Interview Circle: If I Could Do it all Again, Part II
Continuing the Interview; 'If I Could Do it All Again' between Debra Maxwell, GM Ireland & Global Operations Director for Arvato Finance Services Ltd and Pascal Henssen at the recent European Shared Services and Outsourcing week.
Debra: And if we turn it around and we give the perspective from the client’s side, to suppliers of outsourcing services, what would that be?
Pascal: So what would the client do to make the relationship more effective, is that correct? I think two things come to mind. For the first one I will use an analogy; the first time that I got involved in outsourcing I had five different country teams who were centralizing their teams into one BPO provider. And the different managers of the five different countries managed it very differently; you could see a very big difference between the success and the progress of three centers versus the other two. And the only difference between them was that the three really owned the relationship, and that they owned the BPO that they had outsourced, so they were very involved with the companies that they were dealing with. So the managers had the team leaders of the BPO on their weekly calls, made them feel like an extension of their team, talked to them about events that were happening in their business. So really engaged with the employees on the BPO side, and made them feel part of the team, and those were more successful to other countries where that didn’t happen. In those we had much more issues, we had higher attrition, we had higher defect rates etcetera as a result, so that’s one big one.
And the second one that I was saying is the reverse of what I was just explaining. From a BPO perspective it is be open, and ask proactively about how a BPO can potentially help you, don’t think that your processes are the best in the world, because definitely not all of them are . So, ask how you can use that knowledge to improve your process.
Debra: So the word partnership gets used a lot, what do you think defines a real partnership between outsource endorser and client?
Pascal: I think one where any improvement in the change and the process creates a win-win situation. I am a big believer in what some people call gain-share, which means if we make improvements in the process, whether it is we increase FTE productivity, or we increase cash flow for the customer, or etcetera; then you should have a model where you share those benefits and I think the client has to be open to that as a shared service organization. I think the BPO needs to be willing to stick out their head and be self-confident in what they can do, and commit to deliver some of those results. So, if you do that, if you believe that you are going to make the processes better over time, no matter how you start, fragmented, centralized, solid processes, poor processes - if you together have a vision of we are going to make these processes better, and we are going to share the benefits that we generate with that, then I think that you can speak of a true partnership, because what will start to happen is that the customer is very open to process improvement. And the shared service company is actually not focused on revenue, or FTE’s, they will be focused on creating that value for the customer. So that might mean, one of the questions...a very interesting question that happened on my first week; one of the senior leaders asked the IT helpdesk manager; did you kill your business today? He said, what do you mean? Well did you reduce the number of incoming tickets, by solving one of the customer’s problems? Which is counter-intuitive, because of course you get less revenue from less calls to the helpdesk. But, that for me is real partnership; when the BPO says you know what I’ll help the company solve their problems, even if it means less revenue for me, because in the long run that is better off for everybody.
Debra: So we have been joking about outsourcers being on the dark side. I am in the same position myself, I have just moved from the client side to the supplier side, so why do you think that we have got such a bad reputation in the marketplace?
Pascal: That is a very good question, I think there are a few reasons, and I think there have been mega deals that have been done that have gone awry in the past, so there are some bad experiences in the marketplace. I think a lot of companies suffer from that, especially when I focus on the HRO space, or HRO outsourcing spacing where there have been some deals that have been hanging around for years, where they make no progress and none of the objectives are met. So I think that is part of it.
I think the other thing is everybody is learning; that is clients are learning and suppliers are learning as to what it is that customers actually want, and in the past it was about labor arbitrage only, and so that was where the focus was, and those savings was what everybody focused on. Now people want process improvement transformation, and that is a rocky path to go through for both supplier and client. I think both sides are figuring out what is the right governance to actually make it work. What does partnership, to your earlier point really mean, how you set that in a contract how do you become true business partners? And how do you kind of make the lines between you the supplier, and the client go away a little bit? I think it is very difficult and that people are still learning. It is a young industry.
Debra: When does it get old?
Pascal: I hope never, because it keeps evolving. I think we are nowhere near the end yet. I think there is still a long way to go, both in shared services, because I also believe that there is a need for shared services organizations and in BPO. So I think we have barely scratched the surface to be honest.
Debra: That is good. So here is some crunch time then; let’s talk about regrets. We have talked about some of the things that you have found most challenging - let’s talk about if you did have it all over again, let’s suggest that in your shared service career, what would you actually do differently?
Pascal: Several things probably, the first one is; I probably would have done more and faster. Whether it was that the industry was young or that I was young, I don’t think that we were bold enough. And I think that we, as a result, you stretch out a process much longer which is painful for the organization. I see this happen very often and I suffer from that myself; that you start off with a great idea - we are going to outsource our back office, and that is the CXO decision. Then the functional heads get together and start to figure out what they have to do, so they start to pencil in the numbers and come up with, I don’t know, twenty FTE’s, forty FTE’s, that is exactly what we did. Then, by the time you go to talk to some providers, you get a little bit scared, you get some bad reference calls, you get some good reference calls, you kind of go, I am not sure. So by the time you are done you are outsourcing five FTE’s from three different countries and expect it to work - it doesn’t work because there is no scale or structure to put around it, a good governance structure around it etcetera, so you struggle. So I think I would have moved in certain processes much faster, and much bigger; that is one, because I think you get more CXO attention, you get more dollars if you do that. It is much easier to create a partnership with your provider if you do that.
The other thing is that people always talk about multi-generation and we did that, for example in our HRO services we talked about first we are going to centralize in country, and then we are going to outsource the transactional work. So we did the centralization in-country, and we did that because the transactional function was a bit worried, we created about 350 roles in shared centers around Europe, but then it took us three years to take step two. So if you have a multi-generation plan in your head, then make sure it has got teeth, and that it is real, it has got people’s head on the block if you don’t meet those. So, that is one where I think it took us too long to go from step one to step two.
Another one which I think I would have done differently is probably spend even more time on the right governance structure, and making sure that there is the right escalation, and the right level of customer satisfaction measurement, for escalation of issues, and make sure that you know what is going on in the company, on the customer side. Again I am talking, when I talk about a BPO I consider myself a BPO, an internal BPO. So we went through the same things.
What else would I have done differently? A very interesting one is that I mentioned before that you have to run your shared service like a business. And if you do that you have to be very realistic about where you are competitive, and where you are not competitive. My personal opinion is that there is not a single shared service in the world that can claim that they are competitive to a BPO company in terms of accounts payable. I just can’t understand; we used to do 600,000 invoices, we had five different suppliers that we could choose from who 5 million invoices, with more technology, more experienced, in how difficult it brought out accounts payable. It is really straight forward, so how could I ever have the knowledge or experience of another party that could help me. But I still think it took us another two years to make the decision that in accounts payable my shared services was not competitive, and therefore I had to look for another solution. So, be very honest in your shared services organization, about where you are competitive and where you are not, in terms of cost, in terms of quality, and overall business impact, I think. I think it is very difficult to do that, especially of you have moved to shared services, you go, ok, now we created this, it should be working it should be fine. People are not always open enough to think what is the next step, what is the next generation.
Debra: So, there are some people that I see at these conferences, particularly government services, back in the good old days who used to come to conference after conference, talking about setting up a shared service center, or talking about outsourcing. What do you think people can do to get a gain-in at senior board level, or to get momentum to get these things moving forward if it is something that they really believe in?
Pascal: Well to be honest, if it is something that is not driven from CXO levels, then it will probably not happen. Most organizations are fragmented - you are never going to get a German controller saying I think we should centralize our European accounts payable, it is not going to happen, because they focus on their own organization, they focus on their own job, their own team, and they focus on Germany. First of all I think it needs to be driven by a CXO level, in most cases that is what happens.
I actually think that the problem is the other way around, that when people at a CXO level decide that there should be a shared service center, or outsourcing, there are not necessarily champions that are senior enough level in the company who can actually make it happen. For example, in many cases shared services is a case where there is reporting to a controller, who is reporting to a CFO, or maybe not to a CFO, the customers that actually have to outsource the work are the divisional CFO’s.
Now, if you are underneath the controller and you are not even at the group CFO meeting, and you have all of these divisional CFO’s giving you anecdotal information, you can’t even defend yourself, so if the CFO is not personally driving it, or if the CFO who is responsible for the shared service initiative is not at the same level as the divisional CFO’s, I think that you have almost failed from the beginning. It is going to be very difficult to be successful on either your shared services or outsourcing, because those divisional CFO’s, their country CFO’s or controllers - they are always going to find issues that they can use against the shared services or outsourcing. Even if the issues were worse before the outsourcing they have a very short memory, so that is forgotten, but they will use every single example they can get to say that it is not working, and if the people that are responsible for driving the transformation are not at the same level, it is a very uneven discussion.
Debra: Do you think that organizations should be brutal in removing dissenters and protectionists from their organizations? And have you ever had the experience where you have felt the need to move somebody on out of your organization; you don’t need to name names?
Pascal: Well first of all, I think it is a tricky one; people are allowed and should be allowed to be critical, and asking a lot of questions about what works and about what doesn’t work. You have got a lot of experts in the organization that ask the right questions around compliance, about local and statutory compliance if you start to do things differently. I think that if you give the right level of exposure to the people who are driving it, and they have an equal vote at the table as the dissenters, then let’s have that debate, let’s have the discussion. If that still doesn’t work, but I think that is not limited to shared services, I think that to any initiative that is going to be important. I think you should find a way to liberate those people, so I think ultimately yes, but initially a shared service or outsourcing proposal needs to have business merit, all you have to make sure you do is ensure that people talk honestly, and not through back channels or anecdotes. That is to your first.
Have I ever had to remove people out of my own organization? Yes definitely, but not because of just shared service or outsourcing decisions - ultimately it is much more effective if you can actually convert a dissenter, it’s much more effective because you can use that across the entire organization as an example to say, even this guy who used to be so negative is supporting it, that is much more powerful.
Debra: What would you say are the best ways to turn around those dissenters, how have you gone about it?
Pascal: First of all, take the effort to take them to see a shared service center or an outsourcing company, every time that I see someone who was a dissenter and actually goes to visit a shared service center of another company or actually goes to visit a outsourcing company usually they come back pretty impressed. Because what they realize is that something they saw as a back office process, is a front office operation in another company, gets all the attention, all the metrics etcetera that can make it a success, so that’s one.
Second of all, simply tell people not to use anecdotes, tell people to use data. I still am amazed at how many people make shared service decisions based on gut feel or impressions and so on. For example we are in Budapest right now, I became a customer of Genpact Budapest in 2003, I was one of the first when the center was created saying, I can’t believe there are still people setting up shared service centers in Budapest right now. I don’t know where their thoughts are right now, I don’t know what data they are using, I don’t know what their thoughts are; if you are considering setting up a shared service center in Budapest you must like something about the city, it is not the financial model that is going to be supportive of that. It is great if you have some talent, but setting it up from scratch doesn’t make a lot of sense, so the fact that it is still happening shows, I don’t know what data people are using to base their decisions. So, if people are dissenters for whatever reason, force them to use data, force them to use examples. If they say that my invoices are not getting paid, then how many are not getting paid and how late are they? So talk data make sure that people use data and not just impressions or anecdotes.
To be continued