The art of sharing – Simon Newton, John Lewis

13 June 2014

Having served as the vice-president of shared services at Kimberly-Clark for six years, Simon Newton moved on to become finance director of Partnership Services, the business service provider for the John Lewis Partnership. Two years into the role, he reflects with Richard Hannigan at the 14th Annual European Shared Services & Outsourcing Week in Dublin about the key differences in approaches to shared services as well as some of the lesser-known industry undercurrents.

The 2013-14 financial year was a good one for the Partnership. In early March, it announced that annual profits before exceptionals had increased by nearly 10%. Waitrose and John Lewis had also grown their market share for the fifth consecutive year, and, for the first time, the Partnership's sales figures beat those of its major high street rival Marks & Spencer.

In the current climate, the feel-good factor from having a workforce of 'Partners' rather than 'workers' seems to be rubbing off, not just on the shop floor but also behind the scenes in two shared service centres - in Bracknell, Berkshire, and Victoria Street, London - which are known as Partnership Services. Created in 2009, they provide shared services for the Partnership, covering finance, indirect procurement, personnel and IT.

"We really grew out of a couple of things," says Simon Newton, the finance director guiding the Partnership Services division. "First was the implementation of some common finance software, and second was the creation of what we call goods not for resale [indirect procurement] within the Partnership. We introduced a central team to manage that.

"By 2011, we had opened our first dedicated centre, focusing on finance and procurement services, transferring our IT infrastructure in late 2012, and growing personnel in 2013 and 2014."

Cost savings have been achieved largely through the accepted model of process improvement via standardisation, elimination, automation and consolidation. In terms of governance and stakeholder relationships, Newton is keen to highlight the difference between the centre's 'customers' and its 'users'.

"This is one of the areas where I see a very clear differentiation in our shared service division," he says. "Too many organisations mix the two up - they use the words almost interchangeably. But these are actually very different populations with separate needs, and you need to treat them as such, especially in terms of how you engage with and report to them.

"The John Lewis finance director, Rachel Osborne, is a user of our services, but she's also a customer, and I have to remember that and act like any outsourcer should. I'm constantly trying to understand what she's trying to do and how I can support her agenda. In general, I think shared services underestimate and under-invest in these relationships. At John Lewis, we're doing something about it, though it is hard work."

The personnel touch

Newton is also confident that Partnership Services is better positioned than other shared services organisations to capitalise on insight benefits from cross-functional management. Having taken a multifunctional approach from the outset - rather than viewing operations as a series of functions under one roof - it is more integrated than its competitors and will subsequently learn much more quickly.

"As we think about our challenge, we genuinely look at it across our whole organisation rather than in terms of individual functions," Newton explains. "We have, for example, lots of Partners building careers by moving between finance and personnel. The skill sets are broadly similar at the lower levels.

"I don't want to oversell this, because we've still got more opportunity on the table than we've actually taken, but I think we've positioned ourselves in a way that will be much easier to land in the end."

In a curious twist of fate, Newton actually attended the same secondary school in Yorkshire as Osborne, though they were in different years. He has suggested that it is this "consistency of values important to being a Partner" that allows them to work so well together.

While this may be true, his previous role as vice-president of shared services at Kimberly-Clark is also likely to have earned him respect. But how much of what he learnt at Kimberly-Clark is really applicable at Partnership Services? Can all shared services ideas be safely transferred across different industries?

"I could really wax lyrical for hours about this," Newton jokes. "But one area I think is really worth mentioning is how shared services operations are impacted by extremely fast-moving markets, like retail.

He explains how, as head of indirect procurement when Waitrose decided to offer free coffee to customers, hundreds of coffee machines suddenly had to be sourced. Next week, it might be new payment options or break-fix services. The list goes on.

"In comparison with retail, fast-moving consumer goods - like we had at Kimberly-Clark - isn't actually that fast," says Newton. "But retail is really quick, and, from a shared services perspective, that means you've got to be speedier at changing your business support services. You have to meet the new challenges that the front end of the business chases and meets every day."

"We won’t just put in new stuff because it feels like the right thing to do; there has to be a real hook."

The other core difference between Kimberly-Clark's shared services operations and Partnership Services is, Newton believes, the emphasis placed on personnel operations. With 90,000 partners - some of whom are employed on a short-term basis during our peak trading periods, such as Christmas - and 25,000 retirees being supported, even the most basic process and system improvements carry huge weight.

"In retail, and particularly at John Lewis, providing simple-to-use and effective workforce-supporting processes certainly takes on a much bigger role," says Newton. "We recruit many thousands of people each year, and they are typically going to be doing short-term work. So you need a really good, efficient machine to recruit, manage, administer, pay and then separate again.

"For us, it's particularly important, because we are a Partnership. These people actually own the business, so they have a heightened sense of the need to be well supported."

Focus on the basics

It is in this area that Newton envisages some of the greatest changes in shared services practices in the years to come. Comparing the often clunky user experience of booking holidays or checking payroll with the intuitive, easy-access smartphone interfaces so many are now used to, he believes the industry will have to significantly improve its game if it is to maintain users' and customers' faith, and continue to grow in value. He is also optimistic about some of the more creative ideas currently being floated across the sector, like those linking automation with cross-organisational processes.

"Take a very banal example: my accounts payable function is somebody else's accounts receivable function. So, how can we innovate here to make a real difference, with benefits across the organisations? Some of the blue-sky thinking in this area is really interesting," says Newton.

Yet, when it comes to growing Partnership Services, Newton's strategy is a little more cautious. Rather than offering the data analysis and front office services that many shared services centres are now taking on, the focus will largely remain on improving basic functions and processes.

"Those sort of areas are pretty standard roadmaps for lots of captive and outsourcing organisations. I think we're probably a bit different - because we're so young, there are still a lot of the essentials that we can do much better," he says.

"We won't just put in new stuff because it feels like the right thing to do; there has to be a real hook. So, while we will move up the value chain from routine journal entry through to a little more control activity and analysis, that's not what we're really aiming for at the moment."

By sidestepping the industry trend towards offering higher-level services, Newton demonstrates his independence and business acumen. To build a quality shared services operation, it is vital to achieve the highest possible standards with basic processes before higher-level functions are attempted.

Slower development also frees up time to forge strong, empathetic relations with customers, the significance of which some shared services operators would do well to remember. All too often, customers are forced to adapt to a shared services function, rather than the other way round. As Newton says at the end of our interview: "We are in the service industry. The clue is in the name."

Simon Newton joined John Lewis Partnership in March 2012 from Kimberly-Clark, where he worked for 17 years. His last role, as vice-president global shared services at Kimberly-Clark, saw him lead several major transformation projects, including the creation of the shared service centre supporting European business.