csc news Realização____ Uma empresa do grupo _______ THURSDAY March 17th 2011 YEAR 2 | No 20 What Are The Success Factors and Where to Next? By: Gary Simon sharedserviceslink.com Interview with Paul Hutchison, Vice President Global Delivery Operations, NorthgateArinso What’s HR’s biggest challenge today? By: Barbara Hodge, Online Editor, SSON ssonetwork.com “Change management,” says Paul Hutchison of NorthgateArinso. Today’s technology suites offer automation as never before, but you need to get employees comfortable with the selfservice concept and with the shared services model. There is so much potential there. The promise of data analytics and knowledge analytics has been a long time coming, for HR. page 6 Susie West Founder and Director of sharedserviceslink.com was interviewed by the editor of FSN.co.uk Gary Simon in a webinar. Here is a transcript of the interview. page 2 The Case for a Chinese Shared Service Centre By: Jonathan Wong financeasia.com One or even a few shared services within a company’s group structure in one location is nothing out of the ordinary. So establishing a specific shared service centre (SSC) would be a logical step for a company to grow its business at home or even abroad. page 11 What Are The Success Factors and Where to Next? By: Gary Simon sharedserviceslink.com Susie West Founder and Director of sharedserviceslink.com was interviewed by the editor of FSN.co.uk Gary Simon in a webinar. Here is a transcript of the interview. Gary Simon: What does shared services actually mean? Susie West: That’s an interesting question because the term shared services is actually very elastic and I think it is inappropriately used by many. Functions call themselves a shared services organisation (SSO), when actually, all they are is a centralised accounting function. We are seeing this inappropriate turn a phase today, especially within local government. When people ask what shared services is, my short response would be a business within a business selling finance and accounting services to its internal customers. Because it’s a business, the three key business principals apply: cost, quality and timeliness. My longer response would be, and I believe that there would be a general agreement in this, that shared services is substantiated through a number of characteristics existing such as the: 1. Centralisation of a back office function, typically finance 2. Consolidation of that function onto minimal systems (if the business lends itself then consolidating ideally onto one system within region or even globally) 3. Standardisation of that function and processes within it From an operational viewpoint, shared services can be seen on a spectrum, from a basic model, all the way through to a market place model, which is very advanced and ready to start offering its services to other companies outside its holding company. From an organisational perspective, there are a number of factors which determine whether something is just centralised finance or indeed an SSO. I can think of four, being: 1. Leadership – does the CEO/Director/General Manager of the SSO have entrepreneurial skills required to start up a business or is the leader an accountant or Finance Director. Having commercial, accounting and IT skills means you might make the perfect SSO Leader, and chances are you’re heading a true SSO because of the commercial qualities you are brining to the table. 2. Service level agreements – when as a customer you buy a service, you typically sign up to a service based on a proposal and contract. Equally, if an SSO has a comprehensive SLA (this does not mean it has to be long) then it means it’s more likely moving away from an accounting centre and becoming an SSO. If there are penalty clauses enforceable by this SLA, then this suggests that the SSO is confident in its service delivery. 3. Attention to customer service – how customer oriented is the SSO? Does it really live or die by the service offered, like any other business, or is there still a peer-to-peer mentality in service delivery. If a notmy-problem attitude plays out, which can often exist in a typical back office department, then the SSO’s progression towards a market place model will be stunted. A significant shift to a service attitude has to exist in order to be a true SSO, and certainly to attain a market place status. 4. Charging – Referring back to what an SSO is not – it’s not a centralised finance function. It should be, and is, in its true form, a business, not a charity. It provides services which have value associated with them, and this value transpires largely because of the commercial pillars of Timeliness (ie efficiency) and Quality (ie effectiveness). The value derived here justifies a fee, and in fact deserves a fee. A true SSO recognises it is a business, it has costs, and it needs to cover them and ideally make a profit. So the commercial argument supports charging, but so does the value argument – we only really value what we pay for in this life. Finally, if charging is per-transaction, an SSO can start influencing behaviour by financially rewarding the good and penalising the non-compliant. This single technique where, for example a PO invoice is charged at €4.00 and a non PO invoice is charged at €12.00, can enforce good behaviour and have hugely positive ramifications on the finance function, and the company’s overall profit. G.S: Which functions lend themselves neatly to shared services? S.W.: The function which seems to be in an SSO as a rule, and almost without exception, is accounts payable (AP). I certainly haven’t come across a finance and accounting (F&A) SSO which hasn’t had AP within it. The rule of thumb is to shared service the function that the external customer www.institutodegestao.com.br 2 cannot see or touch. This might be considered a slightly ‘old fashioned’ perspective, as now some areas of marketing functions for example seem to qualify for shared services adoption. However, the trend is there – F&A SSOs have AP within their walls. The reason for this in my opinion is many fold: 1. Some argue that shared services itself is used as an application to ‘tone up’ the purchase to pay function, and specifically within that the AP function. That, if you really want to get a handle on your P2P function, you need to standardise, centralise and consolidate for a start. AP is a great place to start, as historically AP sat out with the shop, plant, factory, and followed its own process and varied wildly in cost per transaction. By simply applying shared services to this kind of environment, you are attaining a certain level of control, getting a visibility over what the real problems are, and moving towards an organisation where processes can be benchmarked. 2. Accounts payable is about as far from the external customer as you can get. It doesn’t need to be local, it doesn’t need to sit near the customer. So if it doesn’t need to be in a particular location, then why have it decentralised? Where’s the case? G.S: What trends and developments are you beginning to see in shared services? S.W.: So outside AP the second and third likely candidates, again as a rule, seem to be accounts receivable (customers don’t generally care where their invoice or bill comes from), and general ledger. I think there is a slow move towards starting to embrace other F&A functions like, for example, tax or treasury, where a company might not necessarily want to lift these functions and drop them in a low cost location because they are not very transactionally rich. But they might want to include these functions, which require local knowledge and expertise, within the overall global shared services model, keeping them locally or in the regional SSO. These components within the SSO model, which require to be kept locally because of the job in hand, and require expertise which might only be available locally, are often known as centres of excellent. So I think we’ve been seeing some SSOs having practiced this model for years. But they really are at the top of the pyramid, and the next wave of organisations is beginning to come through, but not, evidently, in a great rush. Secondly I seem to be noticing that those SSOs which are ‘advanced’ in their SSO performance, are now applying the process, service and system expertise to other areas of the business, like IT and Procurement and HR, Legal, Fleet. G.S: How do you define what falls in the scope of local organisation, shared services, off shoring or outsourcing? S.W.: There’s a matrix that any organisation can use. Along the top you have a breakdown of all of your functions, and on the left are the following tabs: close to the customer; local; country based; cluster of countries; regional; global. And if it falls in the last three, can it be near or off shore? And is there any reason to run these functions internally when Accenture, HP, Infosys and Genpact offer such competitive and expert services? It really is a case of looking very hard at the business and asking, quite ruthlessly, is there any reason why we can’t outsource/offshore/shared service this function? The more local the function, the less standardised it will be and the more expensive it will be. So only keep it local if there’s a very strong argument. And if it needs to be local (ie few would agree that employees in Mumbai are familiar with tax law and regulations in Peru), then create a centre of excellence which can adopt some of the principles of shared services. G.S: In your opinion does the IT and SSO strategy need to be aligned? S.W.: My view is that yes, in order to have a successful SSO implementation, IT needs to be tightly dove-tailed into the project. Which ever way you look at it – from Finance or IT, the two seem to have little choice but to be aligned if the optimum effects are sought. For example, if it’s a company’s intention to role out one instance of SAP, then an implementation will be much more effective if the processes it supports are managed within a shared services structure. Similarly, because two of the key features of shared services are standardisation of process, and consolidation of systems, it would be hard to achieve process and cost benefit if an SSO didn’t move to one, or a minimal number of systems. The options are there – whether it makes sense for a company to move to one system before, during or after a shared services implementation can depend on several factors. However, I am increasingly seeing companies package these ERP and SSO projects together, and as a country migrates into an SSO, so it moves to the new single system. In addition to this, many continuous improvement tools keenly adopted by stable SSOs require, or indeed are, technology. For example, once an SSO is migrated and all invoices are now centralised, keyed into one system and the process is standardised, the SSO will most likely be very aware of true costs and true problems, and have a clear view of what the fix is. Often that fix will involve process automation, and IT will need to be involved in scoping electronic invoicing projects, and workflow projects, and essentially, IT will have to be available to resource the implementations. Finally, it has been said that the perfect SSO Leader has both finance and IT experience and an entrepreneurial attitude. And I think this in itself is testimony to how tightly the IT and www.institutodegestao.com.br 3 SSO strategies are bound. Simply put, for one to be wholly effective, I don’t believe it can do without the other. So, yes, the SSO and IT need to be aligned, and this relationship starts from the evaluation and feasibility of shared services, to the design phase, and understanding the IT and process ‘as is’, and the ‘will be’, and understanding that IT is an enabler for the SSO to be wholly effective, and shared services is really an enabler for some corporate IT goals to be met. G.S: What are the trends that you’re seeing within outsourcing to India or low-cost locations in Asia? S.W.: This move, on the whole seems to be adopted by two extreme groups – firstly those who are very mature and have been operating shared services for years, and outsourcing is really the next logical step in the journey. And the second group, though less commonly seen, who are at the beginning of the journey, have done a country by country assessment of their ‘as is’ F&A operations, but now want to just lift and shift their decentralised operation to an outsourcer in a low cost location. If we look at the first group. A company which has had shared services in place since the mid to late 90s will have come a long way in terms of cost per transaction, time reduction in month end, and general operational cost reduction. Through applying the basics of shared services, they may have well chopped out 40% of their costs, and have their F&A function costing well under 0.5% of the company’s revenue. This is where an SSO looks hard at where is can squeeze out more cost – maybe it’s through a) further process automation or maybe it’s through b) offshoring. But in some cases these options might seem high risk and offer only a marginal return. Imagine, for example, that a cost per invoice is €1.20. To reduce that by a sizeable amount you could consider a move to India, but this poses a big organisational shift, and a large investment pushing out the ROI, and finally who says labour costs in India won’t double in the next 10 years? If a company is indeed processing invoices at a fully loaded cost per invoice of €1.20, then to strip out an additional 30 – 50% may well be a challenge for any solution provider. In these instances, an SSO may well turn to a BPO to offer them a ‘guaranteed’ saving of 15 to 25%. A further attraction of BPOs is that providers are offering finance transformation as part of the package. For example business process management (BPM) technology is being offered as part of the package by BPOs. BPM technology enables the user (the end customer in the case of a BPO) to access and view the invoice transaction flow at any time to see the status of invoices posted, invoices blocked and why, and invoices queuing. This live feed offers users with a dashboard illustrating the most up to date view of finance processing, and importantly cash in and cash out. This kind of technology can then lead to decision making around working capital management. But it’s this kind of application that advanced SSOs might look to acquire through a BPO partner, rather than independently. So, advanced SSOs seem to be partnering with BPOs because of the re-engineering opportunities, rather than solely for cost reduction purposes. The second group of companies who haven’t actually been through the shared services journey, but decide to jump straight to outsourcing, follow a lift and shift approach, and leave it to the BPO to apply the elements of shared services to deliver savings with the view that they can do it better and faster and for less. Talking to an FMCG in the last three months which had taken this approach, they reported savings of 15% in the 18 months of the project. G.S: Can other functions like management reporting be migrated into shared services? S.W.: My view is that it can be done and is done. Although F&A functions which are transactionally rich lend themselves beautifully to shared services, I don’t believe these should just be creamed off to leave the remainder of the F&A activities outside the SSO remit. Management reporting doesn’t need to sit locally, it doesn’t need to be near the external customer or business unit, and it relies heavily on a process and systems. There maybe a reluctance to put management reporting in an SSO as: a) it is business critical; b) if there are indeed variances in numbers these are best reconciled face to face, and c) it requires a skill which may not be abundant in a transactional processing centre. Again, management reporting qualifies itself quite elegantly for migration into a Centre of Excellence. G.S: Why do you think BPM solutions are primarily used by BPOs and not SSOs? S.W.: BPM technology is still in its infancy in terms of its adoption. It certainly isn’t mainstream, and those who use it would be deemed as pioneers or early adopters. If you look at the list of F&A world-class players, you’ll note that a significant number are indeed BPOs like Genpact, HP and Accenture. And I think that providers selling BPM technology have targeted these BPOs for two reasons, firstly because they have the scale which is attractive to a provider for revenue purpose, but also means an attractive business case will likely be realised, and secondly these world class F&A organisations are so process and system mature, they can install an application like a BPM tool and really optimise it. So for these reasons the BPM providers like WebSphere and Cognos perhaps see BPOs as their target market. G.S: How popular is shared services among the mid-size market? S.W.: There seems to be a shift in the mid size market. For a company with €20 billion revenue and 30,000 FTEs, shared services could be seen as a no-brainer simply because of the available scale just waiting to be economised. www.institutodegestao.com.br 4 However, with an SME, processing less that 70,000 invoice per region, savings gleaned through shared services might just stand at 15%, so you have to ask yourself what other benefits justify the organisational change, and is it worth it? Perhaps in this case, handing the function to a BPO which focuses more on the midsize market, like SWS BPO for example, might help you realise better savings, because they have the scale. SME’s face the same problems within F&A as Large Cap organisations – expensive processes, system integrations, and their goals are the same – to have an elegant, inexpensive and timely F&A function to enable larger profit margin and increase shareholder value. But the path taken to reach this goal may differ simply depending on scale and business case. Just because shared services can provide very attractive returns and benefits for large multi-nationals, doesn’t mean it is the obvious solution for an SME. G.S: How can people best exchange tips and information of what works? S.W.: Shared services can be a lonely business. It can also be a very emotional business where SSO leaders can feel isolated and defensive. Often SSO leaders feel everyone is against them and looking for ways to trip them up (ie country finance) or looking for constant proof that what the SSO leader is doing it ‘right’. With shared services comes huge business disruption making them unpopular figures. Even those who allege to back them may keep a distance so as to retain a friendly image, and also to be at arms length rather than full embrace if it all goes wrong. So this makes a SSO leader very defensive and emotionally connected to the task. Which isn’t a bad thing. But it does emphasise the need for reassurance, which might not necessarily be available from within the company. For this reason leaders may look to meet other SSO professionals in working groups, conferences and online, to get that ‘warm’ feeling that what they are doing is ‘right’. You will also find that some professionals in shared services don’t really know what it is, and haven’t reached out to consultants for direction. Again, attending events (which sharedserviceslink.com incidentally run) means that direction can be sought and sounding boards made available. There is a lot of fear within shared services. Often C-level management is watching you closely and this puts enormous pressure on the SSO leader. It is also apparent that shared services means going through massive organisational change and financial investment. If it goes right – it’s worth the pain, but if success isn’t realised, your project can be seen as very disruptive for little or no reward. Therefore there needs to be a certainty, or confidence in decisions, and often this confidence can be attained from attending events and roundtables and developing online interest groups. G.S: Finally Susie, what in your opinion are the critical factors for shared services success? S.W.: There are a few I’d like to touch on. 1. I know it sounds boring because people hear it again and again. But there’s a reason why it’s repeated, and that’s because a) it’s so important and b) it’s often discounted as so crucial. And this is securing senior level buy in. SSO leaders are sales people. They will succeed if they secure buy-in. They are selling the dream and making it clear that the only way that dream will be attained is through the means of shared services. If you don’t have that sponsorship, your shared services intentions are hanging on a thread. You can do all the work you want, and feel like you’re getting somewhere, but if you’re sponsor’s not onside, that work stands for nothing. And lets not forget that your life really is in the hands of your sponsor – they can snatch away your project, give you a sense of purpose and even make your life easier if they blatantly back you and tell everyone else to. The connection between you and your sponsor is absolutely number one in my opinion. 2. Secondly doing a solid feasibility study, gathering baseline data and ensuring the business case is watertight, true and realistic. This helps everyone decide if they want to commit to such a project. Also, if this work has been done at the outset, you can use the baseline data to prove what a great job you’re doing. Shared services is 10% fact and 90% perception, so you need evidence to prove you’re making progress, and much of this progress will be illustrated by the difference between baseline data and today’s data. 3. Thirdly I would choose communication. Communication is mostly about what was heard, not what was said, so ensuring that messages are frequent, clear, congruent, exciting, strong and understood will help the rest of the company break away from a perception and register an actual event. And this will help. But this is hard as people are losing their jobs, and often so much attention is put on these individuals that the staff left behind are neglected. So there needs to be a balance of focus, and a recognition that you are really touching people’s lives, their present and future. So empathising with them and their situation, and understanding that cold communication (ie email) and passive communication (ie posting a note on the intranet) probably won’t help you, are all key. 4. Listening to the customer and actually understanding what they want and serving those needs, and applying metrics around those requirements will save you a lot of bother. Occasionally you may come across an SSO www.institutodegestao.com.br 5 who thinks they know what the customer wants, and what is important to the customer without having actually asked them. This leads to a gap in customer expectation and the SSOs delivery, and means you will never be able to meet the needs of your customer. By having a set of, say 20 metrics, and asking each customer which 5 are most important to them, allows you to focus on actually pleasing them rather than thinking that you’re pleasing them. Also asking them what a perfect F&A supplier looks like, and having them define and document it, means you have a common understanding of what will please them. 5. Having consolidated processes onto the minimum number of systems can only serve you in your intentions. Some business models won’t allow for this as their businesses within the company are so diverse. But if there’s no reason for multiple systems, then switching to one can make financial reporting easier, helps with process standardisation and benchmarking, month close, and general performance. 6. I would say that having a global strategy comes out somewhere near the top. If you have a global strategy it means you have the highest levels of management on board, you’re on a path which is supported, and all employees listen and take you seriously. It gives a shared services leader a sense of security to make more rewarding decisions, because the destiny of your SSO isn’t hanging on a thread. It also means regions can work with, and compete against, each other. One global FMCG organisation started out on a global SSO programme (which included outsourcing in its mix), and reported savings of €750 million a year. I am unsure if this level of saving could have been met without a global strategy. 7. Having the right mix of in and out sourcing and challenging the organisation on why a function or process needs to be internal or local is an important factor. 8. Charging your customer, which few SSOs do at a per-transaction level, is essential if you want to be a truly commercial operation and have the customer value your services, and have the customer behave in a compliant way which will impact cost and therefore profit margin and in turn benefit you, them, the corporation, and the shareholders. 9. Focusing on strong leadership and a strong project team and recognising that the best leader most likely has finance and IT experience, but is an agent for change, is entrepreneurial and commercial, realises the importance of sales, marketing and the customer, and realises the importance of communication. What’s HR’s Biggest Challenge Today? By: Barbara Hodge, SSON ssonetwork.com Interview with Paul Hutchison, Vice President Global Delivery Operations, NorthgateArinso SSON: Paul, what do you think is the greatest challenge to an HR leader today? PH: I think it is really a combination of things. The business proposition that the HR community buys into is that, as they plan to outsource more, they become greater business partners and greater influencers in the business. So they see a need to shed some of the day-to-day HR transactional responsibilities, and the upkeep of policies and procedures to really refocus themselves on the business at hand. I’ll use an example. Take a very large retailer. They want their HR people to help them hire and retain better employees; and they want to be able to drive the cost of maintaining a high quality employee down; and they want to look at ways to shift the culture of the business to better service their own customers. But if you’re busy trying to figure out how to get a pay cheque out the door, or how to get someone’s compensation adjusted in the system, or how to get an SAP or PeopleSoft upgrade through the testing mode so that it can get into the system … you don’t have time to do that work. So what happens is they buy into this model that says, “We’re going to do the higher-end work; we’re going to take a reduction in our overall cost, because we’ll be able to leverage this third-party scale that we don’t have; and then we’ll be able to focus on these other items.” So this is where I think the greatest challenge lies for our customers, because the noise sometimes doesn’t go away for them just because you outsource. The nature of this business is that there are an awful lot of exceptions to be handled, so a good partner helps get rid of that noise, but it requires a lot of work to move that down the path. The second piece of the answer is: How do you really transform your organisation and how do you manage that change? In other words: How do you manage the change that says, “Now my third party handles these day-to-day activities, and you as a customer need to go through selfservice, or through the shared service centre, for this. Your contact is no longer HR person down the hall.” So if I had to put it into one sentence, I think change www.institutodegestao.com.br 6 management is the biggest challenge our clients face today. It’s across a couple of different facets, but it’s all about, “How do you really transform how you’re viewed by the business? How do you engage the business? And how do you transform your employee population to become more comfortable with a self-service and a shared services model?” That’s probably the biggest challenge. SSON: What about data? Many of the HR leaders I speak with mention “data” as a key challenge. Pulling disparate systems together, wanting to get onto one standardised platform. Surely in terms of time and talent management, that would be one of the crucial desirables for an in house HR manager? Would you agree, and how is NGA helping to fill this gap? PH: That’s a great point. So I think for you to be effective at this change management and to be a good business partner, you need to have a lot of data at your fingertips and you need to be able to show or leverage that data in a consistent and reasonable way. So the promise of data analytics and knowledge analytics, if you will, has been a long time coming for the HR community. Think about marketing businesses and sales teams, for a moment. They’ve had all of this for a while. HR is the last place where investments occur, and they do need it! I think where NGA comes into play is that we’ve got a suite of tools that allow them to, firstly, consolidate all their employee data and all of the relevant information that they want to do analytics on into one system; and secondly, we can help them standardise their processes so that the relevance of that data is consistent from location to location — so you’re comparing apples to apples, if you will, and I think that’s something that we’re very strong at bringing to the table. I think what differentiates us from a lot of our competition in our ability to do that is how well we understand the local markets that are part of our customers’ bigger global footprints. A lot of people provide global services and a lot of people drive this data into one system. Everyone makes that promise. I think the big difference is that NGA has really developed a lot of capability at a local market level. And that really comes out when you start doing the analytics – tell me why this is different for Italy than it is for France? Or than it is for the US? A lot of people can look at the data. Very few can bring the level of expertise around the recruiting market place, the benefits market place, and the compensation market place in the local areas that we can. locations around the world. Internally, we call it a Tier 2 platform. Tier 2 is really the wrong terminology, though. It’s our small country, small payroll and HR solution. So for smaller populations, that link into euHReka and the euHReka workspace, the self service tools allow a global enterprise to service not only its very large populations — populations of 10,000, 20,000, or 30,000 people — but also to get at the data that’s sitting in countries with only 10, 15, or 20 employees, so that you get a full picture. So from a product perspective, there’s euHReka; agoHRa … in the UK there is Resourcelink; in Asia there is Preceda … and it’s all under a common technology integration layer, which allows a company to see into this data, and access a consolidated version. SSON: There’s a lot of talk about the disappointments that come with outsourcing, or with technology implementations generally. So what can clients do for themselves, to really make the best out of a new implementation or an outsourcing partnership? What things should they be setting in motion to really make sure they get the results they’re hoping to get? And conversely, what are some of the mistakes that you see time and again, that are costly? PH: Great question. Here’s the thing … the reason clients opt to outsource is because they want to take cost out of the operation and they want to facilitate change. The clients that succeed and that have the best results are those that really embrace this change. We have a client right now, for example, who has really embraced this concept — namely, that they’re going to transform their company. Their HR group has absolutely embraced the need to standardise processes and to say, “Look, we’re going to offer a capability out of HR that is consistent, but there is SSON: Which specific tools are you referencing right now? I know you’ve got a whole suite of products, but can you give more details? PH: Well, I think if you look at our Agora offering, which we’ve recently announced, this really pulls together our local knowledge and capability into our broader offering for companies that have a bunch of small www.institutodegestao.com.br 7 a cost — we need to change what you’re used to.” At the end of the day, the companies that fully embrace change seem to achieve the greatest successes. On the opposite end of the spectrum, you have those who want to leave their processes the same, who don’t want to standardise. They won’t adopt best practices and they say, “Look, this is just the way it’s always been. You have to do it this way.” It’s really a process of moving something that, over the years, has been developed — not intentionally of course — inefficiently. In this case, success or failure is based on what I call the “hero model” of working. If they have somebody with 20 years of experience, who really has everything up in their head and knows all the idiosyncrasies, then they’re pretty successful; but when they lose that person, they have a tendency to start failing. So what we try to do is help companies drive to a standard and drive to a process that is less dependent on this “hero model” and more dependent on process and standardisation — really leveraging the tools so that they can make the change. When companies really embrace that and pursue it in partnership with us, you see success even beyond what’s initially expected. But when companies fight that, or they don’t have the wherewithal to drive that through their organisation, that’s when you start seeing things pop up and become negative. And what often happens is that they actually become driven by noise instead of by data; and so a small issue becomes a big one — and it would never have been an issue before, but it’s an issue now because it’s “different” in that it is being serviced by somebody else. The customer is annoyed that they are being expected to do things themselves. So, you take a single point of error, and instead of figuring out how to recover from that error, they focus on the fact that the error is caused because of this change; but in fact, it’s not. And so they become noisedriven versus data-driven. And because they don’t embrace change, the opportunity to root these things out becomes difficult, so it’s this self-fulfilling prophecy that you move a “mess” for “less.” Well, that is fool’s play. You don’t get anywhere with that. You really do have to transform your organisation and you have to be committed to it, otherwise you don’t really yield the value. SSON: As you move towards standardisation, which is the way you are encouraging clients to go, what about “agility”? Clients today need to scale up or down according to external market factors. Do you not think, Paul, that this move towards standardisation lessens an organisation’s ability to be agile? PH: I actually think just the opposite. If a company partners with an outsourcer, for example, who helps them discover best practices that work, and those best practices are shared across multiple clients — then these processes, in essence, become affordable; because, let’s face it, best practices are expensive to implement on your own. Generally, companies just don’t have the scale to do it in HR. They can do it in their core business, of course. So, for example, if they’re a retailer, they can figure out, “What are the retail best practices”? And they can do that because it’s their core business and they have scale in it. If they’re a manufacturer, there are best practices, there are quality programmes… things that you can implement. Let’s take CMMI, for example, which we have embraced pretty fully. A company could almost never afford to do CMMI on their HR processes. They just don’t have the scale to do it. A lot of people look at CMMI and say, hey, that’s a cost take out opportunity. Well, it is if you’re a manufacturing company, but if you’re an HR organisation, it takes more people to implement it than you get from savings, and so most companies never embrace it. What happens with us, because we have scale, is that a client company can embrace the standardisation and the best practices we have developed, and can take advantage of all the other things that we’re putting into play … and so they become extremely agile. If there is a divestiture, for example, the change is instantaneous, because NGA will absorb that. If there is an acquisition, the ability to absorb an additional 10,000 people across 11 countries is equally instantaneous. You don’t have to go out and hire a bunch of people to do that, because the processes allow you flexibility with your resources. On top of that, we are able to apply Six Sigma programmes, CMMI programmes, audit, and controls around standards that a company would never be able to afford on their own, for their HR organisation. Again: They can apply these kinds of measures to their core business, but they’d never be able to afford to apply it internally. However, because this internal function is our core business, meaning NGA, we can afford to do this. Because of our scale, we can put all these things in place that actually make us agile. SSON: So, NGA positions itself as an innovator in platform based BPO. I’ve heard about HR 3.0 on demand, or Hybrid HR. How can a company optimise the HR delivery model, using an outsourcer? In other words, what are the options? PH: Well, that’s a great line of thought. Here’s the thing… what we’re doing is not necessarily magic. A company that had the ability to invest in it, could do it itself. The problem is, it’s quite expensive. It takes a fairly substantial investment, and a recurring, ongoing investment to maintain it. So what we do is we try to build this “on demand” model for customers, to allow them to embrace our products and embrace our capabilities, without having to make a substantial technology investment, and without having to www.institutodegestao.com.br 8 upscale the organisation every time a change comes down the pipe. Our innovation is really the investment we’ve made in our products and the investment we’ve made in our “on demand” processes, which give a company easy access to that kind of leverage. It’s innovation in that we’re investing in, and driving, those things that make it more efficient for client companies to use. Much like www.salesforce.com, which has taken a fairly difficult function and made it available through the SaaS model, for managing sales contacts — we’re doing the same thing for HR. We’re basically saying, “we have an “on demand” model that gives customers access to our software, but we’ve taken it one step further; so all of our processes in the operation that can’t be automated today, we provide via an “on demand” model. So when I think about HR 3.0, it is really about taking all of the innovations that we’ve come up with in this industry space, and the vision and direction that’s coming down the pipeline on how to really transform organisations, and make them available in an instant. It’s like when you walk into a room and you flip the switch on the wall — your expectation is that the lights come on. Well, we’re doing that for HR! So you can walk into recruiting and you can “turn on” recruiting. You can “turn on” best practices and transform the way you do benefits. That’s really the innovation that we’re driving. It’s the promise of the SaaS model. Other people are looking at it as a cloud delivery mechanism, but we’ve taken it beyond software and we’ve applied it for services. SSON: And is this an ongoing process? PH: Well, it’s going to be ongoing, right? For the core parts of our business, it’s there. In fact, smaller clients can sometimes embrace standardisation much more quickly than a big client can, and so those clients literally have the ability to “turn it on” in a week. For bigger companies, it’s a month, two months, three months, and then for really, really large companies, you have to do a lot of standardisation work. It’s harder to turn an aircraft carrier around than it is to turn a rowboat around, but at the end of the day, that same concept applies. As you move forward, you’ve got to apply that to the whole fleet, and so the innovation is going to come as you take some of these processes outside of core HR administration and payroll and start applying the same methods and capabilities to them. So, if you look at our product road map and where we are today, you’ll see that we have a journey ahead of us that… it’s like that painting where the road disappears off on to the horizon. That’s where we see ourselves. We don’t see a limit to the innovation that we can come up with. We are on the road. SSON: Paul, considering NGA has a consulting, a technology and an outsourcing division, how do you leverage all three areas to benefit clients? PH: I think the balance of delivery does a couple of things for our clients. Number one is the fact that we have a product, which means that we have an ability to deliver something right out of our suite of tools, and so we don’t have to go and piece something together from other people’s offerings and worry about a different way to configure it every time. We’ve got a standard process that allows somebody to very quickly take advantage of best practices, and it’s configurable, so you don’t get locked into one way of doing things. The outsourcing piece allows you to take that next step around delivering value and say, okay, here are the things that are inside the product and that automate through your end user, but here are all the support activities that go around that, and they are not necessarily core business functions for our customers, but they are our core business function. The last piece – the consulting piece – is really how we glue this thing together. There is no question that it requires a lot of change management to move from the way you do your work today to the way you’re going to do your work tomorrow. You do part of that journey and then there’s change management that has to occur; then you take the next leg of that journey and there’s more change management that has to occur; and so, through us having people who are knowledgeable about our capabilities, but also have a business consulting mind and can help people go through the technology change, the process change, and, quite frankly, the emotional change of taking on these services … it allows us to round out the package for the client. We’re extremely tight knit. People move in and out of consulting into the product organisation; in and out of product into operations; and vice versa on all those, and so our staff develops over the years. We’re able to offer the kind of career path, which would normally require you leaving a company to get to the next level of experience, and then maybe come back at a later time. Because we have these three business lines inside our company, we can offer tremendous variety. You can actually move laterally through the organisation and get your next phase of development, and so we can develop more senior and tenured individuals than a company could that only does one of those things. SSON: Can you tell me about your global delivery network? As I understand it, you have 16 global service delivery centres. Can you talk to me a bit about the strength of the various locations and how you think this positions NGA for growth? PH: First of all, if you look at our global centres, we’ve tried to build them around centres of excellence, and that includes language, knowledge of the geography that www.institutodegestao.com.br 9 they are servicing, and the skills that they’re specifically delivering. So, for example, we have a Granada centre that is primarily an application management outsourcing centre for Europe, and what it does is it allows us to leverage people who are consolidating into a centre location, where you can build career paths, you can run training programmes for those individuals, and you can have a strong management in place to help develop them. And I’m able to consolidate them in a location where they are close to the customer base throughout Europe and they can deliver some very specific skills. But because of the nature of our business, we need to be able to follow the sun, if you will. And so what we’ve done is for every place where we have a “core centre”, we actually create a “sister centre” to that location, which allows us to move that work around the globe, because a lot of our customers are global in nature and we need to “follow the sun” with them. For example, the sister site to Granada is Hyderabad, India. Well, in India we can’t necessarily get all the European languages, but we can get the skills and capabilities, and so we operate on a common business language internally, but we link very closely to the geography and the language of our customers — so that we’re able follow the sun in our delivery capability. We do the same thing with our HRO type capabilities, as well as our IT on demand service for our staff software. So each of our centres has a geography specialty, a set of languages specialty, and a skill specialty, and then they have a sister site that shares at least two of those things. Sometimes it’s not language, sometimes it is. It’s always process capability though. So we have a few more centres than some of our competitors, because of that philosophy. Now, if you look at our total global delivery network, beyond those basic service centres, there are a lot of other localised centres that are part of that global delivery network. We do that because we think that’s something that differentiates us. For example, when I say, I can deliver services for Italy out of Budapest, Hungary, because that’s the centre of excellence for near-shore delivery in Europe, that’s absolutely a true statement! But I’m not dependent on resources solely there, because I’ve got operation centres and capabilities inside of Italy, and this is something a lot of our competitors don’t have. Again: we’ve done this specifically because we want to differentiate ourselves on our depth of knowledge around local capabilities, and we think that part of our delivery structure allows us to really build standards and global processes that companies can adopt and that will reduce the pain and the learning curve for each individual country. It also provides us with a mentorship programme for the centres themselves, and so I’ll use another example. Manila is our strategic off-shore delivery centre for North America. However, I have a very, very large centre in Jacksonville, Florida, and a very, very large centre in Cincinnati, Ohio, and I don’t plan to ever remove those two organisations, because they are my centres of excellence for skills in the US. So I can do work in the Philippines for the US, and I can drive my customers to a price point they want to achieve, but I can do so without sacrificing local skills, capability and knowledge. So I’m building a delivery network that provides the best of both worlds, if you will — the experience and depth of local capability … combined with the global reach, follow the sun, and cost advantages of off-shore and near-shore centres. That’s really our philosophy and direction. Will we continue to add big global centres? Probably not over the next couple of years. I think we’re very comfortable with the locations we’ve chosen, and those locations will continue to grow, but they won’t grow to the detriment of our local capability. Our local centres will continue to grow as well. So, as we bring new customers in, we will grow both locally and globally with those new customers. Paul Hutchison, Vice President Global Delivery Operations, NorthgateArinso Paul B. Hutchison III joined NorthgateArinso as Vice President Global Delivery Operations in July, 2010. In this role, Hutchison leads all delivery operations, application management, and information system management globally for NorthgateArinso. Paul has extensive product/software development, IT and application operations, service center operations, process management, and client management experience in Business Process Outsourcing, particularly in the areas of multiprocess Human Resources Outsourcing (HRO). He joins NorthgateArinso from IBM, where he held a number of roles, including, Global Delivery Leader, Americas HRO Operations Leader, and Critical Client Program Executive. Prior to joining IBM, Paul held a number of senior executive BPO and HRO roles including Regional Vice President in ACS’s HRO business unit and SVP Development and Operations for Fidelity’s Employer Services (FESCo) business unit. www.institutodegestao.com.br 10 The Case for a Chinese Shared Service Centre By: Jonathan Wong financeasia.com One or even a few shared services within a company’s group structure in one location is nothing out of the ordinary. So establishing a specific shared service centre (SSC) would be a logical step for a company to grow its business at home or even abroad. But according to Jason Wang, Henkel’s Greater China chief financial officer, the shared service centre model is being applied not only for treasury functions but also for many other finance operations. “Henkel’s shared service centre model is a pyramid structure providing worldwide outstanding financial services. The role of the SSC is to ensure corporate governance and to provide an optimal financing structure for the group,” said Wang at the EuroFinance cash, treasury and risk management conference in Shanghai at the end of last year. “Our lead administration centre covering Greater China is located in Zhangjiang, Shanghai, and is focused on centralisation, standardisation, automation and compliance.” The primary objective of setting up a SSC is to reduce costs, enabling a company to in-source rather than outsource. Benefits include faster response times allowing improved control within the same organisation, and lower costs compared to fees charged by an external service vendor. For a rapidly growing Chinese company, a SSC enables it to capture economies of scale and provides additional flexibility for domestic and international expansion. At the operational stage, processes and people should be standardised and consolidated before any move to the new SSC so that key individuals are retained and services are undisrupted. The first cost reductions usually come from lower headcounts and the homogeneity of technology and systems across the corporate structure. “At the operation stage, processes should be well documented. Having the right people with the right skills and sound, secure and robust systems is essential,” said Wang. Is it necessary for an expanding company to set up a SSC? There is no right answer. Many factors may influence a company’s decision about whether setting up a fully fledged SSC will reduce costs and provide unmatched visibility and flexibility. But for a large company operating in multiple locations, streamlining decentralised operations can be as simple as setting up a SSC. The SSC model is continuously evolving and it is quite possible to achieve optimum conditions with a mixing and matching of options by taking a step back and outsourcing selective back office operations. As Chinese companies continue to grow, so too will the SSC model evolve. But setting up a SSC is not a task that can be completed overnight. Choosing the right location is perhaps the key decision, and many Chinese companies and multinationals with an established China presence such as Henkel choose first-tier cities despite the increased costs involved. “Why did we choose Shanghai, an expensive first-tier city and not another, second-tier city? Because there is easy access to talent,” Wang explained. “Locating in a city such as Shanghai means there are more career development opportunities for our finance team members. In Zhangjiang there is better support for businesses and a developed information technology infrastructure.” For the expanding Chinese company looking to build a SSC, the setting up stage requires advanced resource planning according to Wang. A phased approach should be taken and proactive internal and external communication is paramount to success. Editores Conselho Editorial Rodrigo Lang Thaissa Lemos Vanessa Saavedra Caio Fiuza Eduardo Saggioro Vitor Marques Diagramação Gabriel Almeida Contato: pesquisas@institutodegestao.com.br www.institutodegestao.com.br 11