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Fahy, Cacciaguidi-Fahy and Currie, 2002

Executive summary

The market in which multinational companies operate is characterised by globalisation, mergers, acquisitions and consolidation, requiring companies to standardise operations to stay competitive. An effective way of keeping costs down and improving efficiency is by moving certain functions to one central location. One way to meet this challenge is for companies to set up a shared services centre.

Shared services entered the corporate lexicon in the early 1990s as large decentralised companies looked to combine basic transactional processes such as payroll, purchasing and accounts payable, and sell back those services at cost to the individual business units. As companies extend their presence across borders, it becomes increasingly uneconomical to maintain a duplicate accounting infrastructure within each country of operation. Many public sector organisations have also recognised the benefits of implementing a shared services approach.

This report explores the financial shared services centres (FSSC) phenomenon, and in particular the shared experiences of those multinational enterprises and public sector organisations that have set up such centres in the UK and Ireland. The study examined the emergence of FSSCs in Europe, their impact on local accounting services in strategic business units (SBUs) and the long term implications for the development of the accounting profession. In addition, the study explored the training and education challenges and implications of the centralising of pan-European reporting in primarily Anglo-Saxon settings, particularly in the area of language skills.

The two part empirical study consisted of a postal survey of FSSCs in the UK/Ireland and an in-depth case study examination of seven organisations that have established financial shared services centres. The results of the study indicate that shared services centres are an established part of the business landscape and are likely to remain so for the foreseeable future.

The need to align the business strategy and financial/administrative process, combined with a desire to reduce headcount through process improvement initiatives, is shown to be a primary motivation for the move to shared services centres in Europe. Companies in the study reported reduction in staff costs of the order of 35%. The research confirms the importance of effective change management in realising the benefits of FSSCs and highlights the growing challenge in maintaining Ireland’s attractiveness as a location for FSSCs.

The main drawback in setting up a shared services centre is in the area of staff turnover. Shared services can offer an extremely fast-changing environment during the start-up phase. Once the business units have been centralised, however, the work becomes less challenging and many staff will move to find more challenging positions. Much of the knowledge gained in the work-shadowing phase can be lost to the organisation. The absence of a common IT system can also be a drawback, as this can inhibit the achievement of process efficiency through standardisation.

The study also found that keeping staff motivated was a major issue, as much of the work tends to be transaction processing. As a result, firms in the study found themselves facing the double challenge of keeping cost to a minimum while finding and then motivating high quality staff for what is very often routine work. Attracting and retaining multilingual staff in what were often remote locations was a common problem.

The findings of the study highlight the importance of cultural and linguistic issues within the FSSCs examined. In particular, the migration of multilingual pan-European operations to a single site, while technologically and economically feasible, raises a large number of cultural and linguistic challenges, which can have a detrimental impact on the long-term viability of the FSSCs.

Differences in expectations regarding cultural and communication norms gave rise to frequent misunderstandings and a continual need to modify accepted US-based work practices to the European environment. The response from many firms to what they saw as ‘cultural and language’ problems has been to try to minimise the language element of the work and to ‘de-language-tise’ at the process level. The long-term objective for many firms appears to be to centralise pan-European service provision in a single (and often UK or Irish based) location and to eliminate the language diversity of the process over time.

The key critical success factors are a clear vision, strategy and support from senior management. Support from senior management is particularly important as this type of project cuts across the power base of the organisation and, as with any moving of one set of responsibilities to another location, there will be resistance. When this resistance appears, senior management support ensures that the project moves forward.

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