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.

 

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