Shared Services and Strategic Business Alignment

SSON News and Analysis
Posted: 07/09/2012

SSON spoke to Davide Laghi, Founder and Managing Director of Y6Sigma®, at the 9th Annual Shared Services and Outsourcing Week in Budapest about the importance of Strategic Business Alignment in Shared Services.

SSON: Davide you are chairing the Blue Sky Room at this year's Shared Services and Outsourcing Week here in Hungary; can you explain the relevance of Strategic Business Alignment in an operating Shared Service Center?

Davide Laghi: Sure, what we have found through working with Shared Services as practitioners is that "change" experiences in Shared Services can be rather traumatic. To understand change and to actually make change experiences less traumatic, in order to remove any resistance to change, we need to understand Shared Services more from a "contextual" perspective rather than a "content" standpoint.
If you look at Shared Services from a multi-dimensional point of view, there are so many elements which are interconnected to each other; elements such as Teams, Leadership, Processes, Technologies, changes in Location, changes in Business Models.  All of these elements are interconnected to one another and need to be understood from a contextual perspective.

When we talk about Strategic Alignment within the Context of Change, there are merely three elements which need to be considered:

  • Culture and Behavior
  • Purpose and Vision
  • Performance Measurement

The first element is centered on Culture and Behaviour. Not behaviour in a prescriptive fashion, in terms of imposing or training teams on what the right behaviours are, but really looking at the context of behaviour which points to Values and Beliefs. And when we talk about culture and behaviours, from a contextual perspective within a continuously changing environment, we need to move in the direction of a Culture of Operational Excellence. If we evaluate tools such as Lean Six Sigma to enable continuous improvement and continuous change, we have to first and foremost understand Lean Six Sigma from the human dimension - the people’s perspective.

The second element is around Purpose and Vision. We must really understand the Value-Add agenda and look at Shared Services beyond the simple cost reduction exercise. Let’s take Finance Shared Services for example and look at the retained Finance Function (i.e. Finance Director and Financial Controllers), after transactional work has been handed over to the Shared Services organisation. If Shared Services does the right thing, in terms of continuously streamlining and improving the processing, then what else is there left for the Finance Director to focus on? If the Balance Sheet and the P&L accuracy is not a problem anymore, then what is the next big challenge for the retained Finance function?  In my opinion, they would need to begin strategically looking at both the Top Line and the Bottom Line. Top Line in the sense of Market Analysis and Intelligence – you need Finance Leaders to support the development of Strategic Business Plans. In terms of Bottom Line, efficiency and cost reduction opportunities would have to be considered across the whole Business – this is true Strategic Alignment and a shared higher purpose between Shared Services, their retained functions and the business itself.

The third element that we need to look at in terms of business alignment is Performance Measurement. With this in mind, there are two different types of metrics; measurements from the traditional Outcome and Target Orientation, which from a behavioural point of view could be quite a dangerous thing to do. Because, if you target people too aggressively on certain performance objectives, you risk distorting their behaviours and it could be rather damaging for both individuals and their organizations. If you take tools like Lean Six Sigma, which are more Knowledge and Learning based, actually these perform as measurement tools but in a different category altogether. You can then integrate Lean Six Sigma tools with other kits like Knowledge Creation Spirals: Integration of the Creation and Sharing of Knowledge, moving from Passive knowledge to Explicit knowledge, then from Explicit knowledge to a Shared knowledge position, and then ultimately to an Applied knowledge position. It is at the applied knowledge stage when learning becomes Systemic and a virtuous Knowledge Creation Cycle is created.

To reiterate, Strategic Alignment looks at three integrated elements: Purpose and Vision, Behavioural and Cultural Alignment, and Performance Measurement; and their overall integration with Knowledge Creation Spirals to create an organization that makes Continuous Improvement a sustainable effort which will encounter virtually no resistance.

SSON: Davide, you chaired in the Blue Sky Room this morning – is there a current theme running through the presentations in the Blue Sky Room this year?

DL: Yes indeed, I believe that I have found one. If you look at the seven sessions within the Blue Sky Room, the first one was about Driving Strategic Change, again looking back at the topic that we just talked about earlier on. The underlying theme is around organisational strategic alignment for change enablement.

The second session was about Innovations in BPO Contracting. At the first glance, this could look like a discussion about the technical side of BPO contracting; but actually, the session pointed in the direction of enabling a new phase of BPO, which we can call Transformational BPO. Now we all agreed in the room, that together with the legal aspects of BPO contracts, we also need to look at their human and collaborative culture dimensions.

The third session was about Shared Services as an incubator for talent, and talent does say it all.  We talked about people, talent development and retention; we talked about People Systems.

The fourth session was about Service Excellence and we discussed it from two points of view – the hard and the soft. The hard of course is about technologies, processes and measurements; and from a softer point of view, we looked at elements such as improvement mindset and collaborative relationship management.

The fifth session will actually be lead by myself and will focus on Customer Intimacy.  The core part of this session will be about the transformation of customer relationship from a hierarchical to a partnership type of rapport.

The sixth session will be about Business Adoption, and even there the title says it all.  This session will look at resistance to change; therefore, we will be discussing and looking at shifting from traditional Change Management to a more innovative Change Leadership approach to truly and deeply win change resistance.

The last session, once again at the first glance, appears to not have a whole lot to do with People Systems, Alignment and Change; this is the session about ERP’s. However, if you take a closer look at the way IT systems are normally introduced in organizations, you will find that usually they are introduced in a hierarchical and imposed fashion rather than in a participative way. And again this type of approach in many cases often creates a great deal of stress and a lot of resistance to change. The IT topic will also steer in the direction of Change Leadership challenges. And in summary, it appears that the common element across all these sessions is centered on Change Leadership and the Human Dimension of Change. I regard these topics as the Critical Success Factor number one to make Shared Services change initiatives a success.

SSON:  Do you believe Davide that Six Sigma is being applied more within Shared Services for those specific reasons to further leadership and to direct change management?

DL: Through my past observations and experiences, I believe that Lean and Six Sigma are being utilized too much as a technical tool with overemphasis on the statistical details; therefore, making process and continuous improvement efforts much more complicated than they really are. Additionally, far too often, the human dimension for change formation and the relationship aspect are too easily disregarded.  These are two key factors in making Lean and Six Sigma an organizational success.

SSON:  What would your advice be to Shared Service Centres and BPO’s to improve change management, and to improve leadership management qualities?

DL: Shared Services and BPO’s would need to first implement an adequate organisational cultural alignment before embarking upon big change initiatives such as Lean Six Sigma. Good and genuine cultural alignment, and nothing prescriptive and authoritarian as already highlighted earlier:

  • Steer teams towards the desired behaviours, but leveraging what is below the water line (Values and Beliefs)
  • Beginning with Leadership, understand and align yourself first
  • Stay congruent and align your teams, groups and the entire organization around your new culture

If SSO’s and BPO’s take the right steps from the beginning and conduct a thorough cultural alignment before undertaking big change initiatives, they will be laying down the right foundations for sustainable success. If SSO’s and BPO’s fail to see the importance of cultural alignment from the start, by purely looking at the hard fast approach, then they will ultimately risk failing.

SSON News and Analysis
Posted: 07/09/2012


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