Model 3: Establish customer/provider shared services

Under this model, more complex arrangements include shared back-of-house services such as:

  • œ  Procurement
  • œ  Payroll service
  • œ  Marketing or communications services
  • œ  Finance, HR, ICT, fleet management or other back-of-house services.

While this model a shared procurement service can be established quite easily if there is no obligation for organisations to use the service or any minimum volume requirements, other services take more time and effort to establish. The amount of complexity to establish the service depends on factors such as:

  • œ  the cost for the service
  • œ  how critical the service is to the organisation’s business
  • œ  whether the ‘provider’ of the service currently provides the service to other clients and has well established service descriptions, pricing delivery mechanisms
  • œ  the transition effort (and change impact on both organisations).

The significance of each of these factors will determine how much effort you should invest to establish a shared service arrangement. Taking up an offer for a free payroll service from a large organisation that you have a good relationship with may be an easy decision. Determining whether to receive ICT services that are critical to your business from a similar-sized organisation that is not substantially more mature in their service delivery is a more complex decision.

Irrespective of the amount of effort that is required, most organisations go through the following stages to establish a shared service arrangement.

Figure 7: Steps for establishing more complex shared service arrangements

Scope options

Take time to discuss the reason why and to gain the support of the governance structures before going to solutions.
— Advice from an NFP

The main task in this stage is to identify options for sharing services and how the arrangement will work. By this stage you should have a partner or partner organisations, and you should have identified if there is value in sharing services.

As a group you should discuss: 

  • œ  Why shared services? – confirm you mutual understanding and the drivers
  • œ  Which services will be shared – ICT, HR, payroll, marketing, etc?
  • œ  Who will provide the service (ideally one organisation should excel at providing the back-of-house service so others can leverage their expertise)?
  • œ  What activities are in-scope and out-of-scope for the arrangement (see Appendix A for a description of common activities in back-of-house services)?
  • œ  What is the level of service required?
  • œ  How well do you understand your current processes and procedures? Moving to a shared services arrangement will often mean aligning your own processes to those of another organisation.

Answering these questions will set the implementation up for success by providing a clear and common understanding of timelines, targets and responsibilities.

Develop business case

Be very specific in what your expectations are. Be very specific in the services delivered. Be realistic on time frames and costs.
— Advice from an NFP

Once you have an understanding of the options for shared services, you can develop the business case. The purpose of the business case is to provide key decision-makers with information to assess and demonstrate how the preferred shared service option best meets the need of your organisation and your partners. The level of detail required at each stage should correspond with the nature, size and complexity of the proposal and the associated risk and strategic significance of the proposal.

A rigorous assessment of the options, costs and risks is an integral part of any proposal. It is generally appropriate for two or three options to be considered in the business case.

There are four steps to developing a business case, they include: 

  1. Confirm service need
  2. Evaluate options
  3. Recommendations
  4. Implementation strategy.

Business case checklist:

  • œ Have all the benefits, tangible and non-tangible, been identified? e.g. service improvements, cost savings, etc.
  • œ Have all the costs, tangible and non-tangible been identified? Consider an independent review of your costs and benefits.
  • œ Have you identified your critical success factors/key business requirements?
  • œ Have you identified risks and do you have a risk management plan in place?
  • œ Have you identified your shared services model, including your governance arrangements?
  • œ Have you developed a project plan and do you have resource in place with the right skills and experience to deliver it?
  • œ Have you considered how the new processes and systems will be rolled out? (i.e. will it be a ‘big bang’ roll-out or a phased approach?)
  • œ Have you got an implementation strategy?
  • Do you have sufficient change management capability to support your preferred roll-out approach? Have you reviewed, prioritised and potentially stopped other projects? (this may release scarce resources).


Spend the time to get the contract right - explicit and detailed. Get legal advice about liabilities. Do exhaustive risk management - remember that organisational reputation is at stake as well as practical risks
— Advice from an NFP

Once the plan for action has been established and agreed to by all parties, it is time to put it into action. The key tasks include establishing formal MOUs and contractual agreements, assigning roles to implement change and establish processes for ongoing evaluation.

Establish formal agreements and assign roles and responsibilities

The business case will identify the key steps to implement the desired governance model. From the outset of the implementation, it is important to:

  • œ  assign roles and responsibilities to manage the implementation phase
  • œ  formalise management and governance structure through the development of MOUs or contractual agreement
  • œ  schedule milestones and key deliverables
  • œ  develop a monitoring and reporting schedule
  • œ  set performance targets for all organisations involved
  • œ  communication strategy (see below for more information on change management).

Evaluate benefits and update model where necessary

As the shared services arrangement matures over time, potential weaknesses and challenges will inevitably arise. It is important to have a clearly articulated process to evaluate the arrangement and to incorporate agreed changes over time.

Implementation checklist:

  1. Are the roles and responsibilities of each organisation clearly defined?
  2. Have you established firm contractual agreements that will engender trust?
  3. Have you given an equal voice and responsibilities between the organisations?