The Moreira Chronicles: Bangemann and Zabel on Organisational Models & Driving Transformation [Part 3]
Over the past year, Pedro Moreira has written a series of columns for SSON summarizing his experience in rolling out an enterprise SSO model to a subsidiary, emphasizing the pros and cons of this approach.
Following the conclusion of this series, Pedro interviewed two well-known practitioners – Tom Bangemann of the Hackett Group and Kai Zabel of Heraeus Group, both highly respected practitioners in the field of Shared Services, with decades of implementation experience. Over the next two months, we are sharing a transcript of these interviews right here, covering the role of the SSO, its evolution and future trends; implementations and operations; and a discussion around GBS and new robotic technology.
Left: Pedro Moreira, Shared Services Expert
Middle: Kai Zabel, Head of Shared Services for Accounting, Heraeus Group
Right: Tom Olavi Bangemann, Senior Vice President Business Transformation at The Hackett Group
Part 3: Organisational Model
PM: Is there a risk that companies running SSOs at “cruising speed” might reach a plateau in which additional benefits don't outweigh the costs of obtaining them? Meaning the benefits of robotics/automation or upgrading the organizational model (e.g. to GBS) won't cover the costs of implementation? Can that happen, or do you always foresee a next step where you can get more benefits and they outweigh the costs?
Tom Bangemann: To some extent we have that situation because theoretically you can always automate everything and the question is exactly as you pointed out: is it worth it? If my process/activity is too complicated or I am automating around all kinds of things and the benefit is very small – putting in some tools might cost more than the benefit that I get out of it for the next 100 years – then I’m not going to do it.
That for example, is one of the reasons why this robotics approach is working – because robotics enables automation of smaller volumes, which is very scalable and very low in implementation costs. So, it’s not rocket science. Robotics doesn’t do anything else other than have a robot do what a person did before, so the robot is performing a repetitive operation just as it was done before, but instead, now there is a robot software keying it in. That enables us to automate something that, before, was not automated, exactly as you said – because there was no business case for it.
That has happened before and will happen constantly and therefore, yes, there will come a time where, process by process, and area by area, you’ll get to this point where you know there is something to improve on the process but it’s not going to pay off and then it gets trickier to get benefits out of it.
Another option then is that you move that process to a lower cost location. The basic shared services philosophy has been always the same and it’s very simple: you have wage arbitrage and you have productivity improvement. You have these two levers and you’re doing nothing else than working them. Either you can get wage arbitrage or you can get productivity improvement, mainly by automation; and if I don’t get automation I can try wage arbitrage. If I’m done with wage arbitrage, I can do productivity improvement. If, theoretically, I get to the point where I’m done with both, then I need to think in a different dimension. That would be changing into something else. For example, instead of looking at the running costs you can look at working capital impact, or you could look at risk reduction, or you could look at expenditure reduction ... some other dimension that you can impact and that will bring you benefits. It could also be that you’re not reducing costs at all because you can’t, but you’re trying to get better output, effectiveness or value, happier customers or lower cycle time, some other metrics that you can focus on. But you’re absolutely right, in certain areas you will reach a point where you can’t do anything, at least with the business case that pays off.
PM: How do you see future threats and opportunities for the SSO model?
TB: One trend in general is this scope enlargement. So when you look at what this Shared Services called GBS does nowadays – and Kai can give you a nice example on that – it’s often one function and bits and pieces of the others, or maybe 2 functions, but there’s still more than half left. So it will take quite some time until this concept is rolled out across all the functions where it can be utilized.
We do have companies that are asking us, “How can we utilize this on marketing, on legal, on supply chain?” things like that. So, there are many areas where we can still think of how to utilize the concept, therefore scope expansion, in terms of functional and process expansion, is still significant, even within the processes you’ve got in-scope.
If you have a Subledger process out of accounting, say purchase-to-pay, order-to-cash, then you will never have 100% of the process and the split that we do there, we call central-local split or process-split, so you have 80% or 90% but you can still do 5% more.
On some other processes like General Ledger, you might only be doing 50% in the center and the other 50% might still be decentralized in business units, so you can increase the split up, you can do broader and deeper still within the scope.
Kai Zabel: Maybe I can add a different dimension to that. What I’ve seen in recent years is that more and more companies move into a system landscape which is based on one single global ERP system. That was one of the main reasons why we believed that shared services was the right approach for us. This drives the importance and relevance of shared services. These developments are a big opportunity for shared services and other more center based approaches.
That was exactly the motivation why shared services was implemented at Heraeus and we currently get the biggest benefit out of that. We will see more global approaches, more global process thinking and more automation in future. And all this is driven and supported by shared services.
TB: Shared services is a great change enabler, if you want. When you think of transformation journeys in companies, all of these companies are constantly doing nothing else but transformation. If you didn’t have shared services or GBS, where would you drive these changes from? There is actually no other place, no other logical place to drive this journey from. So if we didn’t have this, we would really be searching for somebody whom we could ask to run a certain project. While not everybody likes that it comes from there, it’s a logical place to run all these transformational initiatives from and it is absolutely a change enabler. Probably, at the end, the benefit to large organizations is significantly higher than we estimate or calculate, as we do not calculate all of these effects, but you actually drive huge cultural change programs for something like this without really calling it that.