Recognizing an Opportunity
The downturn in the global economy, while challenging to the core business of most companies, may present a window of opportunity for us as shared services leaders. With external conditions challenging organizations to identify savings opportunities, the nature of our role becomes increasingly relevant. Rather than looking to simply maintain or even scale back operations, we can seize this occasion to contribute via investment in improving execution, updating delivery strategies, and expanding service portfolios. Why? Because those very factors that made the shared services model attractive during good times make an even more compelling case in a challenging environment:
- Economic benefits, realized both directly from operational efficiencies and indirectly through working capital improvement, discount capture, and reduced revenue leakage now have an even greater appeal to key decision makers
- Better business intelligence and more efficient decision-making, enabled by the improvement in information delivery, will usually accrue from the conversion to a central processing model
- Experiences with the shared services model have proven that the centralization of transaction processing activities tends to cultivate a more effective internal control environment. At a time of heightened sensitivity and reduced risk tolerance, optimizing financial and operational controls
become a critical imperative
- More effective deployment of financial resources is facilitated when operating under a shared services model. Directing much of a company’s key financial talent toward commercial decision support and core front office activities, while removing the distraction of processing and reporting, may prove to be vital
during commercially challenging times.
For those organizations with established, well-supported shared services operations, now can be the perfect opportunity to embark upon initiatives, which will serve to showcase their value. Conversely, for those companies that have historically experienced difficulty enlisting consistent C-level commitment, now may be the opportune time to sell what should be a more compelling business case for change.
Whether a company is operating a mature shared services operation or contemplating a start-up, the opportunities can be broadly categorized into three areas:
- Processes: Focus upon opportunities to improve execution, especially where the effort yields quick wins via either reduced processing costs or downstream benefits of DSO improvement, discount capture, or write-off avoidance. In these times, it is quite possible to find a more receptive ear for enforcing process discipline. Now may also be the time to assess whether standardization or complete redesign of certain work streams may be practical in order to reap short-term benefits. Finally, recognizing that many organizations may be faced with capital allocation constraints, it nonetheless may be prudent to pursue technology that might deliver an attractive economic return and rapid speed to benefits relative to the upfront capital outlay. Some of these applications such as e-invoicing, transaction matching tools, or collections automation may not only reduce costs but also improve the customer experience
- Expand service offerings: Assuming sufficient physical and operational capacity, broadening the service portfolio will yield early cost reduction arising primarily from the initial co-location benefits of supervisory span and role functionalization
Depending upon location, there may be some arbitrage savings, as well. Our shared services organization has found significant value in approaching expansion from two perspectives:
- The first is vertical extension from transaction processing to thought or knowledge-based activities within a given service stream. For example, broadening the scope of accounting activities from closing, reconciling, and reporting to financial analysis, planning and forecasting enables synergies, which not only reduce costs but also improve services. Overall, moving into these technical services tends to present more compelling economic returns and faster speed to benefits, which are both arbitrage and efficiency driven
- The second is horizontal expansion into new or similar services, which will also yield positive results. As an example, our operation recently expanded the scope of an order entry function by extending its reach beyond the revenue cycle into one of the large service areas of the business. Finally, for those companies lacking a mandated shared services delivery model, you may find that now is an opportune time to pursue business from new or existing internal clients, especially those which may be facing the most external commercial pressure
- Consider alternative sourcing strategies: It is always prudent to periodically assess the efficiency and effectiveness of site locations and their coverage, and evaluate the options of captive-nearshore, captive-offshore and outsourced operation models.
These decisions are often considered in the context of a company’s culture, tolerance, and flexibility for the temporary disruption which arises from migration activities. Current external conditions however, combined with extraordinary pressure on core operations for many companies may make key decision makers and stakeholders more amenable to certain alternatives. Further, given that the financial malaise is global in nature, expectations are that the historical high wage inflation and turnover dynamics in emerging economies may be cooling somewhat. This prospect should enable more timely recovery of upfront costs, possibly making either an outsourcing contract or offshore captive startup more viable.
During good times, shared services are best appreciated when we are invisible, smoothly running a back-office operation. However, in the current, challenging environment, we should embrace the opportunity to take a higher profile to prove our value and contribution to the mission of the enterprise. This value can be manifested in many forms, including hard economic benefits, better and faster information delivery, improved controls compliance, and a heightened positive customer experience.
At a minimum, staying the course is an absolute imperative while seizing the moment to improve execution and expand the portfolio of services should yield exponential benefits, serving as a catalyst for future growth.
About the Author
Bill Johnson is the leader of Coca Cola Enterprises Inc. Global Finance Shared Services organization which is comprised of 1,400 employees and includes a captive delivery center in Tampa, Florida and outsourced services in Guatemala City, Guatemala, Chennai, India, Krakow, Poland and Hot Springs, Arkansas. Bill has worked in the Coca-Cola bottling system for 27 years in a variety of field based financial roles and has led the shared services operation since its start up as a North American processing center in 2001.