Shared Services as a New Organizational Form: Volume 13

The reason of this chapter is to clarify at a conceptual level the phenomenon of shared service centers. The aim of the chapter is to enable managers make better decisions when applying the concept of shared service centers.

This is a conceptual chapter, in which the phenomenon of shared service centers is being rewritten, from an initial cost efficiency level, into a constituting building block in the new nature of the firm.

The findings of this chapter are that especially the combination of financial shared service centers and IT shared service centers are an instrument to organize information outside the structure of the internal organization of the firm, as implied by the changing nature of the firm. Also shared service centers are enablers for new business models, especially those based on human capital.

Executives and managers that have a better conceptual understanding of the application of shared service centers will create more benefits beyond costs savings.

This is the first chapter in which shared service center is reconceptualized in terms of the changing nature of the firm. With that it is also one of the first chapter describing the changing nature of the firm in operational terms. The value of the chapter is that it will help executives to define more efficient change processes. A second value of the chapter is that it opens new avenues of empirical and conceptual research for academia.

This chapter seeks to optimize HR shared services performance by highlighting the potential for service fragmentation that can arise out of in the so-called Ulrich (structure or service delivery) model.

The evidence used in this chapter principally comes from the author’s own work, especially research for the UK’s Chartered Institute of Personnel and Development (CIPD), and draws upon academic literature where possible.

This chapter argues that HR directors should guard against three sets of fragmentation risks. Firstly, HR shared services should be properly connected to the rest of HR to offer customers an integrated service to avoid the structure’s division of labor inducing incoherence. Second, to guard against this risk, HR directors should exercise care in outsourcing/offshoring beyond individual, discrete services because contractually or spatially separating services risks exacerbating this tendency to fragmentation. Outsourcing/offshoring may focus too much on cost savings and insufficiently on quality. So, third, HR should argue for the distinctiveness of its activities and fight commoditization that is also implied in the creation of cross-functional shared service centers.

The arguments in this chapter could be better supported by academic research. In-depth case studies of management decision making and shared services operation would help support or challenge the chapter’s conclusion, as could quantitative evidence on the benefits/disbenefits of outsourcing/offshoring/cross-functional shared services centers.

We have highlighted a number of reported problems with HR shared services operation, besides the three principal risks noted above, but we have suggested possible solutions that could be adopted by practitioners.

HR managers may find this chapter helpful in designing new HR structures or in assessing the effectiveness of shared services that goes beyond the typical key performance indicator measures.

The purpose of this study is to offer an integrated literature review of shared services’ organizational structures by specifically focusing on centralization, specialization, control, and formalization mechanisms.

A sample consisting of 103 empirical and conceptual articles, identified in a structured literature search in Science Direct and Scopus, was analyzed. The focus was on exploring the structural dimensions of shared services in various fields: Supply Chains, Finance, Human Resource Management, and Information Technologies. Findings from the selected articles were codified alongside the structural dimensions drawn from contingency theory.

Most of the papers identified were concerned with the Human Resource function or with Accounting and Finance in the private sector. Purchasing was only mentioned in a few general articles and Marketing not represented at all, even though the literature suggests that shared services do exist in this field. This uneven distribution across fields, as well as the reality that many articles fail to make clear divisions between disciplines, is hardly conducive to identifying trends for individual disciplines, and only general trends for each dimension could be identified. Although centralization was one of the most discussed dimensions, there was no consensus as to whether shared services should be centralized or decentralized. Standardization and formalization were both found to be highly important, although a need for customization was also emphasized.

Future research should be oriented toward the structural dimensions of shared services in a broader range of fields as current findings are dominated by the Human Resource function. Another implication of our findings is that scholars could usefully test empirically the dimensions, especially those where opinions differed the most: centralization and specialization.

Earlier conceptualizations noted that the mixed shared service outcomes stem from the diversity in governance and several contingency factors. This work continues the exploration of the contingency factors and mechanisms that, through integration, allow shared services to respond to the environmental uncertainty. The value of this chapter is in examining the structures of different functional types of shared services that are reported as successful in the literature, thus offering an overview of best practices in organizing shared services.

This chapter discusses the constitution of Shared Services and the value of a consensual agreement of a definition for academe and practice. It explores the operating principles and services, the concepts of internal customer and internal service, and their importance for the practitioner and research communities.

This chapter employed a broad review of the literature to examine Shared Services. The research team used NVivo as a tool to create a database of key articles and books to analyze the key concepts and topics.

There is a lack of consensus on the definition of Shared Services in the research and practitioner community. Additionally, the concept of internal customer requires greater exploration and understanding within the context of Shared Services. How Shared Services provides competitive advantage to organizations is also not well understood.

This discussion provides a challenge to the research community to focus on the contributions of shared services to business management theory. This requires a consensus that is currently nonexistent, to ensure the correct use of the terminology and model.

By establishing a clearer understanding of what is Shared Services, the academic and the practitioner community, in particular, will gain greater competencies on Shared Services to support change management programs during the implementation phases and minimize implementation costs by lowering organizational and people resistance. The variants in shared services terminology create confusion which is likely to result in ambiguity during implementation and have practical implications on governance, customers and service, benefits realization and performance.

This chapter addresses the lack of agreed definition of the term Shared Services and the role of the internal customer and consequent internal service delivery.

The study aims to add to the knowledge of governance and control aspects of intrafirm relationships by exploring a transaction costs economics perspective (TCE perspective) on governance and management control structure choices related to the development of a shared service center (SSC).

The notion of governance and control in SSC organizations is explored and a TCE model is developed to analyze management control structure choices for SSC governance. The nature of internal transactions is related to the dimensions of transactions. Then an example case study is used to illustrate the application of the theoretical model.

The theoretical analysis broadens existing frameworks of management control structures by particularly pointing to the possibility of including governance structures for internal transactions and exit threats (connected to a market mechanism) in the management control structure of an organization. Confrontation with the case example illustrates that the possibility of an exit threat was not explicitly considered by top management (“the designer” of management control). Although the TCE model may be a useful tool for analysis purposes, it has little explanatory power in this particular case. Organizational change processes toward SSCs are complex and can only partly be examined with conventional economics-based approaches such as TCE.

Governance and control of SSCs is conceptually theorized, using an instrumental economics approach. The case study is not generalizable but illustrates the use of the model in a particular situation. To understand governance and control change within SSC organizations, more longitudinal case studies are needed.

A TCE approach to governance and control choices regarding SSCs might provide practitioners with insights into the efficiency of specific management control structures.

This chapter contributes to the extant knowledge by both exploring and challenging a TCE perspective on SSC-related changes in management control.

The purpose of this study is to explore the use of shared services by end-users and why this may conflict with the use as intended by the shared service center (SSC) management.

By applying structuration theory, this empirical study draws on qualitative data obtained from semi-structured interviews with managers and end-users of an SSC. This SSC is part of a Dutch subsidiary of a multinational corporation that produces professional electronics for the defense and security market.

We find two main types of shared services usage by end-users which were not intended by the SSC management: avoidance and window-dressing. These forms of unintended usage were the result of contradictions in social structures related to the centralization and decentralization models as appropriated by end-users and management.

Our findings show that the benefits of shared services depends on how well contradictions in managers’ and end-users’ interpretive schemes, resources, and norms associated with centralization and decentralization models are resolved.

A popular argument in existing studies is that the benefit of shared services follows from the design of the SSC’s organizational structure. These studies overlook the fact that shared services are not always used as their designers intended and, therefore, that success depends on how the SSC’s organizational structure is appropriated by end-users. As such, the originality of this study is our focus on the way shared services are used by their end-users in order to explain why SSCs succeed or fail in reaping their promised benefits.

The chapter presents case evidence to argue that rather than comprising noncore, back-office business support services, shared service centers (SSCs), when viewed from a knowledge management perspective, can create both valuable and firm-specific resources and dynamic capabilities.

Literatures in strategic management, knowledge management, and business process sourcing are drawn on as a prelude to a longitudinal case study conducted by the authors in a large private sector utility company.

A knowledge management perspective demonstrates how the SSCs, as a hybrid organizational form, may help to redefine core versus noncore activities and thus, to play a role in the creation and protection of firm-specific resource and dynamic capabilities.

The SSC model is an emerging phenomenon and the field work is restricted to a single case study. Further field research is suggested.

The findings should be useful to those organizations embarking on the reconfiguration of back-office support services which might gain from further consideration of what activities might be seen as constituting core enterprise architecture. The case study demonstrates that when the traditional core activities of the organization become commoditized over time, a core competence becomes the management and administration of a bundle of technical projects premised on the processes and information systems of the SSC.

Shared services is an emerging phenomena and scholar literature is nascent. The chapter explores potential benefits of the SSC model beyond the headline agenda of cost reduction through efficiency savings and labor arbitrage.

The purpose of this chapter is to introduce the capability map that addresses the potential of transactional Shared Service Centers (SSCs). The mapping approach represents a heuristic logic that provides means for analyzing SSC operation, connects SSCs capabilities with their value, and supports academics and practitioners in developing a transactional SSC that is of strategic importance.

This chapter reports on findings from a longitudinal case study within an organization that has implemented a transactional Human Resource (HR) SSC. Over a period of three years, several formal and informal meetings were attended, more than 20 interviews were conducted with SSC MT and customers, over 500 pages of project documentation and memos were studied, which allowed after integration for an in-depth analysis of how resources are bundled to build different types of capabilities.

We uncovered and mapped the operational and dynamic capabilities of a transactional SSC, their role in value creation, and their interdependencies. While the operational capabilities enable the HR SSC to provide day-to-day services to take care of individual end-users and support the business, the dynamic capabilities enable transformation of HR delivery throughout the organization and increase HR’s strategic contribution.

One limitation of this study is the extent to which the capabilities and their role in value creation are generalizable to transactional non-HR SSCs. SSCs providing services that cover other business functions might develop and deploy different capabilities. The use of a capability map is not limited to the capabilities uncovered in this study, however.

In the literature, the primary focus regarding transactional services is limited to cost savings and efficiency. This chapter addresses the potential of the transactional SSC and introduces the capability map as a tool to leverage its potential.

Sharing services increasingly extends beyond intraorganizational concentration of service delivery. Organizations have started to promote cooperation across their boundaries to deal with strategic tensions in their value ecosystem, moving beyond traditional outsourcing. This chapter addresses two research questions geared to the challenge of interorganizational shared services (ISS): why would organizations want to get and remain involved in ISS? And: what are the implications of ISS for (inter)organizational value creation?

The conceptual chapter reviews literature pertaining to ISS from public, commercial, and nongovernmental sectors. ISS is understood as a multistakeholder organizational innovation. In order to analyze ISS and conduct empirical research, we developed a taxonomy and research framework.

The chapter shows how ISS can be positioned in value chains, distinguishing vertical, horizontal, and hybrid ISS. It outlines ISS implications for developing business models, structures, and relationships. Success factors and barriers are presented that epitomize the dynamic interplay of organizational autonomy and interorganizational dependence.

The research framework offers conceptual ideas for theoretical and empirical work. Researchers involved in ISS studies may adopt strategic, strategic innovation, and organizational innovation perspectives.

ISS phases are distinguished to focus innovation management — initiation, enactment, and evaluation. Furthermore, insights are provided into processes and interventions aimed at making ISS a success for participating organizations.

Cross-sectoral perspective on ISS; taxonomy of ISS; research framework built on organization and strategic management literature.