Designing Your Organization for BPO and Shared Services

Home > Outsourcing Strategy > Strategy Development Highlights: Free Newsletter! Improve your Outsourcing skills and knowledge | | | | |

Search: | |

for |

Outsourcing AdLinks

Sign up today!
Manage Subscriptions What is Outsourcing? What is Offshoring? What is BPO? Offshoring to India Offshoring to China Glossary of Terms Sourcing Directory Outsource by Function Outsource by Region Outsource by Industry Outsourcing Strategy Outsourcing Tactics Legal Research & Statistics Tools & Templates Vendors & Consultants Channels Business Process Mgt Innovation Six Sigma Quick Access Help Search Advertise Here Article Archives Newsletter Archives RSS/XML Feeds

Designing Your Organization for BPO and Shared Services
By Alsbridge This article provides guidance on organizational design (OD) for organizations that are undertaking or contemplating a shared service or business process outsourcing (BPO) initiative. It comes from the series, "Guidelines for Shared Services and BPO," developed by Alsbridge to reflect a shared understanding of good practice in outsourcing. Related columns will discuss the following areas: developing a business case, change management and SLAs and service levels, charging and benchmarking. Organizational design is sometimes used to mean simply the design of an organization chart. However, this article uses a broader definition which covers the operating model, the organizational structure (including the organization chart), the roles, competencies and job descriptions. For shared services and BPO the model has three main areas, as follows:
Bookmark This Page Email This Page Format for Printing Submit an Article Read More Articles

TIME Business Internet… Speed Up To 50Mbps From RM168. 100GB Server Storage & Fixed IP. Full / Part Time Masters?… Get A Masters In International Biz. Apply For Your INTI Masters Now! Strategic Sourcing Report purchasing-proc… Shows A Step By Step Process To Develop Sourcing Strategy & Plan General Manager Job Find company salaries, interview questions, reviews & office photos
AdLinks Information

Related Tools & Articles
Developing Your Shared Services/Outsourcing Business Case Outsourcing and Offshoring Predictions for 2007 Managing Risk in Outsourcing: The Strategy

The service management organization is the shared services/BPO operation itself, undertaking the various transaction Discussion Forum processing or administrative activities. Some shared services/BPO "If all else fails, try talking to operations will deliver specialist and expert services. This those people and communicating the value organization may be an internal shared service center, serving one they are adding to your or many internal customers, or external, which is typically the organization..." outsourced/BPO option. Contribute to this Discussion The retained organization is the term used to describe what is left behind when the shared services or outsourced activities are transferred to the new service provider. There are two aspects to the design of the retained function. First there is a need to design an organization that is effective in "receiving" the service delivered by the shared service/BPO provider. This will require an organization where there is clarity of responsibility for inputs and outputs to and from the provider. Second, there is a need to design a retained organization that is effective in performing its role in supporting the business. The governance layer term refers to the activities that are necessary to manage a customer/supplier relationship, including the management of service level agreements, performance reporting, billing, and issue resolution. Figure 1 shows this diagrammatically.

User Feedback Please suggest site improvements.

Figure 1: Organization design for shared services comprises three elements.

[ larger form ]

The reason for making the distinction between the three components is that each has a different job to perform in terms of ensuring the effectiveness of a shared services or BPO initiative, with different requirements in terms of skills and competencies, career and reward structures, culture, and performance management. Where Does the Organizational Design Fit?

1 of 11

12/13/2012 9:03 PM

com/content/c070219a.Designing Your Organization for BPO and Shared Services http://www. Figure 2 describes a framework for change management. However. An Approach to Organizational Design The approach illustrated in Figure 3 is designed to deliver a working organization structure." such as the overall operating model for the wider business. which defines: Organization structure Job descriptions Staffing and skill requirements Gradings Clarity about the boundaries with other organizational groups Figure 3: An approach to organizational design. To get to these outputs. it can't be seen in isolation. existing structures and people. of which "Organization" (the OD work-stream) is a critical component.asp OD is about developing an organization that is fit for purpose. and headcount targets. agreement of the 2 of 11 12/13/2012 9:03 PM . Figure 2: A framework for change management. The outputs are generated from a number of activities. there are often externally imposed "inputs. which usually happen in a sequential order (from the top of the diagram below) starting with a statement of the vision and strategy.sourcingmag. but as one element of a complex mix of activities that fit together to deliver the overall change to a shared services/BPO environment. political and strategic constraints. which will often have been articulated in the shared services business case.

While the statements in this example may appear generic and/or high-level. Figure 4: From strategic intent to design principles.sourcingmag.Designing Your Organization for BPO and Shared Services http://www. The model describes in broad terms how the new organization will operate and interact with its customers and other stakeholders.asp design criteria and sign-off of the operating Strategic Vision and Design Principles The first activity in designing an organization structure is the development and agreement of the strategic vision and related design principles. they are important. signed-off by the governance body. Figure 5: Operating model (an example for finance). of the type of organization that will be delivered. 3 of 11 12/13/2012 9:03 PM . The model in Figure 4 gives an example. The Operating Model The operating model is the first key deliverable in any organizational design. Figure 5 shows an example of an operating model for finance. because they represent a statement by the design team.

including what information is passed across the 4 of 11 12/13/2012 9:03 PM . The text that would usually support this model would describe the nature of the interactions.asp As can be seen in the example. role descriptions or headcount numbers. Figure 6: Various models for organizational design. it describes in broad terms what activities are undertaken and how the various relationships work. the operating model does not have any reporting lines. The diagram shows at a very high level what the shared services operation will deliver. However. However. the next stage is to develop the organization structure to support it. Organization models can take various forms.Designing Your Organization for BPO and Shared Services http://www. for a shared services strategy document. There are interactions with: External customers (these could be suppliers. a much more detailed description of how the model works will be required for the detailed design of the shared services organization. Organization Models Once the operating model has been developed. from functional/process models though to matrix models and market/customer models (Figure 6). for example. This level of detail will probably be sufficient. tax and regulatory authorities) Internal customers Other business units The corporate center The example also shows that self-service is a key part of the model.

Figure 7: Organizational design and effectiveness." at the end of this article contains more guidance on that. Job Descriptions.asp For shared services the design is usually based on a functional model. This is why OD must cover more than just organizational structure.sourcingmag. "The Retained Organization. Grading and Role Profiles These document the roles. How OD Supports Organizational Effectiveness An organizational design that is fit for purpose is a prerequisite for organizational effectiveness. it's important to note that the switch to a shared services or BPO environment will mean that additional skills and competencies (for example managing across organizational boundaries and client relationship management skills) will need to be included in a number of roles that have not required these in the past. however. 5 of 11 12/13/2012 9:03 PM . The sidebar. as other elements such as governance and stakeholder management processes play an important role in ensuring that effectiveness objectives are able to be met.Designing Your Organization for BPO and Shared Services http://www. Most organizations have their own templates for this experience and competencies required to support the new organization. although when there are multiple customers it's common to find an organization design that incorporates sub-groups that service specific customers within each functional grouping. skills. The structure of the retained organization is usually based on traditional functional designs.

Ensuring the shared service capability is adopted and fully used throughout the organization. Governance relating to user organization Aligning the shared service capability with the business strategy. Appoint recognized leaders to the governance team. Address and resolve shared services issues which threaten to limit achievement of overall objectives. Figure 8: Implementing a shared services governance structure. Evolving the retained function to operate in a shared services environment. It's critical that mechanisms exist to collect information and disseminate decisions throughout the organization. Providing resources to implement and improve the use of shared services. Approve framework commercial agreements. Senior representatives from the shared services operation.sourcingmag. Heads of profession for the key functions in the shared services. it comprises a set of processes and structures that are designed to address top management concerns such as: Governance relating to the shared services Measuring and improving shared services performance. Key components include a governance board consisting of: Senior customer representatives. The model in Figure 8 is an example of how a shared service governance structure can be implemented. Champion convergence of shared services requirements. Cascading shared service strategy and goals throughout the organization. Monitor delivery of shared services objectives.asp Organization and Links to Governance Shared service/BPO governance is about making decisions and assigning accountability for agreed outcomes.Designing Your Organization for BPO and Shared Services http://www. The board has responsibility and oversight of the shared services capability and will: Set the policy for shared services/BPO. The shared service/BPO governance structure should reinforce the roles and responsibilities of the business function and the shared services capability. An effective governance structure can be designed using the following principles: Decision making responsibilities should be clearly articulated and confined to the formal governance This governance board receives inputs from customer forums and the shared services operations management team. Service Management Service management is about building relationships with key customers and stakeholders and ensuring 6 of 11 12/13/2012 9:03 PM . Implement a clear communication approach. Consider and approve interventions required to deliver on shared services objectives. Moderate and approve plans. Determine the performance management regime to be applied and ensure links to broader performance management mechanisms. priorities and investment. Governance bodies need membership from the business and shared services/BPO communities with a mandate to represent their constituents.

Designing Your Organization for BPO and Shared Services http://www. evidence-based manner. which meet on a quarterly or half-yearly basis to review overall performance and prioritize new services for roll-out. Service Development Team 7 of 11 12/13/2012 9:03 PM . service reporting. showing the various activities and tools that typically underpin service management. Service Governance Team Responsible for managing key strategic relationships with customers and conducting account planning and contract management discussions. A focus on service performance and a continuous improvement mindset. Process improvement teams to manage change requests and to act to correct service non-compliance in a timely manner. it will help drive: A customer-focused service center culture. as necessary. review past performance and set expectations for future activity. capacity planning and non-compliance interventions. There is no clear cut rule for how service management organizations are usually structured. Performance measurement to track volumes and adherence to service key performance indicators within cost parameters. An efficient mechanism through which performance against agreed-upon service levels can be managed and nonperformance This is essentially a small support team for the service management director.sourcingmag. If service management is deployed correctly. Governance boards. Service Management Team Responsible for day to day incidence management. which will normally represent the shared service organization at governance board meetings. Service management is usually made up of the following key activities: Quality control to monitor standard processes and outputs on a day by day basis. but it's common to find four main teams reporting into an overall service management director. A regular supply of data and analysis to ensure that the governance of the shared service arrangements is conducted in an informed. A successful service management team will continually check the alignment of the services from the shared service center with the goals and objectives of the customer groups. Customer satisfaction feedback surveys to measure baseline satisfaction with services on a regular basis (normally a sample approach across different customer sectors). improvements to be scheduled or investments to be made.asp that the services of the shared service operation deliver to their needs. Figure 9: Service management activities. Performance reporting of key performance indicators (KPIs) and balanced scorecards on a regular (normally monthly) basis to inform the dialog between the service provider and the customer. as you can see in Figure 9. Service level agreement (SLA) management to set up suitable SLAs that define the responsibilities between service provider and customer. These activities link together. This team manages customer satisfaction surveys. This team will also prepare monthly/quarterly reporting packs and participate in service review meetings. At the highest level service management exists to meet regularly with customers to share objectives.

Hiring decisions where appointments are made on the basis of attitude as well as technical skills. This section describes the Alsbridge FastSource Lifecycle in summary terms and maps the various "types" of OD work onto it. the shared service center management team needs to consider the following: Being clear about the values of the organization and how these link to expected behaviors (so that the way that people are appointed. starting at a high level. The performance management process also creates consequences for poor performers who are made aware of improvement requirements. there's usually a big attitude change required by staff moving from traditional service functions of a back-office job into a shared service operation of a front office service delivery role. Financial Management Team Responsible for operational budgeting. Promotion and succession planning where decisions on who gets moved are based as much on how an individual gets work done (their behaviors and demonstrated values) as on their ability to deliver results. Performance appraisal and reward where the focus on assessment is to identify and reward those who go the extra mile to deliver customer service or those who work with their teams to bring everyone to the same performance level. depending on where an organization is in the lifecycle.sourcingmag. as indicated by the numbers on the diagram in Figure 10. The Evaluate Phase The journey to shared services usually starts with a series of evaluations of the options. Planning Organizational design isn't a one-off exercise. Figure 10: Shared services lifecycle. In shaping and developing the culture. People and Culture The higher degree of clarity around services and service standards that SLAs bring about means that service center teams need to focus on developing and maintaining the skills. service upgrades and new service implementation management. behaviors and knowledge that drive outstanding service. Training and development where the training and development offerings are clearly linked to developing the behaviors and skills required to drive customer service for each role. management of any cross charging or client billing arrangements and the tracking of project finances. This team is usually responsible for managing operational risk management and quality audit and compliance activities. The work on the OD will In the case of an internal shared service center. 8 of 11 12/13/2012 9:03 PM .asp Responsible for scheduling continuous improvement activities. managed and developed is clearly driven by the values of the organization). It should be developed and updated iteratively throughout the lifecycle of a shared services/BPO program.Designing Your Organization for BPO and Shared Services http://www. with successive drill-downs into more detail as the opportunity and understanding develops.

With outsourcing. detailed design can commence – covering the future operating environment (processes. sourcing. and the likely "order of magnitude" costs. If this research gives a convincing argument that shared services may be beneficial. It will usually focus more on the strategic drivers and options. There should also be stakeholder "buy in" and approval to proceed. but there may be more or fewer. based on a detailed understanding of the current metrics and a robust assessment of the available options for improvement.asp The chart below has three iterations (research. the organization needs to design its own processes. systems. The shared services strategy articulates the goal (operating model. Consideration of the TUPE implications (in based in Europe). build the shared services operation and then transition and operate the service. Feasibility Study Here the business decision is to agree whether or not there's a prima facie case for shared services and to approve the expenditure on developing a shared services strategy. A general description of the service governance principles and approach. This strategy will articulate the future model and timing (including the sourcing options of in-house or BPO). with potential options. benefits and business case. process scope and outline design. Business as usual principles to be agreed for transition. A high level description of the role of the retained function. rather than on the detail of the shared services solution. the likely risks. then usually a feasibility study is undertaken. The work on organization design is done in the feasibility study and strategy stages as follows. Whether the organization structure should be oriented by process. Blueprint of key measures and SLA/OLA outlines. Assuming that the feasibility study is positive and the organization wants to proceed. commercial and operating models. most of the build and design work is done by the service provider. technology and organization). The development of a strategy for shared services/BPO is a much more detailed task than the feasibility In the in-house model. with a service management "wrapper. A feasibility study is a relatively high-level exercise. In terms of organization design work. The research stage is often undertaken to understand the potential that shared services has to offer." A general description of the service organization. Strategy While the feasibility study is about taking a strategic decision regarding shared services or BPO ("Why should we do shared services or BPO?"). The Implement Phase The implementation activity in the lifecycle usually takes one of two routes. plus a business case and an implementation approach. High level role outlines for devolved function and the retained function. customer or function. At the end of this phase the organization will have a high-level blueprint of the processes.). Outline description of governance and escalation processes. This is a strategic stage – "Do we have a strategic need for shared services?" – and therefore the analysis will be at a high level. 9 of 11 12/13/2012 9:03 PM . Proposals for a formal consultation process. this stage is about developing a clear strategy for shared services/BPO ("How should we do shared services or BPO?"). Basic volumetrics captured to verify sizing by ratios." Although both routes deliver shared services. etc. Formal estimates of likely redundancies. the activities of each route are different.Designing Your Organization for BPO and Shared Services http://www. feasibility and strategy). the potential sourcing options. which enables the organization to understand the options. Ratios and best practice guidelines used to size the organization. and the organization's main responsibility is to design and operate the retained function and to ensure successful transition of the services to the new service provider. Either "build and operate in-house" or "outsource. Outline sizing of the organization headcount. Detailed Design for Internal Shared Services Once a shared services strategy is signed-off. and a description of how the retained function will buy services from the shared service center or service provider. then a more detailed strategy will be developed.sourcingmag. financing. the feasibility study needs to address: The concept of splitting the transaction processing activity from the retained function. the high-level options. with the primary focus on understanding the business need. and it will cover the following OD aspects. the likely shape of the operation (its scope and how it will work). implementation options and timescales. A clear organization model. the general competencies needed. usually this done by analyzing what other organizations have experienced and applying that learning to the current situation.

Champion. Work with senior managers on issues. Completion of job evaluation exercise. Plan for individual consultation and briefings. SLAs and operating level agreements (OLAs). Final organization sizing. Transition Activity for Internal Shared Services Work in this stage will include: Launch of service management and governance activities. Confirmation of pay and grading structures. The service provider will design the shared services operation (often they will have an existing facility from which the services will be delivered). Act as a communications channel for major communications. concerns and ideas. Confirmation of the TUPE situation (in Europe-based operations). The client will design the retained function and will be responsible for ensuring that the services are effectively transitioned to the service provider. drive and embed the functional agenda with the business customers and ensure its inclusion in the business planning process. Support change initiatives undertaken by business Your Organization for BPO and Shared Services http://www. Usually the service won't operate at the target level immediately. Use trend reports provided by the shared service center or service provider as the basis for 10 of 11 12/13/2012 9:03 PM .asp Work in this stage will include: Full role descriptions. Build Activity for Internal Shared Services Work in this stage will include: Populating the new organization. Manage relationships with business customers on a face to face basis (in other words. the design and build activity is shared between the service provider and the client. Detailed Design for Outsourced Shared Services Where BPO is the chosen option. these queries will be passed to the specialists for resolution. Business Partners The role of a business partner is to: Be part of the business management team with specific responsibility for leading the development and implementation of solutions. Roll out corporate policies that are the responsibility of the retained function. These are the functional specialists and business partners who have the day to day relationship with the business customers. The Retained Organization The future service delivery model has significant implications for the retained function. Specialists (Policy Subject Matter Experts) Specialists will advise on setting strategy and focus on policy development. Detailed KPIs. Finalization of business as usual teams. etc. conduct regular discussions where customers can raise issues. Also. including governance team. Setting up governance structures and processes. Definition of key interfaces and reporting and escalation routes. in partnership with and utilizing the resources of the shared service center or outsourcing provider. changing technology and the evolution of a customer service culture. Completion of formal consultation. They won't be involved in basic administration and will have greater space to focus on more added value activities such as assessing the impact of future legislation and leading best practices to deliver appropriate policy changes as required. There are two key retained roles that will have significant interaction with the shared service center or service provider. Consolidate and capture the customer feedback. and so "bedding in" and improving work is needed – usually this is an on-going activity that never ends. Identification of key external recruitment needs.).sourcingmag. ongoing improvement work is required to meet changing customer needs. A mechanism for managing and tracking such queries will need to be agreed. On the infrequent occasions when the most complex policy and process queries can't be resolved by the shared service center. Re-confirmation of headcount numbers by means of detailed volumetrics for both historic and forecast activities. The Evolve Phase The evolution of the shared services starts with "Go Live" Day 1. Fine-tuning job and role descriptions in the light of day-to-day operational experience. This is likely to mean a program of continuous improvement for all aspects of the organizational design. Full definition of the key interfaces with the retained function/customers and third parties.

With a global presence across North | Report A Problem | Submit Article For Publishing Terms of | Contact Us | Privacy Policy | Site CTQ Media. v1.ricardo (at) alsbridge. Act as a coach for business customers on all functional issues. Rate This Article: Current Rating:" in PDF form: http://www. Home | Discussion Forum | Event Calendar | Job Shop Link To Sourcingmag. 11 of 11 12/13/2012 9:03 PM . Organization Read more about submitting an Alsbridge's "The Practitioner's Guide to Shared Services and BPO" (links to four guides on the topic). learning or case study? Share it with the largest community of Outsourcing professionals.73 Poor 1 2 3 4 5 View all top-rated articles Excellent Copyright � 2003-2012 – Sourcingmag.pdf About the Author: Alsbridge is the award-winning consulting firm providing independent.Designing Your Organization for BPO and Shared Services Useful Links Alsbridge http://www.1 About Sourcingmag. CTQ Media.shtml "Volume Two. Contact Alsbridge at or visit shared services and offshoring. improve processes and maximize shareholder value through the use of both onshore and offshore outsourcing and shared services. Europe and Asia Pacific. It's a great way to promote your expertise and/or build your resume. unbiased advice on outsourcing. All Rights Reserved Reproduction Without Permission Is Strictly Prohibited – Request Permission Publish an Article: Do you have a sourcing tip. ©2003-2012 Sourcingmag. Alsbridge provides clients with experience and industry knowledge.asp advice to managers on local activity that needs to be taken. All rights reserved. The advisory firm helps clients reduce costs. http://www.alsbridge. and be recognized by your peers. 0.

Sign up to vote on this title
UsefulNot useful