Organization, Objectives and Relevance

Organization, Objectives and Relevance In the previous article we evaluated the factors (macroeconomic, IT and trends) that led to the surge of the Shared Services Organizations (SSO’s), a brief history and impacts of this phenomenon on the organizational level. This process of organizational transformation carries with it great expectation to attain what was initially planned. This in itself but also this reality is of particular interest to a scientifically driven case study. The results of this investigation can be valuable to organizations facing similar transformation as a management tool to understand the past, adjust the present and plan the future, as well as to the scientific community in general by contributing with new knowledge. Siemens’s Global Shared Services Specifically, the case study analyses the impact on the financial processes of an entity as a result of their migration to an SSO. The Siemens group was selected for the study, the fact that it’s a worldwide company with 343.000 employees, just shy of 72 billion Euros in consolidated revenue and 745 subsidiaries and associated companies under their belt (according to their fiscal year 2014 annual report) and possessing its own SSO, made it interesting to discover and learn how this industry giant processed its own financial transformation. Siemens’s SSO, the Global Shared Services is an internal supplier for a set of services which include finance and accounting, human resources, IT, E-Procurement, mobility and logistics. Conceived and then launched in 2006 with this defined portfolio and several centers worldwide, which process 40% of all Siemens volume for that range of services. By 2009, the GSS was an organization with a considerable dimension that had grown without any specific mandate, even though it possessed a good skill set with some of the best practices, the service portfolio was inconsistent with few global synergies between the several shared centers (SSC’s) due to lack of mandate and objectives. However, the situation turned when the Siemens board expressed clear expectations towards its SSO, to create global and functional synergies in terms of cost optimization, quality improvement, transparency in operations and processes and customer satisfaction. The corruption scandal that hit Siemens in late 2008 seemed to have rocked the organization, demanding increased compliance, transparency and efficiency for the future. A couple of years later, the GSS seems to have transformed, having a clear set of objectives for the years to come. In 2012, Dr Ralph P. Thomas, CFO of Siemens AG, presenting at the Friedrich-Alexander University in Nuremberg demonstrates this focus and trend based on industry leaders and also to the 2009 Shared Service Center Benchmark Study launched by the Hackett Group and the SSON. At this point, we also get a glimpse of the territorial organization, operational objectives and approach/methodology used by the Siemens SSO throughout its SSC’s. The established goals were important for the case study, since the analysis focus on the impact of the SSO (GSS), the goals set the reality that we can expect (before GSS migration vs after GSS migration) to find on the financial processes of a client entity. The approach used by the Siemens SSO, called "Lift-Drop-Change" is also is also of significant importance as it is the tactic chosen to achieve the set goals. In practical terms, a group of pre-defined activities are transferred from each client entity to the SSO organization within a short period of time (Lift-Drop) and then there, begin the process transformation, standardization, automation and optimization (Change). We’ll discuss this methodology, its advantages, disadvantages and its impact more in-depth in the coming articles. In any case, for those wishing to know more about the finance transformation undertaken by Siemens it’s highly advised the book "Finance Bundling and Finance Transformation" by Kai-Eberhard Lueg, Head of Finance Shared Services at Siemens. In terms of the physical organization of its SSC’s, the GSS uses a combination of regional and global models. In the first, regional SSC’s should control regional transactional activities for cost reduction and service standards with a local governance presence, this is the complemented with a Global SSC, which should be in charge of global transactional activities from regional SSC’s for additional cost reduction. In her interesting 2013 article "Three Steps to Global Shared Services: The Siemens Story", Anna Bowsher explained GSS’s strategy to become first a mandated internal supplier, reaching afterwards a world class level and becoming a preferred partner by the end of 2015. The article also includes an interview to Michael de Zeeuw, at the time CEO of the GSS were its reported that this SSO in 2013 was registering a staggering cost reduction, process improvement, transparency in operations and that this organization is growing significantly. Client entity The GSS client entity selected for the study was a manufacturing business unit with a history going back to the beginning of the XX century and which was acquired by Siemens in mid 2000’s. In 2011 the company migrated finance activities to the GSS. The investigation carried out at the entity followed a structured evaluation methodology of exploratory nature, using a defined set of variables to study the impact on the efficiency and effectiveness of the finance processes. The literature review done for the study, made it clear that a migration process like this one will have a range of positive organizational impacts and optimizations. Therefore, these positive impacts were tested in our case study entity by analysing it in different dimensions. These dimensions are Accounts Payable, Accounts Receivable, General Ledger, Operational Efficiency, Process Quality, Process Use, Process User, Financial, General, Communication and Alignment (more details about these metrics will be provided in the coming articles). The objectives were of the investigation were: · evaluate both the positive and negative impact of the SSO on the organizational reality and find solutions for the latter; · help the organization to understand and elaborate its strategic and operational management based on the results; · help the organization to improve its planning and decision ability based on the findings of the study. In the next article, we’ll describe the methodology used to analyse the process impact, its framework and temporal pertinence.

Organization, Objectives and Relevance

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