[HROA Essentials] Siemens saves big with Shared Services

With Shared Services, which has been in place since 1997, Siemens in the UK is leading the way within Siemens, and celebrating back-office successes. Internal customers don't care how internal support processes like payroll and travel management work as long as the quality and costs are right.

Harmonized services

Shared Services handles support processes to take the burden off individual employees, so they can focus completely on their core responsibilities. This not only bundles and harmonizes business support services within Siemens, but also improves them through standardization and monitoring.

"The result is a win-win situation," explains Christoph Urban, CFO of Siemens in the UK and head of the Shared Services initiative. "The customer, that is, the relevant Siemens unit, gets better quality at lower cost and can concentrate more on its core business. Shared Services employees also benefit because their work is now more important. They're no longer seen as just another support process employee. They're regarded as experts. Finally, the company enjoys increased competitiveness and attractiveness as an employer."

The individual support services may seem small at first glance, but the bigger a global company gets, the bigger its network of varied, decentralized business units. Vast amounts of money are unnecessarily invested in duplicate and thus inefficient structures. Shared services are currently being used primarily in the areas of accounting and finance, human resources, IT, and logistics and indirect materials purchasing.

Cultural change is key

In the U.S., Siemens' biggest single market, growth and acquisitions had resulted in a bewildering conglomeration. Siemens USA had more than 600 travel agencies, 25 payroll systems and 28 different ways to pay invoices.

When they started to consolidate these activities in the U.S., each unit was reluctant to open its own entrenched structures to a new and unfamiliar centralized unit. The biggest challenge in introducing Shared Services lay in the minds of employees. According to Christoph Urban, "Management was afraid they would have to give up something, and there was a lot of anxiety about change in the departments. Many employees engaged in providing services also had to get used to looking at the business units as their customers and treating them as such."

Huge savings

The breakthrough in the U.S. was achieved in 2001, when then-head of US operations and designated CEO Dr. Klaus Kleinfeld pushed Shared Services to the top of his list of priorities.

"We needed ways to control costs and yet continue to develop new business areas," Kleinfeld says about the situation at the time. Today, Shared Services issues 1.6 million paychecks, handles 270,000 (around 50 percent) of all travel and expense accounts and pays supplier invoices amounting to $1.3 billion in the U.S. each year. Since the changeover in 1999, the company has achieved savings in the high double-digit millions of U.S. dollars each year because redundant and unnecessary structures have been eliminated.

Besides the fully developed Shared Services units in the U.S. and the UK, similar organizations exist in Latin America, Scandinavia, the Benelux countries, Germany, France, Austria, the Czech Republic and Asia.

For Urban, the concept of shared services is still a long way from its goal. "We no longer have to prove that Shared Services work. Now we have to penetrate the Siemens world," he explains. "In the end, we want to see regional Shared Services units in every area of the world." At the operational level, Meg McGrath, the accountant in the UK, sees the future not only in global terms, but also as an ongoing process. She added "We have managed to reduce costs for our customers by five percent each year on average so far. And we want to at least maintain this level."