White Paper:

Get the most out

of your Shared
Service Center!
 A Shared Service Center:
dream or nightmare?
Over the past 10 years, the centralization of decentralized
services in a Shared Service Center (SSC) has become a
popular organizational form. SSCs are set up for various
services, including HR, Finance and IT. However, expe-
rience has shown that, in practice, many SSCs do not
deliver what is expected of them: leveraging scale does
not automatically result in economies of scale, the SSC is
not able to provide the business with flexible support, or
the business case on which the SSC is based is not real-
ized. Organizations then face a difficult, twofold question:
why is the SSC performing below expectations and, more
importantly, what can and will we do about it?
The answer to these questions is often not sought.
Rather, the main focus is placed on the next steps to
be taken along the path already chosen. Often, one of
the following decisions is made without examining the
true cause of the problem: ‘abandoning’ the SSC and
Why is the SSC per- reverting to departments, or the further outsourcing of
forming below expec- the activities of the SSC. This is a shame in both cases,
because the organizational form of an SSC offers large
tations? And, what possibilities – as long as a number of conditions are
can we do about it? always fulfilled.

For whom is this white paper intended?

Based on the experiences of several of Quint Wellington
Redwood’s consultants, this white paper deals with 4 fun-
damental questions that can help organizations in set-
ting up an SSC. Subsequently, 8 principles are described
which contribute to the successful operation of an SSC.
This white paper is therefore of interest to everyone who
works at an SSC, or is involved in setting up or managing
one. For customers of an SSC, this white paper provides
valuable insights into the choices made when setting up
an SSC and into the services SSCs provide.

www.quintgroup.com 2
 Problem definition
The most common reasons for organizations to set up an
SSC are to generate cost savings and improve the quality of
their services in order to create value. Cost savings should
be generated by centralization, standardization and econo-
mies of scale.
The decision to establish an SSC is usually validated on the
It is definitely basis of a business case. This is understandable, because the
decision-makers want the objectives they have in mind to be
possible to operate substantiated in financial or qualitative terms. What is often
an SSC successfully forgotten is that decisions made later, and changes in the or-
ganization or on the market, can all have an impact on the
original business case and undermine it. If the appropriate
adjustments are not made, the SSC is at risk of not achieving
the objective for which it was established.

Figure 1 – Foundations and elements for successful strategic decision-making and business operations.

Strategy Business Operations

Elements for Success

Not always Customer-

Coalition of Success by
better, but les supplier
the willing saying “no”
expensive relationship

Ownership of
Attitude & Measure to
the business Profit motive
behavior manage
case

What will the Board do to

How does the SSC policy fit
Fundamental Questions

ensure that the SSC policy

into the strategic business becomes embedded in
operations? business operations and the
organization?

What is the scope of the

Does the SSC occupy a logical,
services the SSC will deliver
clear position within the
and what are the ‘ground
organizational structure?
rules’?

www.quintgroup.com 3
 One of the persistent stumbling blocks when setting up
and operating an SSC is the attitude towards change of
the employees and managers involved – and the ensuing
behavior, of course. In this regard, one of the culprits is
unclear communication from the top of the organization:
the objectives and consequences of setting up an SSC
must be clear to everyone in the organization, from top
to bottom. Without this clarity, employees and managers
will come up with procedures and ground rules them-
selves, which seem beneficial from their perspective but
can seriously compromise the business case on which
the SSC is based. Regrettably, this happens far too often
in practice and undermines the reputation of the SSC
concept. Consequently, many organizations reverse their
decision to set up an SSC, or decide to dismantle or out-
source its services. However, they are mistaken because it
definitely is possible to operate an SSC successfully.

Four fundamental questions

when setting up an SSC
If the organization has a business case for centralizing its
services, it should ask itself the following questions before
making the decision:

1. How does the SSC policy fit into the

strategic business operations?
Does the organization have experience in the centraliza-
tion – and therefore the standardization – of activities
and is this part of how the organization is managed, or is
establishing an SSC the first step towards centralization?
The decision to set up an SSC should not be made lightly.
Careful consideration should be made regarding the objec-
tives the organization wants to achieve with a business unit
that delivers services to a part – or the whole – of the organi-
zation. It is important to take the strategic business objectives
into account. If the SSC policy is not aligned with these objec-
tives, friction could arise and the objectives for establishing
a SSC will not be realized, or the SSC will not contribute to
achieving the strategic business objectives. It is therefore
logical that the focus within the SSC should be on the quality
of the services, if the organization is aiming for product leader-
ship and the output of the SSC is part of the end product.

2. In terms of its objective, does the SSC

occupy a logical, clear position within the
organizational structure?
Professor J. Strikwerda (2010) set down a number of
options regarding organizational forms, each with its own
advantages and disadvantages (cf. Figure 2).

www.quintgroup.com 4
Figure 2 – Possible SSC organizational forms (Strikwerda, 2010).

Board of Directors

Corporate Services

50%

Joint Venture
Shared Service Center

BU 1 BU 2 BU 3
Service firm
SSC

Shared Service Center

None of the conceivable organizational forms is either

right or wrong by definition. It is of primary importance
that the choice is well considered, and that it is in line
with the governance of the organization. A form can be
chosen based on the objectives set for the SSC. And,
more importantly, the SSC can be placed in the most
logical position within the organization. For a brief ex-
planation of the different types and positioning of SSCs,
refer to the text box “Different types of SSCs”.

3. What is the scope of the services the SSC

will deliver and what are the ‘ground rules’
(e.g. purchasing obligation, standardized
services, etc.)?
The scope is important in arriving at a clear delineation
of the tasks of the SSC. What services and products will
be delivered? How far do the responsibilities of the SSC
extend? What decision-making authority does the SSC
have in terms of delivering new services or modifying
old ones, and how is this provided for organizationally?
If no proper agreements are made, internal and external
customers will try and push the boundaries, which has
a detrimental effect on the ‘standardized’ nature of the
services provided.

www.quintgroup.com 5
 4. What will the Board do to ensure that the
SSC policy becomes embedded in business
operations and the organization?
A sponsor on the Board of Directors (or at an equivalent
level) is crucial to the continued success of an SSC. After
all, among other things, an SSC is set up to shape or
support the organization’s strategy.
Change processes like this will never have universal
support. There will be resistance to the SSC – open or
hidden. This may take the form of requests for customer-
specific products or services, either through service levels
Change processes or by making the way in which costs are charged out the
subject of discussion. Only too often it turns out that a
like this never have lack of support from a senior manager drives the SSC’s
universal support management into a corner.
Answering these four fundamental questions lays a solid
foundation for setting up an SSC. However, posing these
questions can often be a viable option when an existing
SSC is floundering. Finding answers allows you to de-
termine where there may be problems in your business
operations. You can then set out and implement an
improvement and action plan. Take note: it will not be
easy. Well-trodden paths and established structures will
be called into question which in turn can lead to renewed
resistance.

Eight elements for

success in setting up
and operating a Shared
Service Center
The four fundamental questions mentioned above should
ideally be answered and then implemented by the Board
of Directors. There are, however, eight elements that also
have a great impact on the success of an SSC. These
elements should be dealt with immediately when an SSC
is being set up.
In practice, many organizations have to contend with
challenges that their existing SSC has been trying to
tackle. It is difficult – but by no means impossible – to
deal with these stumbling blocks and have your SSC run
smoothly. How? By using the elements for success to real-
ize improvements. How this is done varies from situation
to situation.
The elements below have a significant impact on the
success of SSCs:

www.quintgroup.com 6
 1. It’s not always better but costs are saved
If the goal of the SSC is to save costs, those savings will have
to result from standardization. This means the business units
have less flexibility to diversify and in providing their own
variants and customization. It is vital that this is communi-
cated clearly and transparently in advance. This prevents
disgruntled customers putting pressure on the SSC to again
provide ‘gilt-edged’, customized services. Acceding to such
pressure would be in blatant disregard of the basic principles
of the SSC concept and would put the business case at risk.
Provide clarity in advance: no more gilt-edged services, no
more customization – and no exceptions!

2. Where there’s no will, there’s no way

Form a ‘coalition of the willing’ and ensure that all the SSC’s
stakeholders are prepared to support its strategic objective.
Often, although this support is present during the setting-up
of a new SSC and in the period immediately afterwards,
stakeholders soon begin to focus once again on the strategic
objectives of their individual business units.
The strategy chosen for the SSC must become part of the
business strategy and remain in place, even if this is difficult
It is possible to get or costs money. So, do not force business units to purchase
services from your SSC if they do not support it (referred to
an SSC running as ‘forced sourcing’). Resistance could arise which would put
smoothly by using pressure on the SSC. Instead, publicize the benefits other
customers enjoy by using the SSC. This promotes a positive
the elements for attitude towards the SSC, and in turn, the SSC becomes
success successful sooner.

3. A business case without

an owner is rarely realized
The owner (manager) of the SSC is not the same as the
owner of the business case of the SSC. Someone high up in
the organization, preferably a C-level executive, who has no
specific responsibility for the center, could take on this role –
the CFO, for instance. He/she would then be the owner of the
business case and would monitor it. Updating and adjusting
the business case will affect the validity of the decision to
set up an SSC. As soon as the case is altered, it can be put
on the agenda of the Board of Directors or Management
Team. The question is then no longer if the SSC is performing
well, but how valid the business strategy is if, for example, an
unsatisfied business unit can deviate from it.

4. It doesn’t work if you don’t say “no”

Many employees at the SSC will have worked for the busi-
ness units in the past. Their former manager and colleagues
can call on them to get around difficult procedures and push
through gilt-edged requirements. This is in conflict with the
change management process: there is no ticket number and
no case – and that means no measurement data.

www.quintgroup.com 7
 Change management, in the SSC and business units alike,
should not be focused on processes but on the attitude and
behavior of people. Unfortunately, change management is
often neglected in the setting-up and management of an SSC.

5. An SSC is just another supplier

People often say the SSC is “just another supplier”. Of course,
the way in which the SSC settles accounts with its customers
differs from that of other suppliers. Specific financial power
plays are often involved, focused on the internal billing pro-
cedures of the organization. However, in all likelihood, certain
elements of standard customer- supplier relationships can be
taken over by the SSC. It is actually desirable for the SSC to
face competition from market parties and for its management
to be based on agreements, set down in SLAs, for example.
Constant attention should be paid to the collaboration be-
tween the business units and the SSC and a good governance
structure is required (as is the case for external suppliers).

Aspects of cooperation
Cooperation can be divided into several aspects that are important for a good custom-
er-supplier relationship. The first factor in making cooperation a success is to ensure
that long-term interests are known. Moreover, there should be clarity regarding what
the parties can expect from one another at the strategic level. To this end, the parties
involved should have a clear picture of the strategic value of the services to be delivered.
Cooperation gives the customer the opportunity to be agile by making use of the room
the supplier provides. For example, by making services flexible so that a customer can
upscale or downscale. Furthermore, cooperation can offer access to technology that
would otherwise remain out of reach. Trust in the resilience of the SSC is also important
as customers can often feel uneasy because they are no longer in control.
Parties on both the demand and supply sides are increasingly aware that shared
processes are a major condition for successful cooperation. Together with processes, or-
ganizational and consultation structures constitute the backbone of every organization.
In a good, constructive cooperation, the roles of both parties are known, as well as the
persons who fulfill these roles and what authority they have. This aspect of cooperation
deserves more attention than it generally gets. Not just when an SCC is set up, but also
during its operation. Trust is an important basis for results. The need for good and clear
communication is widely recognized and endorsed by virtually everyone.

6. Everything must change, especially

attitude and behavior
The director of the SSC, who usually reports directly to the
Board of Directors, must have different competencies from
those of a line manager. He/she must be able to apply the
chosen policy in full and not shy away from win-win nego-
tiations. Moreover, it is better to keep the SSC out of the
organization’s political arena. After all, an SSC stands or falls
by fulfilling its agreements. What the business units decide

www.quintgroup.com 8
 internally is of no concern to the SSC’s director; he/she has
agreements and a strategy. Amendments or changes to
agreements are made using a clear change management
procedure and agreed decision-making powers. When agree-
ments are amended, for example regarding services or service
levels, new agreements on delivery and costs should be made.

Attitude and behavior

The management of the SSC wants to be of service and avoid conflicts. “We’re new
and we’re still finding our feet,” is what you hear. “We don’t know exactly how you did
things in the past in the business unit but we don’t want to upset the status quo and the
customer is king.” This is a ‘your wish is our command’ attitude. When customers know
exactly what they want, they are satisfied in the short term – but the SSC becomes a
slave. Line managers can still steer things in an internal services department, for exam-
ple when the service is delivered. However, this does not apply to an SSC.
So, there is a downside. Suppose a business unit manages to arrange for the SSC to de-
liver exactly what they want but the quality of the service falls short, or the SSC cannot
provide proper support for the service (because it wasn’t set up to do so): the satisfac-
tion of that business unit melts away – and with it trust in the SSC – like snow in the sun.

7. Profit motive helps

Having a profit motive cultivates entrepreneurship and
helps in fulfilling agreements. A cost center can charge
out all its costs, which can definitely help in the early
stages of designing an SSC concept. But why should cus-
tomers stick to these agreements in the long term? The
customers pay all the costs and if the SSC charges out all
its fixed costs, what is the incentive to improve?
A profit center on the other hand, responds immediately
to changes in demand, it is proactive in its supply and
actively monitors its business case. The ‘polluter pays’
principle applies so that purchasers have every reason to
accept the standard, if at all possible.
Having a profit Both profit centers and cost centers have advantages
and disadvantages. And yet, for profit centers we usually
motive cultivates see healthy market forces emerge which make a positive
entrepreneurship contribution to managing the business case.

8. Measure to manage
This old adage is more applicable to profit centers. Measur-
able SLAs are ammunition for bringing the SSC into the right
position and having it take on the correct role. Such agree-
ments also allow the SSC to report on its own performance.
Measurements contribute to creating a true customer-suppli-
er relationship in which both parties have the opportunity to
do business in a professional way.

www.quintgroup.com 9
 Conclusion
When setting up a Shared Service Centre, if an organi-
zation is able to provide well-substantiated answers to
all four fundamental questions, the chances are good
that the SSC will be a success. If the eight elements for
success are also taken into account, the organization can
prevent its dream from turning into a nightmare. How-
ever, perseverance and leadership are needed to bring
this about while at the same time maintaining a healthy
customer-supplier relationship.

Different types of SSCs

Although there is no generally applicable definition of what constitutes a Shared Ser-
vice Center, most definitions assume that an SSC is an autonomous entity within the
organization with responsibility for results. This might be as a profit center, whereby the
SSC must be self-sufficient; or as a cost center whereby its costs are charged out to the
business units based on purchases or on a fixed provisional sum.
The position of an SSC within the organization can also differ. Strikwerda (2010)
defines six positions which are paraphrased below.
An SSC can be:
1. An internal joint venture: the SSC is managed by the business units.
2. A separate operating company: the SSC is managed by the Board of Directors and
delivers services to the various business units.
3. A corporate department: the SSC may or may not report directly to the Board of
Directors.
4. A department within one of the business units: the SSC may or may not deliver
services to other operating companies;
5. An external joint venture: part ownership of the SSC is transferred to an external
services provider;
6. A service firm: full ownership of the SSC is transferred or the service is outsourced
completely.
Setting up an SSC is not restricted to a particular industry or sector. Shared Service
Centers are most commonly used in the following business functions: IT, HR, F&A,
marketing, procurement and facility management.
Source: J. Strikwerda, Shared Service Centers II (Assen-The Hague 2010).

About the authors

Guido Tijssen and Sijmen Vrolijk are sourcing consultants at
Quint Wellington Redwood. They are involved in resolving
strategic sourcing issues, and establishing and managing
customer-supplier relationships. Both Guido and Sijmen
have acquired a great deal of knowledge and experience in
setting up Shared Service Centers.

www.quintgroup.com 10
 ABOUT QUINT WELLINGTON REDWOOD
Quint focuses on two major changes taking place in the world: digital
transformation and the increasing need for sustainability. Technology is
one of the driving forces of change. Many organizations have difficulty in
keeping pace with today’s rapid successive developments and applying
them successfully. They wonder if they are flexible enough to implement
change and whether they will still be a relevant player in a few years’ time.
We see that organizations have to make fundamental choices about
business models, management and technology under pressure from
these trends.

In our vision, technology is not the only deciding factor: the knowledge,
leadership and culture that are must-haves for organizations to recognize
relevant technology and apply it to provide value to their organization
and environment are even more important.

Quint supports organizations in designing and implementing their

digital strategy. Together with our clients, we build roadmaps that facili-
tate fast and effective change, anticipating or responding to opportunities
and threats. We bring technology – and its application – to life.

Digital Strategy & Lean IT, Agile Data Management Transformational

Transformation & DevOps & Governance Leadership

Sourcing Strategy, IT Governance, Risk Service Integration, Training & Coaching

Contracting & & Compliance Automation &
Transitioning Management

© Copyright 2017, Quint Wellington Redwood. All rights reserved. No part of this publication may be reproduced, PLEASE
transferred and/or shown to third parties without prior written consent of The Quint Wellington Redwood Group. REC YCL E

www.quintgroup.com 11