Maximizing the Benefits of System Shared Services

In response to the Great Recession, leaders of state systems of higher education searched for ways to cut operating costs without compromising quality. Many adopted shared services initiatives modeled after the private sector. Yet despite considerable investments in time and money, shared services often failed to yield projected efficiencies, savings, and quality improvements.

As financial pressures continue, system leaders have looked to shared services again. EAB’s research will help these executives overcome common obstacles that made the initial shared services initiatives less successful than expected.

This study examines the functions university systems have most successfully converted to a shared services model. The research also examines shared services experiments in new areas like enrollment and advancement. Download the study to learn how to overcome barriers to staff resistance, standardize business processes and technology, and capture the full benefits of shared services.

Shared services offers promise, but barriers limit benefits

In an era of ongoing funding uncertainty, university systems leaders must find efficiencies and reduce administrative expenditures. While shared services can be an effective means of cutting costs and improving service quality, private sector models often translate poorly and overestimate savings.

Systems have struggled in the past to implement and sustain a successful shared services operation due to faculty and staff resistance and unstandardized business processes. Benefits from successful initiatives often disappear as systems fail to document financial savings and cost avoidance accurately.

The current state of system-wide shared services models—and where systems are moving next

Five functional areas–HR, IT, procurement, payroll, and finance–offer the best opportunities for university systems to implement system-wide shared services. Procurement promises the greatest financial savings and is less likely to inspire controversy among system stakeholders than other functional areas. Adopting a centralized contracting and purchasing system allows the system to leverage its scale to save money on everyday items or large IT purchases. Shared financial services offer the lowest financial ROI, but university systems have successfully built trust in shared services through transitioning this functional area’s staff and operations to this model.

Read more about the current state of shared services in higher education

Several revenue-generating areas have emerged as potential candidates for shared services conversion. University systems are experimenting with shared services in enrollment management, research administration, and advancement. These functions increase the capacity of smaller campuses, bolstering campus and system bottom lines.

Section 1: Augmenting campus revenue capacities through shared services

Shared services initiatives typically focus on administrative functions, but the majority of higher education expenses remain in the academic enterprise. Historically, faculty resistance and concerns about reducing academic rigor prevented university systems from applying efficiency initiatives in academic affairs. Yet low classroom utilization, unfilled sections, and courses with high failure rates are costly for a university system. University systems should integrate the analysis of success rates into program review processes and support redesigning courses with low success rates.

Section 2: Approaching the third rail of academic efficiencies

Tactics to help you implement and sustain shared services across your campuses

Managing resistance to shared services

Systems or campuses planning to adopt shared services often face resistance from staff who fear layoffs and from faculty and campus-level administrators that worry they will lose control over administrative functions. High-profile resistance to shared services has halted well-intentioned initiatives that failed to clearly communicate the goals and impact of shared services initiatives. To mitigate resistance, systems leaders must ensure that affected staff have a clear understanding of the changes and must provide transition plans for staff whose jobs are reduced or eliminated.

• Practice 1: Templatized Change Management Communication
• Practice 2: Pre-transition Staff Duty and Competency Analysis
• Practice 3: Formal Individualized Staff Transition Plans
• Practice 4: Senior Functional Leader Reporting Line Redesign

Ensuring business process and technology standardization

The success of shared services initiatives depends on all units following standard procedures for each business process. While some university systems have adopted shared services without standardizing business processes, these systems have to treat campuses differently, resulting in a loss of potential savings and an increased risk of error.

To reap the full benefits of shared services, systems leaders should convene campus-level service practitioners to agree upon standardized processes. Still, university systems will likely face resistance to standardization, so decision escalation procedures should be in place to prevent endless deliberation.

Furthermore, business process standardization may be impossible without standard technology platforms in finance, HR, and other areas. Therefore, systems should look for opportunities to incentivize standard ERP adoption.

• Practice 5: Peer-to-Peer Business Process Evaluation and Standardization Exercise
• Practice 6: Deadlock Resolution Escalation Procedures
• Practice 7: Standardized Enterprise System Adoption Incentive

Preventing the disappearance of savings and benefits

Systems struggle to accurately collect, analyze, and report data on the results of shared services initiatives. If a system reports on its financial results, media and public officials may investigate those numbers, leading to difficult questions and lowered trust.

Efforts to collect shared services data fail because many systems neglect a baseline estimate of operating expenditures for comparison. If shared services yield financial benefits, savings often are not captured in a separate account, so they return to the general fund. In order to ensure savings are redirected to mission-critical activities, systems should hold campuses accountable for tracking and sequestering savings in a dedicated account.

• Practice 8: Simplified Business Process Cost Analysis
• Practice 9: Sequestered Shared Services Savings Reinvestment Fund
• Practice 10: Continuous Improvement Fundamentals