Shared service centers attempt to leverage economies of scale by taking internal functions common to different business units, such as payroll or accounts payable, and moving them into a central unit that provides the service to all. At that point, the business units become the center’s customers. It is something like a business within a business.
The evolution of shared service center’s organization is generally idealized as a transition from a set of functions (e.g. IT, AP, Accounting, HR) to a set of value stream deliveries (e.g. order-to-cash, talent development). This allows the organization to “break down silos” and “integrate for seamless delivery”.
If we were to depict this graphically, it would look something like this:
While phrases such as these sound good, something like motherhood and apple pie, it might be prudent to ask ourselves whether our organization’s silos might have benefits.
At a recent conference (Corporate Executive Board’s Agile Enterprise Summit) someone remarked that organizational silos have their purposes. As a previous critic of silos, it was incumbent on me to consider this remark in all fairness in order to have a completely informed opinion.
In other words, can a silo possibly be good?
Body of Knowledge
Consider the “to-be” nature of the shared service organization. Presumably, there is someone from each function in these value streams, but potentially no more than a few.
The professions normally associated with shared services – accounting, finance, human resources, information technology – are ones that have professional standards and a common body of knowledge. Accountants get their CPA’s, treasury people their CTP’s, financial analysts their CFA’s, the IT folks their certifications.
If there is only one person of each of these types in the value stream, who will encourage them, or prepare them, or value the knowledge addition?
The stressed Vice-President in charge of the value-stream, intent on maximizing efficiency and utilization? No.
The business-unit (now a customer) chief looking to lower their cost allocation or minimize the increase in their Service Level Agreements? No.
The most likely support environment for an accountant to get their CPA, etc. is peers who are also pursuing it and bosses that understand the importance and support it, and a system that acknowledges it.
What type of organization would do all these things? An accounting organization!
In other words, a silo.
Looking at things from a slightly different angle, if the value stream has one finance person, where is that person to aspire? To move up the value-chain organization, the person would need to acquire other non-finance skills in order to move-up the organizational chart. So long as the person only knows finance, that person is stuck.
The skill set of the shared service professions will therefor atrophy over time. The organizations will attract a lot of rudimentary, entry-level talent, but it will not develop for the personnel will aspire to learn non-functional items in order to progress in the value-chain structured organization.
How would we encourage others to develop professional skills and ability to move up within their profession. Provide managergial, director level, and executive level roles for them. In other words, become a silo!
Now What Do We Do?
So if silos are bad but silos are good, what do we do? My thought here is that the natural gravitational pull is towards the matrix – both value stream and functional. As follows:
Matrix organizations were the trend for awhile, but most have seemed to fall out of favor. Matrix organizations are difficult to manage. Matrix organizations result in some amount of inefficiency on the employees part – after all, balancing the wills and desires of two bosses takes a certain amount of time and effort. This time and effort may have been better spent doing something like…oh, I don’t know… working?
But hold on. Don’t we all manage more than one thing our lives already? We have work. We have families. We have community involvements. In other words, we are already managing more than one boss, one taskmaster, and a variety of separate functional interests.
Bringing it Together
What is remarkable is that the chart above essentially represents a social network. We previously discussed the interaction as being the primary unit of work for the knowledge worker. We can now conclude that the social network is the primary environment on which we execute the primary activity. This has implications.
But for now, we can summarize as follows:
We interact, within a social network. This is the essence of knowledge work. Therefore, this is the primary route for a finance and treasury person to create value.
I would love to hear your thoughts about the Matrix or your stories on this topic if you have them.
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