SHARED SERVICE MODEL AND SHARED SERVICE ORGANIZATIONS IN HUNGARY. The Hungarian Captive Center and Shared Service Center market

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1 SHARED SERVICE MODEL AND SHARED SERVICE ORGANIZATIONS IN HUNGARY The Hungarian Captive Center and Shared Service Center market NAME: UNIVERSITY: ADDRESS: Robert Marciniak, Doctoral School of Enterprise Theory and Practice, Faculty of Economics University of Miskolc H-3515 Miskolc, Miskolc-Egyetemvaros, Hungary TELEPHONE: FAX: SUPERVISOR NAME: SUPERVISOR Istvan Szintay 20th EDAMBA Summer Academy Soreze, France July 2011 ABSTRACT In this paper I summarize the minimum basic of my research. Then I interpret the aim of my research and the theoretical and practical benefits of it. My research will have exploratory, descriptional and explanatory parts as well. I will explore my research questions connecting with these parts. In methodology I plan a questionnaire survey as a quantitative research and making some interviews as a quantitative research. I will use mostly cross-sectional research but some longitudinal analysis also can happen. Shared service organizations will be the unit of my research. Keywords: captive center, shared service organization, SSO, shared service center, SSC, sourcing strategy, hybrid model

2 1. THE BASIC OF MY RESEARCH My research based on the international INNFORMS (innovative forms of organizing) project that was aimed to analyze new forms of organizations. This project was conducted in 1997 and analyzed the most successful companies to explore what kind of structures or processes used for their progress. One of the most important observations was the success of these companies do not come from only one defined organizational structure or process. There are more ways to be successful in these days but it is very important that companies should be flexible and adoptable to the turbulently changing environment. The main result of this project was to define directions of organizational changes and these directions could be represented by three changing dimensions. These dimensions are: structure, boundaries, and processes. This project was extended with a fourth dimension by the research results of my supervisor. This dimension is values. The next model introduces these dimensions: 1. figure: Dimensions of organizational changing Source: (Szintay, 2003) Based on these results I aimed to choose one of these organizational dimensions and analyze the real appearance and characteristics of it at companies. However all of them could be

3 interesting for me but I chose the organizational boundaries as dimension and the shared service model within the dimension. Shared service model is a little bit similar to outsourcing model so it is connected to the shrinking of activity range. The shared service model appeared in the 80 s in the USA and since then there is high interest about it not only in the private sector but in the public sector as well. Nowadays 80% of the largest companies apply shared service model to support some of their non-core functions. (Zinnov, 2010:3) The main target of the model was primarily cost-cutting and service quality improving but until now it has been extended. Shared service model operates in shared service center (SSC) that is a centralized organizational unit to deliver certain internal services mostly for the other organizational units or partly for other companies. (Bodnár, 2006:277) However the most know organizational solution is shared service center but there are more shared service organizations like captive center or hybrid models. Captive center is the same as shared service center but delivers services only for internal organizational units. Hybrid model is a mix of shared service model and outsourcing but extended for different services. In hybrid model the center of some services was moved (for example front-office function) to onshore or near-shore locations which are in time, culture and geographical close to the customers (like Middle-East Europe), and other services (back-office functions) to a cheaper, geographically, cultural distant location (like India, China or South-Africa). The previous one could be realized in a captive center or a shared service center, the latter one with an outsourcing partner. 2. AIM OF MY RESEARCH My research topic is shared service model. I want to prove it is an innovative organizational form (that is one of my assumptions). My research problem is a decisional model for organizational transformation. So I am looking for a model that describe how could a corporate leader decide about establishing and maintaining a shared service organization (SSO) or make a deal with an outsourcing company. If it exist then find it, if not create it. The empiric research will be conducted on the Hungarian shared service market. I think it will be a good market because in the last decade the Hungarian service market plays an important role on the CEE sourcing market that has a greater and greater position in the global service

4 market. In Hungary there was not a comprehensive PhD dissertation in this topic but it could be practical importance as well because I also would like to explore macro economical role of Hungarian shared service organizations like role in the national tax income and labor market. 3. PARTS OF MY RESEARCH My research will have exploratory, descriptional and explanatory parts as well. The first is the exploratory part. In this part I want to analyze the shared service model to answer some questions: - What is actually shared service model? - What are the similarity with and what are the differences from outsourcing? - Why it is so popular? - What are the drivers of global expansion in the last decades? - What are the expected benefits and how much could it be reached? - Is there any progress of the model? What is next step for Hungarian SSOs? I think this part of my research could be executed only with literature review. Maybe some interviews with key experts could be help in it. The second part of my research is the description part. In this part I want to define the main players of this model and characterize them. My questions about this part: - How could we describe companies that use this model? Are these companies in special stage of their lifecycle? - For what kinds of functions is this model used? - How could I define shared service organizations? - What are the main characteristics of shared service organizations? Where is the place of it in the whole organization? Who is charge of it? - What are the most known types of shared service organizations? What are the differences among them?

5 - Which types of shared service organizations are prevailing in the CEE region and especially in Hungary? - What are the most frequent functions that are delivered from these Hungarian SSO s? - Who are the service receiving parties? - How is the internal or external price calculated for the customer? - Who are employed in this SSO and what is HR strategy about these employees? - How could the company measure the accomplishment of service delivery? What are the main key performance indicators (KPI)? How could the company retain their customers? Is there any difference between internal and external customers? In this part of my research beside of literature review I plan a questionnaire survey with leaders of Hungarian SSOs. The third part of my research is the explanatory part. In this part I want to: - Explain the big popularity of CEE region in the last decade on the sourcing market and get answer why it has been changed. What are the reasons of them? - What were the drivers that helped investment decisions for Hungary and now what are the obstacles? - What are the causes of high turnover rates in this sector? How could it be managed? In this part of my research I need make interviews with key experts of these topics. 4. MEASUREMENT OF MY RESEARCH In my research I would like to combine quantitative and qualitative measuring methods. I plan to conduct a questionnaires survey and make some interviews with key figures in this market. The questionnaires will be online and self-administrated that will be sent by to the participants. The questions will be concern for the shared service organization. I have more years experience in questionnaire design so I hope I could make it expertly. I plan mostly single choice and multi-choice questions but some open-box questions as well. I will use to create and manage the survey the Evasys software and the survey results will be processed

6 with Microsoft Excel and SPSS programs. I want to make correlation and regression analysis for example to explore is there any relationship between setting-up shared service centers and tax policy in Hungary. I also plan some interviews. In cooperation with Hungarian Service and Outsourcing Association (HOA) I will make interviews with the leaders of HR organizations that observe the service market and colleagues of consulting firms in Hungary. These firms also watch the moves of the market. And of course with some researchers and observers I also will make interviews but I do not want too much, only 5-10 participants. The interviews will be based on a fixed question list. 5. ANALYSIS UNITS OF MY RESEARCH My research is concerned with shared service model so the analysis units will be the shared service organizations. I do not want to analyze only outsourcing organizations but any type of shared service organizations. The Hungarian market consists of about 90 firms. I want to reach all of them with my questionnaire. If I succeed I will contact with them only by phone than and online questionnaire but where it is necessary I will meet personally as well. To make interview I will contact the person by phone or then I plan to make interview always personally. 6. TIME DIMENSION OF MY RESEARCH Besides some statistics that are concerned for the number about shared service organizations that will be longitudinal in the last ten years. I plan to conduct my research at one point in time so I will make a cross-sectional research. I want to know everything about the concerned topic in the time of data record. The results of interviews could be useful for predictions about the Hungarian service market. 7. CONCEPTUALIZATION Based on the literature review and my observations I collect all of the important definitions or create them. It is important to build a model for the transformations. I need to find those

7 factors that are measureable and help company leaders to decide. These factors could be number of customers, service price, service satisfaction index, income, profit, turnover rate, etc. REFERENCES Bodnár, Viktória and Gábor Vida (2006). Folyamatmenedzsment a gyakorlatban. IFUA Horváth & Partners. Budapest. ISBN: Szintay, Istvan (2003). Gazdasági szervezetek változási tendenciái Hol a határ?. Miskolci Egyetem Közgazdasági Konferenciája. Conference paper Zinnov (2010). Outsourcing info. Shared Services Outsourcing Network. White paper