Quick Wins to establish successful Shared Services

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Facilitator:
Joel Roques, Managing Director, The Hackett Group

Participants: 
Christian Braad, CFO, Koncernservice

Yvette Dorman, Senior HR Change Manager, Metropolitan Police Service

Mark Judd, Director of HR SSC, Rolls Royce

Implementing Change & Vizualization

Joel Roques: Obviously I will start with the data because of where I come from; 60% of organizations surveyed say communication is one of the key things to establishing an effective shared services center. A large part of change management is communication, but whatever you do, it is never going to be enough anyway. I would like see what your own experiences of implementing have been around this aspect.

Yvette Dorman: When we started embarking on the stakeholder buy-in with all of our top management across the organization, we were trying to describe something that we hadn’t actually seen in situ, and understanding what the tangible services were going to be was very difficult. So it was important to us that we were clear on what those drivers for change were in the beginning.

We had two drivers, financial was one of the big ones – we wanted to make £15m a year in savings for the organization, and we were requesting an investment in order to achieve that, which was in  the region of £32m, so it was a big spend to save. So of course getting the top teams to be bought into that investment was a significant thing for us. But again the other benefit was around the reduction of bureaucracy and accessing HR, and also the organizational access to HR, around electronic forms. But of course when we did the stakeholder engagement - they were describing a different interpretation of what we said were the key drivers, which was an interesting experience that we had.

Joel: So you are talking about building the right change case, which is interesting, the second thing which you talk about is visualization, which is a word that I really like,  did you use a quantitative technique to drive this visualization with people?

Yvette: We contacted people at a couple of shared service centers and we eventually got an agreement for one of them to be videoed, so we actually interviewed various members of the organization, who had experienced the HR shared service center in that organization. But we had also interviewed HR members explaining what it was they went through and what the service was afterwards. That helped both the project team who was implementing, designing and building this for the Met, but it also helped us to sell it to members of our organization, but that was more on the service side  rather than the drivers for change.

Joel: What other visualization techniques have the rest of you considered - do you found visualization motivates?

Mark Judd: I agree that it’s very difficult to explain the concept to an organization that doesn’t understand it; but I’d like to make a couple of specific observations about change management. I hear the same prescription quite frequently that you described about inadequacies of the change management program when you’re implementing. And frankly, I would be inclined to spend 10% of my change management costs before I go live and 90% after I have gone live. I think the reality is trying to explain a concept out of context just doesn’t interest a lot of people. You can’t engage very easily in describing something that is not there - and it’s not going to appear for another three or four months. What I have found is that putting post-implementation change management projects in place, you really start to change the organization. And it’s not about accepting shared services; it is actually about fundamentally changing how people work in order for them to be successful.

Going back to visualization, we did a couple of things -  I had the benefit of having worked in implementation before, so knowing and being able to describe a certain degree of reality in what shared services looks like the second time I was involved in implementing shared services. I didn’t have that luxury the first time round; just having that kind of hindsight ahead of you was incredibly helpful. If you are getting people involved in implementation, then it makes it a very different setting.

I think the other thing for me also, is that once you start to establish the operation, you do an awful lot of shared casing in the physical center itself, bringing in line managers, representatives, employees, all those different groups. We had a tremendous amount of good publicity and good press that came from having brought people from the emerging centers. But also the other thing that I would say is that when I started with this power of hindsight behind me, I presented to the steering group, which consisted of business leaders, something that we call the ‘journey map’. I recall one of the engineering managers looking at this and asking why we don’t just go straight to best in class. And I felt a little bit like a Jack Nicholson in a few good men, saying I can tell you the truth but you can’t handle the truth! Because right then best in class were the line managers, not having any more than just perhaps a cursory interface with the function because they don’t need to, and he said well we couldn’t do that, and I said exactly that is why we can’t have a best in class service right now because even if we could afford to invest that amount of infrastructure in place, being able to see the rest of the organization move to that level is very difficult. So I think seeing the journey very early on, and understanding that there is quite a long way to go still, would be very helpful in convincing people that the business case was just the beginning of the process of change, not the end of it.

Christian Braad: In the building of the shared service center of Copenhagen, in the management, the most important thing was actually constructing the business case, saying that you could deliver the service in this way. So we built a model saying that you have to be upfront, make a very small investment, but then build up the investment over time, and then in the first year deliver five percent in price fall for customers. And of course there’s the task of identifying where we would find this five percent in this first year. In our case it was quite easy by getting it together and using our strength in buying things cheaper, which actually delivers benefits. In our first year it was about ten to fifteen percent drop in prices from our suppliers that we got just by working together.
One important thing was in terms of employees, because they have seen these current projects mutate from before, and the people who were destroying the projects were the management saying we do want to do it, but then again we do not want to do it. But we did get their buy-in on the business case by saying the reason we are doing this is that we are moving money from the administration to the citizens and we are going to do it in year one. So the tone changed and it was very convincing case for employees, because it was the first time that they had seen the managers saying the same things in front of the audience, so they could just as well play a positive role instead of playing a destructive role.

Mark: It often helps to have a compelling economic case, like a major downturn to encourage cost reduction as well….

Christian: The change driver ‘either you do or you die’ is always a good one…..

Yvette: With the Met Police the choice is either the government doing it to us or we do it to ourselves so that was one of the drivers for us, taking the opportunity to look at implementing our own self-imposed shared service center.  We conducted a review which looked at all other public sector organizations doing this. So we had to look at what we would do for ourselves to reduce costs to the tax payer.

With regards to the change management and getting the right messages to the various levels in terms of the top tier organization - i.e. your board members, and then for the rest of the organization, one of the things that works really well and has worked so far is the implementation of change champions at the delivery level of the organization, who are extended members of the project, the program team who are a conduit to help us to deliver to that level of the organization. So when you are dealing with the drivers for change the economic and financial rationale, for the top level i.e. the board level and the Authority is different to the message that you are delivering to the rest of the organization. We might be saving fifteen million today which is good news to the Management Board, but what does that actually mean to the police officer on the street? Is he or she going to be seeing an additional police officer supporting them, or will that money go towards another project for instance?

So for the change champions, we had 95 change managers across the whole organization covering every unit, who in addition to their day job were supporting us in the communication for the engagement, delivering presentations and material on our behalf. That helped us to get that level of communication and engagement at the local level. And it was also about not having the HR community being the change managers, but a member of the business, because it is all about how the business accepts the impact. Not the HR community doing it to the organization.

Building the Business Case

Joel: But how are you building your business case? What dimension have you implemented, and has that helped, in making it more real and convincing the people.

Mark: I am increasingly coming up with the view that we tend to look very two dimensional at the business case. Certainly I rarely have a conversation on cost, except once a year and then it is quite a big conversation. But most of the time I am dealing with quality and continuous improvement control, and strategy using the shared service center to help drive changes in the way in which we help manage the business. But interestingly enough when we have been rolling out the model to a wider region, so we have been reiterating the debate as we move into new territory, and one of the things that I think we have been able to demonstrate is a reduced cost base. But it is a bit passé really, because the fundamental benefits that we really have is impacting a multi-billion pound payroll of the entire organization, and having a much better control of the mechanism in place, to manage the HR delivery of the business. I think it is difficult to actually chart that saving because the costs tend to get hold of the business. But where we are looking at things like supply management, and stronger controls to limit the amount of individual management discretion that may take place to increase the cost base by locally decided pay increases, those types of things. Those elements of control can manage a cost base, particularly in the economic crisis that we are facing at the moment, in a way that local based HR teams can’t manage. I rarely see that element of the control sitting in the business case; it tends to be much more around the operational costs of running the center itself, with associated administration. But if you make a substantive saving on the overall cost bill of the business, that is usually one of the highest elements of the business expenditure. Then really the business case is quite easy to explain, and increasingly I’d say our leadership and our organization recognize that, because they feel more control of what is being spent and how it is being spent.

Joel: One of the examples, is one that I was talking about earlier, the procurement side of shared service which is very often focused on procurement process, the savings you can get out of there are fifteen percent, maybe twenty, which are totally relevant. I remember a huge business case for a big company from the Netherlands, no names, but they were spending several billion Euros in non product related purchasing. And indeed the business case for the shared service was ok for the three year payback just under the procurement process, the P2P was the shared service. As soon as we started adding the eight percent that would be divided with compliance, the procurement processes – the payback came in seven weeks. A no-brainer almost. Why did we even write a business case, pretty irrelevant, so without having to negotiate any kind of contract, so very often the downstream savings are overlooked.

Christian: I think you have the responsibility as a shared service leader to say that your improvements in quality are processes which are actually controlled by you, saying that you are actually moving money around to improve your quality. What I often hear in my organization is ‘we’ve saved a lot of money, but we need better quality.’ That quality is something which is decided between you and your customer. Have they agreed that you need that extra quality? Often they are not in agreement that this kind of quality is needed, maybe they would like to have the quality in a pocket of the organization, and often they would like to have more quality in child care than they would like to have say in IT. So I think a shared service center has a big responsibility to show these savings, and then debate with the customer on how to use these savings.

Yvette: Picking up on what you said earlier about the quality of service and the benchmarking, one of the things that we didn’t do within the Met was service quality reviews in terms of what the HR department was giving to the customer before. We baselined it starting with the implementation but we’d already started the journey, so the benchmark wasn’t going to be a realistic test of what they were going to get. But also the quality of service that they’re getting during implementation is going down, even though the idea was that the board of directors didn’t want it to go down, but the reality is that it is going to be affected. So, the customer experience is getting harder. But it does mean that they desperately want a shared service center in place, because they know that it can’t get any worse. Which is one of the disbenefits of where we are.

Joel: Yes, but it is part of the journey. Typically you start with a level ‘X’, and your level of service and you can lower this during implementation, typically it will go up. It is amazing how short people’s memories are, even after you have implemented and all your services go up!!

Mark: We are about to launch a piece of work, which is a second iteration for me, because we did it at PWC as well, which was a piece of post-implementation review on the impact of buying transformation of cost based management in HR and finance and other areas on the line manager. I think it is inevitable that when you have line managers who choose the way of interfacing with the local HR team for example, and it may be slightly different with finance than HR, but the principles still apply. The way that our line manager would have popped into the office and have said I have got this person who needs some occupational help, and I need to recruit this person and these things to be added onto the system. And the local person would do whatever needed to be done, probably in lots of different ways, probably not in any conformist way, maybe in lots of different systems. But from the line manager’s point of view, the local knowledge that the individual personnel administrator had in those circumstances filled a lot of gaps. Invariably the interface that we are now demanding is that the manager has to fill some of those gaps him or herself because that person won’t necessarily know his surname or what his staff number is. I do hear a lot of noise increasingly, not only in my organization but in others also, about shifting the cost from HR to line managers. I have got some empathy for that, but only to the extent that in so much as the total cost and value that the function dividends is not purely in the interface between us and the line management. It is an important part, but it is not the only aspect.

We have got corporate responsibility for data compliance, for the accuracy of data, for the information that provides business decisions. But we also have the responsibility to provide the kind of environment that new and up and coming leaders expect and demand, that previous leaders didn’t; they wouldn’t expect to go on the system and find information about their employees, they will expect to be able to interrogate the systems themselves with management self-service tools. And I think that there is a danger to some extent; to ignore the noise is bad, it would be wrong, but to be too heavily swayed by what you hear without properly analyzing it, is not the way to go either. And I think there is a mechanism of post implementation engagement you really need to invest in. Some of it has changed through adapting the processes or modifying the interface, some of it is about the education of the line manager population. And some of it is about a bit of a wake-up call for the line managers, but that is what we are wanting them to do. And I think that those things will take time, and they are part of organizational transformation - what is critical, is that you need the right structures in place around, pay scales and policies etcetera, to make it all work, which is another big challenge.

Click here to View Part II: Quick Wins to establish successful Shared Services