Leveraging the process experts at Covidien

Tags: SSON

Stephen Smith


Introduction to shared services at Covidien

Covidien is a $10 billion global leader in medical devices and supplies, diagnostic imaging agents, pharmaceuticals and other healthcare products. The Company serves healthcare needs in hospitals, long-term care and alternate care facilities, doctors’ offices and in the home in more than 140 countries, with approximately 55% of revenues arising from the United States. The company has around 42,000 employees, who live in more than 60 countries.
Covidien was formed in mid-2007 when Tyco International separated into three publicly traded companies. While the Company itself is relatively new, some of the operations that make up Covidien have been in business more than 100 years. Prior to the separation from Tyco, R&D was relatively limited, but as an independent company, innovation and new product development have moved to the fore of corporate strategy. Covidien has more than doubled R&D spending in the last five years, ensuring a constant stream of new product introductions giving rise to new market opportunities.

In common with many large companies, the business’ operating model relies on a multi-dimensional matrix organization. The three primary dimensions are Business Unit (‘BU’), geography / country and function. BUs acquire or develop, manufacture, market and sell products in a particular market segment. BUs are further grouped for management purposes into three segments, which in the ‘home’ market of the United States have been run historically as independent businesses. Outside the US, where lack of scale has made this a less effective model, the business has been run on more of a geographic basis, i.e., countries, territories and regions.
Commercial operations in the EMEA region have until very recently operated on a geographic basis, but with strong functional reporting lines. Major programmes of centralization and standardization have been led by various functions, including the rollout of a common ERP across the region. More recently, customer services and transactional finance processes have been consolidated across most of the region. These operations have now been brought together with the process management function to form EMEA Shared Services.

The process function has evolved over a number of years and supported the various stages of transformation highlighted above. The team has organized around projects, sub-processes or applications as the need arose. Now, as the finance transformation programme nears its close, there is a clear shift in emphasis for the team from an implementation perspective, often focused on systems, to a continuous improvement perspective based around end-to-end process performance.

The principles of process performance management
Transformation programmes tend to focus on the critical choices around process architecture, process design, system implementation and change management. It’s all about getting to go-live. The process design typically develops from iterations of the high level processes currently in operation, some best practice input and the capabilities of the systems chosen. Although there will often be some baselining of the existing process, this usually focuses on its costs and/or control weaknesses as the key measures targeted in the business case. Other measures of end-to-end process performance are rarely or sparingly gathered as typically they are difficult to capture and are not the focus of the exercise.

Once the discontinuities of transformation have been accomplished, the focus needs to shift to delivering continuous process improvement. The core activities of process performance management therefore become:

  • Developing insights into the drivers of end-to-end process performance
  • Identifying and prioritizing improvement opportunities
  • Mobilising change to address improvement opportunities

The process management function measures and analyses process performance. Together with the input of users of the process, this analysis drives insights to inform choices as to where to focus for improvement. These choices are business decisions based on the current business strategy and priorities. As such, it is not the choice of the process management team as to where to take action, but rather a ‘process council’ consisting of the key stakeholders and senior internal customers of the process. This group will tend to emphasise external measures of performance, e.g., external customer satisfaction (if relevant), performance relative to benchmark, non-value-added time as a % of total processing time, total cost of ownership, etc. It is the task of the process management team to act on the direction of the process council to develop improvement opportunities in collaboration with influential members of the user community. This may take the form of workouts, Kaizen events or other more directive projects and initiatives.

In support of this continuous improvement cycle, various enabling capabilities are likely to be required:

  • Process performance measurement is itself a distinct discipline given the importance of measuring and visualizing the stocks and flows of the process. Making work – and waste – visible.
  • Knowledge management is critical to the efficient operation of the team and users of the process. The team will need to ensure that process documentation, standard operating procedures, control mappings, etc., are kept up to date with the evolution of the process. To add to the challenge, these materials should be available in a form that can be used to inform and educate users of the process.
  • Measurement of the quality of master data underpinning the process will be an input to the team’s work, either directing data clean-up requirements or more sustainable processes for managing the quality of data as it enters the system and throughout its lifecycle.
  • Experienced lean initiative leaders will need to be available to the team.
    The leadership skills of the team will also be tested. Coordinating and facilitating a wide range of users on the one hand and stakeholders and senior internal customers of the process on the other will present challenges of stakeholder management, facilitation, project management and change management.

Covidien’s ambition for process management
We are only just setting out on this journey but our vision is to achieve a great track record of driving down the total cost of ownership of our core business processes. The first steps in achieving this vision are to build the new capabilities in the team and to mobilize both senior stakeholders and influential users to support the cycle of continuous improvement.

About the author
Stephen Smith is a graduate of Cambridge University and London Business School. His career has spanned strategy consulting, change management, programme management and leadership roles in IS and Shared Services. He spent four years in Hungary running Diageo’s global finance shared service centre in which time the operation grew from 250 to 850 staff and he oversaw the first stages of operationalising a global outsourcing contract with Accenture. In 2010, he joined Covidien, a leading global healthcare products company, as VP Shared Services for the Europe Middle East and Africa (‘EMEA’) region.
Covidien in EMEA is setting out to significantly and continuously improve the performance of core finance processes (Account to Report, Purchase to Pay and Customer to Cash). This article sets the context and outlines the principles of process performance management that frame this change.