Global Business Services: a Game-Changer for Finance
Who would want to be a CFO in today’s competitive and challenging environment? On the one hand, they continue to be tasked with their traditional stewardship responsibilities to the organisation; control of the organisation remains paramount, as is running an efficient finance operation; on the other hand they’re also increasingly tasked with creating a finance structure and capability that brings deep insights to the organisation to help create business value. These dual aims of today’s finance organisation are not mutually exclusive, and, though perhaps not obvious, shared services and outsourcing have a potential role to play in achieving both. Naturally shared service and outsourced finance operations have brought significant cost benefits, but the standardisation and de-duplication of finance processes, coupled with better technology has also resulted in an improved control environment. Similarly, the streamlining of finance processes, and freeing up of the “retained” finance organisation has, in theory at least, put the finance organisation in a better place to deliver insights that genuinely help create competitive advantage and business value.
So far, so good. But there’s a new kid on the block, Global Business Services (GBS), which has the potential to take finance delivery to a whole new place (metaphorically and literally). What GBS is, and what it isn’t, is a source of significant debate (but of course it’s early days). Broadly it can be seen as the defining corporate back office entity, leveraging locations, management, and sourcing methodologies to create a super, cross-functional business support function. GBS in theory is configured around end-to-end processes which cross HR, Finance, Procurement and potentially other business support functions, rather than being defined along functional silos. In theory it also has one unified governance structure with oversight across the enterprise and a seat at the management table. You see, it’s really rather simple.
Or is it? In practice the lines in the sand may be less clear – some finance organisations may be adopting GBS characteristics without truly being cross-functional, and some businesses may be sharing back-office infrastructure and locations but reporting and governance mechanisms remain stubbornly functional rather than cross-enterprise. The key question is this: is GBS often simply a marketing term to signify a major business transformation, when in reality what we’re talking about is still finance transformation?
On paper, the advantages of GBS are compelling for the business and for the finance organisation. GBS structures which are configured around end-to-end cross-functional processes should enable the business to further leverage operational synergies and cost savings. By reducing functional silos, GBS should provide the business with service scalability benefits, making it easier for the organisation to onboard or divest new business operations, as well as improve control and visibility across the organisation. Similarly, further cost savings and efficiencies should be made by pooling locations, infrastructures and investments, as well as joined-up approaches to vendor management.
But should CFOs really care about GBS? With functional silos broken down, and processes managed end to end, the real prize for the finance organisation is that they should have access to a scale and scope of corporate data being brought together that they have previously not known. This enhanced data visibility across the organisation, combined with new technologies and business partnering capabilities, could help finance chiefs deliver the sorts of insights that truly make a difference to the strategic direction of the organisation, or which impact directly on bottom-line performance.
In ACCA’s recent report, we suggest, however, that fundamental questions and unknowns in relation to GBS and the finance organisation remain. Here’s the first one: who “owns” GBS? In some respects the CFO could be seen as the natural inheritor given their predisposition to control, efficiency and focus on value, and they may recognise the potential upside that GBS could bring in terms of helping the finance organisation drive better insights. Also they often have a tracked record in managing other non-finance functions of the business – for example IT sometimes falls within their remit. The difficulty here is that CFOs don’t have to “own” GBS to get the potential benefits. GBS can be someone else’s problem, and anecdotal evidence suggests some CFOs are very wary of what may be seen to be a significant political headache, as well as a distraction from the many other competing priorities they have on their plate such as meeting their regulatory responsibilities, and driving the strategy of the business forward. Placing GBS under finance or some other existing function, such as with the CIO may also send the wrong message – that GBS is subservient to finance or IT rather than a peer in its own right with an equal seat at the corporate table.
Aside from the question of ownership, there are other major questions to deal with too: Does GBS simply represent a distraction to functional finance transformation initiatives? Does GBS change the skills equation further for finance professionals who shift from a finance shared service environment into a global business service operation – is there a new or rebalanced premium placed on skills outside of the traditional finance domain, such as virtual management, change management and relationship building? What is the implication of the move to a GBS model on “finance” career paths? How is the role of the retained finance organisation changed by a move to GBS?
These are all fundamental questions for the finance organisation raised in ACCA’s latest report (co-authored with Deborah Kops of Sourcing Change): ‘Global Business Services – a game changer for finance?’ In theory, the benefits to both the business and the finance organisation of GBS make sense, but in practice, it’s probably a harder sell. At this stage we don’t have all of the answers, but at least the report starts to ask the right questions.
This article originally appeared in Outsource magazine Issue #33 Autumn 2013.
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