Leveraging Economic Conditions to Expand your SSO Value Proposition

First published in Shared Services News: Volume 12 Issue 5 July 2009 

As the businesses you serve are challenged to control costs, reduce staffing and yet continue to provide excellent service to their customers, shared services organizations are handed a great opportunity to expand their scope by taking on extra work. The challenge is to do this without adding staff. Lean practices allow you the "space" to fill-and make compliance a priority, as businesses suffer from stress.

"Lean" focuses on reducing costs through process optimization (improving speed while reducing the non-value-added steps) to increase overall value for the client. It is only through fast and responsive processes that we can deliver the highest quality services at the lowest possible cost. When your standard processes are faster and more efficient than your clients’ processes, it makes it possible to absorb work with minimal, or preferably no, additional staff. Either option points to a cost reduction for your client.

Lean and speed are about prioritization: working on the vital few business objectives that will drive results. Business process execution (Hoshin-Kanri) is all about enhancing alignment and execution towards achieving these vital few business objectives. The business execution process is "policy deployment with method."
Some key terms used with Hoshin-Kanri are X-matrix, A3, catch ball, true north and PDCA. Let’s look at these in more depth.

The X-matrix is a one-page, high-level view of both strategic direction and the targeted actions required to get there.  It has some similarities to conventional Y-trees, but offers advantages by requiring priority owners to drive execution and accountability, as well as forcing "vital few" thinking. The power of the process lies in the discussion that takes place with team members around identifying the vital few objectives ,and the periodic review meetings that ensure that you are progressing to plan.

An A3 form can be used at many levels but boils down to an agreed-upon action plan with goals, deliverables and timing. An A3 and the A3 owner would exist for each of the top priorities listed on the X-matrix. The process of cascading targets and receiving feedback is called "catch ball." The catch ball process is necessary for full engagement of the workforce to realize business objectives.

True north is the term used to describe the vital few business priorities communicated throughout the organization -in basic terms, your vision statement. Ultimately, each person in the organization will know exactly how their work links to true north via X-matrices and A3s.

PDCA stands for plan, do, check, act and is otherwise known as the "Deming Cycle;" it ensures periodic review of data and progress to target.

Figure 1: Business Excecution Process: The P-D-C-A Rhythm (Click to Enlarge)

Hoshin-Kanri helps to prioritize your acti vity, streamline processes and create speed by working on fewer, more important initiatives faster. Speed is necessary to achieve operational excellence; and in today’s business environment, speed is a competitive advantage. Responding faster to customer requests translates to happier customers and increased sales. Responding faster to information transfer between functions, departments or divisions enables everyone in the extended value stream to react quicker and ultimately satisfy customers.

Reducing process steps increases speed, but also enables an increase in volume without an increase in staffing; which translates into expanding your SSO scope to provide value-added solutions to your organization.

By using Hoshin-Kanri to speed up your service levels and then create space for expansion, you can increase your importance to your business units and help them identify    areas that would be better served in a centralized, controlled environment. Given the current challenging business cycles, now is a good time to take a holistic approach to business solutions that affect every segment of your organization.

When faced with the economic realities of today, it’s easier to convince reluctant clients that consolidation and standardization are keys to survival and that your shared services organization can provide cost-effective, timely solutions and benefits.

About Rick Laino
Rick Laino is Director of Business Services for Industrial & Transportation Business at 3M Company, which includes pricing, customer service, training and education, web and customer information management, merchandising and business analytics, lean six sigma, and administrative operations. Responsibilities include developing a synergistic approach to the current business model, while meeting division client requirements, administration of service level agreements, budget management, and productivity target attainment.  Rick has been with 3M for 28 years.

Side note

MAINTAINING CORPORATE COMPLIANCE DURING CHALLENGING ECONOMIC CONDITIONS

Under the cloud cover of a weak economy, the timing couldn’t be more appropriate for your shared services organization to provide foundational compliance support for your organization.
As restructuring and reductions take place across many organizations, maintaining compliance activities becomes harder. It is important to create "space" through automation and prioritization to keep governance at the highest priority. Headcount reductions and budget restrictions are no excuse. You have to maintain a focus on areas where significant auditing exercises take place, especially those areas of core operational activity.
These are challenging times, and many companies are responding aggressively to take advantage of the difficult markets. As a result, employees, customers, suppliers and communities are under increasing stress, which can lead even experienced people to make mistakes. Consequently, it’s a time for heightened awareness on the part of each organization as it relates to corporate compliance.

Your company’s reputation is the result of keeping your promises to your customers and holding to the highest standards of financial and business integrity. People must have confidence in the accuracy and thoroughness of your organization’s accounting and reporting systems. At the same time, you must protect your company’s assets—physical property, equipment, trademarks, intellectual property, electronic files and confidential information. This is not a proposal that you specifically alter your traditional audit plans for 2009, as schedules should already reflect some of these concerns. Rather, you should stay in tune with the tone and activities in each of your operations—i.e., stay in "high alert" mode. Be attentive to what you hear and see around your company. Whether in meetings, over lunch or at the coffee machine, it is imperative to keep your eyes and ears open to possible "red flags" that might be indicators of new problems. If you do begin to sense issues, discuss them with your respective audit managers, who can help determine if a schedule change is warranted or whether it’s more efficient to pursue specific issues directly without waiting to schedule an audit.   

Figure 2: Five Essential Components of an Effective Internal Control System (Click to Enlarge)

Following are some examples of areas which could be particularly vulnerable in times like these:

• Sales or expense cut-off issues, both in general and as they relate to both 2008 and 2009 sales or annual incentive plans
• Unapproved deviations from customer pricing, terms or credit policies to secure sales
  Unusual or significant adjustments to major reserves
• Unexplained changes in inventory levels, write-off amounts and dead and excess stock accruals
  Physical theft of company property, including products, from company facilities
  Inappropriate delays in the start of depreciation on new facilities or equipment

Even with no indication that new problems are appearing, this is a time to be proactive and diligent in monitoring the situation globally. The goal is not to become police, but simply to increase your attentiveness to a challenging environment, both in and outside of your organization, and help management minimize any impacts that might result from the late detection of problems.

First published in Shared Services News: Volume 12 Issue 5 July 2009