Ten MORE Tips for Preparing for Recovery
Last week SSON published our Top Ten Tips for Preparing for Recovery, showcasing expert opinion on how best to position your organization to make the most of what looks like (fingers crossed) the beginning of better economic weather after a pretty gloomy period, to say the least. Now we’re back with another batch of indispensable advice, from reducing your SSO’s IT footprint to looking around at personal opportunities which might arise as a result of the recovery. So without further ado, here are Ten MORE Tips for Preparing for Recovery: as always, in response you can send your own thoughts to the editor or post on our Q&A pages.
1. Invest strategically
As money - hopefully - starts flowing back through your organization into your SSO, the temptation will be there first to repair any damage that might have been incurred during the recession in terms of layoffs and capacity reduction; there could also be an understandable impulse to rehire some of the staff that you might have had to let go unwillingly. While laudable on a moral level, these impulses aren’t necessarily the best options for your organization as a whole - indeed, giving into them could be a major mistake as you risk losing out on everything else that capital could be doing for you. Cash might have been king during the slump but it’s certainly won’t be dethroned during the recovery: invest what funds you do have strategically, and be aware that frequently that won’t mean putting it back where it used to be.
"It’s very likely that your shared service group shed capacity in higher-cost markets such as North America and Western Europe to reduce cost in the downturn," says Rick Bertheaud, EquaTerra Managing Director, Procurement. "As you may need to add back capacity to accommodate returning volume, do so selectively. Don’t invest ‘easy dollars’ back into staffing in the US, for example. Look for more strategic areas. Where is your company growing? If part of the answer to that question is in lower-cost markets, what capability might you have to leverage existing infrastructure in those markets to expand your presence? Rather than invest in human capital, are there selective enabling technologies you can deploy to reduce the need to add headcount?"
2. Prepare for a rapidly evolving business environment
The way organizations interact and conduct business has been evolving at an increasingly rapid pace since long before the onset of the financial crisis (for an interesting perspective on this topic see SSON’s interview with Tim Cummins of the International Association for Contract and Commercial Management ). Like the lightning bolt that awakens Frankenstein’s monster, however, the sudden shock of the crisis and subsequent global downturn has acted as a catalyst for change; many business solutions which might previously have been viewed as simply too far out of the box are now, post-crisis, fair game. Competition can become collaboration; new enterprise models will emerge as if from nowhere (look at the speed with which cloud computing is changing the parameters of the software industry). It’s a tall order to expect any one person or organization to prophesy exactly how all this transformation will end up - but at the very least, your SSO has to be aware of the possibilities…
"What about a ‘process’ cloud – where we get into virtual cross corporate ‘shared service’ captive relationships (not outsourced) and joint ventures for organizations within the same sector (re-inventing the old transaction engine model?) or across sectors to protect competitive position and commercial sensitivity?" posits Alsbridge Senior Manager John Sheridan.
3. Shrink your IT footprint
This one may well have been on the agenda for many firms before the crisis - but the level of change management required, and the risk of potentially destabilizing disruption which it entails, may well have meant that rationalizing the organization’s IT structure got put back until a more opportune time. That time could well have arrived with the onset of recovery. Don’t panic, IT: this isn’t a call for savage across-the-board cuts - but if your firm felt IT-heavy pre-recession it’s almost certainly so now, and the extra flexibility conferred by a bit of judicious trimming could be crucial going forwards.
"Most organizations have an opportunity to rationalize their IT landscape in three areas: SW/Application, IT Services, and hardware/infrastructure. Shrinking the footprint, or rationalization projects have big returns. They are complicated, often requiring a lot of change management focus with end-user constituents, but drive out complexity and costs permanently. They also prepare the IT organization to be much more nimble and responsive to future growth / change needs," advises EquaTerra’s Rick Bertheaud.
4. Improve scalability of cost structure
Constructing the appropriate cost structure is a crucial element in any shared services implementation; ensuring it’s still appropriate following the kind of economic trauma we’ve just witnessed is equally crucial…
"Presuming the organization successfully rationalized costs during the recession, it’s important that these costs aren’t merely added back in full during the recovery. Rather you want to make sure you understand the true fixed/variable cost model of your existing organization to understand what can/should be added back in the new environment that is truly volume-based/variable. Scalability can be accelerated through automation and outsourcing, but any model can be made more scalable through transparency/visibility to cost structure," says Bertheaud.
5. Stack up your BRICs
The increasing influence of the major emerging economies has been augmented significantly by recent developments, and the hitherto-unofficial BRIC (Brazil, Russia, India, China) grouping was taken to a new level in June this year with the four’s first summit meeting in Yekaterinburg. The provisions for service delivery from India and China hardly need highlighting here - however, the rise of the other half of the BRIC quartet poses some fascinating opportunities for those organizations looking to break new ground geographically through the expansion of their shared services elements. Large countries with a growing population of skilled workers and eager for foreign investment, both Russia and Brazil (the latter in particular) are certain to play hugely significant roles in the development of the next global economic order; while for many organizations establishing service delivery hubs in either country is not on the radar at present, those firms able to include either - or both - in their strategic roadmap for the next decade might well see remarkable benefits down the line.
"Brazil is the fifth-largest country in the world with over 190 million inhabitants and its economy is now in the global top ten. While virtually all other economies are shrinking, Brazil’s is stable and growing; it is expected to be the only major global economy to actually avoid recession," says Philip Wye of Ignition Investments.
6. Bring laggard elements of your SSO up to speed
Even the best-performing shared services organization will contain some elements that are worse than others - for a plethora of reasons. In order to fully capitalize on the opportunities that a recovery presents, it’s necessary for your SSO to perform as efficiently and as effectively as possible; that might mean bringing back-burner projects back onto the full flame, or conducting a clean-sheet review. Whatever the method, it’s imperative to fix anything that’s even slightly broken while there’s still some slack left in the system. You don’t want to be having to make major repairs when you’re flying at full speed.
"Recession is all about survival in an inactive market. Recovery is about survival and growth in a fiercely competitive market when everybody is looking to do the same. Inefficiencies, broken or worn out systems, processes and organizations can survive the reduced operational needs in a recession but fail when tested by the demands of recovery. So, now is the time to push ahead with improvements and fixes for underperforming areas of Shared Services, business processes and the systems that underpin them. New initiatives, that were shelved, need to be brought back into current plans. Anticipate the impact of the desired rate of business re-growth, establish a business case to make changes to get from today’s state to the productivity, performance and efficiency needed and push ahead. Businesses that aren’t ready to handle growth will find recovery harder to survive than recession," cautions independent shared services specialist Jim Whitworth.
7. Plan for the next recession
This might seem almost unpalatably depressing - but now, with lessons fresh in the mind, is the best time to prepare for the next bout of bad economic weather. Sure, you’ve got the recovery to prepare for - and indeed that must be your top priority - but setting aside a few manhours for reviewing what your organization’s just been through, and how it got through it, isn’t really asking a great deal when you consider how valuable that experience might prove a few years down the line. Remember: many of the people who navigated your organization through the downturn might not be on your payroll by the time the next recession kicks in - do you really want to lose all that vital knowledge for the sake of avoiding a few meetings and a couple of reports?
"Really think ahead past the recovery and what the shared services center can do for the next downturn. Determine what steps worked well during this downturn and what can be done better. Were decisions related to moving offshore with a captive or outsourcer put off? You need to effectively communicate with executive management to show the best option(s) for SSC cost-effectiveness to determine what can be implemented in your organization," advises Tom Schramm, EquaTerra Managing Director, Finance & Accounting.
8. Examine renegotiation options
As the economy has changed, so too might your organization’s requirements: contracts negotiated before or during the recession might be very different from what’s required now (especially with regards to those companies that had to downsize during the bad times, or those that have taken advantage of their competitors’ troubles to expand early). Obviously renegotiating agreements with suppliers isn’t an option for everyone - and is particularly unappetizing for those suppliers enjoying favorable terms in the new climate (and who might well have lost a lot of business during the downturn). However, for some organization’s now’s a good time to go back to the table. After all, the economic landscape has changed - in some areas very considerably - so why stick with contracts that might not be fit for purpose, if there’s a possibility of renegotiating to everyone’s satisfaction. Remember, too, that even suppliers enjoying very favorable terms indeed would want to think long and hard before ensuring that a currently profitable relationship terminates at the end of the contract simply because they weren’t willing to show a degree of flexibility when it was asked of them. (For more on this topic check out SSON’s Top Ten Tips for a Smooth Contract Renegotiation)
"Engage the supplier - it is often powerful for the message that the customer wants to renegotiate to be messaged as between senior execs, so that there is immediate supplier buy-in to the process. Then establishing well structured lines of communication makes sure that the process can be controlled and hit objectives and deadlines. Establish the objectives and keep to them… This avoids going off on tangents and should result in a quicker, and more fruitful renegotiation," recommends Duncan Pithouse, partner at DLA Piper.
9. Prepare to fight within the organization for capital
Just because your organization’s suddenly out of hock and back in the black, and there’s capital flowing back through the company’s veins, doesn’t necessarily mean that the SSO’s going to have an automatic entitlement to any of it. Every other element of the business will (probably) have been crying out for cash over the past year or two and they’ll all want a slice now the pie’s back on the table. Prepare robust business cases for everything you want to achieve - and be prepared to have many of your proposals rejected as other areas of the business scrabble for the same discretionary funding. You might not like it, but some of the stiffest competition you’ll ever face will come over the next few months and years - and from what’s supposed to be your own team.
"Captive back-office structures will be competing against sales, marketing, R&D and pretty much everyone else for the same dollars and cents," says independent financial expert Graeme Ludlow. "Further competition, of course, will come from external service providers looking to take some of that same capital outside the organization - but the more immediate competition will come from inside the business - and don’t forget that there will be a genuine business case for giving the money to the money-generators rather than the money-savers. It’s up to shared services to provide an equally genuine business case to convince the board to act otherwise."
10. Examine your personal opportunities
A controversial one to finish with (but a little controversy never hurt anyone… much…): having looked at ways your organization can prepare for the recovery, don’t forget there might be significant opportunities arising for you personally as the market improves. These could include possibilities of promotion, or relocation in-house to a more desirable city (or out of the city, if that appeals); there could also, however, be opportunities for you beyond your current employer as other firms look to spend some of their new recruitment dollars on your unique talent. Of course, if your current firm has any sense you’ll be well rewarded for staying put (especially after having helped the organization survive the downturn); nevertheless, it never hurts to be aware of what might be around the corner. Just don’t go tweeting about your job hunt - and watch out for those status updates…
"I’m definitely looking around," says one SSON member (who has, understandably, asked to remain anonymous). "I was looking before the downturn but then - the bottom fell out of the job market and it wasn’t the time to move on. Now I’ve done some surgery on my resume and I’ve started putting the word out. Might take a while but I’m confident."