies See Little to No Cost Ben
November 30 2006 - 9:30AM
Business Wire
Companies can cut finance process costs by over 40% through the use
of shared services, and also improve customer satisfaction, process
quality, and productivity. But many companies never see these
gains, due to common errors in their sourcing decision making or
implementation efforts, according to new research findings from The
Hackett Group, a strategic advisory firm and an Answerthink company
(NASDAQ: ANSR). Hackett�s 2006 Enterprise Book of Numbers analysis
found that nearly one in every five companies see process costs
drop by more than 40% as a result of their shared services
implementations. But more than 30% of all companies see process
costs remain unchanged or actually increase as a result of shared
services implementations, and another 12% see only small cost
reductions. Similar results were found in analyses of the impact of
shared services on customer satisfaction, process quality, and
productivity. Hackett�s research identified several best practices
companies use to generate improved performance in these areas as
part of shared services implementations. Hackett also detailed
common mistakes companies make that prevent them from seeing
improvements. In a separate study of European companies, Hackett
found more balanced results, with most companies showing between
10% and 40% cost reduction as a result of finance shared services
implementations. Hackett�s analysis found two major factors drove
the differing results. U.S. companies are often more aggressive in
their shared services implementations, while European companies
take a more conservative approach, weighing potential return on
investment and possible risk. This leads European companies to
generate less dramatic cost savings, but also ensures that there
are far fewer cases among European companies where the use of
shared services causes costs to increase. In addition, Hackett
believes that European companies are more likely to be taking
advantage of wage arbitrage due to the close proximity of Eastern
European labor markets. �Shared services is clearly a powerful
technique for improving efficiency and effectiveness in corporate
finance,� said Hackett Senior Business Advisor Tom Bangemann. �But
it takes commitment, focus, and initiative to get it right.
Companies that bring these to the table reap significant rewards.
But those that don�t can feel all the pain and see none of the
gain. Worse yet, they can even find that their costs increase.�
According to Hackett Senior Business Advisor Penny Weller,
�Companies that get the most out of shared services implementations
treat them like an independent business, and emphasize elements
such as customer satisfaction, performance measurement, and
accountability. Shared services can�t be just a corporate mandate
that companies try to enforce. The best also focus on change
management, and understand that eliminating the lion�s share of
decentralized activity in corporate finance takes time,
communication, and the backing of senior management. You can�t
expect to reeducate everyone overnight. If you get this part wrong,
people dig their heels in and you end up with �shadow systems� that
undercut centralization efforts. Finally, shared services must be
seen as an opportunity for process improvement. Standardization and
simplification are where a lot of the savings come from. They need
to be an integral part of the change effort. �The value of
successful shared services even extends well beyond short-term
ROI,� explained Weller. �It�s the first step to further reducing
cost structures through globalization. Once finance processes have
been centralized and standardized, they become portable, and it
becomes much easier to take advantage of labor arbitrage
opportunities available offshore, either through captive operations
in low-cost labor markets or by outsourcing.� More information on
The Hackett Group is available: by phone at (770) 225-7300; by
e-mail at info@thehackettgroup.com; or on the Web at
www.thehackettgroup.com. About The Hackett Group The Hackett Group,
a strategic advisory firm, is a global leader in best practice
research, benchmarking, and business transformation services that
enable world-class performance across selling, general &
administrative (SG&A) and supply chain activities. Through the
acquisition of REL Consultancy Group, we offer Hackett-REL Total
Working Capital services to liberate cash flow from operations.
Hackett provides strategic insight, best practice advice and
implementation services grounded in performance metrics obtained
through 14 years and 3,500 benchmark studies at 2,100 of the
world�s leading companies. Book of Numbers is a trademark of The
Hackett Group. Companies can cut finance process costs by over 40%
through the use of shared services, and also improve customer
satisfaction, process quality, and productivity. But many companies
never see these gains, due to common errors in their sourcing
decision making or implementation efforts, according to new
research findings from The Hackett Group, a strategic advisory firm
and an Answerthink company (NASDAQ: ANSR). Hackett's 2006
Enterprise Book of Numbers analysis found that nearly one in every
five companies see process costs drop by more than 40% as a result
of their shared services implementations. But more than 30% of all
companies see process costs remain unchanged or actually increase
as a result of shared services implementations, and another 12% see
only small cost reductions. Similar results were found in analyses
of the impact of shared services on customer satisfaction, process
quality, and productivity. Hackett's research identified several
best practices companies use to generate improved performance in
these areas as part of shared services implementations. Hackett
also detailed common mistakes companies make that prevent them from
seeing improvements. In a separate study of European companies,
Hackett found more balanced results, with most companies showing
between 10% and 40% cost reduction as a result of finance shared
services implementations. Hackett's analysis found two major
factors drove the differing results. U.S. companies are often more
aggressive in their shared services implementations, while European
companies take a more conservative approach, weighing potential
return on investment and possible risk. This leads European
companies to generate less dramatic cost savings, but also ensures
that there are far fewer cases among European companies where the
use of shared services causes costs to increase. In addition,
Hackett believes that European companies are more likely to be
taking advantage of wage arbitrage due to the close proximity of
Eastern European labor markets. "Shared services is clearly a
powerful technique for improving efficiency and effectiveness in
corporate finance," said Hackett Senior Business Advisor Tom
Bangemann. "But it takes commitment, focus, and initiative to get
it right. Companies that bring these to the table reap significant
rewards. But those that don't can feel all the pain and see none of
the gain. Worse yet, they can even find that their costs increase."
According to Hackett Senior Business Advisor Penny Weller,
"Companies that get the most out of shared services implementations
treat them like an independent business, and emphasize elements
such as customer satisfaction, performance measurement, and
accountability. Shared services can't be just a corporate mandate
that companies try to enforce. The best also focus on change
management, and understand that eliminating the lion's share of
decentralized activity in corporate finance takes time,
communication, and the backing of senior management. You can't
expect to reeducate everyone overnight. If you get this part wrong,
people dig their heels in and you end up with 'shadow systems' that
undercut centralization efforts. Finally, shared services must be
seen as an opportunity for process improvement. Standardization and
simplification are where a lot of the savings come from. They need
to be an integral part of the change effort. "The value of
successful shared services even extends well beyond short-term
ROI," explained Weller. "It's the first step to further reducing
cost structures through globalization. Once finance processes have
been centralized and standardized, they become portable, and it
becomes much easier to take advantage of labor arbitrage
opportunities available offshore, either through captive operations
in low-cost labor markets or by outsourcing." More information on
The Hackett Group is available: by phone at (770) 225-7300; by
e-mail at info@thehackettgroup.com; or on the Web at
www.thehackettgroup.com. About The Hackett Group The Hackett Group,
a strategic advisory firm, is a global leader in best practice
research, benchmarking, and business transformation services that
enable world-class performance across selling, general &
administrative (SG&A) and supply chain activities. Through the
acquisition of REL Consultancy Group, we offer Hackett-REL Total
Working Capital services to liberate cash flow from operations.
Hackett provides strategic insight, best practice advice and
implementation services grounded in performance metrics obtained
through 14 years and 3,500 benchmark studies at 2,100 of the
world's leading companies. Book of Numbers is a trademark of The
Hackett Group.
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