Potential disadvantages

The potential benefits of shared services must be balanced against potential costs. For organisations that effectively outsource their back-of-house service delivery to an external organisation there is a potential to lose autonomy over the quality of back-of-house service delivery. There is also a need to communicate regularly with another organisation about your needs (to keep relationships going and services on-track) and a concern that another organisation (who you might compete against for grant funding) has access to confidential information. To make the most of the potential benefits of shared services, NFPs need a like-minded partner, a clear reason to proceed and a strategy to implement change.

The fact that some organisations are less than satisfied with their shared services, demonstrates that the value of shared services is not necessarily guaranteed. It important to understand the costs, benefits and risks involved in sharing back-of-house services, and ensure that you have the right ingredients for success.

There are often three disadvantages from shared services, compared to providing services ‘in-house’:

  1. loss of control/less tailored services
  2. reduced job diversity for staff within the organisation
  3. increased risk from competitors.

Loss of control/less tailored services

Shared services can lead to lower levels of control over back-of-house service. This is a problem if the service is not as reliable as required, if the service is ‘business critical’ or if the service needs to be tailored to suit specific needs.

Less job diversity

The second disadvantage is job diversity. Shared services can result in less job diversity when organisations pool resources and streamline processes. If staff relish the opportunity to have broad and diverse role, the specialisation which comes with scale might result in the loss of some back-of-house staff.

Greater exposure to competitors

A third reason why an organisation might want to control its own services is to compete. Sometimes sharing services can put an organisation at a disadvantage if the service is critical to their competitive advantage. This is less likely to be the case with back-of-house services (as compared to client services) however competition can prevent organisations from sharing services. Whilst this can limit the degree to which some services are shared it doesn’t necessarily preclude cooperation, especially in relation to less ‘business critical’ back-of-house services.