A Brand New Frontier: How Shared Services Can Propel Chinese Companies to World-Class Status

China’s enormous scale has placed it at the center of global growth and expansion strategies. For companies within China, this represents a significant opportunity to leverage their business support services, in order to present a more efficient front to both the domestic as well as the global marketplace. China represents a new and exciting corporate frontier for Shared Services and there is no doubt that Chinese organizations will have a profound impact on what world class and 1st quartile performance will look like in future, This paper advocates a 10-step plan that will guide companies over the next 3-5 years, and suggests corporations follow the lead of the Chinese Government, by first outlining a comprehensive Shared Services strategy, and then following a diligent path to its execution. [download this report in PDF format] Leland Forst, a veteran of the North American and European shared services market, has now shifted his focus onto the Chinese market. For the past year, he been advising, amongst others, a large, state-owned oil company in Bejing, and has gained a good understanding of what is required for Chinese companies to gain better results through shared services models. He shares tips on how a shift in internal strategy can yield returns, and suggests organizational modifications to get the best out of the shared services model. When I arrived in Beijing last year, I brought with me much intellectual curiosity and many content questions: Why was China apparently interested in and supportive of the adoption of Shared Services? What were the primary underlying factors and drivers for this? How would the Shared Services concept, as originally founded, need to change and be modified to reflect the Chinese culture and the Chinese way? And, most importantly: if Shared Services could prove to be successful and could be tailored to this culture and marketplace without any loss of concept integrity, what would this mean and what opportunities would it represent? Was I groundbreaking Marco Polo? Absolutely not. The large consulting, outsourcing and technology firms had already arrived, plying their mystical spins and magical webs regarding what Chinese companies should do, and, of course, how they could help. In fact, I had arrived just in time for the Shared Services implementation wave hitting the Chinese shores. [eventpdf] What will it take for Chinese companies to succeed with the Shared Services concept? Let’s start with what is going on in Chinese companies and what drives their interest in Shared Services: Support fulfillment of corporate strategy: Shared Services is commonly adopted by Fortune 500 and world class companies, as it supports their business strategies and has been proven effective. Upgrade business management: Shared Services provides opportunities to share advanced knowledge & experience; unify operation processes; simplify and optimize work assignments and specialized service arrangements; optimize resources; raise efficiency; and upgrade management. Support business growth & expansion: Shared Services improves the capability to integrate and optimize the organization, HR, processes, and IT systems of newly acquired businesses. Cost reduction, improved efficiency, and value added: Shared Services optimizes process efficiency, applies advanced operational practice, increases productivity, reduces operational cost, and adds business value. Develop common understanding: Management at each level needs to change its traditional concept and way of doing things. Shared Services is a proven change vehicle for overcoming significant resistance in this respect. Structural and organization change: At present, organization structure in Chinese companies is complicated, consisting of multi-level management, and with business management organizations not standardized. Shared services introduces simplifications. Impact/changes on employees: Setting up Shared Services yields strong leaders and teams with valuable experiences, talent and strong motivations. Clarify roles/responsibilities and streamline processes: Shared Services introduces major changes to both functions and operating units, often streamlining interactions, roles and responsibilities that are key to operational efficiency. Processes not consistent, standardized: Shared Services is a strong proponent for process standardization and consistency, and establishes standardized processes and integrated ERP platforms as essential to long-term success. Against this backdrop of what is driving Chinese companies to consider Shared Services, consider these 7 Key Principles of Shared Services, which address some of these needs and priorities, but also reaches beyond current perspectives: 7 Key Principles of Shared Services Staff work is defined as a portfolio of services for which the bases for leveraging are known and maximized. Internal customers know what the costs of each service are, are charged based on usage, and can influence both the cost and level of service received. Providers regularly measure customer satisfaction (service importance & delivery performance to users and payers) to ensure business alignment. Providers know their customers’ defined service expectations and are capable, aligned, and motivated to meet and even exceed them. Internal customers and providers share responsibility for clarifying service requirements, performance improvements and work priorities. Providers emulate the operating and management practices of for-profit, competitive service businesses. Customers and providers embrace the need to change any and all aspects of Shared Services over time, to produce value-added results. Shared Services’ full potential is realized when all 7 Principles have been deployed, beginning with the definition of the portfolio of leverageable services. In light of this, I suggest the following 10 points be taken into consideration in order for Chinese organizations to gain the benefit of the Shared Services Model: 10 Steps to Implementing Shared Services in Chinese Organizations Continue to research and benchmark best practices and industry sector approaches and results – but focus on what can be used. Don’t deprecating the findings because they are not based on Chinese market data. The same principles apply. Use those learnings and insights to leapfrog traditional approaches in much the same way China has expanded in recent years, but doing it in the Chinese way (Carpe Diem – seize the moment). Accept that China is at an early stage of the Shared Services journey and most organizations are not yet operating at the leading edge of best practice. The potential, however, is enormous. While technology plays an important role in Shared Services, Shared Services should not be viewed as, or treated like, an application development project. Many Shared Services subject matter experts do not speak Chinese, therefore it would make sense to develop a bilingual approach that harnesses best practices based on existing experience and integrate them appropriately into the local circumstances. Understand that, at its very essence, Shared Services represents a major transformation from what "is" today, to what "is possible" tomorrow, and this necessitates accepting a new "order" regarding how things are done. In other words, it requires change. Remember: Insanity is defined by doing the same things but expecting different results! Prepare a comprehensive strategic plan for what Shared Services should consist of and what it could look like in 3-5 years time, in much the same way the Chinese Government does; then be steadfast and focused on the plan’s execution. Accept that all questions cannot be answered upfront to the extent desired and that not all risk can be mitigated, no matter how much planning is done Spend time meeting with your executive counterparts at peer multinational companies to learn from them, instead of conducting site visits with SSC heads whose knowledge and focus is too narrow to satisfy your robust interests for exchange. The rising tide will float all boats, so collaboration is of benefit. Chinese organizations will likely have a profound impact on what world class and 1st quartile performance will look like in future, so consider these indices as guidelines, rather than end points. Everything is in motion. China represents a new and exciting corporate frontier for Shared Services and there is no reason for any of us to doubt that it will have a significant impact on Shared Services as we know it today. As for any other undertaking, we can be sure that Chinese companies will fashion Shared Services in their very unique "Chinese way," and that the benefits reaped will impact their opportunities for global expansion. About Leland Forst Leland I. Forst has been Chairman and CEO of The Amherst Group Limited since its establishment in July, 1991. Prior to founding Amherst, Forst served as a Director of the Board, member of the North American Management Committee and Partner of A.T. Kearney, Inc., a global management consulting firm. In this capacity, he was responsible for directing the firm’s telecommunications industry practice, environmental, health and safety functional practice and the Organizational Effectiveness practice world-wide.

A Brand New Frontier: How Shared Services Can Propel Chinese Companies to World-Class Status

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