The Top 10 Issues with Global Business Services (and How to Succeed with Them)
10 GBS leaders share tips based on hard-learned experience
What makes GBS a success?
We surveyed 10 of the most respected GBS leaders in SSON’s global database to identify how they are making great strides to deliver superior performance through their operating model. They highlight governance frameworks, talent strategy, leadership style, and value-add. What emerges is a cheat sheet based on first hand experience on how to outperform in global service delivery.
As with so many things, seeing is believing, so we have brazenly stolen the best and most candid tips and insights from 10 GBS leaders to help you achieve more.
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1.Today’s Imperative: organizational agility
One of the key characteristics of a successful enterprise is operational agility. Today, the market is forcing change so CEOs need flexible business services structures that can respond quickly, anywhere in the world, via global operations, global talent and global technology. Yet, few are currently at the stage of being agile enough to reconsider their enterprise strategy, structure, processes, people, and technology at the speed required.
Global Business Services can deliver this, however. The integrated nature of operations; the ability to tap into resources wherever this makes most sense; the ability to switch resourcing across regions or indeed, into automation; and leveraging the unique insights to enterprise data … all of this makes GBS the enabler of digitalized, agile, global operations; perhaps even the silver bullet in the face of the shifting business landscape.
Kai-Eberhard Lueg, Head of Business Process Shared Services and Finance Shared Services, Siemens, sees Shared Services in a triangle relationship, driving digitalization across the enterprise: “With our profound process management knowledge (and, at least equally important, our strong innovation culture) we are the link between corporate IT and our customers,” he explains. “By improving and simplifying processes, we develop innovative solutions and drive digitalization within Shared Services and beyond.”
Increasing digitalization possibilities now allow for a more individual approach, Kai-Eberhard adds. In some cases, Shared Services expertise can even support improvement and digitalization of processes on the customer’s side first.
2. Leveraging a global footprint in the smartest possible way
As integrated operations are doing away with silos, today's enterprise can reach across the world to tap into the services and skills it needs, when it needs them, in order to deliver optimized service. But this does not mean 'centralization' in its strictest definition. Many GBS leaders are successfully combining global and local [glocal] services via a hub and spoke approach.
Swarovski, for example, is successfully deploying this strategy as Marcel Angst, Executive VP, GBS explains: “We run our main hub in Poland, set up just a year ago, and two spokes – one in Malaysia launching this quarter, and one in Costa Rica, launching early next year, for APAC and the Americas respectively. That presents our global footprint. Our assumption is that we can do anything out of the hub but where we find that due to language, time zone, or other proximity issues we require a more regional approach, we shift services to the spokes,” he says.
So, whereas record-to-report or master data management is done at the global, hub level, much of order-to-cash or procure-to-pay is be done in the spokes, for Asia and the Americas. Swarovski’s business model is also characterized by more than 1400 ‘own’ stores, which have specific language requirements.
“These are serviced from the spokes, or even from local retained operations,” Marcel explains.
Eltel also operates a global transactional hub in Poland, while each country has a retained country office. “Given our broad functional scope, the country units are very relevant, not just the global hub,” explains Jan Nikus, Group Shared Services – Program Director.
3. ‘Halfway there’ works, too
You don't have to implement ‘true’ GBS to benefit from the advantages of the model, however. Many organizations have evolved to a kind of halfway house of leveraging some of the characteristics (and therefore harvesting some of the wins) while avoiding the more sensitive issues associated with GBS implementation. Less than half of the current roughly 200 GBS centers, in fact, are fully implemented – six out of 10 are still in the ‘partial implementation’ phase, according to SSON Analytics.
The truth is, for many businesses GBS is not the right solution, and though enterprises may want to target ‘the best’, ‘just short of the best’ may be absolutely good enough.
“We don’t operate what you might refer to as a ‘traditional GBS structure’ in Shell,” explains George Connell, VP Finance, Strategy Operations, Royal Dutch Shell. “We operate a functional Shared Services model, where each function in the Centers reports directly through their functional line [Finance reports to the CFO; IT to CIO; Customer Services to Commercial Operations; etc.] The locations are named Shell Business Operations and the team that operates these acts as a ‘landlord’, providing common infrastructure support – offices, facilities, IT infrastructure, health & safety, HR and communications.”
SBO does not have responsibility for operational performance, George adds. The direct reporting line for process performance is through the ‘tenants’ – the functional lines.
“This model provides all functional areas with the best support and liberates the tenants to focus on process performance,” he says.
4. Global Process Ownership drives better E2E performance
Standardized, end-to-end services are, most GBS leaders agree, key to a successful model. Where the entire end-to-end P2P process is not owned by the GBS – say Procurement is owned by Supply Chain and sits outside it – there are limits to what you can drive. “To leverage a true GBS model you need to operate in a post-functional stage of service delivery, with cross-functional integration to optimize service by combining different functional teams together,” explains Andrew Jackson, Head of Global Shared Services at Anglo American PLC.
Where GPOs are present, the benefit in terms of continuous improvement and process (re)design are clear. And whether they sit within the GBS or not, their ownership of the end-to-end process, even that which might sit outside the remit or scope of GBS, puts them in a potentially highly strategic position. Their ability to collaborate with those who sit in the business, means they can impact the front end of a process to identify, communicate, and enable performance improvements across the entire Sales or Supply chain. The key is to build their competencies such that they can initiate these strategic conversations.
Probably the most important characteristic in a GPO is strong lateral leadership. “What's key is to find someone who won't shy away from digging deeper,” says Swarovski’sMarcel Angst. “One could argue that GPOs are effectively ‘tigers without teeth’ – accountable for the results and continuous improvement but not directly responsible for delivery. At the same time, they need to represent the corporate side: the strategies, policies, and controls that corporate expects. We are positioning our GPO roles at a high level, reporting directly to me, to provide the proper context of their importance within our organization.”
At BAT, the GPO model has helped tremendously in standardizing processes across the enterprise’s 21 markets, Sanjay Patel, Group Head of Global Business Services, says. “The GPOs operate from the GBS itself as this offers the advantage of understanding any variations in the processes and fixing them at source.”
Indeed, GPOs are becoming more important, as automation enters the picture: “Strong process ownership becomes much more important in a world where Intelligent Automation trumps moving transactions to a low cost location,” explains Jan Nikus of Eltel.
5. GBS rests on integrated technology – but the trend is opposite.
GBS tends to assume a monolithic ERP platform, but that is more often than not a tough hurdle to get over, says Anglo American’s Andrew Jackson. “Wall-to-wall SAP is probably not the objective of most corporations, these days, with better and more seamless integration capabilities.”
In addition, he says, IT strategies are evolving in a direction where they are actually becoming more flexible – which, in some ways, works in the opposite direction.
Anglo American operates with more than 20 ERP systems within Finance and Accounting alone, and two in HR, “so we are some way from the kind of consolidated systems that are required for aggressive process standardization,” Andrew concedes.
A key barrier to standardization, in other words, is the underlying systems environment. But one solution might be to overlay the system with business process management, he suggests, “which means you could leave the underlying system intact while defining a common way to interact.”
That certainly explains partly the move towards digitization that is driving a lot of GBS leaders to rethink what they are doing and how they are doing it.
6. Think about Leadership talent when launching your centers
Developing and retaining talent within GBS leadership is a critical objective. Recruiting internally is an advantage, as there is greater awareness of the internal ways of working and it is easier, therefore, to manage both internal and external stakeholders, explains Bobby Abraham, Executive VP and Global Head of Finance, Vodafone Group. “We deploy an intelligent location strategy: all our 7 GBS centers are based in countries where we have a leadership position in our mainline telecoms business – e.g., Hungary, Romania, Egypt and India. This helps in attracting senior leaders from the front end of the business, which supports the business understanding required to operate the GBS effectively.”
BAT’s Sanjay Patel emphasizes the value of functional experience to GBS, and vice versa: “At BAT we actively move talent between the GBS and the functions, and vice versa. All my leadership team members came from the functions and we have stated that future leaders of functions need to have done a stint in GBS.”
Right now, the priority for GBS leaders is to refocus staff to remain relevant in an increasingly automated and digitized work environment. “That opens up a whole new playing field,” says Chris Gunning, Global Shared Services Finance Operations Lead at VEON. “We now see digital transformation also moving into core areas of business. What that means is once we build up relevant experience in support services, there's no reason we could not apply this to front office functions like Marketing or Sales. It gives us the confidence to play on the global stage.”
7. Drive a culture that supports higher order thinking capability
GBS leadership has a strong card to play in tapping into global resources and capabilities to deliver optimal service. It is, however, a not inconsiderable challenge in the face of politics, culture, and external economics to identify and establish these global centers, says Andrew Jackson. “Culture is key,” he says. “Can you shift from transactional processing towards new opportunities like data analytics? How quickly can you get there?”
If you consider the traditional triangular pyramid standing on its base, with leaders at the top, thinkers in the middle, and a broad base of doers at the bottom, says Andrew – “we now need to transform this into a diamond standing on its end: the thinkers need to be expanded in both scale and scope by shifting roles traditionally associated with doers into higher order thinking capability. That's certainly the way the market is moving but it's a tough change to make. And, if you don't promote the right culture in the organization, it will be a stretch to get there.”
Indeed, there is a lot more around Analytics, Corporate Tax, and Treasury that would make sense to service from within a GBS, adds Chris Gunning. “We have already moved up the value chain and are currently providing these services out of our Pakistan Centre. It certainly makes sense to consider some of the retained services further down the line, as well as looking for examples to build capabilities for Centers of Expertise for Robotics, RPA and Analytics,” – but none of this will take hold if you have not set the groundwork in terms of an enabling culture that is open to change.
8. Faced with RPA don’t discard offshoring just yet – but do rethink it
The emergence of digitalization, and specifically RPA, has fired up a discussion around the continuing relevance of offshoring and outsourcing. “The emergence of digitalization really changed the equation for us,” explains Andrew Jackson, “as I could see that what service providers are doing with RPA and automation to a certain extent mirrors what happened 15 years ago, with offshoring.” The question is, he continues, how are service providers passing on efficiency benefits to the client?
“We decided that we were probably better off doing that automation work ourselves and reducing the cost of change but retaining the full value of automation,” he explains. “South Africa certainly offers the labor arbitrage that drives Shared Services, so the model still works for us, but if I were in the US or the UK, I think I would certainly be reconsidering offshoring's significance. It's not the end of offshoring [or outsourcing] by any means, but the business model will need to evolve to drive more benefits to the end-user.”
The truth is that robotic automation should reduce the need to offshore for cost or even global talent leverage, as more roles become automated. Offshore still has significant role to play, but more for the value-adds. This will inevitably pressurize BPOs to move to outcomes-based contracts, instead of FTE/volume-based contracts, “which are starting to look decidedly old school” Sanjay Patel says. “RPA is proving to be a big game changer.”
However, it’s not the end of offshoring, Siemens' Kai-Eberhard Lueg reminds us: “As long as activities are performed manually, offshoring will remain important. Not only from a location cost perspective, but also with regard to bundling effects, transparency, and because Shared Services typically have invested many years in a culture of change and innovation, a great basis for further improvements.”
9. Is your reporting line too risk-averse?
The reporting structure can make the difference between a successful transition or a bumpy failure to launch.
Most of the GBS leaders we spoke to report to a Global Head of Finance, or the CFO, but one individual stood out for a truly unique reporting line which is certainly worth considering:
“I must have one of the most unusual reporting structures in GBS in that I report directly to the Head of M&A, who is also the Corporate Development Officer,” he explains (his company would not allow him to be quoted by name). “I think our CEO was a genius in setting it up this way – because the Head of Corporate Development is basically a business deal maker. His number one concern is to enhance the value of the company in the eyes of the shareholder."
“This requires being financially astute, i.e. understanding the numbers, but it also means that you have to inherently be prepared to take a risk for a return. A lot of GBS positions report to the CFO who is inherently risk-averse. I also know some GBS heads that report straight to the CEO, though I would question whether that is the right line. CEOs are concerned with revenue streams – and GBS is a cost.”
10. Make clear that ‘value add’ is not just measured in money
GBS derive their basic value proposition from labor arbitrage, just as Shared Services do, but beyond this is where the GBS model flexes its muscle to deliver exponential value. What GBS offers is the ability to target bigger prizes where the value derives from delivering on the commercial side, rather than ‘fixing’ a process or saving money. Key to this are process experts, combined with Lean or Six Sigma thinking.
For example, in the Source-to-Pay process, a GPO’s ability to look beyond Procurement’s focus on improving supplier deals, and instead look at how contracting could be improved, or how pushing out terms could drive positive cash flow, is the differentiator. Another important driver of value is discipline. Basic Shared Services models don't filter up to operations as readily as GBS do, not can they enforce discipline across global operations, and thereby prevent individual regions from pushing ahead with duplicate processing activities.
In addition, improved decision-making, the ability to enable and drive transformation, and the global distribution of best practices all roll up into value created by GBS. In fact, it is the ability of GBS to integrate and globally deploy additional capabilities, like Sales & Marketing, that highlights the power of this model. Through its global, integrated scope, GBS is able to drive transformational initiatives and own strategic projects. Given the infrastructure, deep process understanding, quality of talent, cross-business relationships, and project management expertise that characterize GBS, it is a most powerful enabler and driver of change.