It's Good to Share

Providers of outsourced services have come to see shared service centres (SSC) as a stepping stone, noting that the many companies that have moved to shared services have then progressed to using external partners for a range of business processes. However, some leading companies seek to optimise their SSCs, post-completion, as an alternative to outsourcing.

Moving selected business processes to an SSC can add efficiency and simplicity for large, complex and diverse enterprises, if they approach the transition in the right way. Having learned the lessons from the early days of SSCs, companies such as Newell Rubbermaid have taken on board best practices and implemented large-scale SSC projects.

Since its foundation as a seller of curtain rods in 1902, Newell Rubbermaid has developed into a diverse product company with a successful global business. It spans the markets for office products, tools and hardware, home and family, and cleaning, organisation and décor, with wellknown brands such as Paper Mate, Dymo, Waterman, Parker, Irwin, Lenox and Graco.

The company has implemented a major change programme to create shared services in the US and Europe. The transition of its European financial transactions processing is complete, with accounts payable, accounts receivable and credit management, and US GAAP reporting now being managed in a single location SSC in the Netherlands.

The project achieved common financial reporting, common systems to automate accounts payable, common accounts receivable processes and credit policy, and reduced the company’s transactional processing costs. ‘Shared services can be sensitive and controversial,’ warns Graham Lyons, director of Newell Rubbermaid’s SSC. ‘In the early days, many SSC projects were not seen to be successful. Newell Rubbermaid is a collection of simple yet very different businesses, but it is making the effort to harmonise as a single company, especially in terms of the finance function.’

‘It gives us the ability to control the business better,’ adds Peter Truijen, VP Finance and CFO EMEA. ‘The company was more diverse in the past, but it is now consolidating around its growth opportunities.’ To achieve this consolidation the firm has recognised that its organisational structure would have to change in order to reap the potential efficiency benefits that the SSC can offer. Without the willingness to embrace change on a broader scale, a company is unlikely to get the most out of shared services.

‘When the project kicked off the business was built around silos,’ adds Truijen. ‘We needed the CEO at the top to see that our enabling functions – such as finance and IT – were harmonised and to understand that this would require change.’

Newell Rubbermaid understood the need for major change before implementing its SSC programme, and this is a key lesson it can teach other large organisations.

Experience is the best teacher

Once organisational change has been accepted, the experience of the transition to a shared service centre has taught Newell Rubbermaid many valuable lessons. Chief among these is that while the implementation needs to have clear long-term goals, the transition process must also be flexible.

For large firms in dynamic markets, the goalposts often move, not least because of the purchase or disposal of companies within the group. Structure often changes through mergers and acquisitions and the challenge is to maintain a process of harmonisation as the business changes shape.

‘Migrating businesses into common processes is always a challenge, but particularly against a backdrop of acquisition and divestment,’ says Lyons.

The long-term strategy that underlies the transition needs constant management in order to ensure flexibility and movement towards a clear objective. For Lyons, the change can’t be just for better compliance or better results in a year’s time.

‘This is not a six-month exercise,’ agrees Truijen. ‘We must be aware that the process continues so we can plan for such changes. For example, the acquisition of Dymo in 2005 was very important and we had to integrate it immediately, so longterm change projects such as SSC must adapt. It is a challenge to track a moving target.’

Commitment throughout the organisation is vital to keep the transition process on track. This is driven by a strong mandate from the top of the company. Change, believes Truijen, comes when the CEO and the CFO say that it is mandatory. ‘You need to walk the talk if you are to create a single company,’ he says.

Lyons agrees, noting that ‘part of what attracted me to Newell Rubbermaid three years ago was the strong willingness to move towards a shared services centre,’ he adds. ‘The company was clear about how an optimal shared service centre should look. This kind of vision is vital from the start.’

The vision from senior executives needs to result in buy-in at all levels, which means the success of the SSC is dependent on how well an organisation handles its internal communications of strategic messages. Newell Rubbermaid had a positive response from local managers in most markets, who readily engaged with the SSC project.

‘At the higher levels it is important to keep going back to the ultimate vision but, at lower levels, people need to know and understand that this entails a clear handover of responsibility and accountability,’ says Lyons. ‘The divisions from which you take work must have a clear migration strategy. They need to be reassured the work is going to a safe pair of hands.’

Every business unit must feel confident in the process and understand the reasoning behind it. This means giving them a clear agenda and updating it as the business changes.

‘You need to set a date when you say "this is it, no one in this country will be doing tasks that successfully migrated to the shared services center", so that people can ensure that they are ready,’ says Truijen. ‘Local finance directors won’t own it after that date, so the remaining team will focus on business finance. Have a date and have a future for the people who remain to do business finance.’

Short-term pain for long-term gain

Companies find out a lot about themselves when they engage in organisational change and the transition to shared services. They may not like everything they find, but Lyons believes that every one of the hard lessons that come in the initial phases of the process has a positive effect on the overall project and helps a company to identify precisely where it can find efficiencies.

‘People say they look forward to the improved visibility in the SSC, but it hurts for a couple of months when you first get it,’ he remarks. ‘You have a fresh pair of eyes, that is true, but you are clearing out closets so you may find some skeletons.’

He and Truijen accept that there can be hiccups in the early stages, but stress that these are usually cured quickly, after which the advantages of the SSC start to reveal themselves. Companies begin to see improved efficiency, which drives down cost.

Metrics for managing the overall business improve visibly and Newell Rubbermaid has been able to target specific areas such as purchase order compliance and reducing customer overdues.

Furthermore, savings on SG&A go straight to the bottom line. Swifter transactional and reporting processes also lead to tangible gains. Newell Rubbermaid has significantly reduced the time it takes to close its books each month and reaped benefits from effectively centralising its Sarbanes Oxley compliance testing. Also, the company used to have around 20 banking relationships. Greater visibility and harmonisation in its finance function mean it is now working towards a single bank.

‘With the SSC we have better control over the quality of what we do,’ says Truijen. ‘Visibility gives you more room to manoeuvre and there is no disputing the numbers that each of our businesses has to work from.’

He believes that the issue of control is extremely important, and, on that basis, that shared services may be a better option than outsourcing. For Lyons, the SSC also offers benefits that will become increasingly apparent, but which depend on the sustained commitment of the organisation.

‘By centralising some basic finance functions into a centre of excellence, the finance people have more time to concentrate on value-added business finance work. There comes a tipping point where people just get it. The rest of the organisation can now see the new landscape.’

The Newell Rubbermaid shared service centre is now gearing up to take on additional responsibilities.

‘We’ve got US GAAP accounting here, which is a big win,’ says Lyons. ‘We can have a harmonised policy for it, which gives us better visibility and control. We are absorbing new migrations while reducing costs. The technology is in and we have experienced people using it.’

Once the project has built up momentum it must be maintained, but Lyons advises organisations not to be tempted to push ahead too quickly to squeeze out efficiencies. He advocates a steady, phased approach to ensure that every business unit or function migrated to the SSC is getting optimal value.

He believes it is wise to take a break after each phase of migration to let it settle in. This allows later stages to progress more quickly as the processes for transition become more easily repeatable. Furthermore, he urges companies to take care in selecting the regions with which to start the migration, to ensure that the success stories happen first.

Perhaps the most important lesson that emerges from Newell Rubbermaid’s experience is that the engagement, sustained commitment and a clear understanding of the benefits of shared services are nothing unless the SSC project has been meticulously prepared and planned before it begins.

‘You need to plan smartly, pick your targets and approach it step by step,’ stresses Truijen. ‘It’s like climbing Mount Everest, you go from one base camp to another.’

The ascent may be steep, but the view from the summit is worth all the effort.

Newell Rubbermaid in numbers

Key company facts and figures: 22,500

Total distribution of employees worldwide 75

Countries with active sales centres $6.4 billion

Value of net sales 35.2%

Gross margin of sales Market segments, annual sales:

$2,096 billion Cleaning, organisation and décor

$2,042 billion Office products

$1,289 billion Tools and hardware

$980 million Home and family

Newell Rubbermaid's leasing brands

• Amerock
• Bernzomatic
• Calphalon
• Dymo
• Goody
• Graco
• Irwin
• Kirsch
• Lenox
• Levolor
• Paper Mate
• Parker
• Rubbermaid
• Sharpie
• Waterman