The Crisis: Six Months In (Part 2: Organizations Respond)
Half a year on from the collapse of Lehman Bros and the conservatorship of Fannie Mae and Freddie Mac, the global economy faces challenges the like of which has not been seen for decades. How has the business world responded? How have organizations reacted to these sudden and dramatic pressures? How have SSON members in particular reacted to the tremors rumbling through the shared services and outsourcing arena?
In the second installment of our three-part series commemorating six months that changed the world, we present responses from the SSON community to a simple question:
How has the crisis impacted upon your own organization?
(To read the first article in this series, click here.)
VP Global Financial Shared Services, Coca-Cola Enterprises
At CCE our SSO always manages to a long-term business case segmented into a series of tactical plans. The economic downturn has placed an even greater emphasis upon achieving the financial results embedded in those plans. We have not however altered course from an operational perspective. What we have experienced is an increase in requests for information and reporting to assist in managing the company's core business. This includes expense management, working capital analysis, and detailed functional and segment forecasts.
Overall our six-month plans are to stay the course while continuously seeking to expand our service portfolio and leverage our existing investment.
Principal, Deloitte Consulting LLP
We have aggressively implemented shared services across all support functions and are continuing to expand and refine our model to respond to current economic conditions. Like our clients, we continually review our shared service operations for improvement opportunities and ways to expand our capabilities and services to our internal customers.
The way the focus on cost reduction has affected our own business is interesting, because it reflects the great diversity of shared services cost-reduction opportunities that can exist. We’ve been helping companies in their efforts to do everything from develop an SSO location strategy to pursue incentives to rationalize headcount to streamline processes and technology – there’s a wide range of possible steps that can help improve an SSO’s cost/benefit profile.
Prof. Dr. Soeren Dressler
Director, Offshoring Institute
As we are a research and consulting provider we have seen a steep increase of demand for location data. We have been busy like hell in Jan and Feb as so many companies were looking for location assessments – from our perspective an indications on how strong the interest is to be prepared for relocations as soon as the crisis settles. Some large-scale corporations which had location assessments pending for more than two years came back and were looking for updates on data. Also, we heard a couple of times in conversations with companies things like "there are no sacred cows anymore"; "BPO is a topic to be discussed openly"; "We need to find way to make fix costs variable"; "the CFO is asking for even more cost reductions – we have to go offshore" – the rules of the game are being newly defined.
Manager Business Development, Oxfordshire Shared Services
We will be looking at further opportunities to reduce internal operating costs. Shared services can make a siginificant contribution to that. Options include moving more non-core services to shared services from operational areas and earning revenue by offering services to external organisations.
Vice President of Global Sales & Marketing, LawScribe
Over the last six months we have struggled to keep pace with the increasing number of RFPs coming through the door, as legal departments increasingly compel their outside counsel to utilize LPO for certainly large scale document review projects. We have also witnessed increased demand for services pertaining specifically to the financial crisis itself, such as foreclosure defence and bankruptcy related work.
Research Director, Everest Research Institute
Some of the trends outlined above are causing some impact on our business as well. Client decisions are moving more slowly so building a project pipeline takes more time and effort than it would have previously. We are also orienting our services to address those issues that are most in demand during the crisis, i.e., things which help inform decisions with near-term impact.
CEO, Carisma RCT
First, let me clarify two points to set my response in context. Carisma RCT falls within the Small Business definition; and our core offering within the outsourcing and shared services space is improvement through redesign of business models, strategies and operations. That said: the most obvious impact we’ve seen on our own business is probably no different than many others have seen too in our sector: quite a few negotiations have been brought to a premature end due to unforeseen lack of funds and there is a generally tighter control of project cost-benefits due to increased accountability of project sponsors.
Having said that, if I was asked to identify one good thing about this global economic meltdown, it’d be that losing money, facing budget cuts and fearing failure make businesses more likely to try and improve and optimise whatever they can in order to squeeze every possible penny out of what they currently do/have. This often results in either one or both of these two scenarios: initiate process improvement projects, outsource non-core processes (or do both).
In the short time, decreasing revenue, decreasing profit margins and limited working capital available (in both larger and smaller businesses), is driving executives to prioritise process efficiency through business process re-design as it has the potential to generate benefit quickly. Which is melody to our ears, of course!
In addition, in desperate pursuit of cost savings, even multibillion dollar corporations are starting to favour the higher nimbleness and speed of delivery and lower cost base of smaller business services firms to the rigidity and higher costs of the usual well known names in consulting. Which again, doesn’t sound too bad at all to us!
In other words, all this indicates that this dark cloud of recession actually offers a silver lining to our business. There are opportunities now for us to work with forward looking (small and large) businesses (on both end of the outsourcing relationship – i.e. supplier and clients) which understand that, in order to survive this crisis and to come out on top, now is the time to go back to the basics, i.e. the process design, and are ready to support targeted investments in improvement, innovation and development. Spending at times where the cash is the hardest thing to get by may seem illogical, as many businesses out there seem to believe so strongly. The only comment I can make about this is: let’s wait and see what will happen to these businesses in a year time.
Thomas Tunstall, Ph.D.
Advisory Liaison, ACS
Market pressures continue to drive the need for ACS’ services. But, generally, services providers’ business growth is counter-cyclical to the overall economy so companies like ACS tend to do well in uncertain economies. Financial management is a hallmark of ACS. We have a solid, defensible business model that can grow during uncertain economic conditions.
In fact, managing during tough economic times is the way ACS operates – it’s part of our value proposition and why clients turn to us as a trusted advisor. Now more than ever, clients are turning to us to help them implement innovative solutions and strategies that will enable them to grow and perhaps prosper in this climate.
By helping clients increase efficiencies, reduce overall expenses, improve the services they offer their customers and increase competitiveness, we’re helping them emerge from this crisis in a stronger position and with a competitive advantage.
HR Service Delivery Manager WEMEA, Avon Products
Like most, we have a monthly rental charge, then pay as you go over and above the baseline so we are very conscious of all the transactional work that we send to our provider, but it's of course in heightened proportions in these bumpy times.
It's made us interrogate our processes again to make sure that we do the task in the minimum amount of steps and as infrequently as possible. This is never a bad thing. It also happens to be our mentality in the Service Delivery team, so is done in the spirit of continuos improvement - which we are always striving for.
So, every cloud has a silver lining and we have found that some of the process changes that we may not have previously had success with in the change management area, have become easier to enforce as we are able to carry a bit of weight behind us and leverage the finance constraints.
Director, Decision Support, Integrys Energy Group
A planned addition of a Lean/Six Sigma black belt position in my group has been cut from our budget. More dramatically, the just announced down-sizing and/or potential complete divestiture of one of our internal business partner business units which accounts for about 7% of our shared services internal "revenue" will bring additional pressure on cost cutting, even though many of the costs be charged to that business units are simply an allocation of fixed costs such as Investor Relations. We also continue to have challenges with an shared services organizational design that has six "C" level positions leading functions within the shared services entity with no single point of accountability or authority short of the holding company CEO. Getting each group to "give their fair share" in any cost reduction initiative is a challenge.
Talent Acquisition Diva
The shared services group (focused on contingency workforce solutions) that I began running in June 2008, for a $13-billion global holding company, folded only months later because the individual agencies could not fund it... and the parent company would not. The short-term value was too little, and the long-term gains had yet to be defined. But it speaks volumes to the mindset of the Wall Street-controlled CEO that the risk was not worth the wait.
Alan Hamzah Sendut
Group Head/SVP Global Services Centre, Sime Darby Berhad
My company has adopted two strategies. Projects that are deemed to be transformational and strategic are taking advantage of the economic volatility to drive change that will enable the company to be more competitive and effective post the turnaround. In general, budgets for the transformational and strategic projects have been preserved. Other parts of the operations, especially the marketing and manufacturing organisations, are undertaking cost-cutting measures - the severity of which is dependent on the global impact in their respective sectors.
Notwithstanding the generous support given to our "next generation" shared service project roll-out, we ourselves are prioritising our implementation efforts and spend on low-hanging fruits and on activities that can deliver genuine higher productivity for the organisation. Internally, we are also reviewing our departmental expenditure and we are driving our team leaders to seek out greater value and efficiencies via 6Sigma initiatives and by reviewing and squeezing better value from the current services received from our vendors.
Chief Operating Officer, Steria UK
I believe the most effective approach to strategic sourcing partnerships is with an integrated offshore-onshore model. The particular challenges presented by the current economic climate have heightened interest in Steria’s process. Organisations are looking for the cost and efficiency savings enabled by offshore delivery and shared services, but they also want the reassurance of a regional or even onsite presence that responds at an immediate level to what’s going on locally.
Head of the Technology, Sourcing and Commercial Group, DLA Piper
We are fortunate, as legal advisors, that we have inputs at every stage of the lifecycle of these kinds of projects, on a "cradle to grave" basis. We will frequently also be asked to assist our clients with strategic renegotiations of ongoing deals, e.g. so as to achieve additional cost savings or adjust service priorities. Accordingly, our technology and sourcing practice remains relatively buoyant (although our colleagues in corporate, banking and real estate are no doubt quieter than they would like!)...
(These comments, representative as they are, are of course only a drop in the ocean: we’re keen to get your thoughts too, so why not write to the editor to give your own feedback? We’ll follow up with some more of your thoughts in a couple of weeks.)