Shared services in a growing private firm Critical aspects to consider when managing the relationship between shared services and business units Master’s thesis in Management and Economics of Innovation AXEL GEREBRINK OSCAR KORSHAVN Department of Technology Management and Economics Division of Entrepreneurship and Strategy Chalmers University of Technology Gothenburg, Sweden 2020 www.chalmers.se Report No. E2020:057 REPORT NO. E2020:057 Shared services in a growing private firm Critical aspects to consider when managing the relationship between shared services and business units AXEL W. GEREBRINK OSCAR J. KORSHAVN Department of Technology Management and Economics Division of Entrepreneurship and Strategy Chalmers University of Technology Gothenburg, Sweden 2020 Shared services in a growing private firm Critical aspects to consider when managing the relationship between shared services and business units Axel W. Gerebrink Oscar J. Korshavn © Axel W. Gerebrink, 2020. © Oscar J. Korshavn, 2020. Report no. E2020:057 Department of Technology Management and Economics Chalmers University of Technology SE-412 96 Göteborg Sweden Telephone + 46 (0)31-772 1000 Gothenburg, Sweden 2020 iv Shared services in a growing private firm Critical aspects to consider when managing the relationship between shared services and business units Axel W. Gerebrink Oscar J. Korshavn Department of Technology Management and Economics Chalmers University of Technology Abstract Implementing organizational structures that include shared services have been a popular way for firms wanting to reduce cost and streamline operations since the 1990’s (Paag- man, Tate, Furtmueller, & de Bloom, 2015). In order to reach these aims, firms are looking for ways to reduce redundant provision of non-core activities. Shared services could be used as a mean to centralize these activities performed at the business units. Dependent on the characteristics of the firm, different configurations of shared services are implemented. Consequently, shared services are defined in multiple ways by different authors. In this master thesis, an entrepreneurial growing firm has been studied with the use of the Relationship Management Framework by Janssen & Joha (2004). Furthermore, this thesis is based on a case study approach and data was collected through interviews. The initial problem which led to the first research question, Which factors are most critical to consider when managing the relationship between shared services and busi- ness units at a growing entrepreneurial firm?, was derived from a practical problem. The second research question, How is the Relationship Management Framework by Janssen & Joha (2004) suited for analyzing the relationship in a growing entrepreneurial firm?, was a result of a literature review as the framework was found and chosen to constitute the foundation of the analysis of this thesis. The collected data revealed four interesting aspects to consider when managing the re- lationship. First, the firm has to configure shared service having the motives behind the implementation in mind. Second, the organizational culture needs to be taken into account when managing the relationship. Third, social/cultural control can be difficult to exercise in a growing firm. Fourth, it is important to configure the coordination for each service individually and not treat them as one homogeneous entity. In this thesis, a revised version of the Relationship Management Framework by Janssen & Joha (2004) is presented in order to better fit the characteristics of a private growing entrepreneurial firm. The Contract dimension was removed from the original framework. Moreover, the Organizational culture dimension was found to have a substantial impact on the relationship. Since all actions are supposed to have the corporate goals as starting point, the Overall corporate objectives dimension was added as the point of departure for the framework. keywords: shared services, relationship management, coordination, gov- ernance, control, entrepreneurial culture, growth v Acknowledgements This master’s thesis has been conducted during the spring of 2020 at the Department of Technology Management and Economics at Chalmers University of Technology. The thesis is the last part of the master’s program Management and Economics of Innovation. First, as the case study that constitutes the foundation of this report would not have been possible without the help from our contact at the studied firm. We would like to direct our gratitude for his guidance and interesting discussions. We would also like to thank all the participants at the studied firm that took their time to be a part of our study. Finally, we would like to thank our supervisor at Chalmers University of Technology, re- searcher Kamilla Kohn Rådberg, for her continuous support during the writing process. Rådberg’s expertise has been helpful in guiding us through the theoretical area which have been studied. Once again, thank you all! Gothenburg, Sweden June 4, 2020 vii Table of Contents List of Figures xi List of Tables xiii List of Abbreviations xv 1 Introduction 1 1.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.3 Research questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.4 Delimitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.5 Outline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2 Theoretical Framework 3 2.1 Definition of shared services . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.2 Why implementing shared services? . . . . . . . . . . . . . . . . . . . . . 6 2.3 Drawbacks of shared services . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.4 Control-oriented perspective on shared services . . . . . . . . . . . . . . . 9 2.4.1 Coordination mechanisms . . . . . . . . . . . . . . . . . . . . . . 10 2.4.2 Management & strategy . . . . . . . . . . . . . . . . . . . . . . . 13 3 Methodology 19 3.1 Research approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3.2 Research process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3.2.1 Data collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3.2.2 Data analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 3.3 Research quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 4 Case Study Presentation 27 5 Result & Analysis 31 5.1 Managing the relationship . . . . . . . . . . . . . . . . . . . . . . . . . . 31 5.1.1 Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 5.1.2 Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 5.1.3 Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 5.1.4 Interaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 5.1.5 Behavioral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 5.1.6 Efficiency & Outcome . . . . . . . . . . . . . . . . . . . . . . . . 58 5.2 Additional dimensions discovered . . . . . . . . . . . . . . . . . . . . . . 63 ix Table of Contents 5.2.1 Organizational culture . . . . . . . . . . . . . . . . . . . . . . . . 63 5.2.2 Overall corporate objectives . . . . . . . . . . . . . . . . . . . . . 64 6 Discussion 67 6.1 Critical factors to consider . . . . . . . . . . . . . . . . . . . . . . . . . . 67 6.1.1 Comparing intents & the actual results . . . . . . . . . . . . . . . 67 6.1.2 Entrepreneurial culture & shared services . . . . . . . . . . . . . . 69 6.1.3 The role of shared services & control mechanisms . . . . . . . . . 70 6.1.4 Governance & Management control structure . . . . . . . . . . . . 71 6.2 Framework fit for entrepreneurial firms . . . . . . . . . . . . . . . . . . . 73 6.2.1 Removing the Contract dimension . . . . . . . . . . . . . . . . . . 74 6.2.2 Adding two additional dimension . . . . . . . . . . . . . . . . . . 74 7 Conclusion 77 References 79 Appendix A Interview Template I x List of Figures 2.1 Visualization of an organization using a Shared Service Center (SSC). The figure is built upon an illustration by Janssen & Joha (2006) together with the illustration of Shared Service Centers by Ramphal (2013). . . . . . . 4 2.2 Visualization of an organization using free standing shared services. The figure is built upon an illustration by Janssen & Joha (2006) together with the illustration of free standing shared services by Ramphal (2013). . . . 5 2.3 Illustration of the four perspectives found in previous research on shared services according to Richter & Brühl (2017). . . . . . . . . . . . . . . . 10 2.4 Visualization of the management control structure choices for service trans- actions based on the model by Vosselman (2002). Depending on the three factors, the firm should decide how to manage their buying and selling (b/s) structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.5 Illustration of the Relationship Management Framework developed by Janssen & Joha (2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3.1 An illustration of the used research process, based on the process of qual- itative studies developed by Dalen (2015). . . . . . . . . . . . . . . . . . 20 4.1 Visualization of the organizational structure at the studied company. The figure shows the internal relationships but does not consider the size of the different services or BUs. The operative management group consists of several Country Managers (CM) that are responsible for both BUs and for some of the shared services. . . . . . . . . . . . . . . . . . . . . . . . 28 4.2 Illustration of the internal hierarchy at the REM Commercial business unit. Note that there exist multiple Business Managers who are responsible for different geographical areas and multiple Regional Managers who are responsible for smaller geographical areas and so on. . . . . . . . . . . . . 29 6.1 Using the management control structure model by Vosselman (2002), the project and market & communication services have been analyzed in order to find which structure that suit them best. . . . . . . . . . . . . . . . . 73 6.2 Revised framework building on the framework by Janssen & Joha (2004). This version includes two new dimensions, Organizational culture and Overall corporate objectives, and excludes Contract. . . . . . . . . . . . . 75 xi List of Figures xii List of Tables 2.1 List of possible motives to implement shared services and their rank (fre- quency of use) according to literature (Paagman, Tate, Furtmueller, & de Bloom, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.2 The two types of control mechanisms according to Amiruddin, Aman, Auzair, Hamzah & Maelah (2013). Formal control can be divided into behavioral control and output control whereas Informal control correlates with social/cultural control. . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.3 The included components in the Intent dimension (Janssen & Joha, 2004). 15 2.4 The included components in the Contract dimension (Janssen & Joha, 2004). 15 2.5 The included components in the Structure dimension (Janssen & Joha, 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 2.6 The included components in the Interaction dimension (Janssen & Joha, 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 2.7 The included components in the Behavioral dimension (Janssen & Joha, 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.8 The included components in the Efficiency & Outcome dimension (Janssen & Joha, 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 3.1 The criteria for judging the quality of research design according to Yin (2018). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 5.1 List of the motives mentioned by the respondents and their respective rank. The motives are ranked according to the number of people that has mentioned the motive. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 6.1 List of the motives mentioned by the respondents and the respective rank. The motives are ranked according to the number of people that has men- tioned the motive and then compared to the rank in the literature by Paagman, Tate, Furtmueller & de Bloom (2015). . . . . . . . . . . . . . . 68 xiii List of Tables xiv List of Abbreviations BU: Business Unit RE: Real Estate RED: Real Estate Development REM: Real Estate Management REM C: Real Estate Management Commercial REM R: Real Estate Management Residence SLA: Service Level Agreement SSC: Shared Service Center TCE: Transaction cost economics xv List of Tables xvi 1 Introduction 1.1 Background At the start of the 1990’s, different business units (BUs) in divisionalized corporations often had their own support services dedicated to them (Ulrich, 1995). Consequently, there existed multiple duplications of the same support service within the organization. During the 1990’s, this started to change when the field of shared services became pop- ular (Paagman et al., 2015). Schulman, Dunleavy, Harmer & Lusk (1999) define shared services as “concentrations of company resources that perform similar activities, with the aim to serve multiple internal BUs at lower cost and with higher service level”. These services often comprise of support and administrative functions like Human Resources, IT and Finance which are centrally organized in specific service functions in order to reduce redundant service capacity. In addition, Janssen & Joha (2006) state that the implementation aims to provide predefined services for the core business within the or- ganization. Ramphal (2013) summarizes the different definitions of shared services as a “collection and concentration of noncore and nonvalue-adding activities”. Therefore, the rationale of shared services is to provide and manage these activities to multiple BUs in order to promote efficiency, cost reduction and quality improvement (Ramphal, 2013). In recent years, shared services have gained more attention as they can potentially bring economical benefits as well as creating new competencies (Gospel & Sako, 2010). Because of these potential benefits, shared services have become the “silver bullet” for many firms (Ramphal, 2013). As a consequence, Richter & Brühl (2017) state that the majority of the Fortune 500 companies have implemented organizational models that include shared services. Although the aforementioned benefits are well illuminated by academia, the overall results of implementations of shared services are contradictory and a study car- ried out by Janssen, Joha & Weerakkody (2007) even indicate that there are more shared service implementation failures than successes. Richter & Brühl (2017) argue that the success of shared services depends on a complex combination of interactions within the organizations. To deal with the complexity of shared services, Minnaar & Vosselman (2013) argue that the firm need to have both governance structures and management control structures in place. As the implementation of shared services creates an internal client-supplier rela- tionship, the two aforementioned structures become crucial in order to realize the bene- fits from the usage of shared services (Janssen & Joha, 2006). Furthermore, Amiruddin, Aman, Auzair, Hamzah & Maelah (2013) state that firms can exercise two types of con- trol in order to mitigate risks associated with the relationship between BUs and shared services. First, formal control such as policies, procedures, reporting structure, planning 1 1. Introduction and budgetary reporting can be used in order to achieve common objectives. Second, informal control can be used to mitigate the risk of having unsatisfactory employees. Informal control means could be interactions, meetings and codes of conducts. In order to analyze the relationship between the BUs and the shared services, Janssen & Joha (2004) developed a framework called Relationship Management Framework. The framework facilitates in finding and analyzing the most critical aspects to consider when managing the relationship. The framework were developed studying a public organiza- tion. In this thesis, the framework will be used in order to analyze the relationship in a private setting. Therefore, a case study was performed at a growing entrepreneurial firm that in recent years has implemented an organizational structure consisting of shared services. 1.2 Purpose The purpose of this thesis is to investigate critical aspects to consider when managing shared services at a growing private firm. Also, this thesis aims to investigate how well the Relationship Management Framework developed by Janssen & Joha (2004) is suitable for analyzing the relationship between shared services and BUs in a growing firm having an entrepreneurial culture. 1.3 Research questions RQ1: Which factors are most critical to consider when managing the relationship be- tween shared services and business units at a growing entrepreneurial firm? RQ2: How is the Relationship Management Framework by Janssen & Joha (2004) suited for analyzing the relationship in a growing entrepreneurial firm? 1.4 Delimitation The studied company act in the construction and real estate industry which potentially can make the findings not directly applicable for other industries. Furthermore, the thesis is based on a single case study which limits the generalizability of the findings. 1.5 Outline First, in chapter 2 Theoretical Framework, relevant theory necessary in order to under- stand and discuss the result from the conducted interviews are presented. The next chapter, 3 Methodology, will present the research approach, process and quality. The company which will be examined in order to carry out the case study is presented in chapter 4 Case Study Presentation. In chapter 5 Result & Analysis, the results from the conducted interviews are presented followed by a discussion of the results in chapter 6 Discussion. Last, chapter 7 Conclusion sum-up the findings and presents the conclusion of this thesis. 2 2 Theoretical Framework 2.1 Definition of shared services The field of shared services took off in the 1990s with the main objectives to reduce over- head cost and streamline internal operations in order to improve the quality of service (Paagman et al., 2015; Ramphal, 2013). Organizations recognized that their shareholder value were affected negatively by redundant support service operations (Alvarez, Blansett, Counto, Dunn, Nielson, & Niekirk, 1999). These support services can include Human Resources, IT, Finance and other supportive and administrative functions. By imple- menting service functions that provide these services to all BUs in the organization, the implementation of shared services can potentially increase professionalism and efficiency (Ramphal, 2013). In recent years, shared services have gained attention as they have the potential to both bring economic benefits as well as creating new competencies (Gospel & Sako, 2010). According to Richter & Brühl (2017), a majority of Fortune 500 companies, the largest 500 companies in the US according to revenue, have implemented organizational structures that include shared services. Shared services have in that sense become the “silver bullet” for many firms (Ramphal, 2013). Because of this extensive use of shared services in practice, scholars argue that research has not been able to keep up (Lacity, Khan, Yan, & Willcocks, 2010; McIvor, McCracken, & McHugh, 2011). However, the definition of shared services are many. For example, shared services can be explained as business functions, operating companies or organizations sharing a set of services (Quinn, Cooke, & Kris, 2000). Another definition is that shared services are concentrations of company resources performing similar activities, with the aim to serve multiple internal partners at lower cost and with higher service levels (Schulman et al., 1999). In addition, Bergeron (2002) describes shared services as follows: “[...] shared services is a collaborative strategy in which a subset of existing business functions are concentrated into a new, semi-autonomous business unit that has a management structure designed to promote efficiency, value generation, cost savings, and improved service for the internal customers of the parent corporation, like a business competing in the open market.” - Bergeron (2002) As stated above, the implementation of shared services aims to provide predefined ser- vices for the core businesses within the organization (Janssen & Joha, 2006). Ramphal (2013) summarizes the different definitions of shared services as a “collection and con- centration of noncore and nonvalue-adding activities”. Moreover, as the shared services’ 3 2. Theoretical Framework purpose is to serve the BUs, only support processes and non-strategic services should be provided by the shared services (Schulman et al., 1999). Furthermore, shared services can be structured internally in two different ways, according to Ramphal (2013). The first option is to manage the shared services collectively, as shown in Figure 2.1. This set up is used when aiming to generate greater cost efficiency as a consequence of having policy making and instructions centralized in a Shared Service Center (SSC). Having a one stop shop experience, the SSC facilitates for the employees to not be confused about the responsibilities of the persons in the shared services and thereby avoiding long-lasting search processes (Janssen & Joha, 2006). Figure 2.1: Visualization of an organization using a Shared Service Center (SSC). The figure is built upon an illustration by Janssen & Joha (2006) together with the illustration of Shared Service Centers by Ramphal (2013). On the other hand, if the shared services are managed independently, one can visualize the organization as in Figure 2.2. This set-up is called a free standing shared service struc- ture according to Ramphal (2013). The author argues that this structure creates more autonomy within the different services as each service can implement its own strategy. However, this set-up can be more resource intensive and consequently more expensive (Ramphal, 2013). 4 2. Theoretical Framework Figure 2.2: Visualization of an organization using free standing shared services. The figure is built upon an illustration by Janssen & Joha (2006) together with the illustration of free standing shared services by Ramphal (2013). Due to the extensive implementation of shared services world-wide, different set-ups have been developed in order to fit different organizational structures. According to Schulz, Hochstein, Uebernickel & Brenner (2009) and Janssen, Joha & Zuurmond (2009), there exist many different configurations and set ups of shared services. Schulz et al. (2009) explain three different categories of shared services. The first one is “disguised central department”, where the shared services are a part of the organization and are the only service providers for the BUs. Despite the similarities with centralized services, Ulrich (1995) argues that shared services are not equal to centralization, they are the opposite. Shared services, in contrast to centralized services, are controlled by the field whereas centralized services controls the field. In addition, in shared services, the field pulls re- sources from corporate whereas centralized services push activities to the field. In that sense, the field should control the activities (Ulrich, 1995). “Preferred provider”, is the second category described by Schulz et al. (2009), were the shared services are indepen- dent subsidiaries and BUs have limited access to the external market. In the third one, “competitive SSC”, the shared services are independent subsidiaries, BUs have free ac- cess to the external market and internal service charges are benchmarked with market prices. Even though many success stories have been highlighted, Janssen & Joha (2007) mention that research has shown that several shared service implementations have failed. Therefore, scholars stress that the implementation of shared services includes complex decisions regarding the configuration, make-or-buy decisions and how to coordinate the transactions (Farndale, Paauwe, & Hoeksema, 2009; Gospel & Sako, 2010). One decision could be where to locate the shared services. According to Ulbrich (2006), the shared services are often geographically separated from the head quarters. The geographical separation can either be in a different country, city or floor level. As they can be placed anywhere, the shared services become independent of space. 5 2. Theoretical Framework 2.2 Why implementing shared services? As stated before, the motivations behind the implementation of shared services could be many, and are widely mentioned by various authors (Dollery & Akimov, 2008; Janssen & Joha, 2006; Paagman et al., 2015; Ulbrich, 2006). In their article, Paagman et al. (2015) summon the 13 most common motives for implementing shared services according to literature (see Table 2.1). Table 2.1: List of possible motives to implement shared services and their rank (fre- quency of use) according to literature (Paagman, Tate, Furtmueller, & de Bloom, 2015). Motive Rank (Literature) Cost reductions 1 Improve quality of service 2 Improve efficiency/effectiveness/ productivity 3 Access to external resources 4 Standardize processes 5 Focus on core competences 5 Concentration of innovation 7 Improve customer orientation 7 Exchange of internal capabilities 7 Improve control 10 Consistent management information 11 Improve compliance with legislation and standards 11 Mitigate risk 13 Cost reductions According to Paagman et al. (2015), cost reductions is the motive that has gained most attention in shared service literature. The reduction of costs can be achieved through economies of scale gained by shared services (Selden & Wooters, 2011). Also, costs reductions can be achieved through reducing the number of employees and thereby gaining lower costs of staff (Dollery, Grant, & Crase, 2008). Yet, Dollery & Akimov (2008) discuss that there is a lack of evidence showing that firms have successfully reduced their costs. On the other hand, the same authors argue that the implementation of shared services have not shown negative effects on the costs either. Improve quality of service Through the implementation of shared services, firms hope to improve the quality of ser- vice. The increased attention to management is believed to improve the aforementioned quality (Aksin & Masini, 2008). 6 2. Theoretical Framework Improve efficiency/effectiveness/productivity When aiming to increase the productivity and in turn the efficiency, Wagenaar (2006) argues that firms bring together their support processes into shared services which are centrally provided. With the same initiative, firms also hope to increase the effectiveness (Miskon, Bandara, Gable, & Fielt, 2011). Access to external resources Paagman et al. (2015) state that they found the need to access various resources to be an important motive behind the implementation of shared services. These resources could include expertise, people, services and technology. One potential advantage of shared services could be that high quality resources become concentrated and more easily available for the internal customers (Redman, Snape, Wass, & Hamilton, 2007). Also, implementing shared services provide the employees with a more attractive career path, which can improve the employees’ motivation (Rothwell, Herbert, & Seal, 2011). Standardize processes Through having more standardized processes, given the implementation of shared ser- vices, firms aim to make reductions in duplicated processes (McIvor et al., 2011). Selden & Wooters (2011) further argue that standardization of processes ensures a more consis- tent delivery to clients. Focus on core competences According to Paagman et al. (2015), there exist support for using shared services as a mean to free up management time. This time could be better used focusing on the core competencies (Crump & Peter, 2014; Janssen & Joha, 2006; Sako, 2010). Concentration of innovation When implementing shared services, firms can gather all support processes at one lo- cation (Paagman et al., 2015). This can ease the work for firms trying to develop new applications and processes as they can concentrate on this particular location instead of spreading the investments on multiple organizational units (Borman & Janssen, 2012). Improve customer orientation The introduction of shared services could be used as a way to gather activities that were previously performed in different departments (Paagman et al., 2015). According to Ulbrich (2006), firms can put the customer in focus by handling work quicker and in a more targeted manner instead of spending time on support activities. Exchange of internal capabilities According to Paagman et al. (2015), previous research has claimed that shared services could improve the exchange of knowledge and best practices between different internal departments. The shared services can deliver services to internal users and thereby contribute to the internal exchange of knowledge and best practices (Paagman et al., 2015). Improve control In order to improve control, shared services can be implemented to control the delivery 7 2. Theoretical Framework of services (Farndale et al., 2009). Yet, Paagman et al. (2015) state that the motive for improving control is not extensively discussed in shared service literature. Consistent management information Paagman et al. (2015) argue that information about similar processes, which normally is distributed in different units and departments, can be centralized into one location, using shared services. Utilizing this information management, firms may secure consis- tent information across the organization and create more efficient communication (Turle, 2010). However, Paagman et al. (2015) state that many firms already had these systems in place. Thus, this motive was not the key driver of the implementation. Improve compliance with legislation and standards According to Paagman et al. (2015), there exist literature showing that shared services can be helpful for organizations to keep up with legislative changes. Having shared services, firms can check for compliance at one location instead of performing these controls at every single location (Interligi, 2010). Paagman et al. (2015) discuss that this motive is not often covered in literature because it is more important for public firms than private. Mitigate risk There are very few scholars discussing the aim to mitigate risks, connected to uncertainties of the development and deployment of new services, as a motive for shared services. However, according to Janssen & Joha (2006), by concentrating investments, these risks can be mitigated. The shared services mitigate the risks as they often have formal contracts and standardized ways of working (Paagman et al., 2015). 2.3 Drawbacks of shared services As stated before, some motives for shared services were accomplished and some were not. In that sense, shared services does not solve everything the organizations hope for as the expectations often are a combination of the benefits of centralization and decentralization (Janssen & Joha, 2006). Ulbrich (2006) states that the three most frequently recognized issues connected to shared services, according to the accounting firm KPMG, are business relations, interfaces and location. The issue regarding business relations concerns how the shared services interact with the BUs and who is responsible for providing the service. The BUs should be client-oriented but simultaneously have to consider the organization’s best rather than one specific BU’s (Ulbrich, 2006). Having decided what to deliver, prob- lems can emerge while merging different practices and interfaces into one. If processes are not extensively described, information could risk to get lost that are crucial for the outcome of the work done by the shared service. At last, the location of shared services is considered to be an issue, according to Ulbrich (2006). The questions regard in which country or city to locate the SSC and if the organization should have one or several cen- ters. This can be compared to the choice of having a SSC or free standing shared services as discussed by Ramphal (2013). According to Ulbrich (2006), the decision depends on the organization’s prerequisites and the answer is different from case to case. Moreover, most of the benefits of having shared services were first accomplished after having a functioning governance structure in place as the relationship creates a set of 8 2. Theoretical Framework issues which have to be governed (Janssen & Joha, 2006; Wagenaar, 2006). One main issue was the shift from supply orientation to demand orientation and client-oriented thinking. This shift in orientation demands another mind set and can create a cultural clash in the organization which need to be considered (Wagenaar, 2006). The issue of cultural adaption is also mentioned by Janssen et al. (2007) as one of the main aspects to consider when implementing and maintaining shared services. Another issue highlighted by Wagenaar (2006) was the trade-off between standardization and customization. Stan- dardization can gain efficiency as standardized provision of services to all BUs can lead to lower costs. However, customized services and supplies are perhaps needed in order to gain competitive advantage. Therefore, the costs of the customized services and supplies must be made transparent (Wagenaar, 2006). 2.4 Control-oriented perspective on shared services By conducting a literature review of previous research done in the field of shared ser- vices, Richter & Brühl (2017) found a need for further research. In their paper, the authors present a four-perspective framework based on previous research (see Figure 2.3). By focusing on the topic of the research questions of peer-reviewed papers, Richter & Brühl (2017) could identify four major perspectives of shared service research. The Determinant-oriented perspective is according to Richter & Brühl (2017) the most fre- quently used perspective in previous research followed by the Process-oriented, the Control- oriented and at last the Outcome-oriented perspective. The Determinant-oriented per- spective captures different factors and drivers that affect the shared services, for example different motives and critical success factors. The Process-oriented perspective examines how the implementation of the shared services can take place and how this affect the processes inside the company. The Control-oriented perspective analyzes the relationship between the shared services and the internal customers within the company and examines how to coordinate these two actors. The Outcome-oriented perspective explores the fi- nancial and non-financial outcomes of the shared services (Richter & Brühl, 2017). Since the first research question of this thesis regards which factors to consider when manag- ing the relationship between the shared services and the BUs, it is appropriate to delve deeper into the Control-oriented perspective. 9 2. Theoretical Framework Figure 2.3: Illustration of the four perspectives found in previous research on shared services according to Richter & Brühl (2017). 2.4.1 Coordination mechanisms This concept concerns how to control and monitor the services that are being carried out by the shared services (Richter & Brühl, 2017). The implementation of shared ser- vices results in an internal client-supplier relationship between the BUs and the shared services. In order to coordinate this relationship, the firm must use the mechanisms of governance structure and management control structure (Minnaar & Vosselman, 2013). The difference between these two concepts is, according to Minnaar & Vosselman (2013), that governance structure is a wider concept. According to Schulz et al. (2009), there exist two types of governance structures, hierarchies and markets. These two concepts will be further discussed in the next section. Given the choice of governance structure decided by a rational, efficiency seeking human actor, a management control structure needs to be decided (Minnaar, 2014). Management control structure should in that sense be a consequence of the chosen governance structure. 2.4.1.1 Governance structure As stated in the section above, there exist two main approaches for governing the trans- actions between the shared services and their internal customers, through hierarchies or markets (Schulz et al., 2009). Most organizations, however, use some form of coordina- tion approach which is categorized in between these two extremes. Minnaar & Vosselman (2013) call this third approach for a hybrid version between market and hierarchy. Min- naar & Vosselman (2013) used the theory of transactions cost economics (TCE) in order to analyse governance structures where the transactions are deliveries of services or goods. These three alternative governance structures consequently have different transactions costs (Minnaar & Vosselman, 2013). Schulz et al. (2009) describe hierarchies as struc- tures within organizations in which managers decide the levels of services provided to the BUs. Minnaar & Vosselman (2013) further explain that a hierarchy typically consists of a management control structure which is supposed to control and influence the em- 10 2. Theoretical Framework ployees to act in line with the organization’s strategy and intends to constrain, monitor and incentivize managerial decision making and behaviour. This means that if the right incentives are in place within the management control structure, the BUs’ managers can successfully exercise management control over the BUs. On the other hand, in order to use the market approach to manage the relationship between the BUs and the shared services, the BUs need to be allowed to use external suppliers of services. In addition, the organization often needs to implement an exten- sive management system that includes contract management, invoicing or management of suppliers (Schulz et al., 2009). Additionally, using market-related coordination, reg- ulations is often needed in order to, for example, decide preferences on using internal or external service providers (Schulz et al., 2009). Using the market approach, together with a hierarchy, thus creating a hybrid version, an exit threat is established towards the shared services (Minnaar & Vosselman, 2013). The exit threat becomes relevant when the BUs’ managers perceive the price-quality ratio too low from the shared services and the BUs’ managers can then decide to use external services (Minnaar & Vosselman, 2013). 2.4.1.2 Management control structure As stated above, Minnaar & Vosselman (2013) state that a management control structure is supposed to control and influence the employees to act in line with the organization’s strategy. According to Vosselman (2002) and Minnaar & Vosselman (2013), the dimen- sions of the transactions between a shared service and the BUs are affecting the choice of management control structure. Building on previous work by Williamson (1979), Vossel- man (2002) used three different dimensions in order to examine the management control choices. These are characteristics of the services, frequency & volume and degree of uncer- tainty/complexity (Vosselman, 2002). The model by Vosselman (2002) describes which type of management control structure to use in each case (see Figure 2.4). When the service is standardized and there is no need for a close relationship between the supplier and the client, the introduction of a market coordination approach can be efficient. Then Vosselman (2002) recommends to use a free buying and selling structure in order for the BUs’ managers to be allowed to acquire services from external suppliers. In the free buying and selling structure, the shared services’ managers are also allowed to sell their services to external clients. When the service provided is more customized and the usage of the services is recurring, Vosselman (2002) recommends the usage of shared services to be of a captive buying and selling decision. This means that the market approach is not used and that the BUs are not allowed to use external suppliers. In case of highly specialized and recurring services, Vosselman (2002) argues for a deconcentration of the shared services. This means that the services are moved from a centralized position into separate BUs. A highly specialized transaction benefits from a close relationship both in terms of geographical distance and understanding of the daily work. In cases of high levels of complexity and uncertainty there are advantageous to deconcentrate the customized services as well (Minnaar & Vosselman, 2013). 11 2. Theoretical Framework Figure 2.4: Visualization of the management control structure choices for service trans- actions based on the model by Vosselman (2002). Depending on the three factors, the firm should decide how to manage their buying and selling (b/s) structure. 2.4.1.3 Control as a mean to mitigate risks Amiruddin et al. (2013) argue that control is a significant mechanism in order to min- imize risks associated with the relationship between the BUs and the shared services. The authors declare that there are two main risks that can arise, namely relational risk (opportunistic behaviour) and performance risk. The relational risk regards the prob- ability and consequence of two alliance partners not having a satisfactory relationship (Das & Teng, 1996). Opportunistic behavior can cause a risk when a party are trying to shirk, cheat, distort information or appropriating resources (Nooteboom, Berger, & Noorderhaven, 1997). Amiruddin et al. (2013) state that even though the cooperation is satisfactory, there is a performance risk that the common objectives will not be achieved. The performance risk can be affected by intensified rivalry, new entrants to the mar- ket, demand fluctuations, changing government policies and sometimes even bad luck (Amiruddin et al., 2013). In order to mitigate these risks, Amiruddin et al. (2013) state that two different types of control mechanisms can be used, formal and informal (Merchant & Van der Stede, 2003). Formal control consists of behavior and output control. Behavior control includes policies, procedures and reporting structures that are used to direct and monitor the behaviors of managers (Eisenhardt, 1985). Also, Janssen et al. (2007) suggest that orga- nizations should implement a way to enforce and monitor the service levels of the shared services. KPIs, performance measures and benchmarking are methods that can be used in monitoring purposes (Janssen et al., 2007). Moreover, in order to motivate managers to meet strategic goals and objectives, output control can be used in forms of planning and budgetary reporting (Ouchi, 1979). Informal control, also called social or cultural control, is based on shared norms, values and beliefs (Amiruddin et al., 2013; Merchant & Van der Stede, 2003). In order to gain social/cultural control, firms have to pay at- tention to certain activities, such as frequent interactions, meetings, negotiations, codes 12 2. Theoretical Framework of conduct, senior management attitude and rituals (Amiruddin et al., 2013). According to Ulbrich (2006), the decision to implement shared services is often based on the target to take advantage of the organizational culture. The organizational culture is described by Schein (1990) as “a pattern of basic assumptions, invented, discovered, or developed by a given group, as it learns to cope with its problems of external adaption and internal integration, that has worked well enough to be considered valid and, therefore, is to be taught to new members as the correct way to perceive, think, and feel in relation to those problems”. Connell (2001) argues that bigger firms often wish to create an orga- nizational culture of a smaller company in order to obtain a higher level of employee morale. Also, the author argues that bigger firms often are more structurally complex which consequently leads to slower processing of information and execution speed. These larger firms are often bureaucratic with centralized decision making power. Increased size often results in more hierarchical layers which slows down decision making process as the top management group is moved more further away from the “front line” (Connell, 2001). In order to be able to succeed with an organizational change in large organizations, the author argues that there is a need for detailed plans which can reduce the responsive- ness for external changes. On the other hand, smaller firms are able to implement new strategic initiatives on a shorter notice due to their flexible and simple structure as well as their simple communication channels (Connell, 2001). The different control mechanisms are summarized in Table 2.2 below. According to Amiruddin et al. (2013), social/cultural control can be used to mitigate the relation risk, whereas behavioural or output control can be used to mitigate performance risk. Table 2.2: The two types of control mechanisms according to Amiruddin, Aman, Auzair, Hamzah & Maelah (2013). Formal control can be divided into behavioral control and output control whereas Informal control correlates with social/cultural control. Formal control Behavior control Output control Mitigates performance risks Policies, procedures and reporting structures Planning and budgetary reporting Informal control Social/culture control Mitigates relational risks Interactions, meetings, codes of conduct, senior management attitude and rituals 2.4.2 Management & strategy The service transactions provided by the shared services need to be aligned with the overall business strategy (Janssen & Joha, 2007; Richter & Brühl, 2017). Due to the fact that there are different BUs involved in the transactions with the shared services, there are multiple agencies with different objectives which makes this alignment tough to achieve (Janssen & Joha, 2007). Furthermore, in order to successfully implement shared services and for the employees to accept and adopt the new organizational form, a shared vision amongst all involved stakeholders is needed (Janssen et al., 2007). 13 2. Theoretical Framework Moreover, Janssen & Joha (2004) present a framework with factors to consider when managing the relationship between the shared services and the BUs, called the Rela- tionship Management Framework. In their paper, Janssen & Joha (2004) elaborate on a framework based on a study by Kern & Willcocks (2002). Kern & Willcocks (2002) developed a framework, the KW-framework, which was used to analyze outsourcing re- lationships. Although the original framework was based on outsourcing relationship, it can be appropriate to use when analyzing the relation dimension between shared services and BUs (Janssen & Joha, 2004). By conducting a case study on an implementation of shared services in a public organization and viewing it through the lenses of TCE, inter-organizational relationship theory and relational contract theory, Janssen & Joha (2004) revised the KW-framework in order to better suit relationship management for shared services (see Figure 2.5). Figure 2.5: Illustration of the Relationship Management Framework developed by Janssen & Joha (2004). 2.4.2.1 Intent Starting with the Intent, it is important to align the organization’s strategy with the motives behind the implementation of the shared services (Janssen & Joha, 2004). The included factors in the Intent dimension are presented in Table 2.3. 14 2. Theoretical Framework Table 2.3: The included components in the Intent dimension (Janssen & Joha, 2004). Necessity The difference between the motives that are mandated or voluntary. Reciprocity The benefits that are anticipated when cooperating and collaborating with the shared services. Legitimacy The underlying political motives. Efficiency The expected cost reductions of the implementation of shared services. 2.4.2.2 Contract The Contract dimension is included in the configuration and process phase of the frame- work. It deals with the legally enforceable and binding promises of the contractual re- lationship (Janssen & Joha, 2004). The included factors in the Contract dimension are presented in Table 2.4. Table 2.4: The included components in the Contract dimension (Janssen & Joha, 2004). Promise Exchanges which are expected and required in the relationship. Non-promissory accompaniments The completeness of the contract or Service Level Agreement (SLA). Presentiation The degree to which future elements are imbedded in present contract. 2.4.2.3 Structure The Structure dimension concerns the underlying factors that affect the relationship between the BUs and the shared services (Janssen & Joha, 2004). The included factors in the Structure dimension are presented in Table 2.5. 15 2. Theoretical Framework Table 2.5: The included components in the Structure dimension (Janssen & Joha, 2004). Size The size of the client organization. An increased size increase the complexity of operations. Complexity The variety of services and the multiplicity of exchanges between the business units and the shared services. The complexity affects the management structure and coordination efforts. V&O Management structure The vertical and occupational (V&O) management structure concerns the creation of new roles and changes in present roles in order to optimize business. Stability Concerns the strategy for the continuity of the relationship. 2.4.2.4 Interaction The basic elements of processes in and between functions are being dealt with in the Interaction dimension (Janssen & Joha, 2004). The included factors in the Interaction dimension are presented in Table 2.6. Table 2.6: The included components in the Interaction dimension (Janssen & Joha, 2004). Exchange content The actual content exchanged. Normative content Both implicit and explicit exchanges. Communication Interaction which supports and underlies most exchanges. Can be both informal and formal interactions. Type of interaction The characteristic of the exchange link. Can be classified using three dimensions: formality (degree of codification), reciprocity (degree of symmetry) and standardization (degree of specification and routine). 2.4.2.5 Behavioral The Behavioral dimension concerns the standards of conduct and basic rules for future interactions (Janssen & Joha, 2004). The included factors in the Behavioral dimension are presented in Table 2.7. 16 2. Theoretical Framework Table 2.7: The included components in the Behavioral dimension (Janssen & Joha, 2004). Dependence The degree of dependence and to which extent the dependence is on one particular source. Power The perceived degree of control and influence. The dimension also includes the degree of conflict and negative perceptions about the relationship with the shared services. Cooperation The undertaking of complementary activities. Conflict How conflicts are handled in order to “clean the air”. Trust The belief that the shared services will perform the required exchanges so that the outcome will be beneficial. 2.4.2.6 Efficiency & Outcome The factors included in the Efficiency & Outcome dimension concern the evaluation of the performance of the relationship between the BUs and shared services (Janssen & Joha, 2004). The included factors in the Efficiency & Outcome dimension are presented in Table 2.8. Table 2.8: The included components in the Efficiency & Outcome dimension (Janssen & Joha, 2004). Transaction costs The efficiency, including quality, flexibility and innovation, of the relationship. Customization The specificity, i.e. the degree to which investments in a specific relationship can be used in alternative activities. Uncertainty reduction Concerns variability and the degree of stability. Satisfaction The degree of satisfaction with the shared services’ performance and the relationship between the business units and the shared services. 17 2. Theoretical Framework 18 3 Methodology 3.1 Research approach According to Bell, Bryman & Harley (2019), the relationship between theory and research can be associated with two different approaches: deductive and inductive. A deductive research approach is the most common approach. Theory is used in order to understand what is known in the studied field, thereafter, a hypothesis is created. The hypothesis needs to be tested against empirical evidence. Using an inductive research approach how- ever, new theory is the outcome of the research. In this case, observations and empirical evidence build the foundation for new, general theories. Bell et al. (2019) also state that a deductive approach often is linked with a quantitative research strategy whereas an inductive research approach is linked with a qualitative research strategy. Data used in quantitative research is numerical and often analysed through statistical comparisons. Qualitative research, on the other hand, is suitable when trying to understand human behaviors and data is often collected via observations or interviews (Bell et al., 2019). No first hand knowledge about the company existed before the study began. Therefore, a hypothesis could not be presented before data collection. The collected data rather found the basis for new theories, building upon the already existing framework presented in section 2 Theoretical Framework. Hence, an inductive research approach was chosen. Furthermore, as the primary source of information would come from a case study with the aim to examine critical aspects to consider when managing shared services within a private company, opinions and behaviors of different actors needed to be gathered. Consequently, a qualitative research strategy was chosen in order to obtain these different opinions and behaviors. 3.2 Research process As the practical problem arose from a specific case, a case study research approach was a natural choice. The practical problem led to the first research question. In order to gain more knowledge about the theoretical area, a literature review was conducted early. After the literature review, which laid the foundation for the second research question, a data collection method as well as means to analyze the collected data were decided. Figure 3.1 illustrates the chosen research process, which was developed by Dalen (2015). The Data analysis, Data collection and Processing of data steps could be seen as an iterative process in which the different steps affect each other (Dalen, 2015). As data was collected, processed and analyzed, new knowledge were gained that could be used in the next interview and so on, creating an iterative process. How the data collection and data analysis were performed will be further explained in the following sections. 19 3. Methodology Figure 3.1: An illustration of the used research process, based on the process of quali- tative studies developed by Dalen (2015). 3.2.1 Data collection According to Yin (2018), there are six main ways to collect data when performing a qual- itative research study. These are Documentation, Archival records, Interviews, Direct observations, Participant-observations and Physical artefacts. There are several types of documents that can be used to acquire data. For example, emails, memoranda, letters, agendas, administrative documents or formal studies (Yin, 2018). The author argues that documents can be regarded as stable, specific and broad but at the same time be difficult to find and to get access to. Another weakness is that documents can be biased by the author which often is unknown. The next source, archival records, is similar to documentation. Archival records are often in the form of data files such as service records, organizational records, maps & charts and survey data (Yin, 2018). Archival records can in some cases play a major role, for example in quan- titative analyses whereas in others they are not relevant at all. The strengths are the same as for documentation with the addition of the accuracy strength in quantitative terms. The weaknesses are as well the same as for documents with addition of the lack of access due to privacy reason (Yin, 2018). Interviews are, according to Yin (2018), one of the most important sources in case studies and are especially useful when searching for explanations to “how” and “why” questions. Also, they give insights into the respon- dents’ personal perspectives and views which is a major advantage. Another strength that the author highlights is the fact that interviews can be targeted and focused on a 20 3. Methodology specific topic. On the other hand, there are some drawbacks with interviews to keep in mind. The data can be biased due to poorly articulated questions, the interviewer can search for specific statements and “force” the interviewee what to say (Yin, 2018). Direct observations can be performed by observing the specific phenomena of interest when the study is based on a case in present time (Yin, 2018). Direct observations provide im- mediacy and are contextual. At the same time, they are time-consuming, expensive and can be hard to perform without a team of observers. Also, direct observations can affect the studied individuals to act differently when they are being observed (Yin, 2018). In a participant-observation the data collector is not only observing the participants but is also involved in the activities that are being studied (Yin, 2018). The author argues that the strengths are the same as for direct observation with the addition of deeper insights into interpersonal behaviours. The weaknesses are the same as for direct observations as well but in this case, the data collector can also manipulate the events by his or her own acting (Yin, 2018). Physical artifacts can be a technological device, a tool or another physical evidence (Yin, 2018). The author declares that physical artifacts most often are of less importance in case studies but that they can be useful when insights in cultural features and technical operations are needed. Drawbacks of this method can be the avail- ability and selectivity of these artifacts. In order to be able to provide an answer to the research questions, there was a need to get information about how the BUs operate and how the relationships between the shared services and the BUs function on a daily basis. There were no documentation or archival records available describing this phenomenon. Also, direct observations and participant-observations would have been inappropriate ways to study behaviors of a sufficient amount of people as they are both time-consuming and rely on the ability to read peoples’ thoughts and body languages. As Yin (2018) argues, physical artifacts are seldom of any usage in case studies which applies for this thesis as well. Since there was a need to acquire personal views and perceptions, interviews were used. Interviews were considered as a suitable chose considering both the data needed and the time frame for the thesis. 3.2.1.1 Interview methods Interviews can be divided into two main categories according to Lantz (2013). The first one is based on an open-ended approach whereas the other one is based on a more structured approach. In the open-ended approach the interviewee can freely explain a phenomenon and elaborate on which factors that play a major role according to the inter- viewee’s personal opinions. Consequently, the open-ended approach provides subjective data which increase the understanding for personal experiences (Lantz, 2013). However, since personal opinions differ, this can result in different definitions depending on the interviewee’s elaboration on the phenomenon. Hence, Lantz (2013) argues that there can be a major difference between various interviews. The structured approach is appropriate when the phenomenon is already known. Then, questions are created in beforehand in order to investigate the interviewee’s perceptions and experiences of this specific phenomenon (Lantz, 2013). Since the studied phenomenon is predefined, the interviews can be compared. This is difficult, and sometimes even im- possible, if using the open-ended approach (Lantz, 2013). The interviews can either be 21 3. Methodology semi-structured or fully structured. The fully structured interviews have predetermined response options and the questions are only connected to issues that the interviewer con- siders important. Semi-structured interviews have a combination of open-ended questions and fully structured ones. Since the phenomenon was partly predetermined, there was a need to find out the answers to some specific questions in order to compare different opinions across departments. Although, structured interviews do not give the interviewees enough freedom to describe their opinions. There was a need to obtain information about personal experience and perceptions regarding the same issues. Using the open-ended approach however, there is a risk that the interviewees do not provide the answer to the specific questions. Since semi-structured interviews are built upon what the interviewer considers important but also gives information about what the interviewee think is of importance, it was regarded as an appropriate interview approach for this case study. 3.2.1.2 Interview planning The interview questions were created and grouped in different domains in chronological order according to recommendations by Lantz (2013). The interview template was di- vided into three different domains in line with the framework developed by Janssen & Joha (2004) (see Appendix A Interview Template). The sequence of the questions asked were dependent on the answers provided by the respondents in order to get a adequate flow. In addition, suitable supplementary questions were asked when something extra interesting was discussed or when there were difficulties to fully understand what the interviewee meant. The interviewee selection was based on theoretical sampling described by Dalen (2015) which is based on the work by Strauss & Corbin (1998). By following the recommen- dations by the aforementioned authors, the interviewee selection was done with the goal to establish maximal variation in the selection group. In order to be able to carry out such a selection, there was a need to possess a high level of knowledge about the studied phenomenon. This is, according to Dalen (2015), a common problem for students in the beginning of research projects. Therefore, in order to deal with these difficulties, the selection group was selected in consultation with an employee at the studied company. Since the studied phenomenon required deep knowledge about the current and historical strategy of the firm, the sample group mostly consisted of high level executives. How- ever, to get additional perspectives on the phenomenon, employees working on a more operative basis were interviewed as well. Creswell & Poth (2016) consider a sample size of 20-30 interviews to be sufficient for a qualitative research study. In addition, Vasileiou, Barnett, Thorpe & Young (2018) argue that the data collection, in this case interviews, should continue until data saturation is reached. At the start, 20 interviewees were selected and asked to participate in the study. Of these 20, 18 agreed to participate. Unfortunately, due to the covid-19 virus, 3 of the intended participants could not fulfill their partaking. However, during the last conducted interviews, there was a high level of data saturation. Consequently, conducting further interviews were considered to be redundant. In total, 15 interviews were performed with employees at the studied firm. 22 3. Methodology 3.2.1.3 Interview execution In order to be able to maximize the result of the interviews, it was important to make the interviewee fully aware about the purpose of the study (Lantz, 2013). Therefore, the purpose and aim were explained at the beginning of every interview. Also, every interview started by declaring anonymity and voluntary participation for the interviewee. The interviewee was also asked if he or she approved that the interview was recorded. All except from 1 person approved recording. The interviews were performed by following the semi-structured interview template and were recorded and transcribed in order to capture all relevant data. According to Lantz (2013), the content of the interview can become affected due to the fact that people often gets restricted when they are recorded. This was an important aspect to keep in mind. In addition, 6 of the interviews were carried out via telephone. Naturally, during these interviews it was harder to collect other impressions than just the spoken word. Also, supplementary questions were asked when appropriate in order to obtain data saturation. 3.2.2 Data analysis The methods used in the data analysis should be determined before the case study start (Yin, 2018). For instance, if the data collection is not adapted for the determined anal- ysis method, the entire case study can be ruined (Yin, 2018). The strategy that was used to analyze the data in this thesis is called Developing a case description by Yin (2018). This specific strategy builds upon the idea that the collected data are being or- ganized according to a theoretical framework (Yin, 2018). Hence, the data analysis was performed by searching for patterns in the interviews, called Pattern Matching by Yin (2018). When using a pattern matching technique, the empirical data is compared with predicted data (Yin, 2018). The predicted data in this case was the theory presented in section 2 Theoretical Framework. Since the interview template was created based on the theoretical framework by Janssen & Joha (2004), the data was already from the beginning arranged in a specific pattern. Despite this, since the interviews were semi-structured, there are some differences in the data due to different personal reflections. Therefore, the interviewees’ answers to some questions could be applicable to more than the intended part of the theoretical framework. Consequently, there was a need to re-allocate some of the data. Moreover, there are several computer-assisted tools that can be used in data analysis today which makes it easier to analyze large amount of data. Yin (2018) empha- sizes that these computer-assisted tools are just tools and will not do the entire analysis by themselves. Therefore, the output from the computer tools need to be analyzed as well. Since there were a total of 15 interviews carried out, there was a vast amount of data. Therefore, the computer-assisted tool, NVivo by alfasoft, was used in order to organize and analyze the qualitative data. Even though the computer tool needed a certain level of knowledge, the time effort that was required to learn the computer tool was considered necessary in order to capture the expected benefits. First, the recorded interviews were transcribed. Next, the transcribed data was structured and coded in order for NVivo to distinguish between different individuals. With the use of NVivo, quotes from the transcribed data were categorized and structured in order to match the most relevant dimension of the Relationship Management Framework presented in section 2.4.2 Man- agement & strategy. Finally, the quotes were broken down once more into subcategories matching common themes recognized. In that way, the data was broken down, concep- 23 3. Methodology tualized, and put back together in new ways to better match the predefined framework as suggested by Strauss & Corbin (1998). Since the categorization and conceptualization of data were performed manually, NVivo did not perform the analysis by itself. 3.3 Research quality The quality of any given research design to case study research can be judged using four criteria (Yin, 2018). Table 3.1 presents these four criteria, also called tests. Table 3.1: The criteria for judging the quality of research design according to Yin (2018). Construct validity Identifying correct operational measures for the concepts being studied. Internal validity Seeking to establish a causal relationship, whereby certain conditions are believed to lead to other conditions, as distinguished from spurious relationships. External validity Showing whether and how a case study’s findings can be generalized. Reliability Demonstrating that the operations of a study, such as its data collection procedures, can be repeated, with the same results. Construct validity The first test, Construct validity, is challenging in case study research (Yin, 2018). In order to pass the test, the data collection should be done without subjective judgments from the researchers. In order to do so, operational measures must be developed. Also, Yin (2018) suggests that key interviewees should review a draft of the report before pub- lication. The conducted case study in this thesis was built upon the factors of the framework presented in chapter 2 Theoretical Framework. Consequently, the report together with the previously presented research questions were not an outcome of subjective judgment but rather derived from previous research. In addition, key interviewees were asked to read a draft of the thesis before publication, as suggested by Yin (2018). Internal validity Internal validity in case study research concerns the inferences that will be made when- ever a particular event could not be directly observed (Yin, 2018). Conducted interviews and documents will lead the “investigator” to infer that an event is the results of some- thing that happened earlier. However, in order to ensure that inferences are correct, Yin (2018) argues that one can address rival explanations during the data analysis phase. 24 3. Methodology The case study research approach of this study called for the internal validity to be considered. By addressing rival explanations to events described by the interviewees, arguments could either be ruled out or called for need of further explanation with use of the same data set. External validity The findings of a study can be more or less generalizable. The generalizability of a study is also called external validity (Yin, 2018). Arriving at analytic generalization can be done with the help of “how” and “why” questions. In that way, the external validity is best addressed during the development of the research questions (Yin, 2018). By setting the initial research questions during the research design phase, before con- ducting the interviews, the external validity was addressed early in the study. However, the generalizability is still considered as a concern due to the fact that only one firm was studied. Reliability According to Yin (2018), reliability is concerned with the replicability of a study. If a researcher follows the procedures described in a study, the findings and conclusions should be the same. In case study research, this means to study the same case again, not another case. However, the chance to repeat a case study does not occur often. Still, the reliability should still be considered and the procedures should be documented (Yin, 2018). In order to meet the demands of reliability, the procedures of this case study were doc- umented in a way so that the study could be replicated. How the research process was designed, how data was collected and analyzed and how quality was ensured has been described in this chapter, 3 Methodology. 25 3. Methodology 26 4 Case Study Presentation The studied company operates in the construction and real estate industry. In recent years, the company has grown rapidly. For instance, the number of employees has in- creased from around 150 to more than 750 in the last 10 years and their assets have increased with more than 800% during the same period. The growth is a result of both organic growth and acquisitions of other real estate companies. Today, the company owns and manages properties in cities mostly located in Scandinavia. In 2016, the company decided to implement shared services. Some of the services were already in place, but were not explicitly called shared services. For example, there were people working with marketing but not as their main work task. As the company con- tinued to grow, there was a need to introduce centralized functions that could serve the whole company, independent of location. As a consequence, the people working with, for example, marketing related matters became responsible for that function. Other services, for example rent administration has been in place as long as the company has existed. Today, the shared services serves multiple BUs and are mainly deployed in the company’s HQ. The shared services are still under development and internal discussions have been held to what and how the shared services should work. The current structure of the company is presented in Figure 4.1 which could be considered as a free standing shared service structure according to Ramphal (2013). The figure shows which BUs that the different shared services offer services to. However, it does not consider the size of the different shared services or BUs. Also, the different services provides support to some of the other shared services as well. As an example, the Data & IT-department serves the whole organization with IT-infrastructure. 27 4. Case Study Presentation Figure 4.1: Visualization of the organizational structure at the studied company. The figure shows the internal relationships but does not consider the size of the different services or BUs. The operative management group consists of several Country Managers (CM) that are responsible for both BUs and for some of the shared services. Management is divided into two groups: top management and operative management. Top management is responsible for the overall strategy and to find new potential invest- ments. Operative management consists of those responsible both for the different BUs and for the shared services. The shared services are decoupled from each other and the operative management group is the umbrella under which they are controlled. During the recent months, the company has also introduced a forum which aims to help the shared services prioritize their initiatives internally. This forum will be further covered in chapter 5 Result & Analysis. Today, the company has three BUs. The first two, Real Estate Management Commercial (REM C) and Real Estate Management Residence (REM R) are focused on the manage- ment of existing real estates. The REM C unit is mainly focused on the rental of office spaces, stores and restaurants but also includes existing hotels. Housing and apartments to private individuals are managed in the REM R unit. The two different units are there- fore similar in some aspects, for example in rent administration, economy and customer service, but have different needs in others, for example marketing and communication. The third BU, Real Estate Development (RE D), manage the construction of new prop- erties. The unit is quite new at the company and is considered to be under development. Both now and during the lifetime of the company, REM has been dominant and has continued to be the largest business area. In order to gain full understanding and different perspectives on how the company func- tions, interviewees were selected ranging from the operative management group to real estate managers. The hierarchy in both of the REM BUs is structured in the same way, as illustrated in Figure 4.2. There exist multiple Business managers who are responsi- ble for different geographical areas, multiple Regional managers responsible for smaller 28 4. Case Study Presentation geographical areas and so on. Figure 4.2: Illustration of the internal hierarchy at the REM Commercial business unit. Note that there exist multiple Business Managers who are responsible for differ- ent geographical areas and multiple Regional Managers who are responsible for smaller geographical areas and so on. From the start of the company’s lifetime, their key message to their real estate managers has been to be the “kings or queens of your properties”. The real estate managers were given a lot of responsibility to manage their properties and had last say in almost every matter that concerned their properties. Furthermore, the employees have always worked closely with each other and without hierarchical obstacles. But as the company has grown, more managing roles have been put in place making the decision-making process more complex. However, the company wants to keep their closeness to each other in order to minimize the time for decisions and keep the feeling of being a “small company”. Consequently, the company still values entrepreneurial spirit and their message to the real estate managers remains today, even when they are more than 750 employees. Furthermore, the shared services do not have an individual budget. The costs associated with running the daily business at the shared services comprise mainly of the salaries for the personnel. When a shared service are providing their services to the BUs, they are not charging them for the work done. However, when a shared service comes up with an idea that requires additional resources from the BUs and other services, the service has to get the idea approved by the operational management group. In order to get it approved, the initiative has to be either directly or indirectly financial beneficial for the company. For example, the initiative could gain extra revenues or lead to better efficiency which will lower the costs over time. 29 4. Case Study Presentation 30 5 Result & Analysis 5.1 Managing the relationship This section will present the findings of the conducted interviews arranged after the dimensions of the Relationship Management Framework developed by Janssen & Joha (2004). Every component in each dimension will be explained in italic before presenting the findings and analysis of the component. 5.1.1 Intent In this section, the necessity, reciprocity, legitimacy and efficiency factors will be covered. 5.1.1.1 Necessity The difference between the motives that are mandated or voluntary. The respondents regarded the implementation and the motives behind the shared services as mandated. Already before the decision to explicitly name the functions as shared services, people worked with some of those tasks. “Some of these shared services were already in place before the imple- mentation, for example HR, economy and rent administration. And also some kind of technical department. But after the implementation the roles are more structured.” - Interviewee 15 (1) In line with the statement above, one respondent already worked with market-related questions before the implementation of shared services but his or her job was not explicitly to be responsible for a market division. “I became curious about how much money we spent on marketing. Be- cause there was nobody working with that at the time. [...] And later on, I became head of marketing.” - Interviewee 11 (2) As the company grew, new expertise were needed in order to meet new requirements and needs. The required expertise resulted in opportunities for employees interested in specific areas to take responsibility for these matters. These specialized employees could start a group focusing on that particular knowledge area which gained responsibility for matters regarding this area for the whole organization. In that sense, the group had 31 5. Result & Analysis become a shared service. In line with this, the respondents agreed upon the perspective that the shared services had been developed organically. “It did not come all at once, from the first of January, this is what applies. It has grown, division by division took more place and started to manage their business and their processes.” - Interviewee 15 (3) The quotation above can stand as an example of how the respondents viewed the imple- mentation and start of the shared services. Furthermore, they also expressed that they filled a purpose. “The need has been as long as X has existed, of course. Looking at the size the company was then and is now, then it is even more natural and clear that the need exists.” - Interviewee 4 (4) The respondent explained that the need for shared services has been there all along and with the growth of the company the need grew stronger. At the same time, the company had high ambitions. “I think that we want to accomplish very much with our real estates and there is a lot of money that we should handle. Plus, there is a lot of constructional and specific knowledge needed and we have seen the benefit (of the shared services) I think.” - Interviewee 11 (5) The quotation highlights the fact that more knowledge were needed when the company wanted to be better and grow even bigger. Shared services, teams that possess specific knowledge, were therefore a natural step for the company. 5.1.1.2 Reciprocity The benefits that are anticipated when cooperating and collaborating with the shared ser- vices. The main benefit that was anticipated by the respondents was to get better in specific questions and obtain the expertise needed. “It is to get the right help. Get the expert help that you can need. If I call the HR department in a matter, it take them 10 seconds to answer me. If I would look for the answer or take a guess myself, there is a risk that it will go wrong. So the whole purpose is to be more efficient, I would say. More time efficient and reduce the risk of potential failures through having experts in respective area.” - Interviewee 15 (6) The respondent emphasizes on the importance of having experts at the firm instead of taking a guess in order to avoid making mistakes that can lead to processes failing. 32 5. Result & Analysis Furthermore, before the actual implementation of the shared services, there were other expectations from the real estate managers on the shared services. “I speculate now, but I think that some thought that you could send some questions to the shared services just to get help. And often it is like that, that you can send a problem to someone else that have to try to solve it.” - Interviewee 15 (7) The quotation show an expectation to release some of the work load of the real estate managers onto the shared services. The anticipated benefits were tightly connected to the motives discussed in next section. 5.1.1.3 Legitimacy The underlying political motives. The thoughts about the motives for implementing shared services were somewhat divided. The motives have been classified according to the motives mentioned by Paagman et al. (2015). However, using shared services as a mean to continue the growth of the company was mentioned by several respondents and has therefore been added to the list of motives. The motives are presented in Table 5.1 below together with their rank according to the frequency of mentions by the respondents. Table 5.1: List of the motives mentioned by the respondents and their respective rank. The motives are ranked according to the number of people that has mentioned the motive. Motive Rank Improve quality of service 1 Improve efficiency/effectiveness/productivity 2 Consistent management information 2 Focus on core competences 2 Continue to grow (added) 5 Access to external resources 5 Cost reductions 7 Standardize processes 7 Exchange of internal capabilities 7 Improve control 7 As Table 5.1 states, the aim to improve the quality was the motive mentioned by most interviewees. By improving the quality of service, the respondents wanted to be able to in turn improve their core business even more. 33 5. Result & Analysis “Yes, I think it is clear (the purpose of shared services), because in my world, it feels natural to have shared services the more I think about it. It would be damn inefficient if there was a little bit of a shared service in every geographical place where the company operates. It would be IT- departments everywhere that work with their equipment, computers, cell- phones, their fire experts, their rent experts. Marketing could market X different in one place than the other for example.” - Interviewee 12 (8) The respondent highlights the importance of aligning every part of the company in or- der to have consistent management information. The quote also raises the intention of becoming more efficient, which was one of the most mentioned motives. Having shared services that were specialized, was going to save a lot of time for the BUs as they now could ask specialists for help. “We had to be more people that could carry the firm forward through greater presence, greater control and thereby follow-up but with the goal that we knew all the time that we could be so tremendously much better, at everything, by answering the same everywhere.” - Interviewee 3 (9) Once again, the respondent emphasizes on improving the quality at the rapidly growing company and at the same time gain more consistent management information. 5.1.1.4 Efficiency The expected cost reductions of the implementation of shared services. The motive of becoming more efficient was ranked at shared second place. However, only one respondent expressed the motive of reducing the costs when implementing shared services. In particular, the respondent talked about the indirect costs of searching for information and being inefficient at work. These costs, the respondent meant, were going to be reduced as a consequent of the implementation of shared services. 5.1.1.5 Summary of the Intent dimension As the company grew, the shared services did emerge organically inside the organization. The company felt a need to implement the shared services in order to continue to grow as well as to improve the quality of the service. Some of the services had already begun to grow into the company before the decision was taken to explicitly call these functions shared services. Managers were recruited both internally and externally. Improving effi- ciency and getting more consistent management information were two additional motives mentioned behind the implementation. Naturally, the company anticipated to get better in specific questions when experts were hired that could provide guidance and help in specialized matters. Cutting costs were not the main objective and were only mentioned by one respondent. However, as the efficiency was expected to get higher, the costs were anticipated to decrease. 34 5. Result & Analysis 5.1.2 Contract This section will consist of the analysis of promise, non-promissory accompaniments and presentiation. 5.1.2.1 Promise Exchanges which are expected and required in the relationship. Which exchanges are expected by the shared services and are BUs obliged to reach out to the shared services for help? The respondents do not totally agree in this matter. “There is no coercion that says that we must use the shared services. They should only serve as a support and if they cannot reach my expectations, I will find another solution.” - Interviewee 7 (10) The quotation highlights that the BUs can solve the problems they face by going outside the company, using external providers of services. However, a wish from the shared services is to not go directly to those external service providers. “The thought is to let the initiatives canalize through us. It is an exception if they on their own would go outside the company as inexperienced buyers of services. It is better if they reach out to us so that we can solve the task with external providers. In that way, we can at least control the frames from the beginning.” - Interviewee 12 (11) Instead of being rounded by the BUs, some respondents from the shared services expressed the wish to at first be involved in the task of contacting and hiring external providers if they cannot themselves provide the service. The shared services understand that they cannot always help with everything the BUs wish for, but at least they want to be asked before external actors get involved. Internal consultants or not? Moreover, the internal picture of the relationship and the promise between the BUs and the shared services goes apart. While some are clear that the shared services are, and should act like, internal consultants others do not want to see the relationship in that way. “I describe our work as an internal consultant in order for them to un- derstand us and for us to understand them. That is, we have no power over decisions and authority over their work, we just gather information and deliver it to them.” - Interviewee 4 (12) The respondent further explains what he or she meant with the description of internal consultants. 35 5. Result & Analysis “Start by whipping me, a hundred times, I am just a simple internal con- sultant. If you are not happy with my work, then you can whip more and demand more, be tougher and demand results. And if nothing happens, then you have to move on, run over me. It is your fully right. So if I say that you can call me an internal consultant, you have to treat me as one. I cannot say that you can call me that and at the same time act like I am your boss and stand above you or your organization or that my decisions are above yours. It does not work if I am a consultant. A consultant has no power, none. If I say that we should treat consultants in that way, then we would start treating external consultants in the same way and believe that they have power over us. And they have absolutely no power. We are clients and we are specifiers and it has to work both internally and externally.” - Interviewee 4 (13) The way of viewing the shared services as internal consultants implicates that the services are there for one purpose, to serve the BUs. In addition, the respondent want the BUs to put pressure on the shared service and treat them as if they were internal consultants. “The idea is that they should assist and support. In my world, we are the client of that service. But there are split opinions about that. So, it is somehow internally. According to me, they should be the best internal consultants in the world. ” - Interviewee 7 (14) The perspective of regarding shared services as internal consultants was shared among other respondents and both employees within the BUs and the shared services considered the relationship in that way. However, not all respondents saw the relationship in the same way. “I do not see it as I am a client to them. I see them more as a support function rather than that I can trust them to help me with things that have to be done. They should be there more as a sounding board like that when it comes to different government related issues but it is still up to me to solve everything.” - Interviewee 19 (15) The respondent did not consider him or herself as a client to the shared services. Rather, he or she use the shared services in order to get advice. Another respondent had his or her opinion clear and to the question “Is it stated that the shared services should act like internal consults?” the answer was: “No they are not internal consultants. They are a part of the team.” - Interviewee 2 (16) 36 5. Result & Analysis 5.1.2.2 Non-promissory accompaniments The completeness of the contract or Service Level Agreement (SLA). Since the relationship and the “contract” build on mutually trust, the completeness is hard to concretize. However, the level of trust between the involved actors in the relationship will be further covered in section 5.1.5.5 Trust. The quotation below exemplifies the way that the respondents felt about the usage of service contracts. “No, damn no. No no, e-mail and phone calls. We never want, what to say, to protect our backs is wrong and instead you should take shared responsibility for the things we do.” - Interviewee 5 (17) 5.1.2.3 Presentiation The degree to which future elements are imbedded in present contract. As previously mentioned, any specified contract for the exchange between the involved actors does not exist. Therefore, the degree of future elements is neglected. 5.1.2.4 Summary of the Contract dimension The choice to use the shared services as providers is up to the individual real estate manager. However, the shared services themselves always want to be asked first, before turning to external providers. In other words, they want to be the prioritized and pre- ferred provider of services. Furthermore, there is contradictory views on whether or not the shared services should be regarded as internal consultants. Some argue that the rela- tionship should be seen in that way, while others argue that they all should be considered as one team. The “contract” between parties is based on trust and no written contract or SLA exist. The continuing of the relationship is therefore dependent on the level of trust that the different parties can gain for each other. 5.1.3 Structure This section will cover the analysis of size, complexity, V&O management structure and stability. 5.1.3.1 Size The size of the client organization. An increased size increase the complexity of opera- tions. As stated before, the studied firm has grown rapidly during the last 10 years, from around 150 to over 750 employees. The quotation below highlights the pace in which the company has grown. The real estate managers could be assigned new properties with just 14 days notice. Today, the REM C unit is around 120 employees in total, including both officials and collective workers. The REM R unit is even bigger and RED consists of around 60 employees. 37 5. Result & Analysis “It can be like this, that you sit in a meeting and then all of a sudden, in a month you will get one more real estate. [...] Sometimes it is even 14 days, half a month.” - Interviewee 8 (18) Moreover, the size of the shared services varies. Some of them are under development and include just one or two people. Others, like the project service spoken of by the respondent below, include more than 50 employees. “Back when I joined X, the project function consisted of two colleagues. Today they are around 50. So their biggest every day challenge is to find 20 new colleagues.” - Interviewee 12 (19) 5.1.3.2 Complexity The variety of services and the multiplicity of exchanges between the business units and the shared services. The complexity affects the management structure and coordination efforts. In order to put words on the complexity of the connections between the different BUs and shared services, one respondent described the company as a 3D orb. “It is almost like I would like to put them (the different BUs and shared services) into a 3D orb, then you see a brain with all the threads going in every direction.” - Interviewee 11 (20) The complexity was described by the majority of the respondents, but in different ways. The four main themes found were variety of services, insufficient information about shared services, geographical distance and understanding of the core business. Variety of services There are many different functions included under the shared service “umbrella” today and the difference between the various services is in some cases distinct. One of the shared services, the project function, has become so important and integrated in the core business that it is not considered a shared service. But on paper, it is still called a shared service. “Today, the project function are not really a shared service in that way anymore. They have become so heavy in X’s projects that they do not regard themselves as a shared service anymore. But not really expressed, because the shared services are small, niche swot-teams. But when they become too dominant in X, they are not a shared service in that sense. So, they have moved from being a shared service into being more the heart of X.” - Interviewee 12 (21) 38 5. Result & Analysis Moreover, shared services do not solely serve the BUs. The respondent below shed light on the perspective of the shared services being support functions to the whole organization. The variety of services spans from performing services to the BUs to helping the other shared services as well with their work. “We are like a support function for the whole company. We do not only support REM and RED, we also support the operative management and the top management group. [...] We actually support, to be honest, we support the shared services as well.” - Interviewee 10 (22) Insufficient information about shared services As presented above, the respondents see the organization as quite complex. The high degree of complexity also manifests itself in some of the respondents’ statements about how hard it is for employees, especially newly hired, to understand what a particular shared service can do and who to reach out to in specific matters. “I think that it is like a storm or tornado inside their heads. It is very very much to learn and absorb. I notice that when we have new employees. They call me a lot and I refer them further and give some advice.” - Interviewee 8 (23) The respondent expresses that he or she get a lot of calls from the new employees at the firm, giving him or her the role of an intermediary. Another respondent felt like the functions of shared services were comprehensible, but expressed the concern for new employees. “For me, yes. But if I should put myself in the role of being a newly hired colleague that has worked here for a year, definitely no!” - Interviewee 7 (24) There was a shared feeling that employees who have worked at the company for a long time often get a lot of calls from other colleagues wondering where and to whom to call. It was not necessarily seen as a problem for the ones who got the call, rather a natural way of information distribution. However, one respondent was more concerned about new colleagues who did not understand what shared services could help with. “Take the customer relations group, that is a title that says nothing about something. And if one should be even nerdier, you say CRG, which is short and tough. Then it says even less. For a new colleague that has just begun and has heard of CRG, there is zero percent chance that this person even can guess what the CRG do and what they are good for. That is the biggest issue.” - Interviewee 4 (25) If colleagues do not reach out to the shared service when in help, the company has missed out on the purpose of having shared services. 39 5. Result & Analysis Geographical distance Another aspect that was frequently brought up during the interviews was the difference between different locations and their geogra