Global Business Services – Six reasons Australian business has to sit up and take notice

© Ean Evans 2014

Global Business Services organisations have become ever-present in global businesses such as Mars, Proctor & Gamble, BP, Diageo, DHL/Deutsche Post and Siemens. They have delivered significant tangible benefits to these organisation.  I believe these models are highly relevant for Australian businesses and that we will be seeing more of these operating models in Australian businesses and the public sector in the coming years.

 

Is there more to it than just creating a snazzy ‘Global or Group Business Service’ title? 

 

At their core, Global or Group Business Services (GBS) represents a marked shift in how organisations structure their support functions.  In essence, rather than a mixture of separate functional siloes, each with a variety of shared service centres and/or outsourcing arrangements, GBS models deliver value through integrating governance and common business practices across the entire organisation.  GBS organisations typically demonstrate the following characteristics:

 

Multi-function: incorporating multiple functional processes including the typical candidates of IT, Finance, HR, customer service and operations but also industry specific functions such as claims processing (Insurance) and brand design services (Fast Moving Consumer Goods).  Importantly there is high degree of end-to-end integration across processes and GBS teams are often aligned along end-to-end process lines rather than functional lines.

 

Multi-location: typically have multiple locations to deliver services each tailored to the enterprise’s needs.  Common models include: hub-and-spoke, a ‘follow the sun’ network of global centres or the bulk of activity in one (or more) low cost Asian hubs.

 

Multi-sourced: The combination of traditional shared services, outsourcing arrangements and Centres of Excellence within their operating model.  The more sophisticated organisations leave the decision around sourcing choice to the GBS team, whilst holding them accountable to robust service level agreements.  Vendor management techniques are typically common across multiple outsourcing arrangements.

 

Multi-business: Serving a range of internal business customers, selecting leading practices from across the entire organisation and providing them to all business units.1

 

There is lots of good literature on Global or Group Business Service models.   To find out more, see Deloitte (http://bit.ly/1wMX7zQ), International Services Group (http://bit.ly/1vgrCn0) or the Association of Chartered Certified Accountants (http://bit.ly/1BIDTU9).  Definitions aren’t however the focus of this blog.  I’m more interested in what practical GBS lessons Australian businesses can learn and why CFOs and business leaders need to consider them.

 

 

Six practical GBS lessons for Australian business

 

I see Group or Global Business Services as a natural evolution from shared services and functional process outsourcing.  Done right, GBS will help Australian businesses more effectively achieve scale economies from common processing, governance structures and technology enablement tools. At the same time it can deliver operational excellence to internal customers and third parties in a consistent, scalable fashion.

 

I see six key GBS lessons that are applicable to Australian businesses:

  1. A shift in mindset to end-to-end processes:GBS teams are often a catalyst for an organisation’s switch from traditional functional demarcations to true end-to-end process alignment.   This is obvious when you look at the composition of many GBS teams – instead of classical share service team and process groupings such as HR (employee administration etc), or Finance (Accounts Payable etc) GBS organisations are usually defined by process groups such as Hire-to-Retire or Purchase-to-Pay.  This is deliberate.  Typically they also nominate an end-to-end global process owner governing process standardisation and aligning continuous improvement activity that is supported by cross-functional teams.  This will be a major shift in mindset for many Australian businesses and will challenge CFO’s, CHRO’s, CPO’s and CIOs as their teams’ focus and reporting lines evolve.

 

  1. Its more than about just cost saving, but this remains a key driver:All the classic shared service and outsourcing benefits apply:

 

  • Proctor & Gamble’s GBS mantra is enlightening… “The GBS model is all about the AND. We want lower costs AND improve quality AND innovation AND productivity”.  This team also delivered more than US$800m of benefits to its customers.2
  • In another example Siemens’ GBS leader summarised one of the primary drivers for GBS as doing more ‘faster’ and enabling faster deployment of technology and solutions3.
  • In Australia, I’ve seen organisations in the public, not-for-profit and private sector moving to successful Group Service constructs with as few as 150 FTEs across multiple end-to-end processes.  Australian business leaders should be wary however, GBS teams at the smaller end of the scale mean that the implementation needs to be effective first time – the business case may not readily support a ‘second try’.

 

  1. The increased importance of effective vendor management:Australian businesses are seeing an upsurge in outsourcing with many ASX companies outsourcing components of their back office, customer service and operational activity.  This trend means Australian organisations need to learn to equip themselves to effectively manage multiple vendors onshore and offshore and ensure quality and efficiency are delivered hand-in-hand.  As an example,  Suncorp as part of its GBS journey has a central ‘Partnering’ team of more than 25 permanent / contract staff to consistently manage its multiple onshore and offshore outsourcing vendors across Finance, HR, IT, Claims etc.

 

  1. Functional careers and operating models will change: GBS models will challenge traditional back-office functions like never before.  Functional leaders have to re-evaluate their team’s evolving role and pass responsibility for some process delivery to the GBS team.  This delivers a great opportunity for Functional teams to focus on value-added business partnering and business decision support – it shouldn’t be squandered.  At the same time, effective career path development and tailoring of talent development in GBS teams needs to be a key focus.  For Australian businesses an additional challenge will be securing leaders with experience of world-class GBS models to maximise the chances of effective implementation first time.

 

  1. Common governance will test leaders’ ability to influence and drive change:  A challenge particularly for businesses used to high degrees of autonomy and federation – not uncommon across the Australian business landscape.  As Deloitte’s Peter Moller in the UK has stated: ‘Trying to implement finance shared services is like herding cats. And if you’re trying to implement GBS initiatives it’s like trying to herd cats, sheep, goats, dogs at the same time.’.  A strong vision, exceptional leadership and CEO commitment and Board Support is likely required to drive and sustain the change required.

 

  1. Australian businesses can choose to ‘leapfrog’ stages in organisational development: Generally the trends in shared services and outsourcing evolution flow from West to East (from the USA, through Europe and onwards and into the smaller APAC markets such as Australia and New Zealand).  Organisations’ such as WorleyParsons have managed to ‘leapfrog’ by moving directly to Global Business Services and setting up their first significant shared service as a multi-function Global Business Service centre of ~400 seats in Malaysia.   Opportunities abound for organisations and leaders who are bold!

In summary, Global Business Service models can provide significant benefits to Australian businesses who commit to the journey and make GBS meaningful, rather than just a ‘snazzy’ title…   I’m excited at having the chance to watch and support organisations make the most of this opportunity.

 

If you have queries about Global Business Services please contact me directly at eanevans@deloitte.com.au or on +61420546741.

 

Sources:

1 Adapted from Deloitte’s white paper GBS – Better Together.

2 https://www.pg.com/en_US/downloads/company/PG_GBS_Factsheet.pdf

3 How Siemens transitioned to global business services – Michel de Zeeuw, CEO Global Shared Services, Deloitte Shared Service and BPO Conference 2013.

 

Don’t forget the second S… Service

There are many flavours of shared service organisation with huge varieties in functional scope, complexity level of transactions and scale.  In my opinion one thing that sets the better shared services apart is their focus on the second S… namely Service.

High performing shared services I’ve come across often demonstrate six common Service attributes:

1) Their leaders and teams actively seek,  listen and act customer feedback on a regular basis.  They use this as a key input to better align their service offerings to evolving customer needs.  Even in periods when customer feedback is expected to be negative, they actively seek it out!

 

2) They go to often incredible lengths to get to know the business that they are serving better.   A major Fast Moving Consumer Goods who has a Finance and Accounting captive centre in Manila routinely flies and seconds shared service team leaders (and “agents of the month”) into Australia to meet and better understand the nuances of their Australian business.

 

3) They look to exceed customer expectations, every day.  A prime example of this is a major oil and gas business which actively monitors customer personnel who are seeking out information on the Group Business Services intranet site.  If their search takes too long and they are clicking through too many web pages, the shared service team pro-actively make an outbound telephone call to see if they can help them and resolve their issue.  Whilst I wouldn’t advocate this approach in every situation, it provides a clear example of how some shared service look to wow their customers.

 

4) They seek to make it as easy as possible for their customers to follow the ‘happy route’ through each shared process.  Often with Australia’s geographically dispersed workforce this needs careful consideration.  Traditional channels of email / intranet may be inappropriate for some ‘blue collar’ operational teams and alternative channels involving mobiles and handhelds may yield better process adoption, increase transaction speed and reduce errors.

 

5) They “walk in their customers’ shoes” and look to the outcomes their customers are seeking from each process.  They seek to tailor their service levels (within cost/efficency constraints) and  continuous improvement programmes  and engagement channels to each customers segment’s process goals.

 

6) Finally, and possibly most importantly, they train everyone in their shared service team on service with the associated skills of phone and email etiquette,  listening, influencing and managing (and then exceeding) customer expectations.

 

Increasingly I’m seeing shared services in Australia take a greater service focus.   I see this as critical to a successful shared service organisation.  If you have any perspectives on great (or poor) shared services or outsourcing customer experiences, I’d love to hear about them.  Please contact me at eanevans@hotmail.com.

 

Three common shared service challenges and potential remedies

There is no secret sauce to stabilising and optimising a shared service centre.  It typically involves a lot of hard graft, leadership, focus on process and technology optimisation and the development of an effective team culture.
Working with a range of clients in Australia and beyond, I’ve seen three challenges that have held many shared services teams back.  Each of these, along with some suggested steps to begin remediation are outlined below.

1) Overtime levels higher than expected post transition:
Often post transition, the shared service struggles to execute the process to the same level of efficiency as the business team who previously delivered it.  During the initial month and a half post transition this is acceptable – however, beyond that period it becomes a priority to resolve to:
  • Increase process effiiciency
  • Minimise overtime and  project benefit leakage
  • Ensure that shared service teams aren’t burnt out
  • Maintain customer satisfaction.
If your overtime levels are running over 5-8% alarm bells should be ringing…
Suggested potential remedies include:
  • Review staffing levels; have you got the right level of resource to match against the actual volumes of activity passed over from the business?
  • Pro-actively quarantine legacy issues/ backlogs.  You want to demark which activities are business as usual processing and which are not and make this clear to your customerss.  Establish backlog ‘clearance’ plans, treat these as a project and if necessary seek investment to remedy.
  • Review process metrics carefully and identify root causes of delay, waste and inefficiency. Check if processes and all exceptions have been documented appropriately during transition, if necessary update work instructions and train operatives accordingly.
  • Above all, be transparent with your customer.   Highlight volumes versus baseline, backlogs, process efficiency and effectiveness metrics, root cause analysis and agent effectiveness if necessary on an individual basis.  Develop and work on a plan to address and resolve together.

 


2) Attrition levels are too high impacting effectiveness and efficient

A level of attrition in a shared service centre is not necessarily a bad thing.  Managed attrition provides avenues to enable continuous productivity improvement benefits to be realised without having to pay out redundancies.   In addition, some movement of shared service personnel to roles within customer business units is actually one of the biggest complements for a shared service team, and furthers business relationships.
Unfortunately when attrition rates are creeping over 10-15%, there is a huge cost to the business – in terms of retraining, business knowledge leakage, unsettled teams, morale and culture.  It also can be a huge management distraction.
Suggested potential remedies:
  • Try to assess root cause:  Ensure your exit interviews and employee satisfaction survey’s are capturing reasons – investigate and understand these.  Try to isolate the issue, is attrition prevalent across every team, grade or type of role? or is there something in a segment of your organisation that needs to be addressed e.g. a leader, nature of a role, workload etc.  Once identified put an action plan in place.
  • Look at the type of people you are hiring, are they the right fit for the role?  As one of my clients found, they were hiring accounts payable clerks who’d just arrived in Australia – what transpired is that once they had a job for six months, they used this as a stepping stone to an assistant accountant role in other businesses.  Think carefully about your requirements for each role.
  • Put yourself in their shoes? Assess the centre, culture, management and job opportunities through their eyes – would you want to work there in their role?  What would get you down?  Once you’ve done an honest assessment, look to optimise.
  • Seriously consider the non-monetary incentives for your team members.  Could they be rewarded in different ways? do they receive ongoing training? Is there a career path for them?  Do they know how their role/responsibilities will look in 1 or 2 years time? Are they respected by their customers and peers? Consider what you can do to make a difference to their careers.

 


 

3) Roles and accountabilities are unclear, leading to confusion or finger pointing

Often, roles and accountabilities between the shared service and business team become blurred.  Scope creeps and initial service level agreements and responsibility frameworks become outdated.  This can lead to a number of challenges, including:
  • Inefficient hand off of work between business and shared services (often involving multiple phone/email interventions to resolve)
  • Mis-aligned expectations – making it hard for the shared service team to ‘win’ in the customer’s eyes
  • Poor shared service team morale as they constantly try to ‘paper over’ the cracks in the end-to-end process.
Suggested potential remedies include:
  • Review and refresh your Service Level Agreements and service catalogue with each of your customers on an annual basis.  Get them to sign off annually. This provides an regular reset of expectations and can be used to reinforce roles and responsibilities.
  • Clearly communicate roles and responsibilities for each end-to-end process and reinforce this regularly with the business teams.  If necessary consider refresher training or remind stakeholders in other ways with desktop quick reference guides on how to engage with the shared service.
  • Coach your team in how to respond to change requests/scope creep versus your service catalogue.  Instigate a transparent, pragmatic process that captures required changes and ensures all parties are clear about the amended roles / responsibilities.  When changes are made, ensure docuemented work instructions are also updated.
  • Review your performance reporting and ensure it contains metrics that measure compliance with both shared service and business unit responsibilities, as well as overall end-to-end process measures.  The old adage of ‘manage what you measure’ is never truer than in a shared service context.  Regularly monthly reviews of performance will help you to work with your customers to align their teams behaviours to their agreed responsibilities.

Feel free to contact me at eanevans@hotmail.com if you are experiencing other challenges with your shared service organisation and want a perspective on potential remedies.