Economies of scale continue to increase for most business processes. Because of the desire for economies of scale, what was previously done internally within an operating unit becomes a service to be provided either by someone else in the larger organization or by a contractor. In a desire to achieve economies of scale, what was under an organization’s direct control becomes a service from someone working for someone else. Thus, the management problem of our time is how to capture the benefits of these economies of scale in a way that ensures good customer service. The service provider must be accountable for delivering a defined quality of service for a specific cost. There must be a link between that cost and user satisfaction. This can be done through fee-for-service arrangements that emulate the free market or some other mechanism, but the organization must be able to trade off value for cost. This link must be reflected in agreements between providers and users. These agreements must impose requirements on users as well as suppliers. The service provider needs to be accountable, but so does the user. The provider may be accountable for a price and service quality, but the user needs to be accountable for using the service appropriately. It is important to be able to quantify at least some of what the organization is getting through a shared service. Storytelling is not sufficient. Quantification should involve more than just the direct costs of a service, though this may be the easiest to measure. Quality too matters. Since not everything can be quantified, there may be a need for qualitative measures as well. Managers also need to be prepared to update metrics as they gain experience with the service. Despite the many successful examples in the private sector, not every business process lends itself to a shared service.

 1) Accenture News Letter