Q&A: Christian Kaufmann, Unilever
A few years ago, Unilever Europe embarked on one of the largest outsourcing deals in European business history, as part of the transformative One Unilever programme. Following his presentation at the 7th Annual Finance & Accounting Transformation & Shared Services conference in London, we spoke with Christian Kaufmann, MD Finance Business Services, about the impact this transformation has had on his organisation - and his tips for maximising the benefits of outsourcing.
SSON: Christian, Unilever’s been on a prolonged and significant transformation process over the last few years. Can you tell us a little about this?
Christian Kaufmann: We have been on an incredible journey since around 2005, when we internally announced the One Unilever programme aimed at streamlining our business to be more competitive. And one of the key elements of this has been to implement financial shared services with an outsourcing provider. We are now at the stage where we can say "let’s get the benefits out of that" – where we have now harmonised processes to a great extent across Europe.
SSON: That outsourcing deal is one of the biggest in Europe’s history, isn’t it?
CK: It is, I believe – so I’m always told! It affects various processes in Finance to a great extent - purchase-to-pay, travel expenses, record-to-report, bill-to-cash - and it affects around 800 people.
SSON: And you’ve said that this has resulted in great efficiency gains – can you tell us exactly what you’ve gained from this transformation?
CK: To put it simply: alongside the implementation of a single-instance ERP system, which happened at the same time, we have now managed to get new harmonised tools in place which we have worked with our service provider. We believe we now have access to the best technology which we wouldn’t, quite frankly, have had access to before. So that’s one element. The second element is simply that you get a better approach in service delivery; you can beef up the qualities of your delivery on a more harmonised level, whereas it was quite frankly of very varying quality before. And then obviously we’ve moved to a lower cost-base.
SSON: To give readers some idea of the scale of the transformation, how many regional offices have been absorbed into the One Unilever programme?
CK: Within the One Unilever programme itself… it has been around 25 countries, and within each country we had at least three units, so let’s say 80 units. We had three different divisions of business; each of them was quite proud to have its own ERP system, and - guess what - more or less each country managed to have its own customised version, so at the end we believe we had 18 different ERP systems. And we managed to have so many variants of the processes that they numbered in the hundreds.
So we had a very, very diverse situation which we confronted at the beginning of 2005. And that has now actually changed dramatically, because now we have only, let’s say, one process for each of those I mentioned earlier – like purchase-to-pay, the way we do general ledger, reporting, how we do travel and expenses, fixed assets, and also bill-to-cash. I think for a fast-moving consumer company such as ours that’s a great achievement and we’re very proud of it.
SSON: You recently presented at the 7th Annual Finance & Accounting Transformation & Shared Services event in London, and as part of your presentation you were speaking on the importance of clear and robust governance, and of good communication with an outsource provider. Let’s look at the governance issue first: why is that so important?
CK: I believe governance is important because, as I always say, it has to work on good and bad days. So when you talk to your provider you have to have as robust a relationship as possible which will take you through the ups and downs – especially the downs, obviously! Because there will be issues, and you have to manage those issues, as you have to manage them internally as well on a day-to-day basis. Operational issues are hitting you left, right and centre at some point; at other times it’s more quiet.
We had – at the time when we decided on our outsourcing provider, IBM – decided to go for a cooperative style. We spent some time, deliberately, on what type of relationship we wanted to build, and we said that, well, we didn’t want to have a shared P&L at the end of the day, but we wanted to get very close in the way that we would jointly solve issues, and that we would jointly take ownership of issues even if they would hit one party harder than the other one. So I think we learnt from other regions where we had also outsourced, within our own organisation, and from listening to a lot of other companies as well, that this is quite fundamental. So we have moved away – I think successfully – from normal customer-client behaviour towards a partnership.
SSON: You said "keep regular meetings going even during the good times when it might seem there’s nothing to meet about"; how important are those meetings, and keeping the relationship going even when things are going well?
CK: I think it’s really crucial. There’s always a tendency – especially now in times of economic crisis – to see everything else as more important than your basic processes; but if you can’t find the five minutes, ten minutes, half an hour, whatever it takes, to link up with your service provider – who’s actually managing quite big parts of your processes – and just ask "how’s it going?", if you’re not careful, issues will creep up and they will not be resolved, because people will see them as not being urgent enough and so on.
You have to work continuously on the issues as well as on the partnership; I believe you can have lovely PowerPoint slides telling you all about governance but at the end of the day it comes back to the people who have to deal with things, and they need to talk to each other. I strongly believe you can’t substitute this through email or other means; you HAVE to talk to each other. And you have to do it at the lowest possible level; you can’t always do it at the top level because you have to get the teams who actually have to do the job talking to each other.
SSON: You mentioned the financial crisis there, so let’s finish on that topic. Obviously times are getting tougher for companies around the world; often companies that don’t have Unilever’s scale and resources are struggling particularly. What quick wins might you recommend for practitioners going into troubled times without much light at the end of the tunnel?
CK: There’s no simple recipe as such and I can’t speak for other businesses; but I think people need to look at their processes and find out where the leakages are. Some of them may have inefficient processes and the cost of the transaction may be simply too high, so they have to think how they can resolve that. There are options there. They don’t necessarily have to go through an outsourcing provider, as we have chosen; you may find a different solution in-house. It depends really on the type of business, on the culture, and on the current set-up of the infrastructure.