Building an Innovation Engine into a Service Center

Not long after Borealis decided to double the scope of its financial services center in Mechelen, Belgium, in 2002, the question arose as to how the center would subsequently survive in such a high cost environment. We came up with a twofold solution: firstly, differentiate by bringing in more value added services; and secondly, lower the cost of transactional services through drastic process improvements and automation. This second challenge caused us to embrace innovation as an enabler.

The cost of a transactional process is straightforward: volume times unit cost, with unit cost defined by cost of labor and complexity of the transaction. It is crucial, therefore, for service centers in high labor cost areas to tackle complexity and volume rigorously. In order to make headway on the road to process innovation, Borealis created a three-level engine.

LEVEL 1: LONG TERM—STRATEGIC

Every process requires a clear, long term vision or target. This vision is needed to build year-on-year action plans, to align IT resources and to assure the management team is working towards the same goal with a high level of commitment. The long-term process target needs to express a long term aspiration requiring out-of-the-box thinking. A few examples of long term process targets for finance are:
Indirect tax: 5-click fully compliant VAT returns and intrastat statements
Travel & expense: fully lights-out processing of expense statements
Accounts payable: fully paperless and 80% lights-out processing

To ensure that all initiatives relating to long-term targets are effective, the targets need to be validated with top management (your sponsors), with peers in the process chain (your stakeholders) and with IT (your automation enablers).

LEVEL 2: MEDIUM TERM—STEP CHANGES

Traditionally, service centers reference Key Performance Indicator documents, which monitor performance against Service Level Agreements. Moving towards long-term process targets requires an additional KPI document—one with your performance mapped against process targets.
If the long-term vision for an accounts payable process is "fully paperless and 80% lights-out processing," then your process KPI document should include "% paperless" and "% mismatch." Choosing the right KPIs is vital to determine the step changes in projects.

Borealis is continuously searching for projects that deliver drastic improvements to process KPIs. For all processes, several step change projects are needed. For example, when working towards a 5-click VAT return, we need to at least define a project that eliminates the need for reconciliation and a project that addresses the automation of VAT returns. Working towards paperless accounts payable will focus you on self-billing, procurement cards and e-billing. But when you have set process targets at really high levels, you probably need to define a smart way to combine all of the available solutions.

Step change projects always require a multi-functional approach and top-level sponsorship. Complexity arises in finance transactions because finance is generally found in most processes, at the end of the process chain, and so needs to carry all the defects. It follows, therefore, that projects that are carried by all process stakeholders will have the biggest returns. Having that e-billing program driven by procurement will certainly bring you a step further than if you were to address it strictly from the finance side. Sponsorship from the top is the other vital point, as you need compliance. Clear messages that the new way of working is the only way of working will boost your results. Once only one optimized way of working is left, you can move on to automation—and that holy grail of lights-out processing.

LEVEL 3: SHORT TERM — CONTINUOUS IMPROVEMENT

Most of service centers contain some version of a continuous improvement approach, such as Six Sigma. These improvements are generally run by externals or by dedicated resources. But isn’t there the possibility of having your day-to-day resources be the drivers of continuous improvement?
When our financial service center was created, Borealis introduced the "finance knowledge corner." The knowledge corner was where you brought problems that needed improvement. By offering clear guidelines, for example: any booking entry should not take longer than five minutes, you invite all employees to think innovatively about improvement opportunities. Instead of having externals analyze defects, all employees are encouraged to constantly review their own work. Solutions are brought forward by the employees themselves, by colleagues in the same process, or by management, if the solution is out of the normal working area. Giving employees not only service targets but also improvement targets is a very powerful tool. In fact, prioritizing ideas for improvement becomes a greater challenge than just getting those ideas in.We often don’t acknowledge the fact that many defects are the result of lack of knowledge—much of which resides in other colleagues within finance, however. An open improvement idea box will soon reveal that.

CONCLUSION

Has Borealis achieved its long-term process targets? No. We have noticed that the three-level approach has brought us leadership, but not the end goal. Progress has been significant, but to reach end goals more step change is needed, particularly from software providers. Why is it, for example, that the major ERP providers are waiting for someone else to integrate that "3-click" e-billing solution? I think a lot more could be done in this area … but that’s for another article …

About the Author
Reginald Van Peteghem holds a master degree in economics. He joined what is now Borealis in 1990, and has since held various management functions in service departments. Since 2003, he had been leading the financial services for the group and is strategic project manager for the service areas of the company. In 2008, Reginald was awarded the European SSON Shared Services Excellence Award for "Thought Leader of the Year."

BOREALIS
Borealis is a leading manufacturer of plastics and plant nutrients. It has about 5,400 employees and a turnover of 6.6 billion €. The production facilities are mainly located in Europe.
Borealis was formed in 1994, as a result of the merger of Neste and Statoil. The company has over 40 years of heritage in polyethylene (PE) and polypropylene (PP). Borealis created a finance service center at its launch, in 1994. The service center is now located in Mechelen, Belgium and employs about 90 staff. It provides a wide range of financial services for all European subsidiaries.
In 2008, the service center received in the European SSON Shared Services Excellence Award for "Best Business Process improvement and innovation."