"We were in a position of being accountable for corporate operating costs, but those costs were driven by our customers," says Jon Bredemeier, Corporate Services manager in charge of Sears' non-retail building operations. "We were trying to cut costs while our customers continued to ask for more because they perceived the services as free. When we tried to enforce procedures to benefit the whole company, we were seen as being less than customer focused.

"Now that the business units have to justify costs for the services they consume," Bredemeier continues, "we are considered an essential resource that helps them meet their needs."

Sears set clear objectives for shared services on both the vertical business side and the provider side. For the business units, the goal was to create an awareness of how their demands affect costs. For the service providers, it was to establish cost accountability and market rate comparison.

Implementation Guidelines

Sears' senior management stipulated three rules for the move to shared services. First, the shift had to be conducted without increasing staff. Second, it had to be done without purchasing any new computer systems. Third, if the vertical businesses weren't happy with a service provider, either because of cost or quality, that service could be met outside the organization.

"The process was fairly straight forward," says Bredemeier, who manages building operations for all non-retail space including Sears' corporate headquarters in Hoffman Estates, Ill. "We had to identify costs, define an allocation methodology to charge those costs back, and develop service level agreements (SLAs) with all of the business units. Several of these costs were new to the vertical businesses, many of whom suffered from a bit of 'sticker shock' at first. Consequently, we spent a lot of time helping them understand the costs involved."

Fortunately, Sears had long been collecting benchmarking data that made it possible to track expenses against 15 different ledgers and specify the costs for each separate function or service.

"Building operations is kept on a separate ledger from reprographics and food service, etc., which meant we had a lot of data at our fingertips and understood our costs very well," he says. "It was just a matter of allocating them to the various departments and businesses."

Following the executive guidelines, no new software was purchased in the implementation of shared services. Sears supplements its corporate accounting system with a Microsoft Access database customized in-house to develop budgets and track expenses. Aperture, a data management program, is used to track space allocations and add moves and changes.

According to Bredemeier, it took less than six months to measure and report costs, but developing the SLAs proved much more challenging. In some instances, it took more than a year to get the SLAs signed because many businesses had to deal with multiple agreements between different shared services departments.

SPOCs

To facilitate the implementation of shared services, a total of 17 different SPOCs, or single points of contact, were designated within each of the vertical business units. Meetings with each of the SPOCs were then held to explain costs and to set up the SLAs.

"After we got the service agreements and costs agreed to, we had meetings with the SPOCs on a quarterly basis," says Bredemeier. "Initially, we looked to them as a sort of governing body for the new organization. If we wanted to make a change in policy or propose something new, we would ask for their input."

Evolution of the Process

Sears' shared services approach has evolved considerably since its inception five years ago. At the outset, SLAs were as long as 10 pages. In some instances, the agreements would even go so far as to specify the exact range of space temperatures that were going to be provided.

"We went into considerable detail on both the services and the costs involved in the early SLAs. If temperatures got outside the range we specified, the SLAs even stipulated how fast we would respond to hot and cold calls," Bredemeier says.

Today, SLAs are an integral part of the company's budget process and have been streamlined into single-page documents that outline specific costs. The signature requirement has been dropped.

According to Bredemeier, the move to shared services has also brought about company-wide changes in mindset and behavior.

"For example, we used to take all the overhead associated with reprographics and charge it out to the businesses on a cost per square foot basis," he explains. "It wasn't a big number in their overall charge, so if a business group came down and needed 100 copies, 200 was better. When we started directly charging for every copy, behavior changed, and they got a lot more precise with the quantities they ordered.

"We've also seen a change in mindset," he continues. "Our customers now understand that they play a significant role in defining corporate expenses."

Success Factors--Know The Customer

The successful move to shared services at Sears was eased by a number of factors, not the least of which was extensive historical benchmarking that made it easy to break out occupancy costs among the individual business units.

"Paying rent was not a new concept for a lot of our people, but the true cost of occupancy was," Bredemeier explains. "It was a real eye-opener for the business units to understand that furniture isn't free and that there are costs involved with things like mail service and walk-up copiers."

According to Bredemeier, one initial challenge presented by the new model was gaining a clear understanding of who the customer was.

"We had always scored very well on our customer service index," he says. "However, when we went into shared services, we struggled initially with knowing who our customers were. We finally came to realize that we have several different customers--from upper management down to individuals at the workstation level--and that we had to find ways to meet everyone's needs."

He also notes a major shift within Corporate Services itself.

"We as the service provider had to change our mindset towards the customer. Where there used to be an attitude within Corporate Services that the businesses wouldn't be successful without the service providers, now service providers understand that, really, they can't survive without the businesses," he says.

Goal Sharing Drives Maximum Performance

In conjunction with its shared services initiative, Sears has proactively sought to develop an entrepreneurial mindset throughout the company. One of the keys to fostering this mindset is a teamwork concept called goal sharing.

"Goal sharing is about creating an entrepreneurial environment within your organization," Bredemeier says. "It's having everyone on the team act like they are owners in the business. The result is that everyone shares the benefits if certain goals are met. It's not just achieving a number. It's about meeting the customer's needs and striving to be better through innovation."

Sears' goal sharing is a voluntary program that independent departments elect to pursue. Upon implementation, each department creates a committee to develop a goal-sharing plan that is unique to that organization and is generally non-transferable.

As a result of the effort, Corporate Services has seen a 1.5 percent rise in employee satisfaction and a 10 percent annual reduction in overall operating costs. Despite increases in overall employee population and square footage--including a 400,000-sf expansion to the Hoffman Estates headquarters--the facility staff has decreased in size while becoming a catalyst for efficient business practices.

"At the outset of shared services, we saw ourselves primarily as service provider," Bredemeier says. "That vision has since become more aggressive. Now we are focused on the well-being and productivity of the associates we serve, more so than on the services we provide."

By Johnathon Allen