Shell Shares

FDE: Shell now runs six shared service centres (SSCs) in Glasgow, Krakow, Manila, Kuala Lumpur, Guatemala and Chennai (Madras) and plans to expand into areas such as management accounting and credit management. Are SSCs simply about cost reduction?

The biggest reason for putting more and more work in SSCs has been our desire to move towards standardised processes. We have a campaign here in finance that is becoming quite well known within the whole organisation, called ESSA, which stands for ‘eliminate, simplify, standardise and automate’. It may sound a little less catchy than a pop song but it’s surprising how people are beginning to ask the question when anything is proposed: ‘Does that ESSA it?’

Like many multinationals, Shell is an organisation that finds it difficult to do anything by halves. Has the campaign proved powerful?

We eliminate work that doesn’t need to be done, simplify what is left, standardise it and then automate it. The importance of the SSCs to us is very largely that by concentrating activities in a small number of locations, it is easier to drive that process of standardisation, simplification and automation than it is when you have 150 locations doing things. So, we’ve been developing a process standardisation framework and working closely with the SSCs to deliver ESSA.

At the same time Shell is busy consolidating over 100 different ERP systems worldwide into just four SAP installations for upstream, downstream, trading and central finance. Can you explain the process and the reasons behind it?

We are looking at the scope of our finance processes and identifying those that we think ought in the long run, to be conducted out of SSCs. Our priniciple is to maximise the use of SSCs for transaction processing activities. We are also progressively experimenting with moving production of basic management information to them as well. And what we are finding is that the process of migrating the work actually helps to improve control. This is because when you migrate work, you tend to do things that don’t get done regularly.

You discover how much of your data needs to be cleansed and things like that. So, the actual process of migration has been a help to us. And then the quality of service that we’ve got from our shared service centres compares well with existing service levels. It’s quite interesting how positive people are about the performance of the shared service centres.

And this is leading us to progressively both broaden and deepen the types of processes that we move to the shared service centre operation; broader in that we’re moving more into management information provision and deeper in that we’re moving more and more of the transaction process and associate control into the SSC.

Why are Shell's SSCs also moving away from Service Level Agreements (SLAs)?

We are progressively moving our SSCs to what we call ‘finance operations’ and the difference between the two is in the philosophy as much as anything. The service centres have been service centres. That is to say they have provided transaction processing services for the business and have done so in line with SLAs which are then tracked and monitored.

We want to move away from that service model to a model in which the SSCs are conducting finance operations, which is the name we give to the transaction processing and Management Information provision that they do. They’re conducting that work in the same way that anyone else in finance in Shell operates, with a line responsibility for good performance reporting through to the CFO.

So, instead of having SLAs with associated handling and charging, we will simply pursue a continuous improvement methodology based on Six Sigma and Lean Sigma. We will track and review the performance through the judicious choice of matrix or KPIs. Some will be at a strategic level reported annually. At the other extreme, some of them will be operational matrices which will be reported daily, weekly, monthly. We will then treat finance operations as any other part of finance, not a service function doing what the business requests.

It is a highly professional operation that operates the standardised processes we’ve agreed to operate without deviation and without change to world class standards. And if a business comes along and says, ‘Hey can you change this process?’ the answer will be ‘No’, unless we go through the appropriate change control process, and it is then changed everywhere. So, having achieved standardisation, there is a platform for error-free performance. We want to retain that.

How do SSCs improve shareholder value?

Primarily, they do this in two ways. First, they operate at a lower cost and that obviously translates into shareholder value but I think there’s also provision of competitive edge in a couple of ways. A great deal of customer dissatisfaction is created when you make mistakes in things like invoicing, in accounts receivable or credit management and I suppose a great deal of ill will is generated with suppliers when you make comparable mistakes in your procurement activities.

If you accept the thesis that you can more easily run a defect-free operation out of a small number of SSCs, operating off a small number of standard platforms, then you will see presumably either enhanced customer satisfaction or reduced customer dissatisfaction as a direct consequence of offering a less error-prone service.

And the other area where I think you can see competitive advantage being offered is if the SSCs manage to provide more reliable management information, because that presumably translates into better decision taking.

The reason they will be able to provide better management information is that we have a more professional data cleansing activity in our SSCs. Things like data cleansing tend to be processes that people ignore because they’ve always got something else to do. We didn’t have people whose full-time job was data cleansing.

The beautiful thing about bringing that kind of work into an SSC is you get an economy of scale, so that you can actually dedicate people full-time to data management and data cleanse. And that translates into more reliable and more readily-produced management information.

If you accept the thesis that management information is useful then presumably having better management information is even more useful.

Finally, the SSCs provide a basis for simpler upgrade of ERPs, a more consistent management of data, tighter control over process change and a substantial new talent pool.

In the early days, the finance function moved no more than 20% of its processes to SSCs, in large measure because managers feared a loss of control. Has this attitude changed as the SSCs have proven their worth?

It is going to be progressively important to make sure that we develop the balanced CFOs of the future. One of the long-term concerns about the widespread use of SSCs is that because you move much of the basic transaction processing and book-keeping activity away from London or the Hague, there’s then the danger that you breed a new class of Finance Director who has never had direct experience of some of this basic nitty gritty work.

We will address that by making sure that individuals who are heading for the top, spend some time in our SSCs and we’re already starting to increase the interchange of people between SSCs and the rest of finance.