Take a practical approach to reducing cost and response time in shared services.

by Jim Fishbein, Roy Nanz,, Keith Johnson

Many companies don’t think to apply lean methods to shared services—the sharing of services across a company’s divisions or organizations. But when they do, significant reductions in cost and response are possible. Best of all, lean is easily within the reach of most companies.

When it comes to shared services, operating “lean” means launching repeated, continuing attacks on the steps in a process that don’t add value. Toyota identified seven types of waste in its manufacturing and office/administrative processes on its journey toward optimizing processes:
1. Transportation: Moving material/product from one place to another. Example: Walking a customer request form to another department in a call center.
2. Inventory: Material/product waiting to be processed. Example: Orders waiting to be processed or approved.
3. Waiting: Delays of any kind. Example: Orders in the in-box waiting for credit approval by a supervisor.
4. Over-processing: Adding more work than the customer is willing to paying for. Example: Inspection to make sure a report was done right.
5. Defects/rework: Correcting mistakes. Example: Correcting an omission from an order.
6. Motion: Excess movement and/or poor ergonomics Example: Poor workplace layout that requires turning too often to pull together information for a report.
7. Over-production: Making or processing more than needed. Example: Printing extra copies of an order just in case it’s needed.
Each of these areas was a candidate for leaner operations.

The Power of ‘Lean’
A lean organization is one that continuously reduces wasted costs and improves customer response times, while serving customers better. More specifically:
Lean brings cost reductions—fast. Lean brings large cost reductions in shared services, often in the 20 percent to 40 percent range. Lean often uses rapid improvement methods (small, incremental, and fast improvements using the Japanese philosophy of “kaizen”) that produce results in a few weeks or months.

Lean is a cornerstone for a continuous improvement initiative. Making improvement continuous avoids traumatic, episodic improvements, commonly with unintended consequences.

Lean reduces response times to companies: We often see processes deliver 75 percent to 98 percent faster, at even better quality.
Lean increases the quality of service (get it right the first time). Lean helps ensure reliable compliance to laws, regulations, and business ethics in an environment that’s very intolerant of compliance problems.

In Accenture’s work with companies, lean methods show us how all five of these objectives can be achieved together. The improvements from lean are often so substantial—and so fast—that they change the payback calculation for subsequent improvement. Some companies introduce lean to see to what degree shared services can be streamlined before taking more major steps such as outsourcing, automation, or global rationalization.

Lean Shared Services
Five lean approaches have proved particularly useful and practical in shared services:
1. Understand the end-to-end value stream. This value stream includes suppliers, internal partners, and external customers. What do they value? How do they interact? By defining what is of value, nonvalue-added work becomes a visible, energizing target. Lean takes an end-to-end view so as not to suboptimize inside function-based silos. As an example, this end-to-end view, tied to value creation, surfaced on a project for a pharmaceuticals firm. One firm’s Human Resources (HR) center was working heavy overtime to set up new hires for payroll. The largest cause was incomplete or late on-boarding information coming from the business divisions. An end-to-end process improvement cut the HR load 35 percent plus the overtime.

2. Establish process metrics that serve all levels of the company, including daily management of operations. Lean introduces visual management—metrics readily visible in each workplace to clarify each day’s goals and metrics that give timely feedback on performance. An example of a process metric for one company was a benefits calculations unit that posted its intake and output volumes and cycle times every hour. This posting enabled all team members to see approaching demand, shift capacity to meet that demand, and take pride in maintaining fast turnaround to employees.

3. Focus on driving process cycle efficiency. Process cycle efficiency is the ratio of value-added work to total process cycle time. By relentlessly attacking nonvalue-added work responses, cycle times are sharply reduced and costs shrink significantly.

4. Apply kaizen methods to speed improvements. Improvement teams use kaizen methods to gain organizational commitment, get better ideas, and speed implementation. Improvements in one week are not uncommon in shared services.

5. Begin lean with the end in mind. Lean is most effective when leaders start with defining a strategy for each shared services process. Our experience has shown that outsourcing or automating a process that has undergone a lean transformation is much less costly as well as faster, and it entails lower risk. End-state thinking brings out strategic, multigenerational options for improving shared services.

How Is Lean Being Used?
Companies that Accenture has worked with have applied lean methods very successfully. The following list shows a range of lean projects across shared services. Each company listed pursued many lean projects, progressively hammering away at waste.
HR: The Recruiting Process. A Fortune 500 company struggled with its recruiting process. Its lengthy, defect-laden process frustrated hiring managers and affected the company’s ability to attract top talent. Our analysis uncovered significant problems in candidate care, interview scheduling, and the time to fill an open position. In addition, some parts of the recently outsourced process were incurring unexpected delays and errors. The end-to-end process was clearly not performing to business need.

The lean approach used was kaizen. The preparation for a two-day event included:
(1) clearly understanding the needs of all stakeholders, including the staffing outsource provider; (2) reviewing staffing performance data on cycle times and defects; and (3) developing a current-state value stream map to identify wasted effort and delays. In the kaizen event, the project team, key process stakeholders, customers, and HR staffing personnel (both internal and outsourced), used lean methods to redesign the recruiting process.
As a result, the project team was able to reduce the number of process steps by 50 percent, eliminate many redundancies (waste), and reduce cycle times by 50 percent (from 19 days to less than 10 days), and furthered company image by enhanced candidate care.

IT: Help Desk Process. A Fortune 500 company was experiencing an increase in the number of help desk tickets that arose when first contact could not resolve the problem. During one nine-month period, the cost of escalating customer assistance tickets reached $3 million. To address the problem, a one-week kaizen event was conducted. The kaizen started by mapping the value stream to understand the flow, queues, and cycle times of the process. A Pareto chart of the types and quantities of help desk requests was then created. The team analyzed the help desk requests and defined the additional knowledge transfer that allowed more calls to be addressed on first call, without escalation.

The team’s lean efforts reduced the number of help desk tickets that needed to be escalated for customer assistance by 18 percent, saving the company $1 million annually.

Finance: Monthly Closing Cycle. A Fortune 500 company had recently implemented Sarbanes-Oxley recommendations along with a new Enterprise Resource Planning (ERP) system. The combination of added Sarbanes-Oxley recommendations and a new ERP system had introduced significant controls and delays into the company’s closing cycle, stretching the close from seven business days to 17 business days and affecting more than 500 FTEs each month.

In response to the problem, five project teams worked on separate functional areas, using four lean tools: (1) document the current process, (2) externalize process steps that could be started prior to month end, (3) streamline everything that remained on the critical path or eliminate the ones that added no value, and (4) eliminate the root causes of errors that caused rework.

Within a month, the next financial close was completed in seven business days. After additional changes were implemented, the close now takes only five business days.

Purchasing: PO Process. A Fortune 100 company was universally frustrated with the time required to create a purchase order. The three to six weeks that it took to create a PO often delayed projects or required heroic work to expedite PO creation. Through data collection and detailed value stream mapping of the process, the team found that contracting and bidding were delaying many projects two to three weeks even when the supplier was predetermined by the business needs. Regression analysis revealed that each PO required five to 28 approval signatures (approval handoffs took one to two days each).
The findings drove new changes. The number of approval signatures was reduced from a range of five to 28, to a range of three to eight, with the rest of the organization notified afterward. Addressing these root causes and others reduced PO creation time to one to two weeks and eliminated more than 10,000 hours of effort annually. Many purchase orders are now possible in one day.

Legal: International Patent Filing. A global health care company was using outside legal services for the process of filing international patents and wanted to reduce the costs of that process. The legal department was focused on patent quality to protect its products, but a complex billing process made it difficult to understand the legal costs.

The lean approach used process mapping to understand the purchase-to-pay process when partner law firms filed international patents. Statistical analysis of invoices showed that specific fees had large variability, especially translations. This analysis led to new processes and selection of vendors that saved the company more than $2 million annually.

Conclusion
The pressures to reduce cycle times and costs in shared services will only increase over time. Clearly, automation or outsourcing may be options that need to be considered. Our experience is that it is both practical and advisable to consider an aggressive implementation of lean as a first step.  HROE

    Jim Fishbein is a senior manager in the Accenture Process & Innovation Performance service line. His e-mail is jim.e.fishbein@accenture.com. Roy Nanz is an engagement director in the Accenture Process & Innovation Performance service line. His e-mail is roy.r.nanz@accenture.com. Keith Johnson is an engagement director in the Accenture Process & Innovation Performance service line. His e-mail is keith.e.johnson@accenture.com.