The Future Agendas of a Few Great Shared Services Leaders

Participants: Charlotte Makintosh Director, HR Professional Service Center Quintiles James Waters Director, Finance Shared Services Schneider National Keith Butterfield Director, Global HR Shared Services Caterpillar Chairperson: One of the key common phrases that I have heard over the last few days in speaking to all of you, has been transformation, I think that word has a different definition for all of us, depending on where you are, what stage you are with your shared services organisation. So I would actually like to start with Charlotte, I know in 2010 you are really focusing on transformation, what does this entail, what are the expected outcomes, and what do you see from there? Charlotte: For us the big change if you like is that we are a mature organisation, so we’re not worrying about the day-to-day operations, we don’t have the gun at our head with the 20% reduction type thing. Quintiles is a fast growing company, even in the current economic climate. A lot of the questions are how we are going to make that growth happen, without impacting the bottom line. So the HR shared service function is actually been a leader in terms of the shared service for the organisation. And what we are looking at very much is something that some of the organisations are already there, outsourcers are already there, it’s about ok, what is shared services, and let’s not just have HR services, and financial services and what is the skill set? Where is the next generation coming from, what on earth are we going to do to drive going forward in our particular organisation? Outsourcing in this moment in time for this organisation given culture and where we are at the moment is not an option, so we are focused captive shared services. And we are looking at, ok, let’s look at what the next generation of shared service looks like rather than worrying about HR, finance, and that type of thing. And my biggest challenge at the moment is looking at where we are going to get the next set of really good people. A lot of shared services people end up there by accident, they were in HR, and now they are in HR shared services, finance and finance shared services. But what we are finding is that we have got a dearth of different types of skills, they’re not coming from HR, and they’re not coming from finance. HR and finance don’t see shared services as a career, and when you’re in a captive then you have a problem in terms of persuading people that there is a career there. Those are long term options for people, so you don’t always necessarily get the best people, and you’re not getting the skill set that you want. And we are looking much more at trying to get some cross-fertilisation. If I can draw a parallel with a bigger organisation we are an outsourced company for the Pharma industry. And what happens there which adds vitality to both the Pharma industry and to our organisation is a cross-fertilisation of people coming in from Pharma, and us. They’ll come and work for us then they will go back out to Pharma, and what that does is, it broadens the skill set and gives people a different perspective. But because we are captive we just don’t have that cross-fertilisation with the BPO organisation, and that is actually where the skill sets are that we would perhaps wish to look for. Chairperson: Keith I wanted to ask you, you’ve also undergone significant change, you have recently moved your centre to Panama city in a very short timeframe. What is next for you, what do you see in the next five years? Keith: Well the thought of even having a five year plan is intriguing; I’d gotten away from thinking in terms of five years about the transformation of moving to Panama City. I think that is good advice for all of us, if we’re not doing that to get back to some five year futuristic thinking. The turn of the trough as we call it at Caterpillar for the recession, pick your favourite word, has been such that even with everything we have done, it wasn’t enough. We were still 40% too expensive, too costly, it’s what we had to take out of the company, and it’s what we had to take out of HR. Being a captive you talk about a deer in the headlights feeling, because I had not really thought about that in too long a time, and I think that is one of the things that has to be on the planning horizon, whether you are captive, sourced or a blend - is where are those players who are going to run the factory of HR, the factory of finance no matter where it comes from, because it is a special skill set, it has been fun and exciting to take ex PR guys like me and communicators learned a lot, but frankly there are some criterion and skills. I think that when I come to these conferences, I become even more convinced that we need to start investing in and growing. So that is part of one of the things that I take in rethinking a five year plan. I think the other thing that we will look at in Caterpillar, is more on a two year horizon, because at least for us, the way we emerge from the recession...will really in the next one to two years for us, we usually lag, we are a cyclical company so we will be sometime 2010/2011 when we start to really come back in a profound way. And for us the way we emerge will really determine how well we do over the five year glide-path. So we are about to make some fundamental decisions, decisions that even on the trough was very painful, we had really planned for that, it’s coming out in the recovery that I’m not so sure we planned for in this top line sales return, how we tick that G&A and keep it restrained and curtail because we have been very unsuccessful in doing that, that’s one of the things that we’re starting to talk about very diligently and obviously shared services is a big part of that. I observed in the talk that I gave; everybody in Caterpillar in the back office wants to wear a t-shirt that calls themselves shared services, now whether they fit the definition criteria is another discussion. I do believe in HR, we have been at it long enough to know what it is and what it isn’t. But we’re going to have to help our finance people who aren’t as far along as Caterpillar, purchasing and IT in their own growth journey. Then just the last thought, the five year journey for us will absolutely require us to look down the barrel of multi-function shared services, and truly decide is it right for us? And if so, how are we going to do it? Personal opinion, I think it is right for us when you look at the people, and the technology piece, the process may be somewhat different. If you’re going to grow your franchise players why wouldn’t you want to grow them with some multifunctional capability? Chairperson: Great, thank you very much. So the next question is for James, you’re also in the middle of a transformation, really focusing on end-to-end processes. I know you’re looking at hiring to retire, procure-to- pay and things like that - how will this allow you in terms of continuing to move up the value chain within the organisation? James: At Schneider we have been building the foundation for what I would say is the longer term vision for multi-shared services organisation. In today’s environment we have finance, shared services organisation, HR and IT, they’re all separate. What this time has allowed us to do is really get an understanding of how we benchmark against other organisation, we have taken a deep dive into process innovation work, we have taken a look at where do we want to be on that process maturity continuum. Because, not every process is going to deliver value to us depending on where we are at on that continuum. So we have spent a lot time over the last year building out our process maps and focusing on innovating within those processes, and then within the last year we have actually started to deliver the technology. So we are actually in the process of retiring several hundred legacy applications, and moving them to a much more integrated ERP environment which is really new for us. And I would say that it’s foundational for longer term growth, we have a lot of work ahead of us still, the rest of this year, and into next. We have things like expanding our collections outsourcing strategy, we bring up our order-to- cash - the rest of our order-to-cash processes at the end of the year. We are at the process of training shared service people in lean six sigma from a continuous improvement in that prospective. And then longer term - it’s going to enable us to expand our scope, into things like, well we know that we are going to be bringing up China, Europe and Mexico business units into our Oracle systems in 2011. It creates opportunities for us to bring on general accounting, some of our claims processing; there’s an infinite number of areas within our organisation that are right for shared services so, the last couple of years have been foundational, we just have a lot of opportunity to move forward. Attendee: My question basically is for organisations that might be centralised domestically, but decentralised internationally and perhaps don’t have the top-down support to tackle those individual type business units. Do you have any suggestions on breaking down the barrier for that? Charlotte: Well we had, we didn’t find it easy, and I mean we have been in operation for eight years. We started off by calling ourselves global, but the reality was that we were US, Canada, UK and Ireland, and that was it. Again it depends more on what the driver is, but we were really sneaky about it, just kept on biting bits off and being very opportunistic about where we saw possibilities, and we weren’t to choosy at the beginning either, when ever we saw an opportunity we put our foot through the door. One of the things that we found as well was rather than trying to deal with a myriad of possibilities, there’s usually some kind of grouping. That gave us a global footprint all of a sudden, countries that had never heard of shared services, so we did that piece there, we were like one percent awareness or something at that point, and still global we could still say that we were global. And then we started to work and develop some partnerships with some of the other people in HR in different countries, sort of friendlies if you like, and we would develop that relationship as far as we could with that, and it started to be early adopters and spread the word. So, if you’ve got the opportunity, sometimes it just takes a long time. You’ve got to create enough forward momentum that eventually you get to a certain point where everything just tipped over. And at that time the thing that you have got to be prepared for is, the people delusioning you for requests to do this, and this and this. That can be just as difficult to deal with, with people thinking that you’re not even there. But sometimes you have just got to be patient, and underlying that we went and did a lot of work in terms of the things that we could do, the things that we could control. So for example for us, it was getting our HR database rolled out across the world, and again we did that in a very opportunistic way, but we did it. That meant that we immediately had the foundation there and we could build on that, so you have got to be a little bit sneaky, be a bit creative, and be a bit opportunistic. And sometimes you have got to be patient, because if the drivers are not there, then the organisation is not there. Keith: We have taken a lot of approaches, I guess I can share with you a variety; some have succeeded better than others as we have gone global, and this metaphor analogy maybe doesn’t work as well. I am looking at the demographics, do any of you remember the ‘Life cereal’ commercial years ago, where Mickey wouldn’t eat the cereal, if you don’t I wish I was as young as you, but I remember it well. https://www.youtube.com/watch?v=vYEXzx-TINc Mickey was a picky eater and he wouldn’t eat the Life cereal and the kids at the table said well Mickey won’t eat anything, so we had a lot of Mickey’s in our organisation at Caterpillar. They were really entrenched, so we did pick a few Mickey’s and if we could get them to be the early adopters and the pilots, then the others would suddenly go, my goodness there must be something there that I am missing. And it’s kind of your peoples’ soft-light approach, unfortunately in an organisation like our where we want to gain commitment, buy in and we want people to feel good about their decisions. That’s great as long as times are good, but maybe not as good, because you are still short-changing your shareholders. At the peak of the cycle, Caterpillar still didn’t return profitability that we really should have, and it was part of that molly-coddling all of the Mickey’s in the organisation. So when the trough came last November it wasn’t about getting the people to gain commitment it was about mandating compliance, and we still had people, ‘no my business it’s hurting I still see it yet’, we diversified enough so that there was some variability before we went into it, and we did just basically say this is unprecedented, it’s not negotiable, we’re going to do it and that’s the approach that we took in the US. We probably quantum leaped in the US, our transformation here in one year, six months, what would’ve in normal Mickey times have taken two or three budget cycles. Now, Europe, Asia-Pacific is quite different. Asia-Pacific Caterpillar is growing rapidly; it’s really where a lot of our future lies. For whatever reason Asia-Pacific you don’t have to really worry about ‘Life cereal’, they are new employees for us, they are eager , they are excited, they have a hunger for learning, they have as long as you are career-pathing, working on job titles, there are all kinds of things that you have to be sensitive to. They’re going to be early adapters; in fact they are going to run circles around the US. In Europe, they didn’t see the Life cereal commercial I am sure, but they’re still very much believing that every country is a boundary, of which the opportunity for leveraging in common scales stops. But what we have got to do now at Caterpillar is go back, and even though we are doing shared services, doing leverage transactions in Peterborough for all of the UK and some of the continent. We still have a lot of transactions on the continent that aren’t being done through a standard shared services approach, so if anyone has got an idea on how to do that, I’d like to buy you lunch or something. That is all I can afford now on the trough that is still one of the untapped potentials for me on this job. James: I would say that in our experience we have the opposite ends of the spectrum between Europe and Asia, like Caterpillar, we are growing rapidly in Asia and I think that most of the leaders in my north American shared services operation have thought that that would be the next generation. We have children that are learning mandarin, and we are thinking that won’t be our problem, our kids will have to run that shared services. China is pushing us, and we have had to learn how to count to one to ten in mandarin, and how to say hello. So we can’t run fast enough in China, they want our help, they see our success in the North American markets so, and they’re asking to tap into that. There is this enterprise transformation that’s taking place that doesn’t bring them online until 2011, so we are trying to come up with innovative ways to help them, then at the opposite end of the spectrum within Europe; we had set up a captive shared services in the Czech Republic in 2004. Primarily we leveraged that location for labour arbitrage, in terms of getting work done through our legacy systems, knowing that we were going to replace it with different processes and technologies. And what we recently did a few months ago was that we sold that captive shared service center to E-Excel service, and entered an agreement where they are taking that over. And they are going to provide ongoing business process support for us, so that area has actually matured, and they are starting to set the stage how they are going to leverage that technology to support us. But they will also be supporting other customers from that location as well. So from my perspective we can’t move fast enough because they are begging to tap into some of the successes that we have already had in North America. Charlotte: I will make that unanimous; we were exactly the same with that region as well. It’s not an issue there. Attendee: I think you touched a little bit on it, when you are rolling out shared services globally or to outside of North America, how do you deal with the Multilanguage issues, as well as the statutory requirements. Charlotte: Again, we have had to tackle that in two ways, first of all we have two halves of the business, and in the clinical half of the business they all have to speak English, so that is not an issue. We don’t have multilingual issues on that site. On the other half of the business, the commercialisation, we don’t, but again in the Asia region it isn’t an issue, they all speak English. The area that we have issue with is, Latin South America and parts of Europe. And what we did is that we prioritised the languages that we had to get, so we have got Spanish, Portuguese, German and Italian. And that is all we have discovered we needed, but that is our organisation, I can’t talk about anyone else’s, but what we are talking about is sales people in Europe, and those are the languages that are needed. Now, when it comes to Eastern Europe, then again you’re in a whole other ball-park, we found that German was very helpful there, but in some countries what we have had to do was set up mini contact points in the country so that they can deal with the language issues, but again, a lot of what we do is by email or by self-service transaction. Some of our tools are translated into local language, so they need to be, otherwise they can still send things into us in local language, and we can translate it. And again it’s about how standard your processes are, or if there’s lots of ad hoc that you have to deal with, so we have actually got multiple approaches depending on what the processes is and what country it is, and I think that again, because we are not huge, because we have not got a huge shared service centre. We have got three hubs, and we are not huge. So we don’t have the capacity to have many languages, again we are also lucky because the size and the spread of our organisation, we had a multilingual call centre, in our organisation, and that’s how we could always get something translated. Or if there was some kind of issue that we hadn’t picked up. It’s not ideal, but what we have discovered is the reality, with all of the self service systems, and other pieces that we have, in place which are sort of self help rather than requiring contact, the number of issues that we have per year where there’s a language issue that we have to deal with is less than twenty in a year, and that is with 25,000 employees worldwide, so it has worked. The approach that we have taken has worked for the organisation. In terms of the statutory legalities we have, we leverage local expertise but they are formally identified as being experts for a particular activity. Again we are not big enough to have our own little group of legal experts, but we have the expertise within the company, and we know who those people are, and they know who they are as well, and what the expectations are of them. Keith: I think language starts out being a bigger challenge in our minds that it really becomes; yes you have to do some translating in people soft in some things like that. But if you look at it from our context and centre environment, the greater percentage of the transactions are really being done electronically as opposed to the phone. Now at some point if we are doing transactions for our Belgian plant in the UK, would it be nice to have someone who speaks French to, yes it would be nice and it’s probably at a start up, a desirable, were talking about that for next year. So I will need to make sure that we have the budgetary ware that we need to have, some language capability initially, but what we found is once we have found that and transitioned into a more steady state. Less and less of that is dependent on the spoken word, as opposed to being able to communicate just in English, by and large pretty common and ok to communicate in. When we started the service centre in Panama, we had a lot of English language capability there that we leveraged, because the US had such a strong presence there for so many years, and then of course Spanish is prevalent. If we expand Panama out to Brazil with Portuguese that is going to be interesting for a while and that would be part of our five year plan, as it were. Statutory, I agree with what Charlotte said, you have to use local expertise; the thing we’ve allowed ourselves to do until recently is sometimes take some of that local expertises advice too seriously. Some were insisting that Peterborough could not enter contingent workforce data on the system in the UK because it was safe harbour , all kinds of things were being thrown up in emails, and escalation , and I just kept saying it can’t be right. We could have run all of these transactions out of India five years ago, if we so chose, so I don’t accept it. That’s again, five years ago I would have said well an attorney in Belgium is telling me that I can’t do this, and I probably would have accepted it. Today I think you need to push back sometimes, that’s kind of like, what’s real and what’s imagined. And finally the attorneys in Belgium, say yes, you can do it, there is a little bit of risk in our opinion.. So, it is sad that it comes to that. Sometimes, but people are trying to protect the company, so they all have the right motivations. But the statutory bogey man, is not as big as sometimes I think we are led to believe. James: And I would agree with that, we leverage it through a local organisations through technology and language really has not been a barrier for us. In fact one of the attractive points of our captive shared service in the Czech Republic was the fact that we had so many different languages represented there. That was the reason that E-Excel service was so interested in acquiring it. But with China which our biggest challenge has been record keeping, book keeping, formats are difficult to interpret so we have kind of run circles around making sure that the information is accurate, and that we can explain it. But then again we have people from both sides who can translate and work through those issues. Attendee: More of a comment than a question, but as a provider what we are being challenged to do in businesses processes is working with our client, is to design the processes, to minimise the impact of language, to make them not language dependent, so you have fewer of those highly skilled resources in the business. And that’s the challenge that we are dealing with on a daily basis. Attendee: What if the trough turns out to be, the l-shaped curve, but essentially flat, what do you do differently? Keith: Well you used the Caterpillar term, so I guess you are directing that at me. We’re still saying that that could be the case, but we think it is less and less likely. But we are still publicly saying, that could be what we are in for. What we’re talking about again, is coming out of this in a way that we have never done before, which is as those top line sales grow, our G and A costs cannot grow, in fact we’ve got to make do in the back office basically with what we have got. So it’s going to be re-aligning resources, we’ll probably put more cost, what little we can in Asia, and China and that region, and in the developed parts of the world, we are what we are and maybe a little less. James: From our perspective we have been in what we call a freight recession since 2005, so we have become very accustomed to operating in this type of environment. On one hand it would kind of be a little bit of relief for us and our technology roadmap, to not have such a quick up-tick because, we are still getting ready for that up-tick and we are still getting ready to leverage that. We’ll deal with it either way, but on one hand from a technology perspective we’d like to be fully in our new process as we take advantage of our that growth opportunity. In the mean-time our Asian businesses and our European businesses are growing rapidly, so they have been able to offset some of the freight demand issues that we have had in the US. The issues from the US have not been about volumes, volumes have grown but there has been such price deflation pressure, that that has been our biggest issue. So we are really trying to set the stage for being able to take advantage of that up-tick when it does come, and it probably will be well overdue in our market. Charlotte: We are an outsourcing company for the Pharmaceutical industry, the Pharmaceutical industry has been hit by the downturn, but by many other negative factors as well, we are actually the beneficiaries of that, because they are actually looking to reduce their costs, and therefore are looking to outsource to us. Having said that we are also a very careful company, so we have been looking at our costs, and still doing all the safe things that you need to do in a downturn. We have been wondering whether we are going to get cancellations and all the rest of it, but that so far hasn’t turned out to be the case, and we don’t really expect it to you expect that if anything will benefit from the outsourcing. Interestingly the one piece that we are doing, that we are working on, to guard against whatever way the market goes in the longer term, it refers back to the conversations that were going on this morning about contracting, and the other discussion on how that contract should work. I was actually surprised not to see Quintiles up on that list of the top twenty five negotiators, because we are right at the forefront of working in partnership with our Pharmaceutical customers. And taking onboard some of the risk, in terms of the work we are doing with them, and contracting in a much more flexible manner, and basically in a partnership type approach. So first of all, I am hoping that we are not going to have that issue to deal with, but also we are trying to learn from how the business is doing its business, and actually even though we are captive, to take onboard that to how we deal with some of our customers. And actually, it’s amazing how much we can learn, I learned a lot from that contacts discussion, even though I am captive. There’s a lot of ideas there that I would take away, that I’ve seen already going on within my organisation. Chairperson: How are you using and enabling technologies to retain your competitive edge? You touched on it a little earlier. James: We have some pretty exciting capabilities that I didn’t talk about. In the transportation industry, we are pretty reliant on paper documents. Our customer’s require signed documents and a myriad of different documents in order to get paid. We were the first North American truckload carrier to implement satellite technology back in 1986, so we got drivers off the phone, and we started to send work assignments those types of things back then through that technology. Well now it’s coming as we’re implementing that third or fourth generation of technology, and one of the capabilities that we are going to get is the in cap scanning; so our drivers who are out there delivering will be scanning documents in the truck that they are in, then transmitting those to us in the back office, so those are some things that are going to allow us to speed up our code- to -cash, lifecycle to bring in cash faster, so we’re pretty excited by that. Keith: Well we’re well down the path with manager self-serve, but I think that everybody’s doing that I would think, and if you’re not you should. We have a vision for that again I think that things in people’s minds about the barriers to achieving that are greater than they really are. We found with our production workforce, about half of our 92,000 workers are production workers in the shop, they have really not been a barrier. They have told us that 85% of them generally have access to a computer either at home or work, or both, and they prefer to do their transactions online. So, if that was a shock to us and we pushed in self serve with the employees, much more aggressively after we learned that. Managers are still viewing self serve as unfortunately doing HR’s work, so to get that technology where it needs to be, we have got to shift that mindset that that’s a leadership imperative at Caterpillar, that’s part of being a leader is taking care of your employees. In those sorts of ways, whether it be succession planning, performance management, all the big strategic things that you need to do on behalf of your employees, and on behalf of the enterprise. But we’re probably still at least, especially outside the US, at least three to five years away from the visionary state being achieved. [eventpdf]

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