Q&A: John Dickens, NEC Europe
John Dickens is Shared Service Manager for NEC Europe Ltd. In advance of his presentation at SSON’s Finance Transformation Europe 2012, taking place February 14-16 2012 at the Bloomsbury Hotel, London, we spoke with John about his organisation’s transformational journey, changing vendor relationship norms, and different cultural interpretations of doing business…
Outsource: John, you’re going to be speaking on ‘Attacking tail-end spend across diverse operating systems’ at Finance Transformation Europe. You’ve gone through quite an interesting journey at NEC; can you tell us a little about it?
John Dickens: I work at the shared service unit at NEC Europe, which is a London-based operation. It’s actually unusual in that it’s a relatively small operation and it tries to embrace a model of shared services which is more appealing to small and medium-sized operations… Our mandate is to attack the whole end of the rent-to-pay piece; thus far we’ve completed two parts of a three-prong attack in respect of the non-value add activities, namely our T&E – which we’ve done on a pan-European basis with Concur. We’ve gone for a single source for all territories, we use their online system, we back that up with a single-source transport management company and we’ve deployed that to nine different countries in their local languages, and embraced their local policies etc. – and the output of that is that we no longer have anybody inputting data into our ERP system.
With the second prong, we’ve attacked the invoice-scanning piece. Now, I’ve been around far too long – this is my third shared service operation – and I remember the days when people used to sit at one end of the room putting documents in and catching it at the other end, and all they got was a very large-sized document that was e-mailed around. The toys that we play with have improved quite considerably, in that certainly in the last two or three years, I’ve been delighted to see that these things have been a lot more dynamic; a lot more flexible; and reach into your ERP system on a level where you can get them to interact and do a lot more work. To that end, we’ve taken on the Brainware invoice scanning solution; here, again, we’re very small numbers but because it’s deemed to be something that impinges upon many roles in many territories, we’ve built the same model that we had for the T&E piece which was centrally to manage it and deploy it and administer it, so that’s what the shared service function is.
We’ve created a common operating template, the system provides a common entry system and what we then do is go out and work with the territories so they come into line. We have all of that in one unique NEC SAP system, but it’s been built in a manner which allows us to also reach out to other parts of the group who aren’t on our SAP system – who may in the future migrate to that system, but for the time being are on many disparate systems.
The vendor selection was as much geared around their flexibility to meet this kind of environments – and with the same token, we’re now looking at our third piece. We’ve yet to complete our evaluation and sign up, but we know where we want to go with this and that’s very much to look at the indirect spend which is the buzz for most people in shared services these days. What we’ve got is a number of opportunities. I think, again, we’ve got transactional numbers and volumes that don’t necessarily mean that we qualify for some of the bigger operations, the Ariba-type operations – albeit they’re very good products. What we’re looking for is something that which is nimble, and we can deploy locally, and we can allow people to use these tools in a local manner; in their local language; in their local currency, but they are managed from the centre, so we’re looking at operations such as Invapay in particular.
It’s quite interesting to see that the people that didn’t want to play before – i.e. the credit card companies – are now very keen and we’re actually discussing opportunities with many of the operators and suppliers there. Again, it gives us the opportunity to focus on what we’ve got to sell, rather than the back office, which is really just a cost and a burden. That’s where we’re at: the sale piece is definitely the most exciting.
O: Now, of course, as a smaller operation than many providers would be used to dealing with, that entails some specific challenges. Can you give us an idea of some of the main ones?
JD: The objective is to try and release people locally to do things with a greater value. Because we’re small we tend to have, say for example in the finance arena, a number of very highly skilled, highly trained, highly qualified individuals who, for some reason, be it necessity, find themselves as part of their daily role doing a number of mundane tasks – and we want to get rid of all this; we want to release that talent into going out to the field. But the problem with that is obviously that when we’re trying to deploy these tools, they’re the very same people that have to spare time up to actually get involved in the project – to help us build and configure – so as much as we have pressures like everyone has pressures when they’re deploying projects to hit these ridiculous time scales and turn it around in five minutes flat, I think we decided at the outset that it wasn’t really going to be practical given the audience that we were applying to. This same audience is going to be extremely busy – and plus the fact that we’re reaching out, we’re not actually playing, we’re also in the financial environment, so as much as the sponsor is very keen that finance delivers and offers a return for the investments, the reality is that what we’re dealing with here is not functional investment, it’s process return.
So we had to break down many barriers in actually engaging people further up track; being a Japanese company, one of the biggest parts of our business is the management of the supply chain and these are people that have tentatively used SAP because they’ve had to; they concentrated on other things and that’s absolutely right and as it should be, but what we’ve had to do is get them to embrace the idea of getting more out of our SAP, our ERP system, so you’re using that functionality that’s intended for purchasing and then lever off that to make these tools work.
It’s been an education from a reengineering of process; from an understanding of what’s possible in SAP – which is something that most people are comfortable with, if not specialists in – and then use that to build that common operation template which once we’ve deployed in one or two territories, we can then move to rapid deployment. So initially the first territories that we go to – again it’s very much formatted – is the UK because we’re here, we’re on base, we’re on site; we look after the UK operation and sales operations in the European headquarters function. And what we tend to do is go to Germany and Spain for our next deployment because they are of a size that gives us different challenges; different tactics; different types of business that we need to map out, and it seems to work. Once we’ve got those on board, we tend to get greater buying from those, and other affiliates’ time gets freed up – but we’re very conscious of the fact that time is a difficult one when you’re looking to deploy so many tools all at once.
O: Now this transformation programme has coincided with what has been a very interesting – if not very difficult – time economically for a lot of businesses in a lot of territories. You mentioned there a couple of important European locations for you, which are, of course, undergoing their own troubles at the moment. How much has this economic uncertainty played into, and impacted upon, the activity that you’ve been carrying out? Have you had to change your plans as the result of external drivers?
JD: As I say, I was around when the first set of shared services came around, probably just after the first economic blip went out and people were looking to reduce costs. And I think what happened in that period was that the big operations could warehouse, and everybody had this great plan for shared services which was to centralise and to standardise; and then to automate and then to replace. As much as people got two-thirds down that journey, automation never quite arrived in the shape or form necessary for most people to complete that journey. So a lot of people got economies to scale but didn’t quite finish what the original plan looked like. Because these tools in the last two or three years have actually refined and become a lot more interactive and user-friendly, not only has it enabled that to be revisited, but it also brings into the game a lot of smaller and medium-sized businesses.
Now, as an operation, with this division of NEC Europe, we are no more than probably around 1,000 employees across nine territories, so we’re not necessarily big in number anywhere but we all have the same structure, we all have the same finance operation and supply chain etc. The challenge for us initially was to get the benefit of cost reduction. The Japanese had a vision that we had to make more of being a European operation and so their intent was to centralise; we have an operation called One NEC – and I’m sure many other companies have their own ‘one this or one that’ – and here, what we’ve attempted to do is centralise the functional activities; so finance is done here; general accounting is controlled and maintained from here; as is budgeting; the transactional part, which I look after, is; but we also have a centralised IT, a centralised HR and centralised legal and the idea again is to have a pool of talent here that looks after many territories so they can come and shop when they need realistically.
The driver was very much initially cost reduction – and I think, to be fair to NEC, NEC’s view initially that was pitched was: how many will that replace, how many will this replace? Having coming on this journey, with myself having done this many times before, they have been very smart and very quick to wake up to the fact that the opportunity is not just one or two heads that may leave the operation. The amount of time it frees up at the senior end, many of these tasks and activities involve senior managers getting involved far too many times, and they’re touching too many times. So the key point that the operations here bought into was what the opportunity cost was of releasing management from those roles, so the driver initially was cost.
NEC made its first ever loss two or three years ago, and so the requirement of the European operation was tightened up very dramatically: we went from being a shop window to being an operation that was fully functioning on its own and had to make a return and so we had to take a look at many, many things – and it creates an opportunity. As much as, yes, we do have struggles, we do have constraints and business is under pressure as much many others are at this moment in time, what it has done is focussed our attention on: what do we do? What do we want to be doing? What are we good at? We want to be customer-facing and our key talent to be facing in the right direction and generating revenue, and then people like myself and other people in this chain, are looking at how do we actually get rid of the non-value talent and how do we replace it and give it to people, quite frankly, that are better at it?
O: Now, as you say, you’ve been involved in a fair few of these programmes and have spent a lot of time in this space, and a lot of changes have been taking place during the time that you have been active here. One of those, presumably, that you’ve seen is the changing vendor-buyer relationships and an increased capability on both sides. Do you feel that the balance between what a vendor and what a buyer wants in any relationship now is equitable – and do you feel that vendors are working increasingly hard in tough times to go the extra distance for clients, while obviously seeking to ensure their margins?
JD: Having come to a Japanese company – my two previous roles were in American companies and their relationship was more driven by best price etc – the Japanese view is somewhat different. They put a tremendous amount of sway on the basis of the quality of the relationship, guaranteeing the product and ensuring that the quality is there. Ultimately, NEC is an engineering company and I don’t think it’s ever led on price, I think it leads on quality: we make things that don’t break – and I think they see that in their vendor selection. They spend a lot of time picking the right vendors, we work very closely with them; and certainly here, the involvement of the finance team, even down to the accounts payable clerks, is different in that they’re encouraged to form a relationship with their vendor partners.
We do probably a lot more statement reconciliation to make sure that that part of the relationship is smooth than we probably did elsewhere and I think we understand that there’s a lot of cost in replacing key vendors. And so as we work with very few in number, what we do is invest a lot of time in ensuring that the relationship will last a long period of time. Whether that’s a Japanese thing, or an economic thing, it’s difficult to say – but certainly there’s a tangible difference and it’s a healthy difference.
The number of meetings that I’m called into with regards to on-boarding and getting involved with the supply chain, is actually quite promising, in the sense that we can deal with a lot of issues that tend to bung up a lot of shared service centres who are at arm’s length in the future. So when things go wrong, it tends to be a hell of a domino effect; and back here, we get the alarm bells and the flags ticking a lot earlier and we tend to be able to sort things out a lot quicker – so I think given that we’re focussing on the whole process, rather than the function, whether that’s the open-mindedness here, whether it’s Japanese or not is difficult to say, but certainly from the whole selection process through to the ongoing relationship involves many, many people.
O: Finally John, you’ve spoken about the intent to implement the third strand of your strategy over the next couple of years; what other ambitions do you have for your organisation during that time? What type of things have you got in the pipeline in terms of your overall ambitions?
JD: We have a lot of work to do. As much as we have nine operations in NEC Europe, we have exactly the same number in a sister division called NEC Unified Solutions and they’re currently being integrated in. All of those processes are coming into those same frameworks – but they’re on different systems, so there’s a parallel operation to get these into the new tools that we’re using and also getting them into our SAP and ERP systems.
We have a completely different division called NEC Display Solutions which currently is autonomous and again fits under the NEC Europe umbrella, and the hope is that they will also be able to sell some of these tools. Whether they look after them locally or here, is irrelevant to a degree – what we need to do is ensure the tools replace the effort.
So for the next two, three or even four years, we have a lot of this to do and a key part of that now is taking out the cost of the tail. That is very much the focus this year and the only big discussion piece we have here. To a degree, what we’re doing with invoice scanning, what we’re doing with T&E – it’s great and it’s giving a return, but the new kid on the block is the tail and there’s a lot of suppliers out there with a lot of really good ideas. And certainly what I’ve been doing of late is attending many of the procurement seminars – which normally a shared service centre manager or director wouldn’t attend – and certainly over the last couple of years, I try to keep a abreast of this evolution because the pace of change is phenomenal.
What we need to be doing is building systems that last and can be rolled out and integrated much wider so I think that’s the task for us, especially as our remit’s now gone to an EMEA region as opposed to a EU region. I think our order book, for want of a better word, for shared services is quite full for the next two or three years so it’s an exciting time.
For more information on Finance Transformation Europe 2012 see the event website.