The China Syndrome
Standardization creates cascading benefits for shared services stakeholders
With large, global operations come complexities, costs, and sometimes, stagnation. How can a high-value company with worldwide presence stay on top of its game – and how can it compete successfully in a market as complex as China’s? At ABB, the current strategy is to have an SSO for each of the major countries that the company operates in. Today that amounts to 40! Vincent Lim, Head of Shared Services (China) for ABB China Limited explains
Sarah Ye: Vincent, can you introduce your SSO model, and explain what your strategy is currently focusing on?
Vincent Lim: Yes, gladly. Every organization is different. Some companies tend to be more centralized while some global companies tend to be more decentralized. The model that is adapted by ABB reflects the culture and the nature of the ABB group as a whole. In our model, our headquarters in Zurich, Switzerland, decides on the global solutions and each country is given a free hand to decide on how they intend to implement the proposed solutions. With that, we now have a setup whereby each major country has its own Shared Service Organization (SSO). To date, we have close to 40 SSOs worldwide including China, USA, Sweden, Germany, UK, Australia and of course, Switzerland.
Can you brief us on the key milestones of your Shared Services business and your progression – locally and globally? What have you learned?
As discussed earlier, we set the standard and solutions to be implemented globally. Because of this, we have reduced the number of ERP systems we have among the different ABB companies worldwide. The Shared Services projects are implemented in parallel with our ERP projects, so while we are consolidating our accounting operations, we are also standardizing our ERP platform at the same time. As a result, we have successfully reduced the fragmented nature of the ERP system and the complexities that come with it. We currently are unable to reduce it to one but we have significantly reduced it to a handful so it’s a major achievement for us, globally.
The same thing happens in China, where I am located. The projects started for us in 2006. Since then, we worked on coming up with a common ERP platform for more than 30 factories in China. By 2009, we succeeded in standardizing all the 30+ factories’ ERP platforms. At the same time, we integrated accounting operations to the Shared Services organization.
Through these Shared Services projects, we have learned a few important lessons. One is that, for any organization that wants to implement Shared Services, there must be top management support. As a program that entails big changes, people will raise serious questions and doubts. If the support from top management is shaky, this kind of hurdle will be very difficult to overcome. So a very strong message from the global headquarters in Zurich and an equally strong message from top management of ABB China are very important for us to ease doubts from the local unit as we do the implementation.
Secondly, I think it is very important that we choose the right implementation approach. I think that applies not just to ABB but other companies as well. Each company is different so they have to find an approach that is suitable for them. In our case, I think the global headquarters have chosen the right approach, which reflects the rather decentralized nature of our organization.
Each country is given a free hand to decide on how to achieve their objectives; of course, following certain guidelines that have been laid out. If we had adapted a different approach whereby everything was dictated by a central unit and all costs were charged to local units and the countries did not have enough leeway, I don’t think this would have proven a successful approach. Fortunately, I think the management of ABB understands the global organization very well.
The people aspect is also very important. If it’s not managed properly, then it could be destructive to the organization as people will be worried about losing their jobs or being transferred to an unfamiliar environment. It is imperative that manpower planning be handled appropriately.
What does "Shared Services & Outsourcing" mean to your business? Can you share some success stories?
My views on Shared Services & Outsourcing are based on company strategy. Some companies go on a full outsourcing approach, whereby everything is outsourced. Some companies view certain support operations as something important to their strategy so they are quite reluctant to outsource as much. In the case of ABB, we are using an approach that allows us to have control of our operations while selectively outsourcing certain aspects of accounting transaction processing work that are not that critical and where it makes business sense.
Globally, we have outsourced our scanning and Optical Character Recognition (OCR) work to a company called Recall, which is working out pretty well. We are also looking at the possibility of doing more in this area but like I mentioned in the beginning, it really depends on the overall strategy of the company and how outsourcing fits into that strategy.
How are you driving ‘Operational Excellence’ in your SSO? Are you using any Lean, Six Sigma or similar methodologies to improve efficiency?
There are different names to different improvement methodologies. However, it all boils down to the same objective: to find an area where we can improve upon, come out with some action plans, take action and improve.
We, at ABB, have our own internal methodology. We call it ‘4Q’. I don’t want to go into detail but essentially, it serves a similar purpose as any other improvement methodology. Our own 4Q, which was created by our Quality department, is very effective, very useful and very simple. We also work with a benchmarking institution to identify how well we are doing compared to others and from there, it triggers further actions on improvements. We are periodically reviewing our end-to-end processes with the intention of bringing our organization to world class standards.
How would you describe your SSO strategy in 3-5 years time? What are your future plans?
The first priority is to continue to optimize our processes and increase our productivity. We are constantly looking for ways to deliver world-class KPIs. The other part of the strategy, which we will be working on in 3 to 5 years’ time, is to expand our service offering. I mentioned earlier that ABB has a Shared Services organization in every major country that we’re in. The next step is to lump these countries together as regions. With this in place, we will review the possibility of having a regional center. In a way, it’s a regionalization move.
We will also continue to explore the benefits of outsourcing and identify opportunities that we can leverage while retaining ownership and control over key transaction processing operations. There will be a point where we will have to start moving up the value chain. By being familiar with the end-to-end processes, we may be able to see certain parts of the processes that are not really designed optimally or are not being done in the best manner. If we can tweak or change certain way of doing things, we may be able to save significant costs and move towards a consulting related kind of work.