Why is Sharla not so effective in the party?

The unfortunate reality is that Sharla is not very well designed, and is inarguably the worst character in the game - and it only gets worse as you progress away from early-game.

• She only has 4 arts that actually deal damage, and 1 more that debuffs enemies. (And this is with all arts unlocked; it's even worse in early-game. And it doesn't even consider how slow the cooldown on Head Shot is.) For comparison, everyone else has at least 8 damaging arts. This means your other two party members have to pick up a lot of slack damage-wise.
• She's awful in Chain Attacks. Okay for a break-topple daze combo, because she can fill two roles in that sequence, but one red art, one purple art, and no talent art means you won't be getting any sort of chain multiplier going unless it's blue (and really, chaining healing arts is mostly unnecessary). This isn't even to mention that you have to pay extra attention to see if AI Sharla's using Cool Off and won't even participate at all.
• Most of the time, it turns out that you really don't need all that much healing. Once you start getting healing skills, abilities that reduce incoming damage, and other characters with good healing arts alongside a wide attacking moveset, the use for a character mostly composed of heals and protection simply dies off.
• As an AI, she tends to stand far away. You'd think this is a good thing until someone gets stunned and needs help.

Sharla's utility is mostly limited to being an early-game party-filler. Any time after that, having her in the party just makes battles take longer - because you'll be doing so much less damage, you'll also be taking more hits, and as a result probably need the extra healing she has. This actually has its uses in places - a party of Melia, Riki, Sharla is well-suited to taking on high-level ether-based enemies, because neither side will miss and you'll need the extra healing before long. It's like saying "I can't beat these guys straight-up, so let's try beating them with attrition".

It all depends how you've built your characters. Maybe shulk's light heal is just enough to cover your party as your tank just absorbs all the damage and doesn't really get too hurt by it? If your team is in constant need of healing, sharla would be helpful, but if not, it's better to switch out for another character. I also believe that a certain let's player who was playing this game (coughchuggacoughcough) explained this, saying sometimes it's better to just kill the opponent before it hurts you too badly instead of beating on it, healing, then beat on it some more, although the LP is over 100 episodes long, so I may be mistaken. Anyways, hoped this helped!