Shared services: the American Express experience

Citation

(2000), "Shared services: the American Express experience", Measuring Business Excellence, Vol. 4 No. 4. https://doi.org/10.1108/mbe.2000.26704daa.004

Shared services: the American Express experience

Shared services: the American Express experience

Reaping the rewards of organisational change

Many organisations have discovered the benefits of shared services. The ultimate aim of finding ways to reduce costs has won many businesses over to the concept, but shared services can go much further. Innovative companies have realised that the shared service concept can:

• •

  improve process effectiveness;

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  aid the transition to corporate cultural change;

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  and improve customer satisfaction.

More than that, it can provide a wider range of career opportunities and create more challenging jobs for staff.

...During the period since the group was set up, the company has saved over half a billion dollars...

American Express is a good example of an organisation making the most of the advantages delivered through shared services. The company established its shared services group more than three years ago and has witnessed a dramatic reduction in costs. During the period since the group was set up, the company has saved over half a billion dollars. A new work culture was introduced where employee incentives are linked with service improvement and customer satisfaction. Metrics play a key role in all aspects of business and are used not only to measure performance, but to enable workers to focus on company goals.

The old structure of American Express was cumbersome and costly. There were six card operations centres spread across the USA, each working separately but covering the same type of work. The centres all had:

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  a telephone service unit to deal with customer calls;

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  a unit to handle postal inquiries as well as operations and support staff.

The separate units slowed down the introduction of new products and services. The lack of flexibility hampered the rate at which new products could be tested and implemented so not allowing American Express to be as competitive as it should be.

According to LaRae Kunz of American Express, "To adopt a business-owner culture, our challenge was to change from being a well-managed organisation to a well-measured organisation".

Recognising the need for change

American Express sought to move forward with the help of standardisation and new technology. An operations structure which was flexible, capable of anticipating change and helping those changes to take place was the answer. The company was keen to ensure success with three main groups:

1. 1.

   employees;

2. 2.

   shareholders; and

3. 3.

   customers (Figure 1).

The new structure would be required to satisfy the needs of each group and deliver high standards demanded by them.

Figure 1 - Performance measures 1997

Senior vice president of American Express explains: "For employees, we have always sought to make American Express the best place to work. So the structure would have to be consistent with that promise. For shareholders, we wanted not only superior returns but best-in-class economics. For our customers, we sought the ability to deliver world-class service".

American Express followed the following steps towards a more efficient structure:

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  Define, redesign and consolidate core processes. Core processes were examined in fine detail. The service sectors were pulled into line with design and technical support being the same for each. Redesign occurred in many areas of the company from service delivery and customer relationship management to technology and merchant processing.

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  Reorganise leadership hierarchy. Shared services leaders headed key processes such as credit and phone operations. Centres of excellence were created resulting in some job losses while other operations staff moved elsewhere. Although the closure of two large operating centres had a negative effect on employees, it did provide benefits for customers and shareholders with a reduction in costs and a higher level of customer service.

• •

  Restructure senior reporting relationships. Service units were solely responsible for their success. Business activities and operations were the service unit's responsibility.

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  Educate business unit presidents, operations line leaders and employees. Business unit presidents focused on setting goals, examining what was required for the success of each product and looking in detail at cost reduction. Operations line leaders and employees were taught to concentrate on each step in the production process and kept informed of the changes taking place within the company.

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  Focus on metrics. Like other business processes, metrics were scrutinised to ensure they were providing management with a true picture of the company's activities. Production, financial and quality metrics are still undergoing further modification. American Express plans to align its metrics with the new servicing structure to allow industry-to-industry comparisons.

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  Create service level agreements. American Express created service level agreements to formalise joint planning and mutual accountability between units. Keith Halliday recommends that the agreement should be fairly short, restricted to two or three pages in length, outlining high-level goals.

Guiding employees through change

The new structure has been effective. Initially, many employees were worried by the radical changes taking place and the closure of two large operating centres. Although some employees were relocated, a considerable number of jobs were lost, causing concern among the workforce. American Express realised in the early stages that change management would play a crucial role in the project's success. Communication and education were key to the smooth running of the process. Employees were helped to manage job-related change and kept up to date on the company's progress. Continuous education over the past few years has eased the transition. The major changes in work culture have not suited everyone, however. Amex leaders are required to be committed to delivering a high standard of customer service, determined to succeed in a competitive marketplace and ready to hold individuals accountable for results. Some embraced the change wholeheartedly, others accepted change reluctantly while a few were unable to do so and left the company. American Express measures employee satisfaction as carefully as other aspects of the business. An annual survey conducted among its workers across the globe showed satisfaction levels had increased considerably in the last year among shared services employees.

Customers too are reaping the benefits. It will come as no surprise to learn that customer satisfaction is also measured and results analysed. Customer survey results indicated improvements in several areas. Services are speedier and more efficient, standards are high and American Express compares well against its competitors.

...The company has achieved its goal to keep employees, customers and shareholders happy. The company once faced with high costs and structural inconsistencies now looks much healthier...

When an organisation thrives, shareholders do well also, and the improvements at Amex have ensured that shareholders are satisfied. The company has achieved its goal to keep employees, customers and shareholders happy. The company once faced with high costs and structural inconsistencies now looks much healthier. Back in 1994, a new product took 18 months to introduce, now it takes six weeks. American Express has toned up and is in great shape to take on its competitors.

Action points

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  If managers do not know exactly why change is needed they cannot convince employees.

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  Go back to basics (or rather, core operations).

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  Examine every practice, sector and level – do not protect.

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  Help employees deal with change by giving them responsibility for implementing it.