A captive shared services organization is a wholly-owned subsidiary of the organization to which it belongs and has no external customers. This means that the parent organization controls the processes and technology the shared services organization employs to deliver services. The SSO’s governance structure is confined to officials of the parent organization and the parent organization together with the shared services center make decisions about capital investments for the SSO. However, just as the shared services organization is captive to the parent organization, customers are captive to the shared services organization. Being a captive shared services organization and having a captive customer base simplifies things considerably for the shared services organization. Instead of multiple customers with sometimes competing demands, the SSO has only one customer, the parent agency and its business units, to satisfy. And business units are not free to go elsewhere for services offered by the SSO although the SSO may well outsource some of its services. But what is a positive for an industry shared services organization can be a negative for a government shared services organization.
Why Benchmark? Benchmarking is a proven tool for improving efficiency and reducing operating costs. Using common or industry key indicators for the service, an organization compares its indicators against the indicators for leading organizations providing the same service. Benchmarking tells you how your organization stacks up against other organizations. Just identifying where there are gaps is not enough. A good benchmarking study also tells you why gaps exist. It provides a road map for improvement by comparing processes, technology and differences in the operating environment that impact performance, efficiency and cost.
In the absence of a profit motive and a captive customer base how do you drive innovation and efficiency? This is the crux of the challenge with government shared services. In the private sector every entity in the company focuses unrelentingly on profit (revenue minus cost). Profit margins are increased by increasing revenue or reducing costs or both.