Transforming the "Transformations Structure" in F&A Shared Services Centers
Most finance and accounting Shared Services Organizations (SSO) have evolved over a period of time and are increasingly viewed – by their respective parent units – as a key partner to optimize processes. This has led to emergence of transformation or process excellence functions with a mandate to execute process efficiencies (FTE savings) by adopting improvement initiatives for lowering operating costs and passing on the accruing benefits to their respective parent units.
The morphing of SSOs from a linear model to a hybrid model combining SSO and BPO (business process outsourcing) as well as establishing centers in emerging low cost destinations like Eastern Europe, China, Philippines and Latin America represents a new phase in shared services’ evolution. Hence the SSO’s are shifting gears to expand their footprints in order to widen the scope of process transformations and enable process management.
However, there are some key points that lie beneath the banner of process transformations and that merit closer introspection.
1. The first point relates to the structure of transformations teams within SSCs. The predictable patterns which exist are detailed below:
- transformations team as a sub-unit of service delivery
- stand-alone transformations teams with a separate Head
- transformations embedded in process excellence teams
- local (reporting to shared service management) and central (reporting to management of parent unit) transformation teams
- project based teams to deliver on process transformations
Some SSOs leverage a matrix structure while others may prefer to organize their transformation teams along the lines of a functional structure. How about evaluating transformations structures in the context of structural ambidexterity vs. contextual ambidexterity? The relevance of structure enabling the success of business level or corporate level strategy cannot be isolated while defining the transformations structure.
2. The second point relates to nomenclature used to denote transformations. Terms like "continuous improvement, process improvements, re-engineering, process excellence, process solutioning and change management" all get associated with the transformations umbrella, thereby undermining the subtle characteristics, mindsets and skill sets which are inherent in these labels. They may fan high expectations internally and with stakeholders, but the resulting efforts could betray these high expectations.
3. The third point relates to the process of defining the agenda for transformations. The agenda is largely centered on a top-down approach and devised by the Head located either in the parent unit or within the shared services center. In some scenarios the agenda is frozen by the management board that is located in the corporate headquarters and handed over to the transformation function for execution in the shared services center. There is little evidence of a bottom-up approach by seeking inputs from customer-facing employees at the junior level and shaping the agenda. Also the culture of an IDEA generation and evaluation framework is loosely anchored within most shared services centers. John Kotter in "Why Transformation Efforts Fail" (Harvard Business Review) defines "forming a powerful guiding coalition" as one of the key steps in making transformation efforts successful. As a result most transformation projects are perceived as a silo driven approach by the employees and thereby lack the pull factor to anchor change in the shared services centers. Another critical aspect that has low importance is to conduct a study and evaluate the merits of outsourcing certain processes rather than incur investments by keeping it within the shared service centers.
4. The fourth point relates to the nature of the transformations. A majority of the transformation efforts are deeply rooted in upgrading the ERP platforms and integrating new functional modules. A proper evaluation needs to be conducted on the processes followed by standardization and then automation. Otherwise the desire to automate may lead to automation of existing waste in the respective processes and a poor return on investments. There are feeble attempts to "walk the talk" on wing-to-wing process improvements (instead of streamlining accounts payable there is merit in mapping the entire vendor invoice management work stream). The Gartner FAO Report (2011) has a note of caution on a trend that is fast catching up in most shared services centers today by investing in certain "bolt on tools like scanning systems, workflows, and portal views of databases to streamline and supplement existing ERP systems". As per Gartner: shared services centers should not assume that these tools are "robust and have more than 18 months longevity." The value propositions of transformations may further be increased by establishing and nurturing industry-specific relationships which is a missing link within existing transformations teams. The concepts of innovation and research labs are absent and hence limit the spread and connect of innovations. Also shared services centers need to factor the emergence of cloud based solutions and robotic automations (refer to "IT Robots may mean the end of Offshore Outsourcing"@www.cio.com) in their transformations journey.
5. The fifth point relates to metrics for the transformation teams. Most of the metrics are governed by efficiency gains (decrease in headcount), improvement in turn time, and eliminating defects. There is negligible evidence of including benchmarking data to validate whether the transformation was good or bad. The pointers related to effectiveness of transformations (examples like penetration of automation, usage of new modules or systems by end users, NPV-net present value of transformational projects, outages on systems or new modules etc.) are yet to be rooted in the centers. Some modules or systems have in-built data quality modules and dashboards that provide meaningful intelligence however lack integration with overall success measures.
6. The sixth point relates to talent within the transformations teams. Most shared services centers leverage a blend of internal talent including domain experts in accounts payables, order to cash and accounting to reporting, six sigma resources, project management professionals and subject matter experts to drive the transformations agenda. This could endanger the transformations teams to leverage external perspectives and fresh pair of eyes who may not be financial domain experts however possess rich experience in executing transformations in other industry segments. The role of "change agents" and "coaches", who are critical components in the chain of deploying change, are often accorded low priority. Dan Morris (processexcellencenetwork) states that "key business transformation skills and knowledge that are critical in driving business change – the experience of actually transforming operations – are rare" in the context of business transformations, and tend to mirror the existing set-up within the transformations umbrella.
7. Lastly, we need to shift gears on vision and leadership. A majority of improvement initiatives fail due to lack of focused and consistent leadership. There are internal turf wars between different functions to claim victory while implementing transformational initiatives. Hence there is need for a shared vision and collaboration to reap the benefits of process transformations. John Kotter in "Why Transformation Efforts Fail" (Harvard Business Review) reveals that the vision has to extend beyond mere numbers. Plus, the vision has to be influenced by the external environment, else it may dwarf into a tunnel vision and become redundant. Also, transformational leadership tends to ignore these golden learnings:
- acknowledge the emotion and underplay the analysis
- build common practices related to the change, and
- prioritize education and awareness related to the change.
To usher a better climate for transformations and enable robust processes, transformational units need to pay heed to the above-mentioned points. This would serve to get rid of the blinders that currently limit shared services centers from transforming into mature business partners.
About Amarpreet Bhamra:
Amarpreet Bhamra is a business process management professional at Maersk Global Service Center (Finance/Process Excellence-Transformations) with around fifteen years of comprehensive and diverse work experience in business process outsourcing. He has held leadership roles in Service Delivery and Quality in reputed business process outsourcing firms like GE Capital, TATA Business Support Services and Maersk Global Service Centers. Amarpreet is currently pursuing an Executive Program in Leadership and Management from Indian Institute of Management-Calcutta and is a certified LEAN Black Belt and Green Belt. He has completed his Advanced Diploma in Financial Management-Indian School of Business Management and Administration and holds two post graduate degrees in Communications-University of Hyderabad and English-Panjab University and a graduate degree in English-Panjab University. You can reach him at: email@example.com