I read an interesting article on this topic in CFO.com and a related set of detailed GBS / SSC benchmarks. You can access them at the links below.
But first, a health warning!
As you will know by now, I am wary of individual performance metrics and indicators because they rarely tell the full story.
It is also very easy to “game” an individual measure.
How you define a measure is key to the results. More key, sadly, than the performance itself.
According to the APQC benchmarking research, the most productive and efficient Shared Service Centers operate at $1.90 per $1,000 of revenue.
However, if you are spending more it might not mean you are not efficient or productive.
Context is KING.
Other factors like business unit structure and governance, complexity, M&A, Shared Services / GBS maturity, process simplification/standardization and technology landscape and evolution all impact the cost.
For example, if the business as a whole runs highly profitable brands and operating units as quasi autonomous entities, lack of process harmonization (and thus higher Shared Services/GBS costs) can be a financially positive business decision overall. Cost optimization in GBS in a highly profitable business can be a “rounding error” in overall financial results where revenue generating business unit autonomy is regarded as a key entrepreneurial value.
So given that “health warning”, top performers utilize;
- 4.1 FTEs per $1 billion of revenue to invoice customers and 2.5 to process AR, while the comparison group uses 11.3 and 5.8 FTEs respectively.
- 3.8 FTEs per $1 billion of revenue to process accounts payable, while the comparison group uses 6.7.
- 3.1 FTEs per $1 billion of revenue to perform general accounting (record to report), while the comparison group uses 8.
- 3.9 FTEs per $1 billion of revenue to manage financial controls (ICFR), while the comparison group uses 5.9.
But, ultimately we cannot cost reduce our way to success.
We need to balance the drive for cost efficiency with the drive for value creation across the business. Key to success in this is achieving excellence in exercising “influence vs control” and is, perhaps, even more pronounced in the most challenging environments.
End-to-end process adoption, understanding and alignment, both within GBS and the broader business, is a critical strategy that requires this influence.
You can read the source article by Perry Wiggins in CFO.com here . . .
You can get the full APQC benchmark survey results here . . . It is free of charge but does require registration.
Thanks for reading . . .