As organisations expand their operations across regions, or grow through M&A, shared services often emerge as a strategic business model for:
- Reducing costs
- Improving operational efficiency and service delivery
- Enabling faster decision making
- Enhancing strategic capability
- Standardising global processes across brands and markets
- Supporting continued scale and global expansion.
“This business model is increasingly adopted by large and complex organisations in industries like mining, energy, utilities, large equipment manufacturing and renewables,” says Kester Guy-Briscoe, Associate Partner for Gerard Daniels. “The shift towards shared services is further fuelled by globalisation, rapid digital transformation and growing reliance on automation technologies in these and other industries.”
Transitioning to a shared services operating model allows organisations to streamline operations, standardise processes and bring greater consistency to organisation-wide functions such as HR, IT, procurement, legal and HSEQ.
While the operational benefits of this operating model are clear, success ultimately rests on leadership capability. Here we explore the unique leadership dynamic within shared services and consider what it takes to transition to and lead effectively in this environment.
The leadership dynamic
Adopting a shared services operating model fundamentally reshapes how centralised functions interact with the wider organisation, changing what’s expected of local roles and redefining the leadership that is required.
“In decentralised operating models, functional teams are typically embedded in individual business units or geographies. Within this structure, leaders tend to rely on local discipline specialists to manage both strategic and operational responsibilities – but the expectation is quite different in a shared services environment,” says Kester. “By consolidating the more transactional and operational aspects of specialist functions, local roles become more strategic and advisory in nature – a dynamic also referred to as business partnering.”
Transitioning to this type of business model creates significant opportunity to elevate the value that functional teams deliver. It also introduces a range of challenges for senior leaders in:
- Supporting employees through change
- Navigating complex and rapidly evolving stakeholder requirements
- Maintaining strategic and cultural alignment across geographically dispersed teams.
How to transition and lead effectively in a shared services environment
Aligning talent with organisational requirements
Moving from a decentralised structure to a shared services model involves significant restructuring of roles and responsibilities. “During the transition, individuals who previously performed operational tasks may need to take on additional responsibility or perform roles that are more strategic,” says Kester. “Making these changes is much easier when individuals have the right aptitude, backed by consistent skill development and strong leadership.”
As not all employees are naturally suited to major change or performing this type of role, leaders must align individual capability with broader organisational requirement, identifying those most likely to thrive in a shared services environment.
Introducing service level agreements (SLAs)
SLAs are a critically important mechanisms for the success of shared services centres themselves – particularly where outsourcing takes place across large geographical and cultural distances.
“Establishing SLAs helps business leaders to set clear expectations for centralised functions, in terms of responsibility, accountability, delivery timelines, quality of service and performance against defined metrics,” says Kester. “Ultimately, this agreement defines what needs to happen, when it needs to happen and what the outcome should be.”
To realise the long-term value of a shared services model, SLAs must also evolve over time. “As organisational needs change, ongoing evaluation allows for necessary refinement. It also allows gaps to be addressed as teams adjust to the new operating structure,” says Kester.
Leading through influence
The ability to influence and foster alignment around shared goals and purpose, are additional success factors for leaders in a shared service environment.
“Centralised service centres are often located where there is a lower operating cost model. This separation requires leaders to build cohesion across teams that don’t always share the same location, time zone or organisational context,” says Kester. “Leading through influence (rather than proximity) and maintaining strategic and cultural alignment are key to achieving this.”
Weathering the storm for long-term operational gain
Moving from a decentralised structure to a shared services model can lead to significant operational, strategic and cultural change that challenges individuals at all levels of an organisation. The nature of this change makes employee morale and engagement important considerations for senior leaders.
“While temporary disruption is an essential part of progress, adapting to change and maintaining operations while new teams, roles and processes are established, can create a sense of uncertainty that affects performance and morale,” says Kester. “This sentiment can lead to even greater disruption and resistance if it is not carefully managed with empathy and sensitivity from senior leaders.”
Reinforcing the need for change and the long-term benefits of shared services, provides vital assurance to employees during this transition. Leaders must also approach change with patience, transparency, clear and consistent communication.
The defining factor in shared services success
Considerable efficiency and operational gains can be made by transitioning to shared services. However, leadership effectiveness remains the most critical factor in the success of any major organisational change.
“When leaders capably guide teams through this transition, shared services models move beyond cost reduction and efficiency improvements, to elevate the strategic contribution of functional teams,” says Kester. “The skills, experience and approach that leaders bring to this change shapes how well it is received and determine whether teams stay aligned, engaged and focused on delivering value to the business.”
To develop your capability and resilience to deliver on major change and transformation, orto discuss the future leadership requirement for your organisation, connect with Kester or reach out to your local Gerard Daniels team.
