How to manage performance in shared services

Integrate efficiency, quality and customer satisfaction. By Richard Plasek, Capgemini consultant, finance and employee transformation, shared services.

Robust performance management in shared services can deliver flexibility, increase service quality, and reduce costs for the whole organisation. But it hasn't always been that way.

The way we measure and manage performance is continually evolving. In the 1970s, traditional planning and budgeting approaches caused difficulties. This gave rise to the multi-dimensional performance measurement frameworks in use today, such as the quality frameworks (Baldridge and EFQM) and balanced scorecards.

Broad-based financial performance management is now seen as a fundamental part of a business, bringing managers information from across the organisation. However, best practice examples have shown that the true drivers of performance and early signals of change are non-financial.

Stakeholders’ increasing demands for visibility, integration and alignment to strategy have led to a change in performance management. For example, although the balanced scorecard has been well adopted, it is often seen as just a reporting tool. Kaplan and Norton envisaged it aiding the implementation of strategic change.

In the 1990s shared services pioneers recognised that consolidating transactional activities can reduce costs. Companies established processing centres where one team performed transactional activities for multiple divisions or countries. Financial processes such as accounts payable/receivable and travel and expenses were the first to benefit from economies of scale.

The scope of shared services has since expanded and now includes processes such as order to cash or financial reporting. The shared services concept has also been adopted by other functions, including IT and HR. Processes such as compensation and benefits are standardised across business units and are provided by one internal supplier.

Modern shared services are no longer seen as being based on the lowest transactional cost. Rather, they optimise resources available within the services and business units they serve. This integration forces performance management to create flexible frameworks that adapt to an organisation’s needs.

Changing performance measurements

Performance management of shared services has gone from cost focus – measuring throughput and processing speed using technology, economies of scale and lower labour rates – to quality focus. Internal customers want cheap processing and higher quality services. Qualitative or soft performance measures, such as response to queries, error rates and customer satisfaction, are used alongside the traditional volumetrics.

There is also an emerging focus on integration in the shared service environment. Leading players are adopting measures that immediately track efficiency, quality and customer satisfaction. This includes tracking leading indicators such as staff satisfaction, skill levels or people management. Integration creates a challenge because managers need a single set of measures and an integrated, consistent picture across all customers. This can be difficult to achieve but it is necessary to reduce costs even further through enhancing standardisation or reducing exceptions.

Once an integrated approach is established in shared services, performance management can move towards optimisation. Optimisation focuses on combining flexible staffing with multi-skilling in order to gain maximum value. Performance management’s role is in exploiting technology, ensuring flexibility and linking innovation to new skill development.

Danger of complexity

The addition of soft measures in the drive for quality can cause problems. The new sets of measures are often difficult to implement, too frequently tracked and customers find them hard to understand. Many organisations just give up when performance management becomes a complex issue with too many indicators.

Traditional performance management is rarely fully integrated so it can't measure the things that make an organisation successful. Modern shared services try to add value and provide more flexibility to the business. Up-to-date performance management should therefore measure innovation and reward creativity and added value. It should link an individual’s objectives to the corporate objectives.

How companies close the gap

In leading companies performance management is a recognised process alongside mainstream transactional processing such as accounts payable or staff compensation. The British American Tobacco programme director for shared services, D Chakraborti said: ‘Performance management must be transparent and established as a separate activity that can measure strategy implementation across all processes. We put performance management in a leading role to optimise resources, drive value and preserve flexibility to measure moving targets. What you measure gets done.’


There are seven elements of good performance management in shared services:

• charging
• service level agreements
• service desk
• key performance indicators (KPIs)
• balanced scorecard
• continuous improvement and
• personal development.

If implemented fully they can help companies to improve their competitiveness. Performance management’s vision should be to achieve a collaborative and value-generating organisation by using the seven elements in a coherent way. KPIs can strategically align resources and optimise efforts across the business.

Integration and optimisation phase

No company would think of working with an external supplier without defined and measurable performance targets. Similarly it shouldn’t work with an internal supplier of services without setting up robust performance management mechanisms.

This phase ensures that shared services behave professionally, independently and as integrated partners making the best use of resources. A good performance measurement framework is a distinguishing trait of the progressive shared services organisation.

Increased transparency and control by measurable and comparable KPIs/balanced scorecards provide:

• early exposure of optimisation opportunities
• improvement in quality of service and
• customer satisfaction.

This will ensure that shared services deliver value through good, fast tactical decisions, better organisation behaviour, greater span of control and clear definition of roles and responsibilities.

Better management of information and aligning individual actions and behaviour to business strategies will enhance strategic abilities. Growth targets, expense reduction or re-engineering initiatives in other functions should be linked to shared services’ strategy. This will stop integrated shared services being seen simply as a management overhead. A highly skilled workforce will be capable of assuming different roles within the business, making shared services a better place to work.

September 2005