Generally, I’ve found that clients of outsourcing are either desperate or ambitious. In today’s recessionary economic markets, there’s decidedly a desperate tone among the buyer executive team driving the introduction of change. Can you blame ‘em?
 
Look at the wide array of industry segments that are suffering from the economic spiral of 2008: mortgages, lending, transportation, hospitality, automotive, retail -the list goes on.
 
Many of the issues causing today’s economic pressures are here to stay for a long time. The energy problem is not going away. Credit will be in short supply.  Financial institutions are more risk averse. And inflation is a growing concern.  When these pressures take flight, it’s hard to catch up. 
 
So it’s no surprise there’s a relentless focus on instilling operating disciplines that will weather the storms of uncertainty. In fact, if a sentiment index existed that conveyed the relative emphasis between those that are focused on immediately reducing operating costs versus those looking to outsourcing for new capability, we’d see the former outweigh the latter.
 
To cope, senior executives within consumer-oriented firms are figuring out the duration of this climate and its depth.  And with this yardstick, they’re assessing their organizations and asking a series of strategic questions:

• How do we maximize our contributions and value in relation to our enterprise strategy?
• What can we reasonably achieve for ourselves?
• What are the benefits and risks of leveraging external resources to a greater degree?

Most senior managers are focused on maintaining a strong balance sheet and being rigorous around headcount, inventory, and production. With only two major levers at their disposal - increase prices and cut costs - many are concluding that internal organizations cannot move far enough, and/or fast enough towards improvements without some external forcing function for change.
 
Surprised they’re opening their minds to outsourcing?

 The outsourcing roadside is littered with HRO deals that have hit the ditch.  Why then would some of the top India-heritage providers be trying to catch this falling knife?  As one executive told me, “Because there’s market need and we can do this work.”
 
Uncertainty is driving outsourcing demand, and fast-growing India-heritage service providers are making considerable investments to play in the HRO game. They are not intimidated by the failings of their predecessors and they blame focus on process over service as the reason for the early stumbles. 
 
Rather than asserting theoretical best practices for the HR functions of recruiting, learning, workforce administration, and payroll, this new breed of providers are turning their operational practices into marketable services.
 
After all, is the poise really surprising? Who can argue that the likes of Wipro, Infosys, TCS and Genpact aren’t actually foremost in the business of human capital management?  These companies win or lose based on their ability to recruit, hire, train, deploy and manage people. Sure, it applies to a lot of companies and industries, but are others operating at the scale or pace of the India-based service providers?  I doubt it.
 
One of the more eloquent and insightful industry analysts, Phil Fersht, recently published a blog entry on the eagerness of some of the Indian providers to enter the HRO market.  I must say that Phil’s comments match my recent experiences and skepticism. 
 
I agree with Phil, this move should be taken very seriously.  The pragmatic approach to the HRO market is gaining traction.

Change management – who ever heard of such a thing? The first time I heard the phrase I laughed out loud and thought to myself: “Managing change - is that like managing money??” 

If you are in shared services, your role is all about introducing change - if you are successful in shared services you know your role is all about helping people to adapt to the changes you introduce!!

Why people resist change is not hard to imagine, but managing people through the change is harder than most could possibly imagine. Some SSC leaders still ignore the concept while others have dedicated their careers to it. Some outsource the responsibility.

A fair number think they are managing change, while a stout few feel dictating the change process meets the definition of “managing change.”

Where are you on that scale? How hard do you work at it? What do you actually do to manage change, to follow up with your key customers, to measure your success? 

Have you identified those key people in the organization that can help you sell change (hint: think administrative assistants - they really know how to get things done) or do you hope the new process will just “catch on?”

To be certain, change management is no laughing matter. Having learned a few hard lessons, the search is always on for the best method of managing change. Yet, the formula for success seems to always be changing - how ironic.

"Standing still is not an option!" This is a refrain I heard over and over again from an outstanding leader of a shared services operation. The leader continued to preach to the troops that quite a few others want your work: Outsourcers, the business units, and even the functional groups you took the work from, want the work back.

I couldn’t agree more. If you don’t embrace the constant desire to improve or transform your operation, you ought to get out of the business. Shared services is about change—constant change and improvement. The challenge to exceed expectations never ends.

Of course, change is not easy, and in fact it is a lot of hard work, so go ahead and feel sorry for yourself for ONE MINUTE! Yes, I give you permission to visit “Pity City” for one minute, and then you have to move on. The visit to “Pity City” is an effective change management tool I’ve seen used over the past 25 years of consulting, and it works.

Give it a try. The next time one of your managers or employees comes into “vent,” “whine,” or act like a “victim,” allow them their ONE MINUTE. Say to them, “I understand what we are trying to do is hard and tough on you and your people; therefore, I am going to give you ONE MINUTE to vent, whine, or act like a victim.” Then say, “GO! You have ONE MINUTE.” Time them, and when the one minute is up, focus only on going forward; do not listen to any more griping or venting . . . "Sorry, you had your ONE MINUTE!"

Have 120 executives from over 50 service provider firms discuss the “tipping point” in sourcing, and the word you’ll hear repeatedly is innovation. It’s no surprise the topic earned the most buzz at TPI’s Sourcing Industry Conference (SIC) in Chicago on April 22.

How to put the topic of “innovation” more prominently on the table for outsourcing relationships has been led by my colleague Harvey Gluckman. His work with several service providers and law firms is addressing the ways that innovation is declared as an expectation, its evaluation techniques, funding models, and the overall governance constructs. It’s truly market-changing work.

But we took on other “meaty” debates across a spectrum of contexts as well, ranging from macro-economic factors to the minutiae of individual transaction terms. At the end of the day, we were looking for ways outsourcing can have a more substantial effect on the business of clients.

To that end, we took a checkpoint on TPI’s Innovation Agenda for the global outsourcing industry and discussed the recently published findings related to change management led by TPI’s Shawn McCray. I especially enjoyed the collaborative spirit among the participants taking up tough topics many companies struggle with.

It was an incredible event, and there’s more to come! Next week we hold the Americas Sourcing Leadership Exchange (SLE), a conference among buy-side leaders in outsourcing. I suspect there will be a few gems worth sharing for that event too!

In the meantime, for those who attended the SIC and care to keep the public thoughts rolling, please post a comment.

“Poor Me!” Too often, that’s the underlying message we hear from shared services leaders when they go on about staff turnover, diminishing sponsorship or unsatisfied customers. There’s no doubt that, as an SSO leader, you’re constantly faced with challenges from many directions. So, what’s new?

But, if you’re going to act like a victim you’ll never win! The prevailing factor in overcoming these challenges is not to act like a victim! Appearing passive and resistant to tackling challenges won’t turn the issue around. The mentality of a victim dictates helplessness and always reacting to the situation.

World-class shared services leaders have a common thread: Being proactive and getting out ahead of the challenges. They’re astute business people who can quickly assess their environment, determine the potential challenges, and then put into place plans and actions to continue to control their destiny. I see this all the time.

So: Take control! or your worries will control you!

What’s all the hype about internal customer service? If we’re all one team, delivering to external customers, why does one group inside an organization need to extend some level of special service to another group in the same organization?

The answer is quite simple: A frivolous view of customer service is a fatal mistake for any shared services center! Service is not only in the name, it’s a key attribute in defining the SSC culture and operational viability. Let me explain!
 
Most organizations delve into shared services to cut costs. The low hanging fruit in the early stages is the elimination of wasted time, in particular custom processes and services. Cost cutting continues on the back of standardization, adherence to policy, . . . all of which create efficiencies and thus cost reductions -- or do they?? When dealing with a large employee (customer) base, your SSC team will deal with hundreds of different personalities and sets of expectations. To effectively manage varying expectations, policy interpretations, and priorities your people need a service mindset. The immediate reaction is that a robust service offering will cost more -- but consider the price of ignoring a customer service mindset. 
 
It’s too easy to blame shared services for process failures. Customer service is your primary defense against biased attacks; it represents your chance to “wow” people who have a problem. You could argue that the perception of offering high value services is more important than the cost base.

In fact, I would argue that superior customer service does not cost much -- it may, in fact, be cheaper than continuously enforcing a set of rules and policies which simply can’t work for everyone! The costs of providing superior customer service are minor (rarely measured) and, when quantified, are always viewed as a strategic imperative to the success of the organization.

The reason world-class firms are willing to endure some cost for superior service is simple -- the intrinsic cost of poor perception is excessive! These poor perceptions turn into rumors, which turn into urban legend, and eventually into run-away trains. Every SSC leader has faced this problem!

Urban legends build over time, halting the expansion of shared services or even causing a move away from this model. A significant price to pay for failing to integrate a service mindset!
 
Focusing on customer service or understanding why repeat offenders break rules is an opportunity to seek new and better approaches. Can you offer a boutique service of completing expense reports for senior executives and frequent travelers? Can your SSC lead a monthly session for all administrative support personnel throughout the company on how to solve daily problems? Can the SSC offer small but valuable services -- record retention, electronic distribution of payroll statements, a more advanced corporate credit card program, electronic storage of all contracts, on-boarding and training of new employees? The possibilities are endless and almost all of them provide benefits back to the SSC -- if, and only if, you dedicate your SSC to a service mindset and thus think creatively about your service offerings.

A recent response from our CEO regarding a boutique service offering,  “That solution is a Godsend,” captures the value of positive perceptions. When your CEO provides emotional feedback, you have provided value and are driving the right perceptions!

Investing in a service mindset eliminates poor perceptions, creates a winning culture, and ensures the longevity of the operation!

What we do as shared service professionals isn’t looked upon as especially sexy work. The services we propose to collect in our centers of excellence (“non-core,” “back office”) and the terminology we use (“metrics,” “process management”) don’t excite most corporate leaders. In fact, it’s often an uphill battle just convincing the CEO or COO that shared services are a good idea. Once the executives are on board, we fight another battle to inspire our customers to actively collaborate with us. The concept of working with a shared services team isn’t exactly at the top of their list of exciting things to do.

Centralize, optimize, outsource (maybe). Lather, rinse, repeat. Yawn.

Then someone in charge notices that you’re saving money. A lot of money. Now the mantra is suddenly transformed:

Centralize (yesterday!), optimize (even more!), outsource (why wait?!?).

Driving down unit / transaction / you-name-it costs through process optimization is suddenly very sexy. Congratulations! You’ve now become a hero in your company – and potentially its worst enemy.

Senior corporate leaders can easily become addicted to cost cutting. “Now that you’ve managed to cut transaction costs by ten percent,” they’ll ask, “what’s five percent more? How much more efficiency can we drive out of your service delivery process?” Like any other addiction, cost cutting can lead to self destruction.

Companies that get ‘hooked’ on cost cutting often look inward for better numbers rather than at the market. It’s sooo easy to cut costs compared to increasing revenue. And it feels so good at bonus time. Unfortunately, (when will our biggest companies learn this?) cost cutting internally just makes the short-term numbers look a bit better. It doesn’t do a thing to improve market share, sustainability or long term growth.

Being outrageously successful at optimization can change how your business approaches the market. You may inadvertently pave the proverbial road to you-know-where: An introspective (“avoid inefficiency”) rather than expansive (“seek gains”) business strategy.

Maybe we should re-work that mantra of ours:

Centralize, [innovate!] optimize [create new core competences and dazzling customer experiences!], outsource (maybe, maybe not!?!) [take risks, try, fail, try again, seek partners and reinvest savings in revenue production and talent development! Less raw cost reduction, more “!”]

Optimization is an opportunity for innovation. Everyone expects a new shared service to do things faster, better, cheaper. Optimize? Of course! But maybe it’s also time to expect shared services to create new opportunities for their companies – and add some “!s” to their mission statements.

What do you think? Can this be done? And, if so, how?

It was that time of year again. Thanksgiving had come around and the Holidays were just around the corner. That meant Christmas and New Years parties. And the inevitable question of “So, what do you do for a living?”

My wife and I were attending just such a party at the house of one of her friends. As it wasn’t one of my work-related parties, I didn’t know anyone there, and they didn’t know me. I hate these kinds of parties -- but figure I can talk to anyone and have a decent time!

Having introduced me to someone she knew but I didn’t, my wife moved on . . . and I was now confronted with making small talk with this guy. I tried to talk about sports, but that didn’t seem to go anywhere. Very awkward. He then asked me what I did for a living.

So I told him that I lead a Shared Services Organization. He asked, “What’s that?”

Well, as he asked, I went on to tell him. I told him all about how we “mine for gold” and save our customers, all internal of course, so much money. I told him that at first they hated us, but now they seem to be pretty happy with our services. In fact, I couldn’t stop myself from telling him that they now want us to take on more of their work . . . and I’m not sure it really is the type of work shared services can leverage over the larger base, so I’m not sure we in shared services want this new work. He kept nodding, so I went on and told him all about our plans to upgrade SAP and all the new functionality that it will bring. I told him all about the new consolidation module that will reduce our month-end close from 36 to 24 hours. He seemed fascinated. So I kept going.

Out of the corner of my eye, I saw my wife, looking shocked, quickly headed my way. “Excuse me,” she said, firmly pulling me away from our conversation. “Are you talking about shared services again?” I confessed: “Yes. The guy asked what it was, and he’s interested.” “No he isn’t.” she insisted. “He’s just being polite. Now stop it and give him an opportunity to get away from you.”

I found myself in a similar situation a few minutes later with someone else. Some Tom Petty music came on and I asked the guy next to me if he liked Tom Petty. He immediately started talking about Kyle Petty and a bunch of stuff which I think related to NASCAR. Eventually, he asked me what I do for a living. I paused, thought about it, and said, “I’m an accountant.” He looked at me and said, “Taxes are a bitch. I hate the IRS.” . . . and continued to tell me about the speed differences between Talladega and Darlington.

I nodded a lot but was thinking about the SAP upgrade and the new consolidation module. 36 to 24 hours, now that’s speed!