There was a time when finance shared services had two real goals: centralize low-level, transactional functions, and process these at a lower cost. For most companies, the move to shared services was a speedy way to reduce overhead and hit budgetary targets without a lot of bleeding. 

Today, shared services has come of age, transforming from a quick way to consolidate repetitive tasks into a true, digitally powered business enabler that adds tangible value organization-wide.  Although everything from the approach to and role of shared services has morphed from its original iteration, not everyone has caught up with the changes. As a result, there are a lot of misconceptions and misinformation circulating in the marketplace. 

In this paper, we separate the facts from the fiction; debunking the most common myths around human and digital labor in finance shared services. We will also explore how this approach, in combination with robotics, AI and analytics, can provide the scalability, business insight and strategic value that companies need today – along with lower costs, improved transparency and increased control. 

Now, let’s get real. 
Myth #1: “Shared services is either a captive or an outsourcing play.”

Reality: Finance shared services is an ecosystem in which the captive organization and third-party providers work collaboratively. 

Consolidating work in a captive or outsourced environment is a tactical move. It’s largely a choice of location and ownership; “here or there,” and “theirs or ours.” 

Shared services is a much more nuanced, outcome-based strategy in which the company and third-party provider work collaboratively toward a shared vision. Instead of, “How can we get this work done for less,” the question becomes, “What is the best combination of human and digital labor and technologies to optimize performance, improve the customer experience—and do it at a lower cost?”

It’s not a quick fix or consolidation, but a strategic move with clear short-term and long-term goals.

Myth #2: “It’s a pure cost reduction tactic.”

Reality: It’s making humans more productive through the skillful application of digital technology. 

Historically, companies moved work offshore for salary arbitrage alone. Scaling up meant adding more lower-wage people. 

Today, the math is changing. 

Instead of the same number of people working at a lower cost, leading edge global shared service organizations are focused on using robotics, automation and digital technologies to make the people working within those organizations as productive as possible. 

By equipping the finance area with digital technologies that normally wouldn’t be justifiable for a back-office function, this model gives the operation the capacity to improve performance, service levels and leverage those technologies to benefit the entire company. 

Myth #3: “It’s a lift and shift.” 

Reality: Shared services optimizes processes through analysis and digital interventions. 

Instead of moving and automating bad processes, it’s critical for companies to first analyze what’s happening within the internal organization. This deep dive not only shines light on areas with the greatest need for improvement, but also enables the company to set target metrics for each function in the new environment. 

For example, if AP invoices cost $7.00 to process internally instead of the best-in-class of $4.00, companies have to seek out the root cause:

  • If only 50% of invoices are coming in electronically, is finance using optical character generation (OCR) technology to reduce the number of manual touches? 
  • Would a self-service portal for invoice submission and payment updates entice more vendors to submit these electronically?
  • Are error rates so high that resubmissions are substantially adding to cost?

That analysis provides a starting point on what processes need to be improved and refined as part of the journey to a shared services environment.   Then, companies can look at how they can leverage the digital tools to further enhance performance, reduce errors and mitigate costs. 

Myth #4: “You can only move low-level, repetitive tasks.”

Reality: Almost every finance function works well in shared services.

In the past, shared services organizations did focus on more production-oriented finance functions, for instance billing, T&E and accounts payable.

Today, many of those low-level functions are completely or significantly automated, handled through self-service, or have simply evolved away.  

With the help of new technologies, collaboration tools and a higher level of expertise in the global markets, organizations are now successfully moving even the most complex functions, like regulatory reporting, forecasting and budgeting, to shared services. Unless the function is so highly connected to the business that the staff has to physically sit with the business, it can function well in the shared services center.
Myth #5: “Shared services have no strategic impact on the company’s front end.”

Reality: Shared services is a comprehensive source for actionable data insights.

In a traditional environment, finance had a myopic, back-end view of the work coming in. So, it might see a reconciliation issue, but has no visibility into what happened on the front end that led to that issue. Equally the majority of the data received provided historic rather than future insights for business performance.

A digitally-powered finance shared services organization has an end-to-end, front-end to back-end view of the operation. When issues happen downstream, finance now has the insight to go in and sponsor fixes for whatever is causing those issues in the front-end of the organization. Improved data quality in front-end systems benefits the enterprise as a whole, and these behaviors reduce siloed approaches and thinking that can constrain performance.

In case of an insurance company, because all of the finance data loops through a single organization, it makes it easier to build analytics tools into claims, payment processing, disbursement and fraud. This transforms the shared services area into a natural hub for data governance, and a source for certified data that supports actionable business insight.  

These examples are just some of the ways shared services analytics can benefit the company as a whole:

  • Collections Finance Operations might observe defaults occurring more frequently in one geographic area, or with a specific policy or book of business. That analysis can be communicated to underwriting to adjust pricing policies or underwriting guidelines to mitigate additional losses. 
  • Ongoing spend analysis around T&E makes it easy to spot suspicious activity by individuals or vendors more quickly, and prompt further investigation. 
  • Instead of uncovering duplicate claim payments after the fact, preventative analysis can flag these duplicates before they occur, or early enough in the cycle that these funds are more likely to be recovered.
  • Embedded point analytics built into the process reduce the incidence of overpayments and underpayments, as well as late payments and early payments. 

Instead of a standalone analytics function, which is typical in most insurance companies, analytics can be integrated into the heart of the operation, and benefit the entire organization.   

Myth #6: “It will put an additional burden on the IT department.”

Reality: Finance shared services takes the burden off of the IT department. 

In recent years, companies began replacing legacy finance systems with cloud-based ERP solutions, which require new processes and new business rules. Not only do they have to manage the change, but do so without losing the legacy knowledge. 

The challenge is few IT departments are resourced to devote significant effort to back-office functions. In an Insurance company, for example, investments will tend to be directed towards supporting actuarial activities, product development and client-facing analytics, where links to a direct contribution to the front end performance of the business are much easier to demonstrate.

A finance shared services organization, with the right provider, has the bandwidth to manage the system change, as well as offering bolt-on technology, like automated workflows, robotics, automated reconciliation and automated journal entries to enhance the solutions.

As a result, shared services and their outsourced providers can help companies maximize the value of their ERP investments, complementing and augmenting the internal IT staff. 

Myth #7: “Once you set the shared services organization up, you can forget it.”

Reality: You absolutely have to keep thinking about how to evolve and improve the shared services environment you’ve created.

If shared services is an extension of the organization, it only makes sense that this operation will evolve and change with company needs. What was important to the company 12 months ago may not be relevant today. So, it’s important to conduct ongoing business reviews with stakeholders to ensure the current KPIs and performance measures are still valuable to the individual business units and company as a whole. 

At the same time, technology is constantly evolving, as is the definition of “best-in-class” processes.  Both company and provider should actively look for ways to improve performance through the use of new digital tools and process improvements on an ongoing basis.

The shared services organization, like business itself, should be constantly evolving. 

Myth #8: “Anyone who sends work to a shared services organization gives up control.”

Reality: Stakeholders actually gain greater visibility into what’s happening with their work in a shared services environment. 

With activities in finance shared services that have been physically moved, business units do give up the ability to stop someone in the hallway and ask about a payment.  But, what they lose in “water cooler updates,” they gain ten-fold in formalized communications, reporting and visibility into the entire process. Because the operation is measured by KPIs and performance standards, there’s actually more accountability with a shared services organization than an onsite finance function. 

Regular, formalized communications on performance, compliance testing results, error rates and process improvements keep stakeholders in the loop. By also getting stakeholders involved in a shared services steering committee, organizations can demonstrate that shared services is an ongoing strategy, and that the business units have a voice in setting priorities for the organization.  

Myth #9: “If you build a shared services organization, the work will automatically come.”

Reality: “Change management is critical to adoption.”

Any new shared services organization has to pull the work in and sell the benefits to the individual business units. It’s important to set expectations upfront, so business leaders understand both the financial and performance metrics associated with the new operating model.

The goal is to get the business units to try out the organization. When leaders experience the benefits first-hand, they’re more likely to increase the flow of work, which enables the company to maximize the benefits. 

How Aetna Drove Traffic and Built Trust in Its Finance Shared Services Organization

When Aetna set up its finance shared services organization, it projected a 20 percent year-one reduction in costs, with that number growing every year. The challenge was getting the business units to send over the work.

To motivate the business units to try out the new organization, shared services leaders offered to pass that 20% savings back to the individual costs centers at the time of transfer. If a business unit sent over $100,000 worth of resources, its budget was only reduced by $80,000. It became the Shared Services responsibility to generate the savings and demonstrate this to the stakeholders. 

That year-one incentive enticed wary business units to send work over, experience how the shared services environment operated and communicated, and quickly recognize the value of fully utilizing this resource.  Not only was adoption accelerated, but business units continued to push additional activities over, even after the promotion expired.

Myth #10: “Shared services is a career backwater.”

Reality: The transferred finance staff has more opportunities for growth and advancement with a shared services organization.

In a typical insurance company, a number of small finance teams support each of the businesses. Career progression opportunities are more likely granted to those that interact directly with the senior leaders.  By migrating activities into a larger finance shared services organization that supports the entire company, individuals have the opportunity to move horizontally, into project work, or move vertically into supervisory roles, which are more accessible and plentiful than in siloed business constructs. 

In a shared services environment, the staff gains perspective on the entire company, not just one business unit. They have the opportunity to grow with the business as a whole; instead of being one small part of an individual product line.  So, there’s more room for career growth without stagnation. 

Meeting the Real Needs of Companies Today

By moving to a well-planned human + digital finance shared services model, companies not only increase productivity and performance, but realize benefits that go well beyond more efficient transaction processing:

  • Scalability: Shared services provides a more agile support model that can quickly adjust to supply and demand; acquisition and divestitures, without proportionately increasing headcount. In this environment, technology enables people to work more productively, which means fewer people can support a larger organization.
  • Advanced digital technology: Companies benefit from access to world-class robotics, AI, and other digital tools that would not be cost-justifiable to a back office function any other way.
  • True business insight: Integrated data analytics transform the finance area into a hub for data governance and business insights. The function moves from a myopic task-master to the headlights of the organization.  

That’s the reality of finance shared services in the modern age. Not labor arbitrage, not a pure cost play, but a strategy truly that adds strategic value.

Written by:

Charles Morgan
Vice President, Finance Shared Services, Aetna

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