Linking Shared Service to Corporate/Shareholder Value
It’s been said time and again that Shared Services is a journey, not a destination. When it comes to linking what is done in Shared Services to the creation of value, the old clichê holds true again.
At Rinker Materials, we began our journey in 1995. Our original business case included the usual laundry list to justify the "why" to implement:
- lower costs;
- higher quality;
- improved customer service.
Our "how" included:
- standardized processes;
- leveraged technology.
Simply put, we believed that if we consolidated, standardized, and leveraged common technology, the result would be value creation through reduced costs (eg. headcount reduction). We did achieve higher quality and depending upon who you ask and what their definition of customer service is, we may or may not have improved the level of service, at least initially.
By 1998, we had converted over 300 plant sites to common systems and processes serviced out of a new Shared Services Center in West Palm Beach, Florida. By all measures, the implementation was viewed a success.
However, the journey was only beginning. The Shared Services foundation that had been set was now enabling value creation in ways not originally envisioned, directly linked to the Rinker Strategic Plan:
- acquisition integration;
- cost leadership through operational improvement;
- end-to-end process leadership;
The strategic plan for Rinker Materials calls for growth through acquisition. Rinker has grown from a company of US$1bn in revenue with 150 sites to almost a US$2.4bn company with over 350 sites since the Center started.
The Center contributes to the direct overall success of the company by giving Rinker a strategic advantage in acquisitions. Our overhead support structure allows us to model significantly less overhead than our competitors in making bids for acquisitions. We can offer a competitive price knowing we will eliminate substantially all of the information technology and financial accounting overhead infrastructure of the acquired company – generally within 90 to 120 days of acquisition.
All locations have been brought onto the Rinker Materials computer systems and core processes since the inception of the Center. A common approach has been developed by each of the Shared Services using standardized systems and processes.
This approach has been an enabler of the timely integration. For each acquisition, the Center works closely with the Rinker Strategy and Development group in designing the overhead support model. This model includes:
- direct costs to acquired company;
- center support costs;
- cost elimination in acquired company;
- implementation timeline;
- value-added by Center
By quickly implementing our standard systems and processes in the newly acquired organization, we leverage shared services and add value to the business in many ways not readily apparent:
- quick implementation of shared services allows for immediate realization of synergies from acquisition;
- fixed costs are leveraged over a larger base, bringing cost reduction to all existing Rinker organizations;
- acquired organization has information it can benchmark across all Rinker businesses on a like basis to identify improvement opportunities.
Cost Leadership Through Operational Improvement
Operational improvement is not a program within the Center. It is the culture. Every team is focused on improvement. The focus extends from within to outside the Center: initially, in focusing on getting to first quartile benchmarks within the Center; then focusing on end-to-end process improvements that encompass activities done outside the Center.
Every team in shared services builds an annual Operational Improvement Plan (OIP), which cascades down to individual targets and goals. This is monitored monthly, and is consolidated quarterly into a center-wide report, which then rolls up into a Rinkerwide report.
Every year teams have a "Contract OIP", which is equal to their annual projected cost increases. For instance, a team must cover inflation through OIP improvements. "Stretch OIP" is up to the team to determine. On average, within the Center, seven percent productivity improvements have been achieved annually.
End-to-End Process Leadership
The Center provides leadership for "Process Steering Teams", which identify end-to-end improvements that will benefit the entire company. The process steering teams were created to:
- give strategic direction to the end-to-end process;
- promote standardization;
- drive improvement projects that cross multiple business units.
The steering teams have representation from each business unit and members are empowered to make decisions on behalf of their business units.
The Process Team Leaders have positions within the SSC and are considered experts in the process. Besides acting as consultants to the business units on process issues, they are also leaders of the process steering teams.
Below is a list of what a Process Leader is responsible for:
Process Leader Functions
- Process Leader – Process Steering Team Leader (steering team meets formally every quarter);
- Improvements (operational improvement accountability)
- Standardization (including arranging for training)
- Prepares business cases and secures funding where necessary
- Consultant to business units
- Manage and prioritize IT service requests
- Monthly process reporting (key indicators, "heat" maps)
Progress is being made toward the goal of a "Self-Service" Center. Rinker has implemented self-service via the internet for external customers and vendors, and an intranet application for our employees.
Customers of Rinker Materials business units have access to on-line, real time, easy to use information via MyRinker.com. They can view an updated statement (by job, if they like, which makes requesting construction "draws" easy) and drill down to an invoice, an order, or all the way down to a specific delivery ticket signed by their employee at the job site. Many of our customers no longer call Accounts Receivable or Credit with questions as they can help themselves. Some customers have requested that we no longer send invoices or statements because they can get them off the internet themselves. This saves Rinker the related costs, and provides our customers with an added convenience as well as the ability to request payments from their customer quicker.
RinkerVendors.com allows our vendors to log on via the internet and view what we show open for them, and when related payments are scheduled. Phone calls to our Accounts Payable team have been reduced significantly as a result.
It is critical to insure that the focus of shared services is to add value to the enterprise. At Rinker, the foundation set in the early years paved the way for creating value in ways not originally envisioned. As the journey continues, there is no doubt the road will continue to present new opportunities to link Shared Services to the creation of shareholder value.