Article by Otto Acuna N. MBA, CMC, CSSBB 🇨🇷 🇪🇪 – Originally published in Linkedin on January 11th, 2023
Shared Services Centers (SSCs) are becoming increasingly popular in Africa as a way for organizations with multiple locations or groups with multiple companies to streamline and centralize their non-core business functions. These centers offer a range of services such as finance and accounting, HR, IT, procurement, and customer service, and can be a great strategy for organizations looking to improve efficiency, reduce costs, and enhance the quality of their services.
Morocco, as reported by the Federation of Information Technology, Telecommunications and Offshoring (APEBI) employs over 120,000 employees within more than 1,000 companies in offshoring arrangements such as BPOs, SSCs and oursourced IT, with tremendous growth in the last years.
When researching for this article, specific to the African Continent, I also found some information about performance below expectations in SSCs in South Africa back in 2012, as written by Mr. Rohith Roopnarain Ramphal in a doctoral research article.
I will share below at the end my opinion regarding the key ingredients for a successful and lenghthy relationship with the business units, your clients, from the inner perspective of an SSC practitioner.
Having worked extensively in shared services organizations, not only as a consultant, but as the functional “in-charge” person for performance management, and having the experience to lead migrations until leaving the operation stabilized and running, I will share below at the end my opinion regarding the key ingredients for a successful and lenghty relationship with the business units, your clients, from the inner perspective of an SSC practitioner.
Let’s go back to the basics of shared services organizations first:
One of the main benefits of SSCs in Africa is cost savings. By centralizing non-core functions, organizations can take advantage of economies of scale and reduce the duplication of efforts and resources. This can lead to significant cost savings, particularly for smaller organizations that may not have the resources to set up and maintain separate departments for each function.
In addition to cost savings, SSCs can also improve efficiency and the quality of services. By standardizing processes and using specialized software and tools, SSCs can streamline and automate many of the tasks and functions they handle. This can lead to faster turnaround times, fewer errors, and a higher level of customer satisfaction.
Another advantage of SSCs in Africa is the ability to access a concentrated pool of skilled and experienced professionals. Many SSCs in the region hire highly trained and specialized staff, which can be beneficial for organizations that may not have access to this type of talent locally, or may have that talent dispersed, which does not allow for economies of scale, backup arrangement and other good practices.
Finally, SSCs can also be a great way for organizations to maintain a consistent level of service and support across multiple locations or companies. By centralizing key functions, organizations can ensure that all of their operations are receiving the same level of support and attention, which can be particularly important for organizations with a dispersed workforce or multiple subsidiaries.
So for them, for the workers, the reasons for achieving operational excellence and have good risk management and backup practices were personal – it really matter to them to achieve those goals.
Let me share now some insights, grounded in 2023, on the idea of shared services centers in Africa for local companies with many locations and/or multi-company groups:
- The first waves of SSC implementation in a country are usually focused on multinational companies whose benefits are highly influenced by salary arbitrage, which is the difference in cost between talent at headquarters and at the location of the SSC. That’s a valid reason to set it up, but the drivers for SSCs for local and regional companies are different, not based on the arbitrage as anchor.
Better control, standardization and compliance of processes, specially for highly regulated industries such as financial services or pharma
- Better control, standardization and compliance of processes, specially for highly regulated industries such as financial services or pharma, often find that they can avoid the operational risks and the heavy fines by the Regulator when a compliance norm is broken. Banking regulation is evolving rapidly in Africa and setting up shared services organizations to handle operations, backoffice and compliance sensitive processes can be not only beneficial in terms of savings, but also in terms of cost-avoidance (skipping situations where you incur in unexpected additional costs, such as fines or remedial measures when an issue occurs).
- The adoption of standardized standards for improvement, such as ISO 31000 for risk management, ISO 14,000 for environmental management, ISO 9000 for quality management or ISO 26000 to promote sustainability in organizations can be greatly improved and its implementation cost lowered if its implemented from the shared services center, which by definition develop standard processes and “plug-ins” to connect those processes to the business units served by the SSC.
- All of the above are “reasons that benefit the enterprise” to setup a shared services center. There are important reasons why SSCs benefit the employees of those organizations and making evident those benefits need to be an intrinsic part of the organizational culture of the SSC, which in turn impacts the attitude towards continous improvement, the level of service towards the business unit, lowers turnover and promotes a healthy workers environment.
- Today, in 2023, most experts agree that the capabilities driven by new technologies such as Low-Code / No-Code (LCNC) have created a layer of development and improvement that we did not have 10 years ago. This allow motivated shared services practitioners “to fix their own problems” while maintaining the standard solutions (SAP, Oracle, PeopleSoft, Infor or inhouse core-banking software) as they have been designed by headquarters. LCNC provide a layer of automation and optimization that is new and not bound to the scarcity of trained IT personnel that plague organizations today.
Let me share an anecdote to exemplify some the last item above: I used to be in charge of the corporate reporting unit at an SSC: we processed against the clock the accounting of around 140 org units and loaded the global system so that HQ could consolidate world accounting for the Board to review on the 7th or 8th day after the close of the month.
Our unit started with 5 people working on 35 accounting units and we grew and absorbed other reporting units until we handled 140 accounting units with 10 people (notice the productivity improvement). We became one of the bargaining chips for SSC management when negotiating new incoming business from the business Uunits, as they all wanted their reporting with us.
During the 3 years that this transformation happened, our internal improvement initiative had 2 goals: a) eat at home with family, since before the initiative they went home after midnight on a regular basis and b) use their vacation days in full, because many of my team had even 3-4 years of accumulated vacations when I inherited the area.
So for them, for the workers, the reasons for achieving operational excellence and have good risk and backup practices were personal – it really matter to them to achieve those goals.
In conclusion, Shared Services Centers can be a great strategy for organizations with multiple locations or multiple companies in Africa. They offer a range of benefits including cost savings, improved efficiency and quality of services, access to skilled professionals, and consistent service and support across multiple locations.
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