How GBS Works
As companies have become increasingly more complex - but at the same time more integrated - the need for additional cross collaboration and more effective leveraging of the resources at their disposal has become increasingly significant.
A Shared Services Organization (SSO) consolidates support operations into a service-oriented organizational unit and can substantially improve operating efficiencies by eliminating duplication and streamlining processes.
Establishing an SSO in concept can be simple, however the organizational and human implementation components can make the task quite difficult; additionally, optimizing its performance is often a challenge. Depending on the maturity of the Enterprise and of the SSO, the SSO can run as its own commercial grade business, always seeking to deliver the highest quality, while being the lowest cost provider of services. Optimized SSOs have proven to be a value center as well as a cost reduction center.
The consolidation and standardization enabled by Shared Services does more than reduce costs. It also reduces complexity so that businesses can respond to opportunities faster. The more integrated an SSO is with the company's strategic goals, the more adaptable it can be in a constantly changing environment. It must distinguish between commodity and strategic services; align and package services around business processes; and orient service designs and service levels toward the customer experience. In the process, an optimized SSO improves its overall value/cost contribution to the business, and enables its customers in the business to optimize their own value in return.
One purpose of Shared Services is the convergence and streamlining of an organization’s functions to ensure that they deliver to the organization the services required of them as effectively and efficiently as possible. This often involves the centralizing of back office functions such as HR and Finance but can also be applied to the middle or front offices. A key advantage of this convergence is that it enables the appreciation of economies of scale within the function and can enable multi-function working (e.g. linking HR and Finance together), where there is the potential to create synergies.
When A.G. Lafley became CEO of Procter & Gamble in 2000, the venerable consumer goods company had its share of financial problems. Lafley immediately put in place a company-wide transformation program to cut costs, consolidate and streamline operations, and build customer brand loyalty.
One of these key initiatives included creating a shared services organization called Global Business Services (GBS) to deliver cost-competitive functional services to P&G's 138,000 employees in more than 80 countries. Technology, which comprises most of GBS's activities, has blossomed from a back-office drone to an empowered change agent, providing services and solutions to strengthen P&G's competitive and innovative edge.
In 2008, Filippo Passerini became president of Procter & Gamble’s Global Business Services, one of the largest shared services in the world. Passerini, who also holds the title of P&G’s chief information officer, was faced with the challenges of not only enabling an organizational structure that would not work in many companies similar in size and complexity to P&G, but also making it successful.
In an interview with the BTM Exchange, Passerini explained what makes GBS successful:
“GBS is a shared services organization offering global services and solutions for P&G employees around the globe. Three global service centers around the world allow employees to access the same services 24/7, from Manila to Madrid. GBS also provides value-creating services for business units and functions around the globe.
The GBS business model is unique and progressive. We work with a network of best-in-class strategic partners that give us the capacity and expertise we need to both innovate and operate with excellence. For example, we have transformed our data centers to reduce planned and unplanned downtime from days to just hours. That itself represents substantial savings.
Scale, simplification and business transformation are what GBS is all about. We take core business processes, simplify them and automate them so they are more efficient. We then scale the solution to enable the company to deliver faster, smarter, and more cost-effectively.”
As P&G experienced, and many other companies have realized, the journey to become an optimized SSO requires desire, discipline and the ability to execute a plan. Furthermore, optimizing service delivery is more than simply moving people into one location and giving them one system. It involves a change in mindset and an increased focus on the business. Successful implementations integrate processes, people, information, and technology automation to deliver a totally new set of capabilities.
The Value of Shared Services
Benefits of Shared Services include the ability of an organization to:
- Demonstrate the potential to significantly reduce operating costs up to 50% of existing services
- Increase compliance/control and consistency on a global basis that is more easily achieved through consolidation if a company has fewer sites
- Provide clarity on services and customers with the creation of a service portfolio
- Introduce a much higher capability for innovation, and the adoption of rapid business changes
- Drive higher employee job satisfaction/retention and allow for the sourcing of a “best fit athlete” for the task at hand
- Focus critical and transaction support work with the ability to pool knowledge and critical expertise by keeping their operating, governance, and risk areas, focused on their CORE activities
To get started, an organization must begin by assessing its readiness and business case for creating a Shared Services organization. Following that, a design of the future state business and operating model should be created. This design includes the organization structure, funding, governance, services portfolio and operating processes.
Faisal Hoque is the founder and CEO of BTM Corporation. A former senior executive at GE and other multi-nationals, Faisal is an internationally known entrepreneur and thought leader. He has written five management books, established a non-profit institute, The BTM Institute, and become a leading authority on the issue of effective interaction between business and technology. © 2010 Faisal Hoque