Sourcing Shangri-La

Shared Services: In Search Of The Missing Benefits

There's an intriguing backdrop to Deloitte's 2013 Global Shared Services Survey report, just published. Why are so many business cases being missed in shared services? 

The survey confirms that things are progressing as expected. There's growth - in the breadth of services offered, and in the spread of locations - and more complexity and sophistication, with more multifunction SSCs, more hybrid delivery models and more stand-alone GBS organizations.  

This year, Deloitte is not publishing the main survey findings, listing only the questions asked of the 270+ respondents.  But one line in the executive summary hints at what is perhaps the most interesting story of all:

"A multifaceted approach to addressing the retained organization is required to realize the intended benefits." 

The word on the street is that few shared services programmes deliver their business case. They may do great things, they may employ very talented people, but often there seems to be a question mark over benefits realization. And although the 2013 Survey report doesn't comment on this directly, a (separate) Deloitte webinar last week seemed to confirm that there's no smoke without fire.

In Global HR Shared Services: Emerging Trends, Brett Walsh and colleagues from Deloitte shed light on Shared Services ‘optimisation’ challenges:

“Much has been said about the role of shared services in the transformation of the Human Resources function. Yet for many companies, the benefits expected from transformation are proving elusive.”

“Long after project go-live, when systems and delivery models are in place, organisations still struggle to release the full potential of their investment in HR Shared Services. In fact, many organisations report either failure or significant underperformance compared to their original business case.”

[It's true that their focus in this webinar was HR Shared Services. But most SSCs are now multi-functional, and Deloitte claims to have worked on 900 shared services projects. So it's a credible source.]

There’s no single solution. Every organization is different.  But I’m going to stake a claim that one of the root causes for the 'missing' benefits – maybe the root cause - is a laid-back approach to process management.  

It’s the attitude that defining process is simply an overhead and a non-value-add activity; that it's a temporary project requirement, to be consigned afterwards to a dusty folder on the intranet; that it doesn’t matter if process is in duplicated and overlapping fragments, in different tools and formats, unconnected with real work, and ‘governed’ only by email.

Without the rigour and support of a process management platform, effective collaboration among the stakeholders on the design and implementation of change is, at the very least, in jeopardy.  We see it mostly obviously, and dramatically, in the chasm that can appear between IT and the business, but it undermines effective collaboration between all the other stakeholders too.

As it happens, my colleague Angela Chamberlain and I are presenting a WTG webinar on this theme next week.  To hear more on how Nimbus provides a platform for process excellence that can underpin sustainable success in HR Transformation, please register here and join us. 

 

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© Text Michael Gammage 2013

The Patchwork Enterprise

The enterprise of the future looks something like patchwork.  In a good sense.  Patchwork quilts can be beautiful, blending diversity into a coherent whole - and uniquely distinctive. Often it’s collaboration by a group of quilters that creates them. And they’re not just great art. They keep you warm. They deliver.

Outsourcing is becoming ever more pervasive as globalization drives further specialization. In the villages of our forebears, people came to specialize in baking bread, or working with leather, or shodding plowhorses. In our global village too, it doesn't make sense to do in-house what someone else can do better or cheaper.

Outsourcing was once focussed on ‘non-core’ activities. Now everything – from R&D through manufacturing and supply chain to customer experience analytics – can be outsourced, and increasingly is.

In this patchwork future, successful enterprises will mirror the best quilting groups: a clear vision, creative collaboration and the means to make decisions. In other words, a well-defined operating model and a framework for effective collaboration that brings everyone's creativity into its execution. 

Patchwork has another, negative, connotation of course: ‘a hodge podge’. 

I worked with a multinational client once, leveraging Nimbus to bring multiple HR outsourcing contracts into one coherent whole. That end-to-end perspective exposed the multiple gaps between the expectations of the service providers and the retained organization. Non trivial gaps too.  One was an immediate threat to the entire expatriate payroll. 

That's the hodge podge kind of patchwork enterprise, and it has a very limited future. No-one’s going to want to work with, or buy from, a patchwork enterprise where the patterns and colors don’t match, and you can see the stitching - even worse, the gaps.

Some organizations are trying to stitch their multisourced reality together, buying in 'managed governance services' and the like from the Big 4.  But ultimately it demands holistic thinking, discipline and a platform to support it. Much like quilting.

 

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© Text Michael Gammage 2013

Process Resistance

I often wonder why it should be in any way difficult to sell our software. It ought to fly off the shelves.  The business case is slam dunk rock solid. Who doesn’t want a common language and a framework for effective collaboration in designing and managing change across the enterprise?  Who wouldn’t be more agile with a clear line of sight between operating model and operational reality? Who doesn’t need to deploy processes in a way that is intuitive and engaging for people doing real work – and nurtures their feedback and ideas for continuous improvement? Who doesn't need a single source of the truth?

Most often, there’s two kinds of resistance. Sometimes it’s just a failure of imagination. People who can’t imagine that things could be significantly better. A mindset that’s the opposite of visionary.

More often though, there is understanding of the potential – but a wilful decision not to embrace it. Resistance may be justified in some circumstances. But far too often it’s just an aversion to rigor, accountability and a long-term perspective.

I was in a GBS leadership team discussion recently at a prospective client, a Fortune 500 company. The HR Head heard the pitch, and the mixed responses from around the table, then summed it up perfectly for her colleagues:

“We may not like it necessarily - but this discipline is exactly what we need.”

Moving an entire GBS organization to a new way of working requires significant and sustained effort, and continuing executive sponsorship.

But without this new way of working, this GBS organization cannot safely deliver its ambitious growth targets.  It reconciles the tension between its twin objectives: to expand at pace, delivering substantial savings and sustained service innovations over the next five years, and to ensure compliance in a highly regulated environment.

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© Text Michael Gammage 2013

Global Shared Services: Build It - But Make Sure That They Will Want To Come

It's interesting how rapidly the quality of the customer experience is racing up the strategic agenda for leaders of Shared Services Organizations (SSO) and Global Business Services (GBS) units.

Deloitte's Global Survey last year noted the need for any SSO to promote itself effectively - to overcome resistance, and to secure buy-in, by getting closer to its customers.

On the webinar with HfS yesterday, Ron Walker of KPMG went further, stressing brand development as one of the keys to GBS success:

"How you manage the GBS brand is critical. Any GBS has to sell itself, and to show quick wins." 

The perfect backdrop for my plug for an SSON-hosted webinar next month. Building on experience with a range of clients, I want to show how Nimbus Control provides a platform for SSO and GBS organizations to deliver continuous excellence - including an outstanding customer experience.

There's an interesting prelimary discussion, of course, about what we even mean by the 'customer experience' in this context. 

Deloitte has suggested a useful  distinction between the SSO's client - meaning the exec team buying the SSO's services - and the SSO's customer - meaning the day-to-day users of the SSO's services.  

Clearly 'an outstanding customer experience' has to deliver for both the SSO's clients and its service user customers...

[just fyi - in the typical shared services and outsourcing journey for most organizations, GBS units may be the final stage beyond an SSO, but for all practical purposes, I take SSO and GBS to be interchangeable terms in this context].

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How To Simplify Global Shared Services

Most multinationals are almost ridiculously complex. It's a barrier to innovation, compliance and sustainable improvement - and increasingly a C-Level issue. Simplification has been one of three strategic priorities at GSK, for instance, since 2008. 

So Deloitte's report on reducing complexity in global shared services organizations is well-timed. Unfortunately though it misses the point. 

Deloitte sets out survey results which illustrate the prize.  Tackling complexity effectively, says Deloitte, can reduce the costs of delivering Finance, HR and IT by up to 20%, even in already 'rationalised' global shared services organizations.  And yet only 30% of CFOs believe that their efforts in tackling complexity are successful.

The low-hanging fruit of labour arbitrage and automation were harvested long ago. 'Getting a grip on complexity is', in Deloitte's words, 'the next frontier in reducing costs [of Finance, HR, IT and other non-core support activities]'.

Which is great. But, alas, Deloitte's report on how to get a grip on complexity is - frankly - very complicated. It could do with a complexity reduction program of the sort that it proposes. It presents interesting ideas but doesn't join the dots. Its definitions of an operating model and a business model don't quite work. Its attempt to define four different types of complexity - portfolio, organizational, process and information infrastructure - don't hang together well. It's light on governance and controls. It recognises the significance of master data management but doesn't link it with process management. To its credit, the report clearly advises a focus on end-to-end process. But it dismisses 'process flow diagrams' in favour of an exotic visual value stream approach, the benefits of which would be incidental at best.

More fundamentally, it overlooks what must be the 72pt headline to the complexity-slayer story: the power of process visualisation. 

End-to-end perspectives, expressed in the language of the business, with design principles that make it intuitive and easy on the eye. All managed within a methodology that blends compliance rigour with support for people doing real work, and ensures IT alignment.  This is what drives engagement in sustainable improvement and therefore, ultimately, in business simplification.

And it's not just effective in untangling process spaghetti, or bringing coherence to process fragments.  I've seen it to be equally effective in enabling organisations to escape the deadweight of enormous SOP document libraries and migrate to a far more agile world where end-to-end process provides the overarching narrative, supported where necessary by far fewer, and far slimmer, SOP documents. 

A picture being worth a thousand words etc, we shouldn't be surprised that once people can see what's going on, they are far better equipped to identify unnecessary complexity and collaborate to safely 'make things as simple as possible but not simpler' (to paraphrase Einstein, who never wrote on shared services, as far as I know, but knew a bit about complexity..). 

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How Not To Implement Shared Services

A shared services center to deliver HR, finance, procurement, IT and other services for the UK's seven Research Councils. It seemed like a Good Idea when it was announced in 2006. 

Five years on, a review by the UK's National Audit Office (NAO) makes gloomy reading. Overspent £130m against a budget of £79m, and projected savings significantly less than expected. 

How did it happen? The NAO report highlights three fundamental flaws:

Lack of Clarity

"A key factor contributing to escalating costs was the early lack of clarity about how the service would operate. An outline design, known as a target operating model, was not agreed until August 2008, nearly a year after implementation had begun, but it was incomplete and lacked detail. Some elements of design were still ongoing during transition and system launch."

Confused Governance

"Early governance structures were complex. Reviews commissioned at various points during the project showed that responsibilities and accountabilities needed clarification."

Poor Management of Outsourcer

"A contract with Fujitsu to design and build the systems and ICT was "poorly managed".  It was eventually terminated at an additional cost of £13m."

Each of which could, of course, have been avoided, or at the very least mitigated, by the adoption of an appropriate process management platform.

No surprise that developing process maturity is an NAO theme - and runs through the NAO's recommendations in this case: to harmonise processes further, to strengthen end-to-end process management, and to embed continuous improvement.

Hear stories like this one, and other shockers in the Process Hall of Shame, and it's bewildering how organizations can still be in denial about the need for a process management platform at the heart of any shared services project.  As though it was a 'nice-to-have'.

Whereas actually it's the key to clarity at every level; to effective collaboration within a robust governance framework; to IT alignment; to drive process harmonization; to controlling a multisourced environment; to making life easier for the SSC workforce; and to enabling a culture of continuous improvement.

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Deloitte Shared Services Insights: Could Do Better

Accenture's report earlier this month did a good job in advancing the debate about shared services. By comparison, Deloitte's latest shared services insights disappoint. It's a commendable report - but it kind of misses the point.

Overlook the waffle and the sloppy thinking: Accenture's report does nail the essential truth - that a service management framework is vital for sustainable success:

There needs to be a “system around the system” that includes the people, discipline in procedures, communications, service expectations, performance measurement and key cross-functional processes, such as continuous improvement and client relationship management. It’s this broader shared services system around the system— which Accenture calls the service management framework—that sets shared services organizations that have achieved high performance apart from those with a sub-optimized centralized service delivery model. The service management framework is the keystone...

I've argued elsewhere that Accenture needs to go further and recognize that the service management framework for shared services, in its best developed and most valuable form, is the business process management platform at the heart of the enterprise. 

But, that qualification aside, the idea of the service management framework is a crucial advance and deserves to be adopted.   It provides the context by which we can understand that Deloitte's latest list of worthy insights - on the importance of change management, IT alignment, governance and enhanced controls - are in fact all inter-related.  And jointly soluble, once we frame this correctly. 

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Placing A Big Bet On Global Shared Services

"The companies you work for are placing a big bet on your success. Your job is to scale fast...". Deborah Kops's presentation captured the moment at this week's Finance Summit.

Shared services is set for very rapid growth. There is a convergence around an SSOS model of shared services implementation: Stabilize - Standardize - Optimize - Source. It's a model that's driving the expansion of shared services into global business services operations, delivering not just the traditional Finance & HR services but others such as Procurement and Supply Chain - and doing all this in an increasingly multisourced mix.

Unsurprisingly, change management featured heavily, reinforcing the importance of a service management framework. One organization reported 28 change initiatives running concurrently in its P2P process alone in this FY.

The challenges are changing as shared services moves up several gears, and beyond the easy wins in automation and labor arbitrage:

Customer Satisfaction. The pre-conference survey showed service improvement was on a par with continuing cost reduction. Several SSOs are using KPIs based on the Net Promoter methodology to measure client satisfaction.

Continuous Improvement. There's an new focus on continuous improvement programs. CI was one of the delegates' top budget priorities for 2012. 

Talent Management. There's a lot more focus on people, morale, motivation, engagement and retention. 

No surprise that there was a lot of interest in Nimbus Control as a service management framework that can orchestrate complex change and enable continuous improvement.  It was in the challenges of ERP projects that the visualization of process, in the language of the business, seemed especially powerful. Stakeholders in most organizations simply don't have proper visibility of the current and future state, can't do easy gap and impact analyses, and have no governance framework, beyond email, for managing change.

My conference highlight, by the way: sharing a table with a global P2P owner spending $52bn this FY. Awesome.

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Continuous Improvement - Made Easy

Naturally, I would say that Emitra Nelson from Cameron stole the show on Day 1 of the Summit for Finance Leaders in Dallas today (you can hear her story on a SharedServicesLink webinar on 18 October - more details here).

But if I couldn't vote for Emitra, on the grounds that hers is a Nimbus success story, my choice for the most thought-provoking presentation would be Andrew Simpson, Head of Business Services in America for BP, whose case I summarised in a doodle in my notes as this:

 
(my maths is shaky, so I'm hoping this means what I was thinking!)

Andrew defined Continuous Improvement (let's call it CI) as 'operational excellence through process improvements' , or, more informally, as 'stopping business insanity'. He listed the 20 most common excuses he's heard about why CI can't be done, the funniest being the manager who claimed that it would be 'against corporate policy'.

He then proceeded to show exactly how he has implemented CI, and went on to make a totally convincing case that, in the long run, 'background' CI can be even more valuable than high-profile transformation programs.  And a CI culture, he argued, will also make any major transformation program more likely to succeed: people are engaged and energised by change, not simply resistant.  In shared services terms,  CI is 'the critical success factor for any SSO that wants to stay relevant'.  

What's really interesting is how few of the organizations represented in the audience have a serious CI program.  There's lip service but little commitment. How can that possibly be? At the end of the day, CI is pretty straightforward. 

Maybe the clue lies in a video Andrew used in his presentation to illustrate resistance to change (can't find it on YouTube, but it was like this).  The hamster keeps getting on the wheel, spinning faster and faster until it's out of control and finally gets flung out into the cage - then does it again, and again and again... 

Maybe the hamster enjoys the adrenalin rush - just like the business enjoys the thrill of firefighting.   And when, after a while, the hamster is punchdrunk with concussion and unable to think clearly, well that's like the business getting so used to living in firefighting mode that it too can no longer see clearly - and so resists the CI initiative that is ultimately its way forward.

Finally, a great endorsement for CI: people from BP's Business Services unit are sought out by the rest of the business.  It's career-enhancing because it has a carefully thought-through and well-executed CI program that encourages people to bring their brains to work. It breaks out, he noted, of the analysis paralysis of left brain thinking, the belief that life is a machine and we just need to understand how the cogs fit together to get it to work perfectly.  It recognizes the special and unique value that diverse perspectives, working intelligently together, can create.

There was a ton of other good stuff too of course.  More on that later in the week, I hope.

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Accenture: What's Holding Back Shared Services

Hats off to Accenture for bringing some reality and insights to the debate about what's holding back Shared Services. 

Everybody's doing shared services, everybody thinks it's strategic, yadda yadda yadda. The reality though is often disappointment and missed business cases.  Sustainable success in shared services is still the exception.

The Deloitte Shared Services survey, published in April, highlighted some lessons learned: the importance of governance, a collaborative framework, transparency and change management.   

Governance was also a theme running through the PwC/HfS report on Global Business Services, published in July: it has to be 'ongoing', 'well-integrated, consistent and rigorous' and not just another tool for vendor management.  

Those were useful contributions.  But Accenture's report this week Trends in Shared Services: Unlocking The Full Potential brings a new focus.  It spells out what the leaders are doing, and how they are succeeding. And process excellence is front and center.

Noting how one leader in shared services uses automation and metrics and process improvement specialists, it continues:  

"...while other elements are certainly in place - C-level support, comprehensive change management and a relentless focus on value - it is the organization's continued focus on process excellence that stands out ."

I share the report's enthusiasm that shared services will mature to become ubiquitous. And that we are witnessing the emergence of "a long-envisioned" model of integrated business services.  I agree too that 'managing multisourcing consistently' is a huge challenge for most organizations. And I'm delighted that Accenture highlights the vital need for a service management framework.   

But I have one quibble. Because even Accenture hasn't quite joined up the dots.

What is it, ultimately, that enables process excellence, that provides the collaborative framework for change management, that ensures transparency and IT alignment, that supports Lean and other continuous improvement programs, that provides the governance framework for the effective management of outsourcers, and that allows cloud and social media to be most effectively leveraged?  It's a business process management platform. 

It's not a panacea. It can seem a bit boring. It's an unspectacular answer when your SSC is 'in a complete mess'. But everything points to the business process management platform as the foundation for success in shared services.  It underpins process excellence. It's what enables the service management framework.  And it's the only way to optimize the management of process variants, which, the report notes, is the real problem in process standardization. 

What is the business process management platform that can do all this? I've defined it elsewhere as a platform that uses the universal language of end-to-end business process to enable four capabilities.  The only way I'd improve on that definition now, especially in the light of the Shared Services workshop in London last week, would be to re-iterate the importance of adoption.  If our brilliant process management models don't engage process stakeholders, and help real people to get real work done and to contribute to improving things , then we're missing the biggest trick of all.    

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Sustainable Improvement In Shared Services Performance: Here's How

My colleague Rob Speck tells a story on his excellent new Process Maximus blog that perfectly illustrates the performance deficit in shared services, and how to address it. 

It's a deficit that has been largely hidden until recently. Shared services is wildly popular, and growing across all industries and regions. In Deloitte's 2010 Global Shared Services Survey, 89% of organizations declared shared services to be 'strategic'.

But scratch the surface and it's not hard to find business cases that have failed to deliver, sometimes spectacularly. According to the Deloitte survey, 78% of organizations reported ‘no significant positive impact’ on process efficiency or quality. 

In practice, promised efficiency gains have proven difficult to deliver, and sustainable improvement has been even more elusive.

Rob's story illustrates the prevailing condition of many shared services organizations.  His client was the shared services division of a Fortune 100 company, providing Finance and HR services. The SSC's processes were 'managed' and 'governed' in Word and Visio and peoples' heads. Process ownership was fragmented and unclear. KPI metrics were disconnected from their business processes.  Onboarding new clients to the SSC was challenging. The confusion and complexity demanded a culture of heroics.  It was, the client said, in a moment of despair: 'A complete mess'. 

OK perhaps this is slightly harsh, but it was, in many ways, a fairly typical SSC. 

Rob's case study shows how that SSC deployed Nimbus Control to significantly up the pace of its journey towards operational excellence.  At the heart of its success is an integrated management platform that provides visibility and enables effective collaboration, across a complex hybrid delivery landscape, on the continuous improvement of its end-to-end processes.

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BPM: The Invisible Gorilla

Crowds aren't always right. Today's conventional wisdom about business process management is that is tedious, technical and matters only to IT.  I believe that mindset is about to be inverted.

There's a famous experiment where subjects were shown a short video clip of a basketball game. They were asked to count how many times one team took possession of the ball. When asked afterwards, most observers had not noticed that a figure in a gorilla suit walks into the middle of the court, turns to face the camera, beats his chest and dances a jig before strolling out of the picture.

What we pay attention to guides our expectations of what we are going to see. If it doesn't fit the template we are currently working with, then often we won't see it (consciously at least), no matter how bizarre.

So how do we ever learn anything new? That's where the brain's right hemisphere comes into play.  But before I go any further, let me acknowledge my inspiration here: A bo0k that took over my summer holiday, possibly one of the most interesting books that I've read in thirty years: The Master and His Emissary by Iain McGilchrist. 

Managing The Downside Of Global Processes

Why is is that even leading multinationals seem less healthy than successful companies that stick closer to home?

In an article just published Understanding Your Globalization Penalty, a McKinsey team set out to provide some answers.

The findings from McKinsey's organizational health survey data (from 600k people in 500 corporations) was 'troubling'. The weaknesses shown by even multinational leaders 'touch on all three major areas of organizational health—alignment, execution, and renewal'.  The McKinsey team was clearly surprised:

"The global leaders we studied represented the cream of the crop—they not only enjoyed strong financial performance but also had significant global scale and scope, which is why we included them in the sample. If organizations like these can’t stay healthy as they grow globally, can any company?"

To make sense of the data, they went on to interview executives at 50 global corporations. The answers highlighted the familiar challenge: how to balance the benefits of local ownership and focus against the potential benefits of global scale and coordination.

The McKinsey team noted that many multinationals just don't have the collaborative framework in place to make the right choices, and be able to continuously re-optimize as circumstances change:

"Complicating matters further, our interviews suggested that, for most companies, about 30 to 40 percent of existing internal networks and linkages are ineffective for managing global–local trade-offs and instead just add costs and complexity."

This is very much at the centre of our radar at Nimbus. Our clients are looking for a collaborative framework that enables them to manage the trade-off between standard global processes and necessary local variants.  

It's easy to love global processes.  To some extent, they can be imposed - in supplier payment terms, for instance. But, most often, some local variants will be essential for legal reasons, or just plain efficient in overall business terms. And it's always fluid: what is justifiable as a local variant today may not be next year; and sound new reasons may emerge for new variants.

So every enterprise needs a collaborative framework that, on the one hand, enables a relentless convergence towards global processes, and higher levels of automation, but, on the other hand, recognises that standardization is ultimately unattainable, and is able to manage intelligently the local variants and the continual re-optimization of the balance between global and local.

It's a capability that looks set to become ever more crucial. The McKinsey team note that many firms 'are wrestling with the corporate center’s role in their increasingly globalized institutions'. They suggest that 'it may be time for some companies to reimagine what the corporate center does... And since even leading multinationals appear to suffer this globalization penalty, the importance of addressing it will only grow larger in the years ahead'.

Shared Services is usually at the heart of the global processes vs local variants tension. I hope to return to it here over the coming weeks, with some customer examples. It will also be one of the strands in the Shared Services workshop session on Day 2 of the Inspiring Performance 2011 conference in London. So do please register if this floats your boat - spaces are limited - and join the debate.

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Building A Robust Global Services Organization

Rick Lucas and Drew Wright at Everest Group sounded an alarm last week about the challenges in building a robust global services management organization.

Highlighting the increasing complexity of global services delivery, they make the point that today's world demands different expertise and new capabilities. Relying upon the skillsets that have worked for the last twenty years could be, they warn, 'catastrophic'.  

It's not just new leadership that we need. As I've argued elsewhere, the complexity and pace of managing global services - the challenge of service integration - demand a similar revolution in process thinking.

The tools and methods that we've used for process management for twenty years won't deliver in today's world either.  They are too technical, fragmentary, ungoverned and disconnected from real business operations. 

Successful global services organizations will rely on process management platforms that can:

- provide line-of-sight between a target operating model and operational realities

- enable effective collaboration, especially between IT and the business

- wrap governance, compliance and controls around the operational processes

- deliver at the front line and engage the organization in continuous improvement.

Everest makes the case for recruiting the right talent 'to execute with excellence and deliver the next generation of value from global services'. But even the best talent can't deliver sustainable excellence without a joined-up view of the business.

Optimizing service delivery across supply chains that are global, cross-business and cross-service providers, demands transparency, shared understanding and clear accountability. Cue the enterprise process management platform, the crucial enabler.

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Shared Services: Rethinking Process Management

Drawing on data published recently by Deloitte and HfS/Hackett...

How Shared Services optimization demands a new approach to process management. 

In three slides:

Download Shared Services - Rethinking Process Management - 26 May 2011

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