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Welcome to my third article in a series focused on insights, experience and practical advice on an operating model called Global Business Services (GBS). The GBS operating model is the latest step in the evolution of shared services (SS). To refresh your memory, SS is an operational model that's been around for decades. It enables functional resources (i.e., HR, IT, Finance, etc.) to be leveraged across an entire organization, resulting in lower service costs. My first article discussed the evolution from traditional SS to GBS, the drivers for the change and the desired benefits. Article two highlighted that even though the transition to GBS continues, there seems to be a return on investment (ROI) shortfall with a number of implementations. The primary reasons for the ROI shortfall and some solutions to enhance success were also covered. This third article takes a "deep dive" on two key elements to ensure a successful GBS implementation: strategy and governance. Let's get started.
When you talk to experts who guide companies through GBS transformations (and I have had the pleasure of working with many of them, such as Deloitte, Accenture, The Hackett Group, and others), or talk with GBS leaders who are viewed as having world-class GBS operations, similar critical success factors (CSFs) are consistently mentioned. Some of these CSFs mentioned include:
1. Executive Leadership - getting the entire C-Suite aligned and onboard.
2. Technology Enablement - making the appropriate investments in people, process and technology to ensure success.
3. Delivering on Commitments - meeting cost savings targets and aligning your deliverables/measures with your clients' expectations.
4. Critical Mass - transitioning enough process scope and execution authority that is impactful to P&L.
There are several other CSFs that could be added to the above list. However, there are two items that are foundational and provide the direction to the above items... strategy and governance. A famous proverb says, "Without vision people perish." Translating this to a business context, "Without a strategy, your initiative will ultimately fail."
Importance of Strategy
Strategy is critical for every corporation and especially for every major transformation. For GBS, lack of strategy alignment at the C-Suite is largely viewed as the #1 reason for failure. The GBS operation may not fail immediately, but if the strategy gaps are not addressed over time, it will lose its influence and relevance, and will ultimately fail and be restructured. So what are the elements of a good GBS strategy? There are several, but here are the main ones:
1. Primary Purpose - define primary focus, such as cost reduction, scalability/growth, regulatory compliance, etc.
2. Scope of Coverage - define processes that will be transitioned into GBS at the start, and will be candidates for the future.
3. Service Delivery Methodology - define approach of how services will be delivered to clients. Internal (or captive) vs. outsourced centers; global vs. regional centers, etc.
4. Governance - initial organizational structure, operational roles and responsibilities across the enterprise, and executive leadership roles to provides GBS direction.
5. Execution Plan - transition methodology discussing sequencing of businesses and geographies on a timeline.
There is a significant amount of work that goes into developing an effective GBS strategy, and it clearly requires enterprise-wide inputs and alignment. In a McKinsey Quarterly survey, it stated that companies are typically investing an average of six (6) months in transformation planning, and sometimes are still not able to set clear goals. McKinsey's recommendation (and mine) is to take the additional time needed to ensure a clear and aligned strategy which improves the likelihood of a successful transformation.
Importance of Governance
Governance, in many respects is part of the strategy. Just like strategy, if there is no enterprise governance in place, GBS is doomed for failure. So, what does effective governance look like? The major elements include:
1. Executive Board - serves roles of both advocate and critic with clear accountability for performance management, ongoing strategy adjustments, and capital approval authority.
2. Clear Accountability - clear roles and responsibilities definition between Executive Board (EB), GBS leadership, outsourcing partners, business clients on decision rights, service level changes, delegation of authority, etc.
3. Voice of Customer - incorporation of regular mechanisms via client councils and other venues to clearly solicit inputs/requests/changes from business leaders.
4. Strategic Alignment - ensures ongoing review and alignment of the organizational direction across the C-Suite.
In many companies, the term governance is viewed as "slow-moving" or "beauracratic." For GBS, it has to be the opposite - being agile, dynamic and continuing to evolve as the company changes. Governance must flex as business client expectations rise, technology platforms evolves and most importantly, as executive leaders and their expectations change. This is absolutely critical.
The growth of GBS continues and is forecasted to be robust through the end of the decade. However, expectations for even greater results and ROI will continue, as companies keep pushing for higher levels of automation, lower service costs, and higher profit margins while improving the customer experience. To accomplish all those things, one needs to utilize some of the items covered in these three articles. The key takeaways include:
- Executive Commitment.
- Robust planning effort with focus on strategy and governance.
- Anticipate the ROI Shortfalls and Implement the critical success factors.
- Continually "raise the bar", as business clients push greater results and improved customer experience.