For private sectors, the motivations of using shared

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Last updated: September 14, 2019

For private sectors, the motivations of using shared services are really straightforward and widely known, with cost reductions being the leading motivator. There are usually two goals to shared services. The first goal  is to standardise processes and services to achieve consistency of deliverables. This often involves moving to a common IT system (operating platform) or establishing a shared service centre. The other goal  is to outsource operations to a specialist organisation that provides a service and, through economies of scale, can help in the reduction of costs. The UK Government has always been under pressures of rising costs. The government’s 2015 expenditure review reinforced the need for departments to reduce costs and free up resources engaged in back-office functions and shift them towards providing better front?line services.

The central government has long pursued shared service centres as a way of providing such savings and Local authorities typically claim over 20% annual cost reductions from using shared service centres. Both public and private sectors seek for shared service with the aim to imporive process,increase efficiency and reduce cost.However, outsourcing is also a popular choice to achieve these goals.When choosing these two approaches,organizations have different  reasons .One interviewee indicated that  it depends on organizations’ attitude on people and their principles.  Although cost reduction is the main goal, some firms still value its own people.When  the services are targeted to internal people, they would prefer shared services and are willing to spend time merging people as they are able to control operations.

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In contrast, if firms only focus on cost reduction and  service is hold for external clients, firms might prefer outsourcing.Also, both smaller and larger companies will at certain time outsourcing.Beside firms’ principles, the degree of complexity  and time are also considerations. Organizations might prefer outsourcing when tasks are complicated and difficult. They tend to make experts to complete these tasks even the benefit is less then effort. Moreover,they might prefer outsourcing tasks that they trying to improve overtime.

They are aimed to improve prices and transfer to experts as these tasks are done for many clients. When business matures to some extent  and have a clear measurement scale, our sourcing might be applied .However, some simple tasks  such as payroll can also be  outsourced. In this case,organizations set up their internal shared services unit and then slowly outsource some parts to further reduce cost.

There is difference between private and public sector. The latter is more restricted by laws,regulation and political climate. In the public sector, shared services was used properly in about 2004 and 2005 due to the the nature of politics at the time.  They  focus on  mainly  back office, procurement and administration activities. Although its main goal is to reduce cost and increase efficiency and effectiveness, it also provides an opportunity to coordinate services more directly around the demands of citizens and businesses.

In this context, shared services become means of collaboration that  improves services from public sector with a formal contract partnership with more than one organisation, or even a formal agreement to share activities without a contractual commitment. For example, Nottingham City Council have used prudential borrowing to fund a contact centre. With the aom of  both better service standards and significant savings, there are  8 different buildings brought together into a single stop shop. ########### not sure ######It is noticeable that there is a trend that back office services are increasingly coming back into the organization according to one of interviewee. One interviewee observe this phenomenon  and propose further explanation. When firms have outsourcing,they get benefits of getting labors  and improve efficiency.

But they later might  find quality  go down, then they will make back office back.Some services in India  and Philippines are going back to  UK due to the cost of labor and culture difference, Firstly,the wage differential rates  is not as significant as before. These firms are not about to sustain to make benefits as before. Secondly,culture and language barrier make them pay additional management cost. These firms may spend more time communicate  with staffs. Therefore the bonus  have faded  away.

Nevertheless,these approaches  do have benefits for organizations.It is important for organizations to place and recruit the right people for internal activities as there are ‘office issues’. The most vital point is that when applying shared services and outsourcing,firms should have clear goals and focus on the key areas.It is  also noticeable that all the risk and insurance implications are addressed by the partners collectively at the earliest possible stage.

In order to overcome the  barriers encountered,  organizations should have strong leadership , prepare adequate resources and build proper partnership model.  There might be a decline in service standards but it is eventually likely to arise as long as  all people involved understand the vision and strategy. Most importantly, they  have to build a new consensus to accept the  new roles and value through robust communication.

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