Happy Returns Investment Advisors has three divisions. Each division is a profit centre and effectively operates as a stand-alone business. The Retirement Advice Division is located in Brisbane, the Corporate Advice Division is in Sydney, and the Homeowners Advice Division is in Launceston. The general manage of each division reports to the managing director in Head Office, which is located in Brisbane. Each division maintains its own separate support service departments for accounts payable, payroll and staff training. Other support services in Head Office are Human Resources and Finance. The managers of these support departments report to the financial controller in the Head Office. The costs of running these departments are allocated to each division in proportion to divisional sales revenue.
The managing director recently attended a conference where he learnt about shared services units, and he has asked you to answer a few questions.
1. What are the advantages to Happy Returns Investment Advisors of moving the three support departments, located in each division, to Head Office as a shared services unit?
2. Do you think that the restructure would disadvantage the divisions? Explain your answer.
3. Would you recommend that the shared services units be set up as a cost centre or as a profit centre? Explain your answer.