The debate rages on whether we are in a recession in the United States and perhaps technically we are not yet (based on the formal indicators) but all the major trends right now are down. There is little doubt however that we are in a downturn economy and while the pundits determine the expected depth and severity, business are looking to identify potential costs savings in their businesses.
In down turns, senior management turns to the business with an eagle eye and immediately hones in on the old faithful cost cutting and cost saving centers – shared services. What can this mean for shared services as a function? What pressures can you expect to see as a result of the downturn? What potential opportunities do these economic conditions off savvy shared services professionals?
If you are in the early stage of your shared services development, then this may be an excellent time for you to achieve potentially double digit cost savings through employee arbitrage and the resulting efficiency gains. The only difference to business as usual is that you will probably be under increased scrutiny and dare we say pressure to maximize the potential savings. This situation requires delicate management because you still need to build your SS strategy: focusing on the long term structure of the organization – a structure built to deliver additional value to your organization and support the business units.
More mature shared services organizations have had your large cost saving gains. Your objective now is to focus on adding value to your organization, not looking to shave off the odd cost saving percentage point here and there. So how can you find additional costs savings while still meeting your value-add objectives? One way is through adding additional functions to your shared services organization. This way you will see a vestige of the cost savings you recognized in the early stages. And the good news is the process of getting support and buy in from the effected business units will be easier the second time around. Now is the time to use those advocates that you have developed in the business units to generate the support that will make the new transition so much easier.
Another area that inevitably will be considered under economic pressure will be the outsourcing and potential off shoring opportunities for cost savings. You can approach these suggestions as a pure competitive threat, or you can assess the opportunities to truly divest of core functions where it will be more difficult to add value to the business. Either way, as a shared services professional you need to be prepared to answer questions on the off shoring and outsourcing options that exist.
One of the larger effects of the economy is the talent market. This volatile environment provides both an opportunity and a threat to shared services. Now may be the time to attract experienced shared service professionals to join your organization while you make sure that you are protecting your best talent through compensation and career opportunities (such as integrating additional functions into your SSO).
The most important element of a downturn economy is the uncertainty that these market conditions present both to your organization as a whole and to your shared services organization. Flexibility is the name of the game. Being a shared services organization that can scale up and scale down, incorporate and divest functions and show both costs saving and the ability to add value to a business are all present in the most successful SSOs and the best recipe for success.
From our research in developing the Shared Services Summit, industry practitioners told us that the economic downturn was one of their key considerations in the coming months. As such, the agenda will address the impact of the economy on topics such as the talent war and the scope & scale of your SSO.
More on this topic will be discussed during the keynote presentation at Shared Services Summit on “What an Economic Recession Means for Shared Services Organizations” given by Brian Breen, SVP & Treasurer at Simmons Bedding and Sam Poston, Senior Vice President at ScottMadden.
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