Is your organization operating as effectively as possible to deliver for customers and create value for shareholders? Many of the enterprise clients we work with are structured in a matrix with certain functions organized centrally and chartered to support the business units that are providing products or services to customers. In most matrix structures, a company has several business units that draw on support from centralized functions in areas like finance, human resources, legal, information technology and even quality and supply chain management. At Metre22, we’ve noticed that over time the expectations between business units and the shared service functions that support them can become mismatched or ambiguous, leading to conflict. This is especially true for organizations experiencing fast growth - for instance when growth is driven by mergers and acquisitions. Here are three signs that your organization might need to revisit roles and expectations for business units and the matrixed shared service functions that support them.
- Functions do more policing than servicing. The interactions between the shared service functions and the business units can become overly skewed toward compliance. Enforcing compliance to policy is certainly important. But when compliance takes center stage and there is little evidence that the functions are treating the business units as their customers, the effectiveness of the entire organization can suffer. After all, they are called shared service organizations for a reason.
- Functional-driven initiatives comprise majority of the investment portfolio. There are only so many discretionary initiatives an organization can take on. Functional resources are needed to support business unit initiatives like mergers and acquisitions, operational improvement efforts, and new product launches. But those same functional resources are often pulled into executing their own functional, discretionary initiatives like new systems, tools, programs. When the number of functional initiatives force resources to prioritize their time to the exclusion of business unit priorities, there might be an issue.
- Overhead allocation discussions out-number strategic growth discussions. The cost of shared service functions is often allocated to business units via some formula. For example, a percentage of the cost is shared based on business unit revenue, employee count or some other metric. Regardless of how well the formula is defined, allocations are often a point of controversy, argument and discussion. Constant month-end or quarter-end discussions take time and effort – time which is better directed toward customers. If more time is spent on overhead allocations than on strategy, you may have an opportunity for greater clarity in roles.
If you believe there is an opportunity to clarify roles and expectations between shared service functions and the business units in your organization, take a look at our method for improving the situation.