Shared Services and Strategic Business Alignment

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 Laghai: Sure, what we found out working with shared services as practitioners is that change experiences with shared services can be rather traumatic. To understand the context of change, and to actually make change experiences less traumatic and to remove resistance to change, we need to understand shared services more from a contextual perspective rather than a change from a content point of view.

If you look at shared services from a multi dimensional point of view, there are so many elements which are interconnected to each other. Things like teams, leadership, processes, technologies, changes in location, changes in business models; all these elements are interconnected to each other and need to be truly understood from a context perspective.

Now there are merely three elements that need to be looked at when we talk about strategic alignment within the context of change; the first point is around behavior. Not behavior in the prescriptive fashion, again in terms of imposing teams, or training teams on what the right behaviors are. But looking at the contexts which points to values and beliefs. And when we talk about culture and behaviors from a contextual perspective, in the continuous changing shared services we need to point in the direction of a culture of operational excellence. And if we look at tools like Lean Six Sigma, to enable continuous improvement and continuous change we have to look at Lean Six Sigma from a human point of view - from the people’s perspective.

The second element when we talk about strategic alignment is purpose and vision. We have in my opinion to stop looking at shared service initiatives just as cost reduction exercises. Actually shared service projects have to be looked at as value creation exercises. We have to look at the value add agenda. And if we take for example finance shared services, and you look for example at the finance function, the finance director, the finance controllers - after they have handed over the transactional work of shared services. And if shared services do the right thing, in terms of continuously streamlining, and continuously improving the processing - what is left to do for the finance director? If the balance sheet and the PNL accuracy is not a problem anymore, then what are we supposed to do after we have created a successful shared service center?

They need to look in my opinion at the top line, and the bottom line. The top line in the sense of market analysis, market intelligence, supporting the business - you need leaders to develop the strategic business plans. In terms of bottom line, looking at cost reduction opportunities across the whole business - this is strategic alignment, in terms of higher purpose between shared services, the retained function and the business itself.

The first element that we need to look at in terms of alignment is business managers. There are two different types of business managers, we can look at a measurement from the traditional outcome, and target orientation, which actually could be from a behavioral point of view quite a dangerous thing. Because if you target people on certain performance targets, you distort behavior, which could be rather damaging for individuals in that organization. If you take tools like Lean Six Sigma, actually these perform as measurement tools but in a different category which are more knowledge and learning based. And you can integrate tools like Lean Six Sigma with other tools like knowledge creation spirals. Knowledge creation spirals basically look at moving from the passive knowledge position to an explicit knowledge, and from an explicit knowledge to a shared knowledge position, and then ultimately to an applied knowledge position. And then this becomes a system and a spiral, and a knowledge creation cycle. And this points to the direction essentially called learning organizational skills, so the digital alignment looks at three elements: purpose of vision, behavioral alignment and cultural alignment. And performance measurement and their integration with knowledge creation spirals to create an organization, to make continuous improvement and sustainable efforts with 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 is about driving strategic change, again looking back at the topic that we just talked about. The underlying theme is around organizational strategic alignment for changing elements.

The second session was about innovations in BPO contracting. At the first glance this could look like a discussion about the leader’s side of BPO contracting, but actually the session pointed to the direction of enabling a new phase of BPO, which we can call the transformation of BPO. Now we all agreed in the room, that together with the legal aspects of BPO, we need to look at the human dimension, the culture dimension of the people coming in.

The third session was about shared services as an incubator for talent, and talent says it all, we talked about people in talent development and retention. We talked about people systems.

The other session within the blue sky is about service excellence, so we can look at service excellence from two points of view, the hard and the soft. The hard of course forms technologies and processes measurements, but also from the soft point of view we need to look at things like initiative element and the relationship management.

The fifth session which is the one that I will actually lead myself; will discuss customer intimacy, and the core part of this session will be about the transformation of the customer relationship, from a higher article to a partnership, type of relationship.

The other session will be about business adoption. And business adoption, even there in the title says it all, talks about resistance to change. So we need to look at shifting from change management to change leadership, to win change resistance.

The last session, again at the first glance, looks at not having anything to do with people system and alignment and change, which is the session about ERP’s. But actually if you look at the way IT systems are normally introduced in organizations, they are introduced in a hierarchical fashion where there is a participative wave. And again this type of approach in many cases creates lots of stress and in many ways lots of resistance to change. So again, the course topic will be about change leadership challenges. So in summary it looks to me that the common elements across all these sessions is about change leadership, and the human dimension of change. And 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: I believe from my observations in the past, and from my experiences, is that Lean Six Sigma, and Six Sigma’s experiences is being utilized too much as a technical tool and too much orientated into the details of statistics to make it too complicated, and not looking at the human dimension for change formation, the relationship dimension, to make truly Six Sigma an organizational success.

SSON:What would your advice be to shared service centers and BPO’s to improve change management, and to improve leadership management qualities?

DL: Well, you need to look at before you even embark on big change initiatives like Six Sigma for example, look at cultural alignment. Good cultural alignment, not as I said earlier in a prescriptive fashion. You know, training teams on desired behaviors, but actually understand, starting from leadership first. Understand yourself, understand your values and beliefs, and align yourself first – be congruent and then align your teams, and groups, the entire organization around your cultures. If you do this first, then you lay the right foundations for success. If you fail to do this and you undertake big change initiatives, purely looking at the hard fast approach, the technologies and performance measurements, you risk failing.