Shared Services Agreement: Everything You Need to Know

A shared services agreement is a model for delivering corporate support. It works by consolidating and combining services between business units and headquarters into one separate entity that is based on principles similar to the market. 3 min read

Shared Services

It is important for the shared-services business entity to be able to compete with other outside vendors. Business units must operate under marketplace discipline. They also need to be able to seek support services that meet the same standard. For business units to get a competitive advantage, best practices are in, and the corporate culture is out.

Internal customers then need to specify their own service needs. The providers have to meet their requirements, and the providers will have their performance assessed using specific criteria that is easily measurable. When it is properly executed, the shared-services approach uses the advantages of centralization and combines them with decentralization.

How to Write a Shared Services Agreement

In the litigious society that we all live in today, it is very important to have a solid agreement. A shared services agreement is most easily approved legally when it is drafted to be short and sweet. A basic, short agreement makes it easier to get other public agencies on the same page.

1. Use Simple Language While Drafting Your Agreement

Another important tip for drafting a shared services agreement is to use easy-to-understand language. There is no requirement that a drafted agreement contain verbose legalese in order to be upheld in a court of law. Use simple language that could be understood by a fifth grader. As long as the terms and language used in the agreement describe the terms and clauses of the agreement, do not overcomplicate things. Another good example of a well-done shared services agreement can be found in Google's Terms of Service.

2. Include Multiple Parties in a Shared Services Agreement

When you draft a shared services agreement, the best practice is to make the agreement inclusive. Instead of making it a two-way agreement with one other party, make the agreement a many-to-many agreement, or a multi-agency agreement. If you use language such as “this agreement has been reached between the undersigned parties,” then you have the ability to expand the number of jurisdictions that are able to join the agreement.

3. Do Not Include Constraints That are Unnecessary in Your Agreement

It is important to remember that the more flexible you make your agreement, the more versatile the agreement will be. When drafting the agreement, do not make it too narrow and specific. For example, you do not need to narrow down specific types of equipment that will be used or the specific services that you are agreeing to provide. An agreement that is too specific locks you down and corners you to abide by the specific terms. In the event that you want to share services that were not considered when you drafted the agreement, you will be stuck with the already-drafted limitations.

Additionally, do not reinvent the wheel when drafting your agreement. When you are drafting your agreement, use pre-existing templates. There are many options out there to use for your shared services agreement.

Six Principles for Implementation

There are six main principles to guide your company through the implementation process of the shared services agreement.

Decide which services you want to share. Not every service is alike. Rather, they will differ according to the types of customers services and what interactions are needed.
Create a service-level agreement. The point of shared services is to form a market-based partnership to exist between the staff services and the line.
Choose your staff and your leaders very carefully. Senior and entrepreneurial line managers tend to be the best at implementing a market-oriented shared-services organization.
Benchmark your shared-services organization against any outside vendors.
Establish your governing board to be composed of business unit executives.
Choose an approach for implementation. When companies elect to move forward with using shared services, the burning question to ask is whether the company should reorganize for shared services first and then redesign, or whether the company should redesign first before reorganizing.

If you need help with a shared services agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.