Gulf Region Counters Rising Costs With Shared Services

With salaries across the Gulf Cooperation Council countries projected to rise by over 5% in 2014, according to Aon Hewitt research, organizations in the region are keeping a close eye on costs, and standardizing services where they can. The time is opportune for Shared Services, which are steadily growing as a means to controlling non-core, operational costs, while also freeing up resources to better serve the business's growth objectives. And while some regionally operating multinationals like ZÃ½rich Insurance Company, Unilever, and Pepsi-Cola are acting as flag bearers for Shared Services, the Bukhatir Group, Al Futtaim, and the Muscat Electricity Distribution Company are all examples of local organizations that have recognized the competitive advantages of this model. Khaled Alhanaky has been Chief Shared Services Officer at ARASCO for five years, and has taken on the challenge of providing a robust and reliable HR framework for the organization’s disparate business units. ARASCO’s history is an interesting one, characterized by fast growth through diversification – not unusual within the growth economies across the region. Having started as single business line [in the feed business] back in 1983, the early 2000s saw the company expanding into other food related businesses. First, ARASCO leveraged raw material synergies by moving into starch and glucose manufacturing; then it integrated downstream into the poultry business. The company had also built up a reputation for quality assurance expertise, so it was a natural progression to start offering quality consulting and inspection services. All this resulted, by 2008, in ARASCO having expanded to six separate business units, all operating in entirely different markets and serving entirely different customers. However, rapid expansion put a strain on support services, and management realized that it was running suboptimal, decentralized operations. Something needed to change. In 2008, ARASCO launched a shared services model, to provide centralized HR, IT, administration and cultural support across ARASCO’s Saudi Arabian operations. Barbara Hodge, SSON editor, finds out what this has meant for the group. [download a pdf version of this interview] Barbara Hodge: One of the biggest challenges for a new shared services is deciding which services to move out of the business units into the SSO, and which to leave in place. How did you make that decision? Khaled Alhanaky: Our chief executive gave us a simple analogy: if you have six children, and you want them all to learn French, what do you do? You hire one French teacher to teach them all. However, if one child wants to learn German, another Russian and a third Italian, then you would provide a different teacher for each. We applied the same concept to our SSO: any service that required tailoring or business unit specific knowledge remained within the business units. Anything that could be commoditized, however, was moved into the shared services and standardized. One of the challenges you faced was that a staff survey in 2008 returned a 43% satisfaction rating. To drive service excellence, you needed, first, to do something about your employees’ morale. How did you do this? Yes, we faced a significant challenge at launch. The in-house survey that we ran in 2008 asked questions about employees’ satisfaction concerning their careers, their in-house relationships with their peers, the clarity of their role, etc. The results showed, as you say, a low overall satisfaction rate. Clearly this had to change. Over the next couple of years, we invested a lot of time and money into clarifying employees’ positions at work. In 2012, we participated in another survey measuring employee satisfaction, run by a third-party administrator. 100 companies participated in this survey, and we were delighted come out within the top 10. In the same year, we also received the Employer of Choice Award from a leading Saudi financial newspaper. The survey and the award proved just how much we have achieved in four years. Could you provide some details on what you did to effect this change? Projects? Initiatives? Our first initiative was to restructure the HR function into two distinctive departments: HR Services (the operations side of HR) and HR Development (the strategic side). This helped each team to build strong capabilities in their area. Another important project was to improve employee benefits based on their own preferences and priorities, which were captured through a survey. This project resulted in the introduction of child schooling assistance, since it emerged as the highest priority for our employees. My third favorite initiative would be the service catalogue. We have listed all services provided to employees and departments into a structured document that is published on the intranet. Each service is clearly defined in terms of starting point, end point, authorized personnel, related forms, and cycle time. This has set clear expectations between the two parties of customer (the employee) and service provider (HR) and this clarity, in my view, was the biggest factor in achieving a satisfactory relationship. Our initiatives continue to evolve. Today, we are working on a leadership development program, SAP implementation, and workplace improvements to name just a few examples. What was the business’s response to the shared services center? How did you sell the concept? The business culture in Saudi Arabia is not one that readily adapts to outsourcing, even internal outsourcing. As we would say here, we all like to make our own bread. That means we like to keep our operations close to the business. So, initially, we faced some hurdles in persuading the business units to trust us. However, we have also been able to demonstrate how well we perform these services. One of the first things we did was design an HR services catalogue identifying each service. We clearly defined the trigger points, the information required from the requesting party, the cycle time, and the outcomes. It was particularly important that we clearly stated what was required from the business units as, in the past, complaints around HR services were often traced back to incorrect, or non-existence, data supplied by the business unit. We wanted to avoid any confusion with regards to the services we would supply. Today, before any request is made, our clients already know what they can expect of us, how long it will take, and what it will cost them. They appreciate that clarity as it helps them plan their own decisions. Our feedback also indicates high satisfaction rates. How do you monitor your service and how do you track your customers’ satisfaction with your service? The moment a request is received the employee is notified by e-mail, and when the request is completed, another e-mail is sent out. Along with that final e-mail, we include a link to a 1-question survey. The question is simply: Are you satisfied with the outcome of your request? The answer is either "yes" or "no". Last year, we processed about 60,000 transactions. Based on the survey responses, our satisfaction rate stands at 98%. And while the response rate, at 12%, was not as high as we would like it to be, we know that if a customer was dissatisfied we’d hear about it. How do you charge for your services? Are you a profit center? And how has your chargeback model helped drive more efficient customer behavior? CSS is a service enabler corporate unit comprising HRS, HRD, Recruitment and IT Departments. We are serving our SBUs and CUs through a Service Level Agreement. Beside SLA, CSS is providing all the corporate services required by its customers within an allocated budget on no profit bases. As a result of having established an SLA with our customers, our services are handled in a more professional and efficient manner, winning the confidence and respect of all the parties. Could you share examples of how the shared services has impacted the business? The most important advantage that shared services has brought to the business is specialization. What I mean by that is that when the organization's non-core business becomes your core business, you develop a higher skill base and become more adept at that process. This expertise spills over into everything: processing, value-add, and data analytics. Our HR services today are better than the services we provided in the past as a direct result of our staff’s specialization. Take payroll: when each business unit was doing it for themselves, they experienced the standard hic-ups and errors you’d expect when it is not a dedicated process. Today, payroll has become our differentiating factor. So that is to the whole organization’s benefit. Another benefit to the business units is that, as we have taken most of the standard, transactional work away from them, they have been able to focus all their resources on growing and developing the business. Now that we have a few years under our belt, our customers have recognized how much the shared services helps them focus on value-add activity. Finally, through this centralization project IT and HR have worked very closely, as a team. The benefits are significant, and keep growing. Can you quantify your contribution to ARASCO’s businesses? As I said earlier, all our business and corporate units have been given a free hand to fully concentrate on their business activities as CSS is there to take care of all administrative matters. By adapting this methodology, CSS has been able to save us a lot of time and money. For example, if we talk about the employees’ career growth, our Human Resources Development Department is the hub that’s taken care of international as well as in-house training of employees of all SBUs. We have introduced the "Kafa’at" system within ARASCO quantifying our services to the entire organization in an effective, cost- and time-saving way. Did you lean heavily on automation? We did not automate everything within shared services, just the most common processes relating, for example, to company vehicles, access cards, and leads. These are the most common requests we get and we wanted to get the benefit derived from automation. Part of our plan, which has been ongoing for three years, is to implement SAP throughout the organization – to include payroll, finance, and operations. The design phase has taken a lot of time, but we are launching the implementation this month and hope to have it completed by early 2014. However, we could not wait for the implementation to move the services delivery forward, so we developed some automated solutions inhouse, for the most important areas. How are you leveraging the data at your fingertips? When we started the shared services, we were finally able to capture all data into one database. This has enabled much better analytics, which help drive business decisions. We also developed an HR Helpdesk Application, which supports our staff’s engagement. The SAP platform will include a business intelligence model, which we are relying on to help deliver relevant analytics. CSS owns HRS, HRD, Recruitment and IT Departments, and has developed a database with various applications in practice. All the services are undertaken by a central hub, the Helpdesk, which automatically records the activities. Since we have SAP in place as our ERP solution, this includes a business intelligent application. All our data is stored centrally for each SBU and is available to the respective Unit head, enabling quick decision-making and the adoption of strategies to enrich their field and areas of business. What were some of the challenges that you faced during the implementation? The changing culture that the shared services implied was hard for us. In the Middle East, we're not used to outsourcing, whether in-house or out of house. We value relationships, especially personal relationships, at work. It's not easy to build up trust with a new service provider, so it was challenging at the start. However, the businesses like the fact that we free up their time, so they can devote themselves to developing their markets. Today, I believe that our positive satisfaction rates speak for themselves. To what extent do you have outsourcing options within the Saudi Arabian market today? Right now, the market is fairly immature in terms of HR outsourcing. We don't have a lot of options. In fact there are very few options. HR services are very particular according to country – pensions, social security etc are all fairly specific, so an outsourcer would need to display local market knowledge. However, with the SSON running its second Middle East conference later this year, and as the market becomes more educated, I believe that we will start to see more activity from service providers. I attended the Shared Services and Outsourcing conference in Amsterdam last year [Shared Services and Outsourcing Week Europe, 2012] and was very impressed by the case studies shared with us there. Our market is coming to shared services somewhat late, but as the Middle East proves over and over again, we benefit by starting off where others have finished, and where we can build on their experience. When we take up a project, we also tend to take it up at full speed. You only need to look at Dubai to see that. How do you think you’ll develop your business model in future to support ARASCO’s operations? We will carry on building on our experience. I saw in Amsterdam that procurement is offering a lot of value through shared services. That is something that I would certainly consider expanding into going forward. What prevents you from pushing shared services forward within the organization? Nothing, other than needing to prove the business case and the concept. HR has shown what shared services can do, how it can support the business through better, faster, and cheaper services and how it can support the organizational changes that a business needs to go through in order to evolve. I think this bodes well for future development in this space. Thank you very much, Khaled. Note: Khaled Alhanaky will be speaking at SSON’s Middle East Shared Services and Outsourcing Week, November 24-27, in Dubai. He’ll be sharing more details about how to measure the performance of shared HR issues, and how to train employees to hit their Key Performance Indicators. He’ll also share tips on how to increasing confidence and transparency in the Shared Service Center’s mission by reporting measurable and accountable performance indicators. Download the brochure to learn more

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