Oftentimes, when companies are implementing Global Shared Services organizations, they jump straight to new systems as the answer. However, our belief is in order to get the most out of a Global Shared Services organization, it’s important to determine the right combination of organization structure, work processes and systems to maximize the benefits. Making a decision on systems first, and then fitting everything else around that oftentimes creates a suboptimal solution.

Background

One of the first things a lot of companies do when implementing a Global Shared Services (GSS) organization is start determining what ERP system will be the foundation that they will build on. Granted, the ERP system decision is an important one. However, we believe it’s important, and necessary, to look at the systems, organization structure, and work processes together to ensure they all fit appropriately. If they don’t, then it will be very difficult to deliver all of the cost, quality, speed and stewardship benefits associated with a Shared Services structure.

Bringing the Pieces All Together

We view the systems, organization structure, and work processes as a 3 legged stool. If one of the legs doesn’t match the other two, then the whole structure is wobbly. Or at a minimum, it isn’t as comfortable as you imagined when you originally decided to build it. So when creating a GSS organization, it’s important to take all 3 components into consideration in the design phase, because a decision in one area can impact the others, and you need to be cognizant of that.

The Organization Structure

The choices involved in a GSS organization structure and the accompanying service centers are as follows:

1. Standalone vs. folded into Corporate or one of the BU’s – the GSS organization can either be its own standalone organization reporting to the CEO, or it can be folded into one of the other organizations in the company. We believe it’s best for GSS to be a standalone organization (as discussed in the paper “The 5 Building Blocks to Creating a Successful Global Shared Services Organization). However, if the GSS organization is going to be small, then it probably doesn’t make sense to be standalone, and instead it should either report up through Corporate or if there is one function that makes up the large majority of the Shared Services, then the global head of that function
2. Multifunctional vs. single function – will the GSS organization contain multiple functions or will it be dedicated to just one function. If the Share Services group is starting out with just one function, but there is a strong possibility that it will expand to include other functions, then the design should plan for it being multifunctional.
3. Global vs. local/regional – the next question is will the Shared Services organization support all of the BU’s around the globe, or just one country or region. If the intent is to eventually go global, then the organization should be designed with that end point in mind (which means the work processes and systems should be standard globally as well, with modifications only to meet local tax or legal requirements).
4. Onshore vs. offshore – will the service centers be located in the same country as the BU’s, or will they be located offshore in a low cost location. If they are going to be located offshore, then one needs to ensure that the service center has the right language skills and is available during the business hours for all of the BU locations it is supporting.
5. Captive vs. outsourced – which services will still be run by employees of the company and which will be outsourced to a vendor? And if there is outsourcing, what systems will the vendor be using and how do those fit with your policies and work processes?

Of note: we would recommend that the answers to #1, #2, #3 and #4 be one or the other. For example, all of the services should either be in a standalone organization together or report to Corporate together as one group. And all of the services are either going to be rolled out globally or kept locally/regionally. The answer to #5, though, can be include both options, ie. some services can be outsourced and others remain captive.

Work Processes and Solutions

There are four different categories of work processes or systems that need to be addressed in the design phase. They are:

A. Customer facing work processes and systems

B. Back office or transactional work processes and systems

C. Dashboards and reporting tools

D. User communications and tools

 

A. Customer Facing Work Processes and Systems – These are the work processes or systems that are used directly by the BU’s (hence the term customer facing). For example, a request by an  end user in the BU to process a cross charge or submit an expense report. These systems need to be easy to use to free the BU’s up to focus on running the business. However, the work processes need to collect enough data in the right format so the back office can properly handle the request efficiently and effectively.

B. Back Office or Transactional Work Processes and Systems – Once the appropriate inputs have been collected by the customer facing work process or system, then the data is passed on to the Back Office to process the transaction. There will also be some back office processes and systems that don’t require any input from the BU’s to occur. For example, some of the monthly close processes within the accounting back office are passed along with no input from the BU’s. Similarly, some IT system work processes occur regularly in the back office, i.e. monitoring if certain jobs have run correctly, and if they haven’t, troubleshooting and fixing them.

C. Dashboards and Reporting Tools – Processes should be established for automating scorecards and creating standard reports as much as possible. The 80 for the 20 theory should be applied here, where a small number of basic reports should meet 80% of the user needs. However, there will still need to be interactive orad-hoc reporting tools for the other 20% of the user requests. Because most of the users will be from the BU’s, the user interface should again be as easy as possible to use. Oftentimes, there is a trade-off between reporting capability (ie. the ability to slice and dice the data a number of different ways) and ease of use. The service owner will need to take that into account when deciding on a final solution.

D. User Communication and Tools – There should be a standard process for communicating different types of information out to the user community and also for accessing certain tools. Creating a standard template for communicating this information will make it easier for the user to quickly determine if the message is relevant to them or not, and if it is relevant, what they need to do with the information. Similarly, having a consistent, easy to understand user interface will make it easier for the end user to navigate through any GSS systems, ie. like the consistent user interface for all of the tools within Microsoft Office.

Finally, good documentation is critical in a Shared Services structure. As these work processes are being created, it is also important to create th necessary documentation so users of the system (both End Users and people in the Service Centers) can easily understand and follow them. And it’s important to include in the documentation who is responsible for what in each step of the process (both input and output), as well as a basic understanding of the business process, the policy that is behind the work process, and the SLA’s associated with the work process. This is the unheralded grunt work that nobody wants to do, but having this kind of documentation is critical for training and sustaining a GSS organization.

 

Summary

When implementing a new Global Shared Services (GSS) organization, it is important during the design phase to take into account not only the systems, but the work processes and the organization structure, so they all fit together appropriately. Too many times, people make a decision on the system, and then have to force fit the organization structure and work processes around that, sub-optimizing the potential benefits associated with moving to a GSS structure.

There are many questions that have to be answered when designing a GSS organization structure. The answers to some of these could impact the systems and work processes. Similarly, decision about systems can impact work processes, and vice versa. Bottom line, when the GSS design team is working through what the end state is going to look like, they need to take into account the interactions between these 3 different variables, and decide on the optimum combination.

To assist with this process, it often also helps to identify any hard boundaries that have already been established, ie. systems decisions that have already been made, or commitments that have been communicated about the organization structure. Those can then be taken into account and worked around as necessary, to come up with the solution that delivers the best overall cost, quality, speed and stewardship.

Today, many companies have implemented some form of accounting Shared Services (the definition of Shared Services being the centralization of “back office” support services).

Some examples include: General Ledger, Accounts receivable, Accounts payable, Capital and fixed assets, Cost accounting and Balance sheet reconciliation and other stewardship responsibilities.

As has already been well documented by organizations such as the Institute of Management Accounting (IMA), Shared Services & Outsourcing Network (SSON), and Shared Services Link the benefits of creating Shared

Services are: Lower cost (sometimes as much as 40% savings if work is offshored or outsourced), Better quality via standardization, Faster processing of the data and Better stewardship, ie. SOX compliance

To stay competitive in today’s marketplace companies need to leverage Shared Services beyond just accounting. This article focuses on taking Shared Services to the next level, i.e. moving to a Global Business Services organization, where a company can achieve the same kind of cost, quality, speed and stewardship benefits across a broader set of back office activities.

From Shared Services to Global Business Services

To expand from a Shared Service structure to a Global Business Services (GBS) organization requires identifying which work processes in other functions would be good candidates. The key characteristics of work processes that would benefit most from a GBS structure are:

• A large number of transactions where a high level of local interaction is not required.
• The transactions are something that all or most of the Business Units (BU’s) utilize.
• The activity within a work process is similar (or should be similar) across BU’s.
• The opportunity exists to leverage technology to drive improvements in cost, quality and speed.
• The P&L risk to the business is low if anything should go wrong.

As mentioned previously, standardizing policy and work processes in other functions and consolidating this work into one organization can result in significant improvements in cost, quality, speed and stewardship. In addition, though, moving to a GBS organization can also deliver the following benefits:

• Driving more end to end process improvements. For example, many HR processes end up impacting the accounting books (payroll, benefits, etc). By having the HR processes in the same GBS organization as Accounting, the two groups can work together to better integrate their systems and reduce the number of human “touches” as the data is processed.

• Using the same service center locations allows the organization to better leverage its scale, i.e. reduce overall site costs, including internal IT, F&A and HR support.

• Leverage common tracking/scorecarding systems to drive a consistent customer service culture.

Moving Work Into Global Business Services

In applying the above criteria to other functions, the following are some work processes that are often excellent candidates to move into a GBS organization.

Finance

• Cash management
• Intercompany accounting
• Tax compliance and reporting
• Internal audit
• Transactional or back office support for financial planning & analysis

Human Resources

• Payroll processing
• Compensation administration
• Hiring and recruiting
• Car fleet management
• Processing travel and entertainment expenses
• Relocation services
• Benefits administration
• Pension administration
• Processes related to the tracking and development of internal talent
• Core company training

IT

• Distribution and support of all desktops, laptops, company phones and other portable devices
• Running the data center(s)
• Application development and maintenance of all systems
• Firewall security
• Network support
• Oversight of other third parties who are providing services, ie. local telecom companies

Facilities & Real Estate

• Operations and maintenance of current facilities
• Identification and negotiation of any new space
• Selling off or subleasing any underutilized space
• Oversight of other third parties who are providing services to the facilities, ie. food services, security, cleaning, utilities, etc.

Purchases

• Leveraging spend pools that cross multiple Business Units or regions, and thus would benefit from further economy of scale, ie. certain raw or packing materials, vendors utilized by the GBS organization, etc.
• Tracking and administration of all major contracts

Environmental, Health & Safety

• Internal auditing
• Compliance tracking and reporting
• Resolution support

Corporate Communications

• External relations
• Consumer relations
• Internal communications support
• Video services

Legal

• Document preparation
• Vetting of contracts
• Litigation support

As with Accounting, the decision will also need to be made about whether to onshore vs. offshore vs. outsource each of these work processes. And similar to Accounting, the more simplified and standardized the work process, the easier it is to outsource, which usually translates into larger savings, greater flexibility, and frees the GBS organization to focus its internal resources on where it can add the most value.

To be clear, if any of the above work is outsourced, the Company still retains responsibility for creating and maintaining all of the associated policies, and for governing the external vendors who are administering those policies. The governance role is particularly important. Somebody within GBS always needs to be accountable for each of the services being provided by the organization, and also manage the overall relationship with any associated vendor(s), i.e. resolve any differences, track performance, look for opportunities to broaden the relationship where it makes sense, etc. So whenever a service is being outsourced, be sure to maintain an internal governance role so as to ensure the company is receiving the full value from the relationship.

Summary

Many companies have implemented Shared Services groups, usually starting with their accounting organization, and they have achieved significant benefits in terms of cost, quality, speed and compliance. To truly drive step change improvement and stay ahead of competition, companies need to be looking at how they can leverage their Shared Services organization even more broadly.

To do that, the company needs to identify work processes in other functions that would also benefit from moving to a Shared Services structure. In other words, move from just a Shared Service structure to a Global Business Services organization. In addition to driving improvements in cost, quality, speed and compliance, moving these other functional work processes into one GBS organization will allow that organization to better leverage its scale, as well as work as one team to drive end to end improvements in all of the services it provides to the Company.

SynFiny Advisors advocates that companies should move from a Shared Services organization focused primarily on accounting to a Global Shared Services (GBS) structure which crosses multiple functions, and which looks for ways to improve end to end work processes while also driving a consistent focus on continually improving cost, quality, speed and governance (in other words, continually improving its customer service, where the customers are the internal Business Units within the company). (See SynFiny Advisors leading practice paper on “Building Blocks to Creating a Successful Shared Services Org” for further details on shared services).

This paper explores ways to drive even greater value from a GBS organization.

Leveraging External Partners for Greater Benefits

In addition to providing greater flexibility, outsourcing to external partners can provide other benefits, if the contract is structured properly and if the external partner is strong in their field. That’s because the service the external partner is providing is their core business. It’s what they specialize in. And because they are providing this service to multiple customers, they can spread their costs across a broader base, thus allowing them to offer a better price, more flexibility and sometimes broader functionality.

Some specific examples include:

• In the IT area, a GBS organization could outsource all of its hardware. This can help a company significantly from a capital and cashflow standpoint, particularly if the contract is structured such that the hardware is paid via an RU that also includes support and other non-capital services, and there are no restrictions on the how quickly the volume for that RU can increase or decrease. The watchout here is if the RU is for the asset alone, or if there are restrictions on how quickly the RU volume can change, then the cost for this service can become an embedded lease which then needs to be accounted for in both the balance sheet and as capital spending. One additional watchout: if the external partner does not have a solid credit rating, then the cost of the RU could actually be higher than the cost of capital for the GBS organization. So be sure to review credit ratings in the outsourcing due diligence process.
• If the IT external partner is strong in their area, they can also often provide better resiliency, redundancy and security than the GBS group could on its own. Again, this is because the IT partner is providing this service across multiple customers, and is thus able to spread the investments required to deliver these benefits across a much broader base than the GBS group could if they were doing it on their own.
• Similarly in the telecommunications area, a GBS group could outsource running all of its voice and data network. If the external partner is a leader in this area, they should be able to bring the latest and best technology to the table, again without any significant investment required by the GBS group.
• In the HR area, the latest trend is to outsource whole HR systems leveraging the Cloud. Companies like Workday can provide suites of different HR processes that GBS groups can pick and choose from. The external partner also ensures the software is up to date with all local country requirements, and schedules regular updates that go out to all of their users. We’ve also seen external providers canvas their users on what new features they would most like to see, and then based on that input, include enhancements in future updates. In addition to providing greater flexibility to the GBS organization, this kind of outsourcing also frees the GBS group up to focus their limited resources on where they can add the most value. The one watchout with moving to this kind of outsourcing is it doesn’t allow for a lot of customization. However, given the number of large multinational companies who have gone to this model, it’s hard to imagine that all of the basic required functionality isn’t already being delivered by the vendors. Furthermore, from an external benchmarking standpoint, it may call into question if any customization that is being done by the parent company is really warranted.
• If the external partner is more of an intermediary, i.e. an external partner who is managing multiple vendors on the behalf of the Shared Services group, then a contract can be structured such that the external partner can earn one time bonuses for driving additional savings that flow to the GBS organization. For example, in the Facilities & Real Estate area, the GBS organization could hire an external partner to handle all of the costs associated with running and maintaining the facilities, i.e. hiring cleaning services, security services, HVAC services, food services, etc. The contract with the external partner could be written such that they can earn one time bonuses for driving down the costs of these third party services beyond what is already built into the contract. The reason this can work is because those savings come out of the other third parties and not the external partner. We have seen contracts that have tried to incent the external partner to drive savings in their own area, but this hasn’t been nearly as successful because doing so reduces the external partner’s own revenue (and in turn, usually their profits).

Creating New Services with an External Partner

If the GBS organization has the right expertise or business knowledge, it can enter into co-development deals with its external partners to create new services or capabilities that the vendor can then offer to other companies. Any co-development agreements could be drawn up such that the GBS organization would receive either a percent of any revenue generated by the vendor from this new service or capability, or a reduction in the ongoing costs they are paying to the external partner for the service, or both.

GBS Enabling Rapid Integration or Divestiture

A strong cross functional GBS organization can give a company greater flexibility and drive greater value in the acquisitions and divestitures area. In the case of acquisitions, the faster a GBS organization is able to take over and integrate the acquired company, the sooner the acquiring company will began to realize synergies. Also, the broader the number of functions/services that are offered within the GBS organization, the greater the potential savings.

In the case of divestitures, the faster a company is able to sell or spin off a business, the greater value it can command. Also, the GBS organization can offer the acquiring or spun off company the ability to continue to provide certain services for a period of time….for an additional fee, of course, which again creates more value for the parent company.

Within the GBS organization, it’s also important where possible to have the same team of people estimating the costs, timing and savings that will be derived in GBS from an acquisition or divestiture, so they can build more institutional knowledge and continue to improve their estimating capabilities. Similarly, where possible the same team within GBS should execute their portion of the acquisition or divestiture, so over time they will be able to more quickly and efficiently complete an integration or spin off.

One final consideration in the area of acquisitions and divestitures is the more services that have been outsourced, the greater the ability to flex up or down the number of resources supporting the services. This can be particularly helpful in a divestiture situation, as it helps to minimize any fixed or stranded costs. Furthermore, having an outsourcing contract that utilizes Resource Units (RU’s) provides more surety on how much the cost increase or decrease will be. And having more confidence in the numbers that are being used in any project economics always adds value from a risk management standpoint.

Summary

If a GBS organization has chosen to outsource support for some of its services, and the vendors are strong in their field, the GBS organization can leverage those vendors to deliver more value and greater flexibility to the parent company. The key to achieving this, though, is to create a clear understanding up front with the vendors on the Resource Units (RUs) associated with each service and the cost of each RU. Also, the GBS organization needs to contractually maintain the ability to easily increase or decrease the volumes of the RU’s they are utilizing. Lastly, in a mature partnership, the GBS organization and the vendors can began to co-develop new services and capabilities that can benefit both organizations.

Also, if a company has moved from just a Shared Services organization to a Global Business Services structure, then it can began to offer even greater value in the acquisitions and divestitures area. For example, the more services there are in a GBS organization, the greater the potential savings. Also, the more expertise a GBS organization develops, the faster it is able to execute an acquisition or divestiture. And this expertise also enables the GBS organization to provide more certainty on the estimations that are used in the economics associated with any acquisitions or divestitures.

SynFiny Advisors continue the HR breakfast series – “Let’s HRbreakfast!”
Over the past 6 months our life in all its dimensions surpasses all possible and impossible manifestations of VUCA (Volatility, Uncertainty, Complexity, Ambiguity)

Work is where we are

Since March companies have gone from organizing work from home (processes, systems, workplace equipment – appliances, furniture) to adopting a model where employees work remotely from any geographic location. But not all industries can afford this, so there are lots of hybrid options – some employees work from home on a full-time basis, 10 to 30% work from the office 1 to 3 days a week, or a week from the office – a week from home. Many people use online platforms to plan work from the office and align specific schedule with the line manager. Production assets are operating as usual.

Emerging issues and ways to handle

• The current situation forced many to extend the remote work until the end of the calendar year.
• Employees adjusted to working from any place and are creating their own new way of life, and with it the risks for employers (for example, requests to have more flexibility in the work schedule, the ability to leave the city for a long time).
• Employees expect more and more attention and positive communication from their managers at various levels – moving from a culture of control to a culture of motivation.
• Conflict, anxiety, demotivation have increased, there are growing problems with disconnected cameras during meetings, refusal to wear masks when working from the office, etc.
• Social connections are weakening, so more and more often employees request corporate events in a small-team format. A virtual corporate party has certainly become the norm.
• The corporate culture is moving into an online format, the issues of maintaining and preserving culture remain valid.

We work 24/7

Most of us were not in the habit of working online, and online “drags on” outside of normal working hours. There are more meetings, decisions are made faster, there are less distractions and off-subject discussions.
The differences between the teams in terms of productivity and quality are very visible, and employers have already drawn their practical conclusions.

Working from the office as the greatest privilege

Until recently we could not have thought of working from the office as the most coveted perk. Many employees ask for the opportunity to work from the office, and the reasons can be very different – to switch from home environment, to socialize, wear office dress, finish an important project or task without distractions.

Movement towards each other

Now is the time for a healthy imbalance towards executives’ soft skills. Our participants called this trend “Moving towards a culture of motivation” – meaning more positive and less formal managerial pressure, being more human and sincere in communicating with teams. The movement has already begun!

Rebuilding severed social ties

In anticipation of the corporate virtual New Year some companies took advantage of the warm and sunny weather and held team-building events in the open air in compliance with all the requirements of social distance. Those who finished the fiscal year in the summer hosted virtual corporate events across multiple countries and time zones. The online recognition and reward system is also working well (e.g. a personal letter from the General Director and a digital certificate as a gift).

New employees

The quarantine period helped to finally move to the online format of hiring employees at all levels. The onboarding process requires face to face with the team and immersion in work processes. We have accumulated a positive experience of full online onboarding, however there are also cases when online format of getting to know the company does not work out and new employees leave in the first three to four months.

Formation of new habits

The time of quarantine has driven a serious reassessment of life values. For most people it has stressed the importance of the active lifestyle and work-life balance.

Well being firmly in the top position

Employees are increasingly more open to discuss the loneliness, depression, and personal effectiveness at work with a psychologist, and there has been a surge in interest in financial literacy programs.
Employers request systemic programs, marathons to change staff behaviors and take conscious care of themselves.
Employee Assistance Programs (EAP) are becoming integral part of corporate culture.

We would like to thank our partners Dobroservice and Summarylib for their cooperation.

Take care of yourselves!
We will HRbreakfast again in November!