There are about as many philosophies on this topic as there are shared services organizations! On one end of the spectrum are those that do not charge at all and at the other, others with formalized models that detail monthly charges for all services, including shared services leadership as well as center leadership and all overhead support costs.
Some organizations view charge-outs as critical to influencing internal customer behavior. One example is tiered monthly pricing based on the quality of data inputs. For example, in accounts receivable, an operating unit that had fewer pricing errors to external customers and thus cash application had a higher “hit rate” leading to less manual interaction in processing, would have a lesser charge than one with a lower “hit rate” for the same number of transactions processed. In this scenario, operating units are incentivized to increase their billing accuracy at the front-end of the process, which no doubt will lead to greater customer satisfaction, but will also lower total company costs which will be passed on to them.
The majority of shared services organizations do have some sort of charge-out methodology and those are discussed quite often within the research areas within Peeriosity. In the poll below note that 46% indicated they include shared services support costs or indirect or fixed costs that are not necessarily directly attributable to any particular service being provided.
One item of ongoing debate is should the costs of running a shared services organization (Facilities, leadership team, etc.) be included within the charge-out, and if so, how allocated?
In a poll, within the Shared Services Leadership Research Area, the question regarding the charge-out methodology for shared services support costs was discussed. In particular, a member company was interested in what services were included as well as what allocation drivers were being used.
As indicated by the chart below, the debate is on:
The two most popular responses were at opposite ends of the spectrum; Identifying a specific cost driver and charging directly to the internal customer versus charging shared services support costs to corporate. The other two methods mentioned (allocating to other teams within shared services and then including within their charge-out and charging a fixed cost to internal customers) were interesting options being used by a few organizations.
The discussion continues as this poll has been a very popular one amongst the shared services leadership community. What is your Shared Services charge-out methodology? Is it adding value?
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