Leaders of Global Business Services (GBS) met in Amsterdam for the Q2 2014 FDE Amsterdam roundtable event, produced in association with Genpact and moderated by former Unilever executive Pascal Visée. The discussion centred on how GBS implementations can support transformational change. Steve Dunkerley reports.
The Netherlands had just thrashed Spain in the World Cup, so the mood in Hotel de l'Europe was particularly buoyant. Participants included GBS leaders from some of the largest companies in the Netherlands, and, according to Pascal Visée, former chief enterprise support officer for Unilever, it was one of the most impressive round tables he had ever attended.
"In terms of market cap, we must have 60% of the AEX in the room," he commented. "Add to that, Achmea, SABIC and Caterpillar, which are not in the AEX but have a combined value of over $120 billion. So in terms of market cap or turnover and in terms of combined experience around the table, it's pretty much unprecedented I think."
Visée began proceedings by examining whether a best practice had emerged through establishing a GBS operating model, or whether it varied from company to company.
Geert Jan Nieboer, head of leverage finance operations for DSM, was the first to comment. "In my opinion, it's horses for courses. At DSM, we have a unique blend of in-house and outsourced components. For example, transactional finance is run as a captive in India with front offices in the regions close to our business, IT infrastructure on the other hand is a mix of offshore captive and outsourced, while HR is outsourced."
Punnika Kharas, EVP global business processes for Wolters Kluwer, agreed and said that industry conditions and a company's own individual culture generally dictate the type of operating model deployed. The industry conditions for Wolters Kluwer, she explained, had transformed it from being mainly a print publishing company for the B2B space into an online software and services provider.
"For the last eight to ten years, we have experienced a massive transition in our revenue model," she said. "The substantial investment required for going online coupled with the whole change management piece was so massive for our publishing front end that our investment capacity or risk appetite for the back office was quite low, so we decided to outsource with a lift and shift approach."
Doug Alexander, EVP finance operations, Royal Dutch Shell, added his thoughts to the mix. "I think if the ultimate scale you have is relatively small, then obviously you might move to an outsource model perhaps more quickly. If you think ultimately you have scale in-house, then that may justify a captive model."
So there seemed to be no silver bullet for the best GBS operating model.
For a moment, the discussion then focused on master data. There was some consensus that having harmonised master data (for example, customer profile data, product portfolio data, supplier data and inventory level data) can help a business gain better insights, improve agility and mitigate risk. Ahmed Mazhari, SVP, global head of sales and client relationships at Genpact, suggested that companies look at establishing a dedicated MDM operating model.
Alexander acknowledged that Shell had already established such a model. "I have an operational data team; 800 people in Chennai who just do basic data across all the processes," he explained. Visée argued that work on MDM can be postponed but it was something that should really be addressed from the outset. He also commented that companies currently investing heavily in big data should really address master data issues first. "I find it quite interesting that many companies talk about the need to invest in big data, while their 'small data' still needs to be sorted."
The discussion then moved on to how success in GBS can be achieved from a governance perspective. To strengthen governance and mitigate hierarchical power struggles, Punnika Kharas from Wolters Kluwer stressed the importance of appointing process owners with considerable experience from working in the business and a passion for process standardisation. Visée added that a focus on organisation and "straight and dotted lines" wasn't healthy and that the key was to create overall headcount transparency and to avoid the build-up of
"As most processes are cross functional, Unilever made the agreement that all the operational process KPIs were going to be in one single GBS dashboard system. If everybody would measure their part of the process in their particular functionally biased way, we would end up with far too many, different dashboards. So first we agreed that a true end-to-end process approach was important and we appointed end-to-end process owners. When we put all KPIs in the one dashboard that created the transparency we needed."
On the issue of how best to approach governance in an outsourced relationship, Genpact's Barend van Doorn, VP banking and financial services and continental sales Europe, highlighted how poor governance can dismantle a deal even an agreement is signed.
"If there is no strong governance, you may have a problem in lift-off. I've seen many RFPs where the intention was, let's say, to outsource 1,000 people. Then the RFP dwells on it for half a year, a year, two years, three years, nothing happens, and, ultimately, only 20 to 30 people are outsourced or offshored. Then suddenly there is no business case and the whole thing completely collapses."
Mazhari from Genpact stressed the importance of counterparty communication, irrespective of the service delivery method.
"You need to sit together at a certain period. Eye to eye. Agree, disagree. Have a constructive debate, whether it's in-house, outsource or hybrid - it doesn't matter."
Van Doorn concurred with Mazhari and added the importance of bringing in a mediator such as an independent sourcing adviser to ensure effective communication and transparency between counterparties. Ton Nolet, SVP business services at Royal Ahold, meanwhile focused on the agreement itself being a factor in determining the quality of service delivery.
"I think that the proactiveness of what you get from your BPO partner depends on the quality of the agreement," he said. "All it takes is one or two well-written clauses. If you haven't agreed it in black and white, however, you can't build any governance structure on top of it."
Change the name
Nieboer from DSM mentioned that GBS has been on occasion been referred to as "generally boring stuff", so the relationship between providers and users of services was next up for discussion. Alexander from Shell felt that organisations that refer to themselves as "shared services" were putting themselves at a disadvantage.
"We took a deliberate decision very early on not to use either terms," he said. "We decided on 'business operations' instead. I think if you have a service relationship, you will have a service relationship. If you have an operational capability within the business, you have a different relationship."
Koen de Rijcke, VP France and Benelux at Genpact, suggested the term "business support operations" over simply "business operations", and suggested that companies set a target of creating value over cost reduction as a solution to the image problem. He gave the example of working capital optimisation for either the sales or payables cycle.
"Set a target and start to measure, track and reward people for creating value over and above cost reduction," he said. "In the mid-term, this will create a lot of buy-in from the business. That will incentivise behaviour to create value to your business partners. Setting this target to incentivise people is important."
Innovation and strategy
De Rijcke's comment of "value" over "cost reduction" led Visée to talk about the importance of GBS gaining greater relevance at a strategic level through process innovation. He argued that GBS has the potential to extend from the back office into front-office operations. If done well, suppliers and customers will both benefit. If this approach is taken, then, according to Visée, GBS becomes a strategic partner and has the potential to move the needle. Visée highlighted how this mindset is crucial when discussing GBS with C-level executives.
According to Visée, Unilever CEO Paul Polman considers GBS only in terms of customers and consumers, taking out the complexity that the consumer or the customer does not want to pay for. "GBS will have to make the life of the company employees simpler, so that they can spend more time on consumers and customers," Polman was quoted as saying.
To illustrate, Visée gave the example of an innovative global web portal that was being used initially only for internal employees. When a similar portal was rolled out to support suppliers and customers interaction, there was significant business impact.
He added that the power of GBS is in leveraging scale, but even more so in "upscaling" This is where best practices are identified within a company and replicated globally. His example was when his team identified a highly innovative approach to a particular part of a process in a Unilever subsidiary in Vietnam, which was then upscaled globally. There were numerous examples of this in many of the company processes: if only we knew then what we know now... local best practice can become global best practice.
Mazhari said that the benchmarking of processes to identifying best practices should extend to other participants in a particular industry. He explained that Genpact's proprietary smart enterprise process (SEP) methodology helps its clients obtain cross-industry insights that make organisations more competitive and intelligent, and also helps them drive to improvements in cash flow, margin, revenue growth and other target outcomes.
"Few enterprises have granular industry benchmarks to gauge their performance against global ones. Even if they do, they may not have the ability to execute an effective process improvement programme. With SEP, a client maps out its end-to-end process, and for each step, they can leverage best practices from specified industry verticals to assess the maturity of a process and resolve any gaps. Genpact's lean Six Sigma black belts can then help develop an effective process improvement strategy."
Recruit process owners with considerable experience of the business and a passion for process standardisation.Ensure effective communication takes place between stakeholders, especially before contracts are signed in outsourcing deals but also in the 'run' phase of not only outsourcing deals but also captives and (centralised) insourced situations.Consider rebranding GBS to BSO (business support operations) to help elevate its status within the business.Set a target, and start to measure, track and reward people for creating value over and above cost reduction. In the mid-term, this will create a lot of buy-in from the business.Identify best practice within your own GBS organisation and benchmark the wider industry when embarking on business process improvement programmes.
GBS for the uninitiated
GBS is a 'systems thinking' approach to shared services, where functional silos are integrated and cross collaboration is the order of the day. 'End-to-end' business processes are also established to drive increased visibility, transparency and value. For example, the traditionally segmented processes of sourcing, procurement and accounts payable now become the end-to-end process of 'source to pay'. With increased operational capability, leaders of GBS organisations increasingly deploy hybrid (in-house and outsourced) delivery models. The more advanced GBS organisations succeed in connecting multiple end-to-end processes for even greater value.