GBS: The Limits of Centralized Governance Teams

Last week’s webinar on HfS’s survey findings on GBS confirmed the continuing ascent of GBS (ignore the title! No-one beats HfS at razzamatazz…).

For me, it re-opens a debate about governance because at the core of the HfS prescription for GBS success is ‘a strong centralized governance team’. Which may be true but I think misses some important nuances.

We agree that appropriate governance is always essential, whatever the organization and its circumstances, and that it must be centrally coordinated. But it also needs to be embedded in business-as-usual in the line wherever possible.

In a world of mega outsourcing deals, where much of the back office is delivered through a handful of global suppliers, then managing everything through a central governance team (a Vendor Management extension) makes perfect sense.

But that world is fast disappearing, as the HfS data confirmed. Hybrid GBS is rapidly becoming the norm. The future is about weaving end-to-end service delivery from across a constantly flexing mix of internal resources and outsourced service providers.

In that scenario, it is business stakeholders, not a centralized governance team, who are best positioned to drive innovation, to forge more effective collaborations with customers and service providers, to identify and manage risk.

GBS - The Limits of Centralized Governance Teams - 30 Oct 2013Enabling business stakeholders to deliver what buy-side organizations say that they really want – agility, innovation and more collaborative relationships – requires that day-to-day governance is embedded in BAU.

Which links directly to organizational process maturity. High-performing GBS organizations will leverage an enterprise process management platform both for its embedded governance and holistic perspectives but also to underpin their own service management frameworks.

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Whoops, Another Iceberg

iStock_000016216188SmallLunch with an exasperated friend, recently appointed Head of Finance Transformation at a well-known corporate.

“Everywhere I look, I see icebergs looming’, he explained. ‘There are three major systems implementations under way.  There is an offshoring program, and an outsourcing initiative. But there’s no shared visibility of the big picture. Everyone is busying away in their silo, focussed on their deliverables, making sure that blame for the expected failures can’t be laid at their door.”

“They’ve come to think that bumping into icebergs, and losing a few ships entirely, is normal. Bang. Whoops, another program sunk and lost.  Ah well, at least they can’t pin it on me…”

The alarming truth is that organizational insouciance about effective collaboration is not uncommon.  It has to be a root cause of the colossal costs of IT project failures, for instance.

How can it be possible, you might reasonably ask, that organizations can waste so much so easily? Isn’t it totally obvious that effective collaboration in complex global enterprises demands a common language, holistic perspectives and robust governance? Isn’t it staring us in the face that a casual attitude to process management isn’t just a huge waste (and the gift that keeps on giving as far as some consultants are concerned) – it’s also a huge compliance risk?

You might have thought so. But, for some organizations at least, the evidence suggests otherwise.  It can take a lot of icebergs to make a burning platform.

Somewhere an entrepreneur must be putting the finishing touches to a watertight measure of an organization’s process maturity. An index which investors and ratings agencies will come to expect to see in any audited statements. Level 1 might be competence in spotting icebergs.

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We Need To Talk – About The ITO Contract

Alsbridge this week launches a promising series of eBooks, based on conversations with 250 IT leaders across Europe.

The first edition We Need To Talk focusses on why so many IT outsourcing relationships are in a sorry state. IT leaders and their suppliers ‘are in danger of falling out of love’.

Alsbridge offers some wise advice about how to prepare for a successful renegotiation, or a supplier switch.

But what’s missing, or understated, it seems to me, is the potential value of a process management platform as the starting point for that preparation. It can ensure that business requirements, roles and responsibilities are crystal clear at every stage – not just at contract signature but during the detailed analysis of scenarios as well.

More importantly, it provides a platform for effective collaboration beyond the deal.  Which is especially significant when almost half of IT leaders want to drive innovation jointly with their suppliers and to implement new delivery models, many of which will be multi-sourced.

Alsbridge notes that the contract isn’t everything: The most successful outsourcing relationships are true partnerships, based on values and longer-term perspectives that underpin effective collaboration.  The process management platform can just make that easier.

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Shared Services: New Frontiers – And Risks

Genpact has a neat graphic (right) on the three generations of a Shared Services Organization (SSO) in a paper for the European SSON Week next month.

Genpact echoes Deloitte on the strategic challenges:

“Businesses around the globe are finding it challenging to take their Shared Services Centers to the next level. Across the board, few SSCs have delivered the full value envisioned by CFOs and finance directors.”

Genpact makes the case for going hybrid, for working with a strategic global partner to deliver the full potential of shared services.

Which may be a great idea. But here’s two reasons why investing in a process management platform should be the #1 priority:

it provides an SSO service management framework – across all three SSO generations. It enables effective collaboration among the stakeholders, both within and outside the enterprise. It orchestrates the design and implementation of change.

it mitigates partnership risk. It allows the SSO to work closely with its strategic partner – and to adopt a multisourcing strategy where appropriate – while ensuring that the SSO always remains in control.  It ensures, for instance, that you never have to buy back your own processes.

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It’s Not A Talent Gap Holding Back Outsourcing

It seems to me that HfS Research and Accenture are drawing the wrong conclusions in urging investment to close ‘a talent gap’ that is preventing outsourcing buyer organizations from driving innovation and getting beyond cost reduction:

“Barely a third of enterprise outsourcing customers believe their current governance talent – the people responsible for managing the service relationship – can drive innovation or define business outcomes.”

HfS’s prescription is training for outsourcing governance teams:

“The majority of governance teams are comprised largely of procurement professionals, contract negotiators and project executives who are not learning the necessary skills to shift their focus from tactical project management to strategic business alignment. Enterprise leaders fail to develop the necessary strategic business skills as their engagements mature and their needs move beyond managing tactical operations.”

What’s really holding things back is that the business is usually at least one stage removed from the outsourcing relationship.

It’s the business alone – the owners and stakeholders for the end-to-end business processes – that has the visibility, understanding and insights that can drive innovation and optimize the blend of outsourced service providers.

And it’s a process management platform that can bring this to life.  It simplifies so that everyone can see the big picture. It provides a framework for effective collaboration within a unified governance wrapper. It enables everyone involved, both in the retained organization – GPOs, IT stakeholders, Lean teams, Risk and Compliance folks – and in the service providers, to work together on the design and implementation of change.  It engages people with process and makes continuous improvement easy.

A current example, to illustrate that this isn’t hot air. A global organization with a major HRO contract that wasn’t working has been able to turn on a sixpence (as we say in Northamptonshire) and re-source at pace by leveraging its process platform and disciplines. It has been able to rapidly capture the As-Is HR processes (without much cooperation from the exiting incumbent); in parallel, to design the To-Be processes; to define and manage all the necessary variants; to orchestrate the necessary ERP re-implementations; and then to execute, in-sourcing some activities while re-outsourcing others.

You need procurement and contracts people to do this.  But without a framework for effective collaboration that engages all the stakeholders and puts the business in the driving seat, it’s always going to be slower, more expensive and more risky.

It seems like bad manners to trash free research. Hats off to HfS for its continued thought leadership in many aspects of this debate.  But on this one, I think the HfS/Accenture diagnosis is wrong.

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Shared Services: Search For Missing Benefits Continues

Deloitte 2013 Global Shared Services Survey ResultsDeloitte’s 2013 Global Shared Services Survey report, just published, confirms that things are progressing as expected. There’s growth – in the breadth of services offered, and in the spread of locations – and more complexity and sophistication, with more multifunction SSCs, more hybrid delivery models and more stand-alone GBS organizations.

This year, Deloitte is not publishing the main survey findings, listing only the questions asked of the 270+ respondents.  But one line in the executive summary hints at what is perhaps the most interesting story of all:

“A multifaceted approach to addressing the retained organization is required to realize the intended benefits.”

The word on the street is that few shared services programmes deliver their business case. They may do great things, they may employ very talented people, but often there seems to be a question mark over benefits realization. And although the 2013 Survey report doesn’t comment on this directly, a (separate) Deloitte webinar last week seemed to confirm that there’s no smoke without fire.

Now it’s true that that webinar was focussed on HR Shared Services. But many SSCs are now multi-functional, and Deloitte claims to have worked on 900 shared services projects. So it seems a credible source.

In Global HR Shared Services: Emerging Trends, Brett Walsh and colleagues from Deloitte shed light on Shared Services ‘optimisation’ challenges:

“Much has been said about the role of shared services in the transformation of the Human Resources function. Yet for many companies, the benefits expected from transformation are proving elusive.”

“Long after project go-live, when systems and delivery models are in place, organisations still struggle to release the full potential of their investment in HR Shared Services. In fact, many organisations report either failure or significant underperformance compared to their original business case.”

There’s no single solution. Every organization is different.  But I’m going to stake a claim that one of the root causes for the ‘missing’ benefits – maybe the root cause – is a laid-back approach to process management.  It’s the attitude that defining process is simply an overhead and a non-value-add activity; that it doesn’t matter if process is in duplicated and overlapping fragments, in different tools and formats, unconnected with real work, and ‘governed’ only by email.

Without the rigour and support of a process management platform, effective collaboration among the stakeholders on the design and implementation of change must be in jeopardy.  We see it mostly obviously, and dramatically, in the chasm that can appear between IT and the business, but it undermines effective collaboration between all the other stakeholders too.

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© Text Michael Gammage 2013

The Patchwork Enterprise

The enterprise of the future looks something like patchwork.  In a good sense.  Patchwork quilts can be beautiful, blending diversity into a coherent whole – and uniquely distinctive. Often it’s collaboration by a group of quilters that creates them. And they’re not just great art. They keep you warm. They deliver.

Outsourcing is becoming ever more pervasive as globalization drives further specialization. In the villages of our forebears, people came to specialize in baking bread, or working with leather, or shodding ploughhorses. It’s the same in our global village. It doesn’t make sense to do in-house what someone else can do better or cheaper.

Outsourcing may once have been confined to ‘non-core’ activities. Now everything – from R&D through manufacturing and supply chain to customer experience analytics – can be outsourced, and increasingly is.

In this patchwork future, successful enterprises will mirror the best quilting groups: a clear vision, creative collaboration and the means to make decisions. In other words, a well-defined operating model and a framework for effective collaboration that brings everyone’s creativity into its execution.

Of course patchwork has another, negative, meaning: ‘a hodge podge’.

I worked with a multinational client once, leveraging Nimbus to bring multiple HR outsourcing contracts into one coherent whole. That end-to-end perspective exposed the multiple gaps between the expectations of the service providers and the retained organization. Non trivial gaps too.  One was an immediate threat to the entire expatriate payroll.

That’s the hodge podge kind of patchwork enterprise, and it has a very limited future. No-one’s going to want to work with, or buy from, a patchwork enterprise where the patterns and colors don’t match, and you can see the stitching – even worse, the gaps.

Some organizations are trying to stitch their multisourced reality together, buying in ‘managed governance services’ and the like from the Big 4.  But ultimately it demands holistic thinking, discipline and a platform to support it. Much like quilting.

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© Text Michael Gammage 2013