I know I have posted on this several times, but when I googled “the case against shared services” I only found IT companies that stand to profit from shared services and their case for shared services.  The truth must be known.

Whether you are in the public or private sector a shared services strategy is a short-sighted one when the driver is to reduce costs.  Management by the visible numbers has long become a staple and this is a bad habit that just keeps increasing costs.

The management paradox is that when we set out to reduce costs as our focus, we wind up increasing the costs.  Shared services comes from this mindset.  If we combine like work we can save our business, country, state, or town money.  It’s a no-brainer and they are correct (in part) . . . they lack a brain.

Whether administrative functions, call centers, back office or other assorted combinations, people need to understand that costs come from flow and not activity or scale.  In short, economies of scale is a myth.

Here are some potential problems (thanks to John Seddon of Vanguard for these) with shared services:

  • Moving the work to a central location removes continuity.
  • The creation of waste from handoffs, rework and duplication.
  • It lengthens the time to deliver the service.
  • It increases the amount of failure demand (demand caused by a failure to do something or do something right for a customer.
  • The Front-Back Office design is not always the best design for the work.

What we need to do instead is understand that the design and management of work is in question.  This requires understanding our organizations as systems by performing check (from the Vanguard Method) where we understand the what and why of current performance. 

Starting with an understand of customer purpose and demand, deriving customer measures from purpose an organization can improve services first.  Based on knowledge gained from “check” an organization can determine whether or not sharing services makes sense.  Making decisions about shared services from knowledge is always a better way.  Don’t you think?

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.