Q&A: Ravichandran Venkataraman, ANZ
SSON: What are the biggest advantages of the shared services model with regards to increasing the competitiveness of a company?
Ravichandran Venkataraman: I would like to view this from the 5C approach, based on which a company can build a shared service organisation.
- Customer: Enabling scalability through acquisitions and providing the front line an opportunity to manage customers through different channels across geographies. For example, when HP took over Compaq, it took less than three years to integrate the companies, each $40 billion in size. This was because of the high maturity level of the shared service organization of HP which gave it a phenomenal competitive advantage.
- Culture: Build an organisation that draws upon a global talent pool. It should have best in class organisation structures and team objectives. Here, I would like to give the example of Proctor & Gamble (P&G) that has one of the most developed practices in shared services: partly in-house and the rest outsourced to multiple specialist vendors. P&G has created a two-in-a-box organisation concept to drive organisational behaviour.
- Capability: World-class infrastructure that enables innovation, scalability and growth with respect to IT, people, work places etc. Texas Instruments files many patents from its India R&D centre. ANZ is also building a global talent pool in India. This gives employees opportunities to be placed in roles across ANZ globally.
- Controls: An organisation must have global risk frameworks that facilitate cross-border business transactions, in alignment of laws of different countries and ensuring business value. Most shared services organizations make this possible and also reduce business continuity risk by focusing on site, city, country and people outage scenarios.
- Cost: Continuously works towards reduced cost to serve through standardised processes and global platforms. For example, HP and Proctor & Gamble standardized on SAP, and these standardized processes along with global platforms helped reduce costs by over 50%.
SSON: How has ANZ ensured maximum competitiveness through shared services and how far do you think you still have to go?
RV: ANZ Operations’ Global Hub is less than three years old, making it a very new player. It has helped ANZ in moving towards standardised platforms such as PeopleSoft, global processes and frameworks in business and quality such as Lean and Six Sigma practices. It has also increased productivity substantially through use of industrial engineering measurement methodologies and excellent process documentation. The focus now is moving towards building a global talent pool. We have achieved substantial cost arbitrage in terms of moving work to lower-cost locations and also standardizing processes. There is still much to be achieved as the hub matures. In future it will give the same competitive edge that HP gained from its shared service organisation.
SSON: How can shared services overcome resistance from individual business units?
RV: It would be clichêd to say, "Run proper change management programs", but that is the key. What are the real detractors? Fear of loss of control, because the way we metric leaders: number of people under them, revenue generated and cost managed. Offshoring reduces people and cost managed, if they are moved into another unit within the company. Therefore managers may resist shared services.
At lower levels, it is related to fear of loss of job, genuine concerns on lack of customer/territory knowledge, language issues, etc. We need to manage this through an effective change management program that provides incentives to leaders and staff for offshoring or outsourcing (the "What’s in it for me?" question needs to be answered very well).
Apart from this, I believe that there is nothing like "enough" communication in such situations. I have always seen that over-communication is much better and has gone a long way in allaying fears. ANZ has done an amazing job in communicating within business units: both honestly and well in time. P&G has created wonderful structures to help business units to outsource or offshore.
The third piece I would like to mention is building relationships. It would be good initially to have relationship managers handle key positions in shared services and in business units to reduce the noise levels. Finally, when, business units actually experience better customer services at substantially lower costs and the convenience of dealing with shared services through standardised platforms and processes, they will move work. At ANZ, we have focused on relationship building, operating as a global team and front foot communication. All these have resulted in building confidence within business units to offshore more.
SSON: What are the consequences of adopting a shared services model for a firm’s acquisition and divestiture strategy?
RV: As stated earlier, business integration is key in any acquisition. This includes product, vendor, process, accounting, manufacturing facilities, brands, etc. HP became the world’s largest IT company within three years of acquiring Compaq, and it was half the size of IBM at the time of the Compaq takeover. This could not have been possible without a mature shared service organisation. P&G was able to easily integrate Gillette because of a very mature shared service organization. So, companies improve their brand value and competitive advantage because of a solid shared service organisation. This in turn increases shareholder value.
SSON: Is there a danger that senior-level focus on shared services might impact negatively on core competencies and if so how might this best be avoided?
RV: Most organisations have a senior-level professional to focus on building their shared service capacity either internally or outsource or both. This is essential so that there is a key influencer in support of shared services at the senior management level. Each business unit needs to have committed key influencers within it to champion the concept. In fact, when there is a mature shared service, businesses tend to focus more on customers and business enhancement and leave the back end to professionals. Organisations should build IT and operations as a core-capability within themselves or outsource it, so that focus on business is not lost. Staff will be willing to work in a shared service organisation if they believe that there is a good career path within Operations and other areas of the company. Procter & Gamble has done very well in this area by focussing on core competencies like brand-building, sales and marketing and R&D and put other things in either in its own shared services or outsourced. Some, like HP, have made shared services as a core-competency and sell it as BPO services along with their ITO services.
SSON: The future of shared services: what’s next?
RV: Shared service organisations have to drive value to business and staff. So, while initially, focus on cost will be maximum versus the other 4 Cs (as per the 5C approach), the focus becomes more balanced as the shared service organization matures. This can be summed up as below….
To think that cost will go out of the equation is incorrect. It will form a critical part of the puzzle as businesses struggle to bring down cost to serve, innovate and grow. Shared service organisations that help in this will survive. Pure cost play will not work. Cost combined with innovation, scalability (for customers, people and infrastructure) and world-class risk frameworks will be the future.
About the Author
Ravichandran Venkataraman has 25 years' experience covering accounting, audit, consulting, business finance, banking (corporate and investment) and shared services operations, having worked in organizations such as KPMG, Digital Equipment, ANZ Bank and Hewlett Packard. Ravi's current position is Director – Operations at ANZ Bank’s Global Back Office at Bangalore. Prior to ANZ Ravi was with Hewlett Packard’s Global Shared Service Center at Bangalore handling a team of over 2,000 in charge of HP’s accounting and third-party accounting BPO services.