Presentation: Make Change or Wreak Havoc, Part II

SSON News and Analysis
Posted: 07/09/2012

To read Part I, click here 

Pierre LeRoy: The first one is probably expectation management. Because we sold that as a lift-and-shift we oversold the fact that it was an easy transition and despite the fact that it was a lift-and-shift – because we made some transformation in our organization pre-outsourcing – it is never easy.  So don’t oversell to your stakeholders that it will be an easy transition, this is probably one of the lessons that we learned there and we did not very well. 

The other thing which is not to do too much about change management but is about the scope of the processes you are looking at outsourcing, be careful of processes which are too people- dependent, where you have a high level of contextual knowledge. In our case, Kimberley Clark – we have gone a bit far in terms of outsourcing – that is my own opinion, obviously that’s probably not the opinion of the leadership team but that’s my own opinion – I’m telling you my own opinion here.  We have gone too far in two areas, I believe – one is about product costing and manufacturing cost accounting. We have outsourced that – you need to know the manufacturing process to understand and be able to deliver that, and we have a bit – so this is highly contextual, as you can see.  The other piece is about order to cash, which is well known to Philip, because Philip was my previous leader in Genpact for the Bucharest operation – he moved to the light side but he was on the dark side with me before! So, on the order to cash process we have outsourced again – a broken process, to be frank.  There is no doubt about that.  And a process where pricing and administration, rebate and administration, billing queries and administration... and again where contextual knowledge is probably too important and our process – our processes, even – was two people and we accept these.  I am not saying that we have failed as now we have stabilised and it’s done, but it has not happened as expected.
The other area where I believe I would warn and watch out any outsourcing deal in the change management is making sure that you are not fragmenting your process too much.  Again, in the order to cash experience, we have actually split the process between three locations – Brighton, Bucharest and India – and that was too much, so we had to step back and come back.  And this has a lot to do with change management because when you move – when you deconstruct an end to end process, you have to be sure  of all the implications in terms of communication and in terms of workflow breaks.  So these are, to me, the three lessons that I wanted to share with you.  I’m not going to go further than that – I could spend the whole day!

Philip Whelan: So, first of all, everybody still awake?  Yeah?  OK, that’s good – there’s a few familiar faces for me in the room because of my Genpact days so the good news is that anybody that knows me knows that I don’t do Powerpoints.  OK?  So I’ve put up some slides but I’m not even going to refer to them, all right?  So bear with me for thirty seconds while we get everybody awake again.
Hands up everybody in the room who knows who Leo Tolstoy is.  Yeah, the hint is Russian.  Now keep your hands up – hands up! OK – now, of all the people with their hands up, who of you have ever actually finished one of his books?  Keep your hands up!  OK – so in a process of elimination the quotation I’m going to make – nobody can disagree with me, right?  OK.  So, he once made a very famous quotation which was "Everybody wants to change the world, but not everybody wants to change oneself".  And I always remembered it because it’s a very prophetic statement to actually make because it’s one of the biggest challenges companies face when they do change management.  Like Deborah said earlier, frankly I lived on the dark side but I’m proud of it, I enjoyed my dark side days with Genpact – I particularly enjoyed it when I went into my new outsourcing provider last week which we competed against for four years and said "Hello, I’m now your customer!" and he just went rather pale.  (laughter)  So basically, this is the biggest challenge you have is to challenge yourself to actually change from within.  It’s very much like leadership.  But the problem is when companies go through this journey, they start out with their consultants and other dark sides commented on by Deborah, they do tons of analysis, tons of strategic planning – everybody who’s ever gone to an RFP documentation – a Request For Pricing – oh my God, 1,975 pages, font size 6, 15,000 chiefs want to have an opinion on it, by the time you get to the end of the 90 days somebody comes back, maybe the advisor and says "Well, actually we changed 25% of it, can you now resubmit all over again?"  By the time you’ve gotten to the state where you’ve done your transition, have we ever asked ourselves how much percentage of our time is actually spent on planning for change.  Planning for engagement and planning for communication?  Did you ever think about that?  Who am I?  I love change, I want change regularly... I get quite upset if I don’t get change.  I rely on other people to give me change.  Who am I? 

A wet baby.  The only person who welcomes change, categorically, without complaining about it is a wet baby, and as my wife had a child last week I know that completely, OK?  (laughter)  They eat, they sleep and... the other ‘S’ I won’t use because I don’t want to be rude, all right?  So basically what we’ve heard is Deborah has given us her perspective on the goods, the ‘do’s, the ‘don’t’s, the enablers for change, the pitfalls to avoid...  Pierre, and it’s interesting for me because I’ve lived with – I’ve been the service provider for Pierre, I quite appreciate the fact that he now smiles at me every now and then versus beating me on the head, that’s quite nice for a change, thank you Pierre... but what I wanted to take was just a couple of seconds to talk to you and to share with you  about how we and BP are now going to drive change management, engagement and communication in the context of our strategy.  So in order to do that I’m going to take just two minutes to explain what we’re doing.  So, BP has been one of the pioneers for outsourcing, for those of you who do not know that – over twenty years ago they started their relationships with outsourcing providers – we have over two thousand people in India, for example, with two providers and nearly all – 90+% of all the transactional activities.  What we’re now going to do is we’re going to develop a global hybrid model – I’m going to lead the implementation of our European centre for which we’ve chosen Budapest which will be somewhere between one and two thousand people. 

Some of the activities –which Pierre was very interestingly saying very difficult to outsource that because of the contextual knowledge – because that’s exactly what we’re going to try to do with BP.  We’re going to take activities from over thirty countries, we’re going to affect almost every single geography from Germany etc to the UK across Europe, we’ve got fragmentation because, like most big companies we grew up through acquisitions, so we don’t have the same platform, we don’t have the same systems, we don’t have the same processes.  Now they’re the easy things for companies to focus on – it’s very easy to go out and buy a building, or to spend $15,000,000 on an SAP implementation.  It’s very easy to go hire a thousand people, believe it or not.  It’s not that difficult. 

The harder part is, how do you really get people to want to change themselves?  Like the example that Deborah gave – I’m in an order to cash process, well guess what?  The day I’ve got a distributor who’s been killing me because I haven’t been paid  and they don’t want to stock my products – I can go to Bob down the road.  And Bob’s been there for twenty years.  But the problem with that is, that’s a people dependent process.  And the whole value proposition is not about labor arbitrage, it’s not even about skill, believe it or not, in my opinion.  What it is about is: How much value can you create by making processes as automated, as dependent on process versus people as is possible?  Now can you achieve it 100%?  No, you can’t.  But the key deliverables to do that is process, technology and people, and the first two don’t happen without people.  So the big effort that you have to make is on the people side, the change management side.  So what we’ve actually done in BP is a little bit radical which is – we’ve probably spent as much time on creating a change management toolkit, an engagement toolkit, a communication calendar, on site visits to all of the business leaderships across the refining and marketing segment – which is where we’re starting, that’s about 50% of BP, about $180billion of revenue. 
We’ve spent as much time on that as we have with consultants talking about transition methodologies, or talking about knowledge transfer even.  Think about knowledge transfer – what’s the key success to knowledge transfer?  Here’s an interesting one.  OK I’m going to pick now people – I’m going to pick the Gempact  guy, upset him first.  So, what’s the key thing for knowledge transfer?

Attendee: People?

Philip: People, OK.  What else?

Attendee: The knowledge of KPO?

Philip: The knowledge of KPO – anyone else?

Attendee: Sustainability... relationships.

Philip: Relationships, OK.  What else?

Attendee: Sustainability.

Philip: Sustainability.  Now, you take all those things that were just said – can it happen without change?  I don’t think so – can it?  How do you take the knowledge of people with an average tenure of nineteen years in a company, take it to any new location, and there was a very good comment made at the G8 this morning by Nick from PWC who said "You know, you should start having a conversation about whether it’s captive or outsourcing, it actually really doesn’t matter.  If the process is broken then the process is broken, right?  Same applies for change management – I hear people saying to me "Why has BP chosen Budapest, why haven’t they chosen Bucharest?  Why haven’t they gone to Dublin or Cork?"  I mean, I would have preferred Cork, being Irish but... you know, the reality is it actually doesn’t matter that much.   You can give a textbook answer and say it’s language, it’s university, it’s pricing, blah blah blah.  The big driver for us in choosing Budapest was track record of driving change.  Track record of delivering process transformation.  Track record of people that are capable of doing that.  And what underpins all of that is change.  And too often companies just forget about it.  They do the nice model like we have up here, if I click one more I have another, lovely, beautiful site...

Do you like the colors?  Yeah?  You know, I got ticked off when I joined BP first for two things surprised me – first of all was health and safety.  I got into a car in London with one of the most senior people and I was so nervous with the guy, because I do get nervous, that I forgot to put my seatbelt on.  There’s something refreshing about the CEO of a global company saying "Put your seatbelt on" in your first week with the company.  The second thing I got was "You must get the color schemes right" – there’s a particular template, there’s a particular palette. 

It’s called brand.  The third thing I had to realize was that I loved my days at Genpact, I thought that they were the kings, or the queens to be politically sensitive, because I’m afraid of Deborah – you know, I thought they were the kings of acronyms until I joined BP and realized they had an even better website than GE, they’ve got like five thousand acronyms.  So what did I have to do in my first sixty days with BP?  I had to...?  Change.  I had to change.  And that’s the fundamental thing that companies don’t do enough of, and what I just want to finish on is saying that – and this is obviously on a very high level, there’s a lot of detail behind this – not as much detail as if I’d paid a consultant because then I would have had to have more detail just to justify the fee – but basically we’re focusing at the country level, we’re focusing on the employees and we’re also focusing on the new employees, because this relationship goes across all three streams that you see on that board.  The key is integration; if you’re going to do an outsourcing relationship with a HP, a WNS, a Genpact – did I cover all the main providers in the room?  Anybody I miss?  If you’re going to do your own captive, the key is that you must make sure that you’re fully integrated.  Don’t create a silo mentality and that will make sure that you’re successful, and the catalyst for that success is change.  The only way you do that is by having a model like that up there.  You make the people part of the business, you make the business part of the centre; you make the centre part of the retained residual organization.  And to do that, you don’t do it through Microsoft Outlook – you get up off your asses, you get on planes, you go visit, you understand the business - to Pierre’s very well made point – you’re getting a compliment and I’m not even trying to sell you something – you know, when you’re talking about something as contextual as manufacturing cost account or management accounting as a qualified management accountant, you can’t do it if you don’t understand what the process is.  And that again requires change.  A new person won’t learn something because you’ve got a great desktop procedure to give to them.  That means the person that’s done it for years has to change their mentality – I’m going to lose my job but I can’t blame this lady or I can’t blame this man because I’m losing my job.  I’ve got to be professional; I’ve got to make sure that I get my knowledge over to them.  And you get all your infrastructure wrong but that’s all fine, but the key word is that you must embrace the concept of change at the top.  So I finish by saying that leadership starts at the top.  The truly great leaders for me are ones that not only embrace change but are visibly the ones who are driving change.  So, within our global structure, even though frankly, a few hundred million bucks, it doesn’t even hit a pebble in the context of what the company spends on an oil well or something like that, but it’s being sponsored by the CEO.  Not for reasons of labor arbitrage, but because of the belief it can transform the way we provide service to customers.  So with that I will take – or we will take any questions from anybody before Deborah wraps.

To be continued

SSON News and Analysis
Posted: 07/09/2012


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