Building Sustainable Shared Services: "Agility" as a Growth Enabler

[Prefer a sharable PDF? Download it here] Planning for tomorrow’s changes, today – by leveraging leadership and execution second to none Most Shared Services are developed with an end-strategy in mind: achieving a rate of ‘x’ or a service level of ‘y’ to support organizational competitiveness. But what do you do when – as is always happening – external changes impact these carefully laid out plans? Say, the CIO-mentor of the Shared Services initiative, leaves the company? Or the company is acquired … or sold? Given the numerous unforeseeable changes within the internal and external business environment, how can you build the necessary flexibility and capability into your Shared Services model to make sure you survive these storms – instead of being cast aside as "last year’s idea?" As we plan for the 2015 season of Shared Services and Outsourcing Week, these questions top the agendas of most Shared Services practitioners we have been talking with. To get answers, we are covering everything from "contracting" to "staffing" to "process ownership" at SSO Week in Orlando next March. But standing up a sustainable model is only half the story; the other half is about strong leadership and flexibility. In fact, flexibility and agility – common denominators across advanced Shared Services – have formed the basis of Dan Henderson’s impressive career. He first cut his Shared Services teeth at AlliedSignal, and, through the subsequent merger with Honeywell, became president of the combined group’s Global Business Services, overseeing the absorption of all of Honeywell’s back office into AlliedSignal in just 15 months. Here, he lists four key aspects of a successful services delivery model that is flexible enough to adapt to changing internal requirements. The crucial element to a Shared Services’ success is understanding what fits an organization’s overall culture and strategy, setting and achieving high expectations, rewarding results, and always keeping an eye out for changes ahead. The ability to implement accordingly, says Dan Henderson, is absolutely necessary if you want your Shared Services to weather the many storms coming its way: "Frankly, many organizations are saying they want Shared Services, but then don’t spend enough time, give enough thought, or invest enough in leadership and execution. The thing never takes off properly, and is side-lined or written off as the pet project of yesterday’s CFO," explains Dan, a veteran of the Shared Services industry having set up one of the first Global Business Services operations at AlliedSignal in the mid-nineties. "You’ve got to aim higher than that." Shared Services should be implemented as a strategic change in the way the business is structured, managed, and operated, he says. The resulting service delivery model should be efficient, effective, and – crucially – flexible for the long term. Dan identifies four key aspects to developing a successful services delivery model that is flexible enough to adapt to changing internal requirements. First, you need to understand the culture of your corporation. A Shared Services strategy can only be successful if it aligns with your overall organizational culture. You need to be able to understand what is expected of Shared Services at any point in time, and remain nimble enough to adapt to customer’s changing needs. Yes, a rigorous focus on "process and technology" is required, but also required is continuous investment in "people". Investment in training, communications, and recognition and reward programs will encourage and motivate your staff for continuous change and improvement. (Obviously the appropriate architecture for systems, infrastructure, data, applications, and process must also be considered. But we’ll save that for another day.) Second, and more to the point, you need to build today’s model not just to fit today’s market – but by looking ahead and factoring in the changes to come. Your model must be able to adapt over time. Outsourcing, Dan concedes, can allow for a certain amount of flexibility in headcount and resources – "both up and down, as your internal requirements change." "It’s something to look out for when choosing a provider and negotiating agreements," he warns. "You need to make sure that your provider has the ability to respond to global changes if required, and build in pricing and volume flexibility with the provider, especially if you foresee a certain amount of M&A activity or in-house change ahead." Being open with a provider and creating a true "partnership" will help to smooth any transitions down the road, Dan says. Equally, though, with internal Shared Services your SLAs should allow for potential changes. "Include an agreement on how to handle a possible divestiture, for example," says Dan. "At AlliedSignal we built in an agreement to provide continuous services to divested businesses for a certain time period, albeit at different pricing levels to reflect additional transition requirements." [eventpdf] Third, ensure sufficient investment in capabilities. Time and again, organizational boards approve a Shared Services initiative, but then underestimate what it takes to successfully lead and program-manage the new organization. Too often, the quick decision is to put an underutilized functional leader (like one of the assistant controllers) at the head of the program. That person may have finance technical skills, but the skills required of a Shared Services leader – say, for F&A – relate less to technical expertise but have everything to do with creating a vision, building a team, gaining organizational buy-in, process and program management, and motivating a team through the difficult transition. "If this is a critical strategic initiative to the company, then staff it accordingly. The company will know immediately how important the initiative really is by the stature of the person put in charge," says Dan. Additionally, you really need full time "transition, implementation and change management" staff for the duration of any transformation: not just at the start of an implementation, but also for continuous improvement and changes in the corporate business. Dan explains: "It’s neither fair nor fruitful to ask the folks doing their day-to-day service support jobs to take on, additionally, transition management and the kind of customer support required during periods of reengineering and change. You need to make that extra investment in capabilities to be successful." Fourth, "execute successfully and then invest for continuous improvement". Many great Shared Services strategies have failed due to poor execution. Successful execution depends on having the right strategy, the right leaders, the right tools, and then continuous investment to make it a long-term strategic success – not just a short-term cost reduction initiative. Make sure your team has the right skill sets, says Dan, set high expectations and make sure they have the tools to meet those expectations. Reward them for successes, make necessary changes (say, in personnel), and treat your staff with respect. "Think hard about where you want to drive your Shared Services, and then move there confidently." Dan has seen lots of Shared Services initiatives fail. Many of those were the result of taking the Shared Services to a low cost model that was not sustainable over time. They turned into administrative sweatshops, launching one process improvement initiative after another, jumping to low cost locations with too little evaluation of whether that was a good fit for the overall corporate strategy. "They became horrible places to work with no built in resiliency to respond to change," says Dan. "I’ve seen staggering turnover rates as a result of this kind of approach" he continues. "Thirty to 40 percent turnover rates, for example." Those that did well have several things in common, though. They took a strategic approach, created a long-term view, and appointed a proven leader with credibility in the execution of large technology/process programs, and as a team builder and motivator. Summary The Shared Services team will only be as good as the leader you put at its head, warns Dan. If you want flexibility and staying power from your SSO – look for it in your leadership. Note: To learn more about developing an agile Shared Services Center, join us at SSO Week 2015 and find out how Facebook made "agility" a core value driver in response to changing business needs. Vijay Rao, Global HR Operations Leader, is presenting at a session titled: How to Create an Agile Back Office to Scale up and Scale down in Response to both Marketplace Trends and Changes to Corporate Structure. In addition, Warner Bros Entertainment’s Chris Piazza, SVP Enterprise Financial Services, will tell us how Warner Bros’s Shared Services Organization smoothed the integration of a Netherlands-based acquisition thanks to a "playbook" approach. His session is titled: How to Make the M&A Headaches Hurt Less: Navigating the Rocky Waters of Bringing Two Companies Together. See more details and download the brochure here. About Dan Henderson Dan developed his finance and technology management expertise as a CFO in organizations like Bendix, FMC, the Galileo CRS, and AlliedSignal. Dan was put in charge of building and leading the new Global Business Services operation in 1994 at AlliedSignal, providing global F&A, IT, HR, Real Estate, and Travel services to the company worldwide, overseeing 2500 people in 15 global operating sites. During this time he was also Chairman of the Conference Board’s Shared Services Executive Council. His later assignments included EDS, where he was President of the Business Process Outsourcing Business, at Bank of America as the COO/CFO of global technology & operations, and at JPMorganChase as the Managing Director/CIO overseeing all corporate applications and intranet services. He subsequently founded his own consulting firm, ExecuCrest Advisory, and currently advises corporations and private equity on business reengineering and Shared Services. Dan earned his MBA from the Wharton School, is a Six Sigma green belt, and is currently on the Advisory Board of EquaTerra, and is a member of Shared Services News’ advisory panel. Connect with him on LinkedIn

Building Sustainable Shared Services: "Agility" as a Growth Enabler

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