3 Megatrends from the 2015 Shared Service Summit Melbourne: Economic Imperative!, Global Business Services has arrived and Untapped Value!

I was lucky enough to participate in this years Shared Service and Outsourcing Network Summit in Melbourne this week.   I came away intrigued and inspired at the further opportunities for ANZ businesses to deliver tangible value from shared services and take steps towards integrated Global Business Service Models.  I saw three megatrends:

1) Economic imperative: the current economic and competitive climate makes optimising shared and Business Services essential

An excellent presentation by Huw McKay (Senior International Economist, Westpac) highlighted the challenges the Australian economy faces in the coming years.  to adapt Driving further value from shared/business services will be an important part of cost optimisation in Australian business.  In my opinion, this cost pressure will also drive an increased focus on offshoring / outsourcing and ensure clients drive a hard bargain with their vendors!

Some of the key economic point I took away included (and there were many more in this excellent session):

  •  The Australian Dollar is likely to lose value against the US Dollar and only be worth $0.73-$0.76 in 15/16.  Clients looking to lock in/renegotiate existing contracts will follow fluctuations with interest!
  • Forecast Capital expenditure in the Australian economy is trending downwards toward 2016, with Services (which form the majority of our economy) switching from growth to contraction.  A clear bellweather of sentiment in the economy!
  • Across the Asia Pacific Huw highlighted some interesting insights relating to India.  Indian inflation and wage increases have been lower than many other offshoring destinations.  The market has reacted favourably to the appointment of VR Iyer as head of the Bank of India.  Indeed Wipro, Infosys and TCS have been holding wage increases for their staff to 2% – a signal that India will remain a cost competitive destination for the forsee-able future!

Global Business Services models are becoming the logical next step for Australian organisations regardless of scale

I chaired an expert panel with representatives from BP, ANZ Bank, Rio Tinto and MMG to evaluate the relevance of Global Business Service models for Australian businesses.

The largest organisations in Australia, which include RIO, BP and ANZ have all established multi-tower business service models providing a range of support and customer facing functions.  They are continuing to evolve these organisations and due to competitive and economic pressures are expecting to seek further ways to deliver value, not just from efficiency gains, but from effectiveness and delivering  value-added insight for the business.  Some key points made that I found interesting:

  • Ken Jefferd (BP’s Leader of GBS ANZ) and Marcantonio Maglione (Global Process Champion Finance from Rio Tinto) highlighted the “hybrid” nature of their business service models with services delivered by onshore, offshore and outsourced teams.  They stressed the importance of effectively communicating, collaborating and continuously working with remote/offshored teams to maximise value and relationships.  Marc also highlighted the importance of ensuring that work is appropriately allocated across BPO vendors and they stick to their defined scope.
  • But scale is not a barrier to GBS!  Lara Higson (GM Business Services) from MMG demonstrated how an Australian business can make a Global Business Service model work with as little as 100 FTE across 4 global locations.  Key factors in this success include Executive sponsorship, alignment to company strategy and common governance/oversight to ensure that each shared service acts in a coordinated way.
  • All of the speakers in the panel discussion highlighted that GBS was an ongoing journey and additional business value continuously needs to be found.
  • David Cecil (Group General Manager GBS at ANZ) highlighted the importance of the alignment of GBS vision, strategy and execution to the overall business strategy.
  • Ken Jefferd made an important distinction.  BP look at internal stakeholders within business units as partners, not customers – for them this is an incredibly important distinction and permeates in the nature of relationship that they have with the business.
  • The speakers highlighted that each of their businesses were working towards delivering further value from GBS – through provision of greater analysis, insight and more value-add activities – there was agreement that there is a lot of further opportunity to do this.  All are moving up the value curves across each of the functional areas in scope.
  • Marc Maglione from Rio Tinto highlighted the importance of Global Process Ownership and the importance of organisations shifting their focus to  process to gain maximum value from Business Services.

Untapped value: opportunities abound for Australian shared service organisations to improve.  Some great pointers on on future direction were on display

What really struck me walking around the conference was how much latent value organisations in Australia can extract from shared services.  Below, a few factors that reinforced this sentiment:

  •  Only 9% of the attendees at the conference considered their organisation to be ‘top quartile’ in terms of operational excellence.  Whilst there may be a few harsh markers… this says it all.
  • Shared Service first generation stalwarts such as Accounts Payable automation remains a major topic of interest for attendees at the conference. Mark Spazani (Finance Manager Shared Services for Victoria Police) and Cynthia Singh Head of Business Services at Downer EDI, and previously Arrium) highlighted the value that can be optained by moving away from paper, increasing EDI and developing an optimal AP transactional framework to ensure invoices are treated appropriately (EDI, P-Card, Three Way Match etc).
  • Clare Lezaja (Finance Director Retail products at Telstra) highlighted the importance of an effective shared service centre as part of enabling Telstra’s redefined operating model.  Without an effective and efficient shared service group (a hybrid onshore/offshore/outsourced team), Telstra will be unable to shift the majority of the focus of their finance function from value preservation to value creation.  Telstra are currently building their finance business partner capability to capitalise on the value creation opportunity.
  • I loved the vision that Morag Eyles (Head of HR Shared Services, ANZ) and team have painted for their team.  With a key factor being helping the business predict the future. For me, predictive analytics and insight will be key factors in all successful Business Services teams delivering value as we move forward.
  • ANZ also demonstrated that Recruitment process offshoring can work.  With Australian based staff coordinating the process with end customers with  Philippines (search/screening) and Indian Based teams (checking e.g. references, financials, and contract completion).  Whilst ANZ are on a continuing journey, significant value and customer satisfaction has been delivered thus far in delivering their more than 17,000 annual positoons.
  • And finally… Robotic Process Automation, its coming!  It was great to hear from Nigel Clarke (Assoicate Director – Global Accounts at Tyco) that Tyco and their outsourced partner IBM are evaluation Blue Prism’s robotics solutions for use in their business services organisation.  I’m excited about the possibilities of Robotic Process Automation (RPA) and can’t wait to see the results.

All in all, I think the future of shared and Business services in ANZ is both challenging, exciting and critical for ongoing business competitiveness.  Watch this space!

If you have insights, takeaways, thoughts from the conference or just alternative perspectives I’d love to hear about them at eanevans@deloitte.com.au .

What Australian businesses can learn from leading Global Business Services organisations

I was lucky to recently to attend a site visit of a leading Global Business Services ‘GBS’ organisation with one of my client teams.  The visit made me pause and consider what lessons Australian businesses learn as they progress towards Business Services or extending their shared service operations.   I’m excited about advising, implementing and optimising these models across the Australian business landscape to deliver shareholder value.  Some key takeaways emerged:

Shared Services/GBS is a journey, and there is no ‘one size fits all model.

No matter what the starting point, shared services or GBS is likely to be a multi-year journey.  Along the way there may be some false starts and periods of change but moving to a fully formed GBS model would be a massive change for many ANZ businesses, and like an elephant may need to be eaten in many little chunks.

Many of the leading GBS case studies highlight that changes and model optimization take year often, not just months, and businesses need to be brought along and buy-into the journey.  Organisations such as  Shell, BP, DHL, Siemens, Proctor & Gamble and Nestle are engaged in a relentless journey to optimise their business service function, improve business support and develop competitive advantage within their GBS team.

Shift of focus towards economic value added

Many shared services and GBS businesses are built initially on a cost-reduction platform.  Over time, leading GBS organisations shift that focus towards economic value added/delivered – whether measured in cost, working capital, revenue or EBIT terms.  Its not just a pure cost play, leading GBS organisations align their actions to group strategic direction and actively measure their ‘value add’.

Opportunities lie way beyond transactional back-office activity

Many Australian businesses still have a deep rooted mindset that shared services teams undertake transactional activity whether that be Finance, HR administration or IT.  Leading GBS businesses are at the forefront of pushing the envelope further up and down ‘end to end’ process value chains and engaging in activity that in some organisations might be considered ‘front office’.  Examples include:

 

  1. Customer service
  2. Sales, marketing support and outbound telesales
  3. Logistical support
  4. Procurement
  5. Analytical insight e.g. customer or product insight

A common theme remains however of the business retaining its accountability for judgement based activity where proximity to a business unit is essential.

Enhancing the scope of GBS may unlock scale benefits for many Australian clients 

The average ASX 200 company may only have a finance team of ~100 full time equivalents.  Any shared service built in that functional pillar will have limited scale, footprint and be challenged to put in place adequate career pathing and cross training

A GBS organisation, taking on multiple end-to-end value chain segments is likely to create greater scope and organisation scale.  Scale ultimately will be critical for many Australian businesses to put professional management structures, drive a GBS culture and effectively share GBS foundational initiatives across multiple service streams.

GBS when effectively delivered flips traditional functional structures on their heads

Deloitte global surveys suggest upwards of 60% of traditional functions activities are delivered via Shared Services or Centres of Excellence.  My recent site visit confirmed this and in this major GBS organisation the activity split was even starker:

 

  • The strategic finance business partnering being delivered by a lean CFO and business performance analyst team, responsible for judgment call type decisions / activities made up ~25% of total finance headcount
  • The business service team for Finance (~75% of total finance headcount) effectively closed the books, processed transactional accounting and journals and preparing any back-ward looking reporting, and populating trending forecasts for the consideration of the retained finance organisation.

As Australian businesses move in this direction, this will have a profound effect upon career planning, leadership development and succession planning in many functions of Australia’s businesses.

People and Service are at the core of success

GBS teams really are dependent upon their people, leadership and service culture.  Leading GBS teams successful create a lasting ’employee value proposition’ that makes employee’s ‘stick’ for reasons other than purely for their monthly pay-check.  Increasingly we are seeing flexible working, outcomes based performance management and in-house and external customer and employee satisfaction as key levers to attract, retain and focus personnel upon exceptional service.

Supporting the people agenda in major GBS organisations is a strong focus on individual performance, celebrating successes and focusing upon making customer service part of the team’s DNA.

Increasingly the stigma of shared services personnel being ‘second class’ citizens is being overcome in major organisations as they begin to recognise their GBS team’s professional expertise in driving processes, continuous improvement and efficiency and effectiveness

Many aspects of developing the people and service culture are scalable beyond the traditional functional shared service boundaries that exist in many Australian businesses, e.g. core service training is equally applicable for IT shared service team members as it is for call centre and finance teams.

GBS leadership may be a ‘right of passage’ for future Finance, HR and Operations leaders

Back office career paths are changing in major corporates.  The traditional growth vertically through the ranks in a function will be challenged.  Indeed some major global organisations with GBS teams, see a stint in leadership within GBS as as prerequisite for top-jobs in the C-suite.  Indeed, in many cases GBS will provide the opportunity for executives to experiencing manage large teams – this will become increasing more difficult in the retained organisation as these team become more aligned to strategic matters and not process delivery excellence.

So if you’re wanting to become a CFO, COO, CPO or a CHRO, a stint in shared services or a GBS team may actually be a plus on your resume.

If you have any queries or would like to discuss Global Business Service concepts in more detail, please don’t hesitate to contact me at eanevans@deloitte.com.au