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Outsource magazine: thought-leadership and outsourcing strategy | August 23, 2017

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Head-to-Head: Peter Moller & Michel de Zeeuw

Head-to-Head: Peter Moller & Michel de Zeeuw
Outsource Magazine

The Global Business Services (GBS) model is enjoying a protracted stay in the limelight at present, adopted by some of the world’s foremost businesses. But do all those organisations claiming to have implemented it really have what they think they have – and what is GBS really all about anyway? Our head-to-head series returns, bringing together Peter Moller, European Shared Services and BPO Advisory Lead at Deloitte and Michel de Zeeuw, CEO Global Shared Services at Siemens, to address these questions and more…

Michel de Zeeuw: Peter, Global Shared Services is a mature concept – why are many organisations still struggling with the idea of transforming their GSS into a true service business?

Peter Moller: I think we need to differentiate between functional shared services, i.e. doing shared services just within finance, HR or IT, which has been around for many years and is a mature concept, and global business services (GBS), which is a more recent trend. By GBS I mean not just doing separate finance and HR and IT shared services but combining them and coordinating them in one integrated business, which is a far more difficult challenge. I think the organisations that are having trouble out there are the ones that are trying to do GBS and are struggling with some of the additional complexities that that brings along. When I look at GBS I think of two phases: the integration phase, where you’re trying to get your separate functional shared services into a single GBS organisation; and then the value creation or value-add phase. For the integration phase, at the very simplest level, you could just try and share things across your different shared service centres. For example, if you have finance, HR and IT shared service centres, you could share your recruitment model, or the SLA tool you use, or some service management techniques, or maybe Six Sigma continuous improvement. So, without doing anything physically, or in terms of your governance structure, you could just share things – tools and methodologies – across those centres. So at the very least you’re sharing things that make sense, you’re leveraging some common tools.

But beyond sharing, organisations then think about co-locating. So if you look at Shell, they have six centres globally with about 10,000 people in them. Within those centres you have finance, HR and IT, so they don’t go off and build their own centres. This means there is a huge amount of additional sharing you get if you co-locate common infrastructure. So you have one facility, and local finance, HR and IT support will be there in each facility. Beyond co-location, you then have creating a single governance structure, having a GBS leader whom everyone reports to. That’s where some of the difficulty comes in, because politically it’s far more difficult.
Michel, is that a sort of spectrum you recognise – and where is Siemens in this spectrum?

MdZ: Well in terms of running a shared services like a true service business, I don’t think it’s necessarily the aim of organisations. It’s probably one of the means of getting where they want to go, but it’s not the aim. I think the aim is for any organisation to have an operations model that is competitive and agile, supporting business objectives. As far as Siemens is concerned, we are on the way to becoming a true GBS organisation; we still have some things to do, and I can come back on that.

It’s important for us to run shared services like a true service business because I think, in our case, it helps us gaining the trust from the business to help us expand our scope of services and support the company in a better way. So I think it’s important as a means to better support Siemens in its business objectives, more than anything. But as you said, Peter, it depends on the organisation. Functional shared services may not necessarily have the same view.

I’ll take one example: a customer relationship management process may not be as important for a finance shared services organisation as it is for a GBS org where they need to really engage with customers to better understand their requirements and build solutions that address their needs. While in a functional shared services it tends to be much more top-down-driven with a clear mandate and those CRM services are not necessarily that important.

PM: Before shared services, if you look in Europe, shared services weren’t really around until the early or mid-‘90s. Before then, you had centralisation of various things within organisations. Typically centralisation led to a feeling that people didn’t get service, that it became a black box and that stuff was sent into head office or corporate or whatever the centralised body was, and they didn’t really get much back. I think the whole point about shared services, and GBS for that matter, is that, if you lose that service orientation, you end up with centralisation. And although initially the economies of scale and labour arbitrage may look appealing, that’s no good if people in the businesses don’t think they’re getting service; they will start building their own, alternative, support structures locally. Any organisation that looks at shared services or GBS must build a service-orientated shared services or GBS for it to work. I think that’s just pretty obvious. And that needs a lot of focus; you can’t just think about the business case for taking out heads, for getting labour arbitrage, you must think about building in the service orientation that’s required.

MdZ: Yes absolutely, I would completely agree. Build a service orientation and the processes around it; I talked about CRM processes but everything that goes below that in terms of following up on user satisfaction for services, in terms of setting up the right service reviews and operational level and all possible interactions with the customer. Also in the way you define your service innovation, service improvement plans involving users and customers, I think is a good recipe for success.

PM: But right now in the market everyone, it seems to me, is very quickly re-labelling everything from shared services to GBS – regardless of what they’re actually doing. The model I talked about, the integration phase, whether you just share that you’re still pretty much separate SS or you’re co-locating that you don’t have a single governance structure. Shell for example: although they co-locate their functional SS into the six locations and they have a GBS leader, effectively it’s a landlord model where the GBS leader owns the infrastructure and the locations but finance still reports back to finance and HR to HR and so forth. That’s the co-location model.

The fully integrated model is where the GBS leader has full pay and rations control over the resources within GBS. They’re three very different models if you like: that’s just a bit of sharing, co-located and full governance integration. It seems everyone in the market is calling themselves GBS, whichever one of these three models they have. And yet those three models are very different. The final model, when you try and get full pay and rations control with the GBS leader really having the resource reporting to him or her, rather than back through finance or HR, that last step is very difficult to take politically. Doing finance shared services is like trying to herd cats, if you try to do finance, HR and IT at the same time, get them all into one structure, and I think you find a lot of organisations feel it’s just too much to bite off.

Michel, within Siemens, to what extent do you think you have a full pay and rations control GBS or do you just have a co-location model with a lot of the reporting still back through finance and HR?

MdZ: I would say it’s a little bit of a mixed figure. It’s not co-location: all the shared services employees report into the SS organisation. But in terms of governance structure, we have the finance stream in governance – our finance business line also has a reporting line into finance, our HR business has a reporting line into HR, procurement the same – but we also have another business line called business solution services that doesn’t have any governance. We have single locations, where we do have common functions and we try to generate as much synergy as we can on the cross-functional basis in terms of technology, ticketing tools for example, KPI reporting tools, even call centre. So we do leverage our cross-functional aspect, but there is still some strong involvement from the function in terms of providing direction on where they want to go and so forth.

PM: And do you feel that tension between having a GBS organisation that reports all up to one GBS leader, and yet finance still reporting back to finance or HR? My feeling is that, if you have a true GBS model with a single governance structure, the pay and rations control a GBS leader has over finance, HR and IT means that you can really get some end-to-end process optimisation. For the first time perhaps, you can get really get business process reengineering that cuts across the different functions, whereas if you have finance still reporting to finance and HR to HR, it’s much more difficult to really get that cross-functional process optimisation because the different functions have different people responsible for them, different performance metrics, and so forth. What’s your thought on that?

MdZ: I agree that it’s important to have all the shared services people reporting to the same organisation and driving those synergies but at the same time I think it’s important to have good alignment with the function because the end-to-end process improvement will involve the governance function in most activities.

So, in our case we actually have matrix reporting lines, so finance reports equally into me, as the CEO of SS, and into the finance function. So it’s a matrix and we do have the two alignments. The finance head of my business line is working within shared services first and aligning with this function on an ongoing basis.

PM: And Michel have you estimated the benefits you’ve gained from having a GBS model, a combined model, rather than just doing separate shared services in finance, HR, IT? Do you have an incremental business case that shows the true value of GBS rather than separate functional shared services?

MdZ: At this stage in our maturity road towards higher maturity of GBS in Siemens we have identified the savings we’ve made in terms of sharing technology, in terms of sharing infrastructure, in terms of having standard tools, standard backbone technology for all shared services activity in services. But it’s not necessarily the whole business case – there is much more than that as you’ve indicated in terms of cross-functional solutions that we can build.

We’ve started that aspect, for example in the on-boarding process of new employees, where we’ve bundled that under one service; although it includes some IT aspects and finance aspects and HR and some procurement, we’ve bundled it under one service. And that really helped achieving close to one-day readiness for new employees, which was far from being the case when this process was fragmented across functions.

PM: So it’s a value creation in addition to just reducing costs?

MdZ: Yes absolutely.

PM: So I talked about my view that the integration phase is to what extent you’re sharing, co-locating, creating a single governance structure. My view is that the next phase, once you’ve done that, you’ve done the planning, you’ve got the integration of the various shared services, the different shared services into a GBS, then the opportunity is to really look at the value creation opportunities. And it seems to me that there is a whole big play around analytics, the opportunity for GBS, because it’s the obvious one place in an organisation where all data is deposited if you like, and because you can then create one economical technology platform to analyse that data.

There is a big opportunity for organisations to get far more clever with analytics; both to improve the running within GBS, so for example, using helpdesk to understand small factors of process breakdowns; you know, Six Sigma, lean information, that type of thing; and looking at things like early payment discount and so forth; but also to add business insights; what are our customers’ buying patterns, what are the strategic sourcing opportunities? When it comes to looking at value creation, there is a whole play around analytics – and then I think there is also a play around the growth agenda; integrating new acquisitions far more quickly in a GBS environment. If you look at Shell, they can plug a new acquisition into six locations rather than 180 different countries where they didn’t have GBS. And integrating new acquisitions: I recall P&G talking about the fact that they integrated Gillette within about 15 months and it would’ve probably taken three or four years if they didn’t have GBS, and they think the synergies were worth about $4 million per day. You can soon realise the benefits of GBS as it helps you integrate new acquisitions. The other one I’d say would be entering new markets. Again, if you’re going to some new markets in Asia or wherever, rather than building infrastructure – finance, HR and IT – in each of those new markets, you can simply plug them into the nearest GBS location.

Michel, are those the things that you would echo from Siemens’ perspective?

MdZ: Yes, I think it is definitely where we want to go and we’ve started in some areas. Definitely we want to, in the future, build what we call ‘solutions’ for the business that will address specific business needs or business issues, primarily around, as you mentioned, revenue growth. And those are things we do already. I think the first lever there is to eliminate, as much as possible, administrative tasks that salespeople, or field engineers, or research and development people do, by providing packaged solutions for this admin. And revenue growth also, as you mentioned, around analysing customer behaviours, or providing analytics on potential new leads for sales, by finding potential customers that the sales guys would not have found otherwise because it was too difficult.

So that is the revenue growth. I think there is another lever which is about enhancing customer experience and, let’s say, supporting a better customer experience from our standpoint. That could be through the analysis of customer behaviour when we have them on the phone or through other interaction.

PM: Is that internal customer experience you’re talking about – customers of GBS?

MdZ: No, I’m talking about external. And the aspect of organisational effectiveness – you mentioned mergers and acquisitions, and it’s a service we’ve started to provide about two years ago. We’re growing into it; I’m not sure I can say we’re as mature as Shell on this, but it’s definitely one that we do. And I think the on-boarding process for new employees that I mentioned is also a clear one. So I think the idea for us is, in the future, to really try and support those three elements by providing new solutions, potentially around analytics, that will help the business be more effective overall.

PM: Everyone looks at shared services and thinks, yes that’s fine, they can match invoices and pay suppliers and do a bit of HR admin. Do you have the business’ permission to start looking at sales administration and at external customer experience? Because that’s a bit of a leap from back-office transactional work isn’t it?

MdZ: Yes, absolutely and as I said it’s an area we want to grow into. We’ve actually started and here within Siemens we don’t have a governance function; sales and administration is really within each of the businesses and there is no head of sales or administration anywhere. So we have to actually go through a whole sales approach to convince people about the value-add of our services. We do have some experience already and references internally that we can build upon. But it is definitely much more of a sales approach and winning contracts on a one-on-one basis.

PM: One of the challenges within functional shared services was moving from transactional activities up the value chain, so into more advisory activities; so within finance that was moving away from just matching invoices to providing more reporting and support on planning, budgeting and so forth. Now, if you move from functional shared services into global business services, do you think it is going to be harder to move up the value chain, because finance – whilst they’re happy perhaps to give transactional work to a GBS – won’t be so happy to give it the business partnering activity. Is that a problem?

MdZ: I think it is potentially a problem. It’s probably why we want to keep quite a strong alignment with the various functions – so that they still feel that they still own shared services, they control the services that we provide. A little bit like any BPO would do, they always say that they like their customers to feel like there is no difference. That it is seamless in terms of operations. So we are trying to do that internally also – and I think the governance aspect is not necessarily the response, it’s also the way we behave and the way we evolve the function on a day-to-day basis.

This article originally appeared in Outsource magazine Issue #33 Autumn 2013.

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