Global Business Services Performance Improvement
ICGlobal Business ServicesPerformance improvementFrom cost center to competitive advantageDeloitte Consulting readerSummer 2016YOKLO OHS A AMNAPUSA GELNESBAGHMAD DADRASSINGAPOREGUANGZHOUSYDNEYSAIHAGOAN KYSH TO RKYOWNE GKOKBAN IJINGBEIDELHLONDONHONGKONGCAIROTEHRANBOGBAN OTADUNGTIARIONJINDEJA LIMANEIROREHO RLA GOBOOIAGNTRGSAUBERSANGPETST SHENYT TACALCUWUHANAGOBLAHAMENCHE DAB CAANGDBUEN DUOS AIRESANKARAHAERBINHO CHI MINH CITYINGCHONGQDRABAHYDEGLANREMAALO RIAGNBANDXAEAL LINRABE AKHDCASEOULSÃO PAULOBOMBAJAKA YRTAKARACHIMOSISTKVAAM NBUEXLICOROMAASAKINSHJING GNANANYNG AYPYOBARA DSUIDRMA NAXICH
PrefacePrefaceFor more than two decades, organizationsaround the world have been using sharedservices and outsourcing to improve servicedelivery and reduce costs in defined parts oftheir businesses. Leading organizations arenow taking the next steps. Instead of operatingnumerous shared services centers andmanaging outsourcing vendors independently,organizations are implementing global businessservices (GBS), providing integration ofgovernance, locations, and business practicesto all shared services and outsourcing activitiesacross the enterprise.01This in-depth guide by leading DeloitteConsulting LLP specialists in shared services,outsourcing, technology, and organization, iscompiled from years of research and clientengagement experience. It is a collection ofarticles based on research, case studies, andclient work. Several of the articles first appearedin Deloitte Review, the quarterly managementjournal from the Deloitte University Press.Other pieces have previously been availableonly to Deloitte clients and have been adaptedspecifically for this book.This GBS Reader is divided into three sectionsthat represent key principals of GBS. The firstchapter “GBS Operations –Aligning with theBigger Picture” examines the evolution of GBSand highlights the principles that make GBSorganizations successful.2Chapter 2 “Next-generation GBS capabilities:Capturing the full value,” explores the latesttrends and developments in this fast-changingarea. The final chapter, “GBS as a business withina business: Instilling a commercial mindset,”examines opportunities to learn from theexternal marketplace to operate GBS more likea commercial enterprise (e.g., using a definedcatalog of services with set prices and servicelevels).This book is for both public- and private-sectororganizations in any part of the world. It can helporganizations fundamentally change how theythink about and manage shared services andoutsourcing. Those that get it right can achieveperformance improvements.0203
IntroductionIntroduction—The first word on GBSYou picked up this book, no doubt, because you hopedit might offer new solutions to your shared servicesenterprise. It does and it doesn’t. For more than twodecades, organizations around the world have been usingshared services to improve service delivery and reducecosts within defined parts of their businesses. Now,leading organizations are taking the next step. Insteadof operating numerous shared services centers andmanaging outsourcing vendors independently, they areimplementing Global Business Services (GBS), providingintegration of governance, locations, and businesspractices to all shared services and outsourcing activitiesacross the enterprise.Essential characteristics Multi-function: GBS is multi-functional in scope andhas significant integration across those functions (IT, HR,finance, procurement, customer service, operations, etc.) Multi-region: GBS supports all regions within anorganization, typically providing services in the Americas,EMEA, and APAC regions. Multi-location: GBS consolidates to fewer locations.Some organizations continue to rely on a regionaldelivery model, while others choose a hub-and-spokeapproach, with the bulk of work typically performed in anAsia-based hub.A move to GBS requires much more than simply askingshared services centers to cooperate. It represents afundamental shift in how businesses think about andmanage shared services and outsourcing. Those that get itright can achieve performance improvements. Multi-sourced: Typically, transactional activities areoutsourced, while higher value advisory activities aredelivered through captive centers. The most matureorganizations hold GBS accountable for service levelswhile letting the GBS decide exactly how those serviceswill be delivered.While there are many flavors of GBS in the market, thefollowing five essential characteristics and behaviorsare necessary to drive the sustainable performanceimprovements most organizations seek. Multi-business: GBS organizations serve more than onebusiness unit, applying the best and most sophisticatedpractices to the entire organization; this can helpto ensure greater support and quicker adoption bybusiness units.3010203
Introduction01Essential behaviors Common approach to governance: Incorporatea standard approach to governance, structured bybusiness process. By having a single global owner foreach process, they are able to improve efficiency andcontrol. Common leadership structure: Incorporate acommon leadership structure that balances the needfor commonality with business intimacy; effectiveGBS leadership is often part of the C-suite and isthus empowered to make decisions for the entireorganization. Common approach to service management: Setup a common approach to service management,overcoming the mish-mash of service level agreementsand reporting structures. A consistent approach acrossfunctions and regions improves customer satisfactionand reduces the effort required for reporting. Common approach to continuous improvement:GBS bring a business-wide approach to continuousimprovement, which can deliver greater benefits fromless investment and effort by building a culture thatvalues continuous improvement.4 Common talent development model: Standardizedapproach to talent development enables thedevelopment of a unit recognized as high-performingthroughout the organization; it also creates a strongbrand value.What additional benefits–apart from cost reduction,enhanced efficiency, improved control, and better qualityand service levels–can GBS offer? The answer lies inapproaching GBS as much more than a loose collection ofshared services and outsourcing. The potential benefits ofa successful GBS are: Improved alignment with the business strategy andgrowth agenda Increased CEO attention that breaks down barriers andattracts talent and investment Consolidation that drives economies of scale Expanded process scope that enables operationalexcellence A global approach that improves visibility, control, andrisk managementGBS organizations are destined to become a common partof the business landscape. However, it might not be rightfor every company. Each organization should consider itsunique business requirements and culture to determineif a GBS model makes sense. A GBS model tends to workbest for organizations with operating models and culturesthat are truly global in nature.The road to GBS can be a bumpy one, given the complexmix of people, processes, technology, and multiplegeographies involved. Yet companies that persevere arelikely to see significant benefits, including service qualityand costs savings over and above what could be achievedthrough more limited approaches to shared services andoutsourcing.0203
Introduction01The principles and practices described in this GBSReader are no longer experimental; shared services andoutsourcing alone have been implemented, with excellentresults, at many of the world’s highest-performingcompanies. Yet despite this legacy of success, integratedapproaches to internal services still remain the exceptionamong large and mid-sized companies. We hope ourcollection stirs you to action—or, if you’ve already startedthis journey, we hope it encourages you to explore newpaths to profit from improved internal service delivery. Inthis case, you are your customer, and you can always serveyourself better.50203
ContactsContacts0102Susan MerkellDeloitte SwedenStockholmsmerkell@deloitte.seAmericasJean WhiteDeloitte Consulting LLPDallasjwhite@deloitte.comSimon TarshDeloitte USNew Yorkstarsh@deloitte.comBeatriz DagerDeloitte ColombiaBogotabhdager@deloitte.comRolf DriesenDeloitte BelgiumBrusselsrodriesen@deloitte.comAlan FlanaganDeloitte IrelandDublinaflanagan@deloitte.ieDaan de GroodtDeloitte Consulting LLPAtlantaddegroodt@deloitte.comBill BeyerDeloitte USArlingtonbbeyer@deloitte.comEnrique NeyraDeloitte PeruLimaeneyra@deloitte.comDorthe KeilbergDeloitte DenmarkCopenhagendokeilberg@deloitte.dkMario SchmitzDeloitte GermanyDusseldorfmarschmitz@deloitte.dePeter MollerDeloitte UKLondonpmoller@deloitte.co.ukMarc MancherDeloitte Consulting LLPChicagojmancher@deloitte.comOmar MataDeloitte Chile/CanadaSantiagoomata@deloitte.comMuriel BenDeloitte UruguayMontevideomben@deloitte.comAntonio RussoDeloitte AGZurichantorusso@deloitte.chPunit BhatiaDeloitte UKLondonpunbhatia@deloitte.co.ukKrzysztof PniewskiDeloitte PolandWarsawkpniewski@deloittece.comDon PiotterDeloitte Consulting LLPSan-Franciscodpiotter@deloitte.comSusan HoganDeloitte Consulting LLPAtlantashogan@deloitte.comManuel OstosDeloitte MexicoMexico Citymostos@deloittemx.comSergi LemusDeloitte SpainBarcelonaslemus@s2g-bpm.esMarkus KaihoniemiDeloitte FinlandHelsinkimarkus.kaihoniemi@deloitte.fiJohn TweardyDeloitte USPittsburghmostos@deloittemx.comPablo PesoDeloitte ArgentinaBuenos Airesppeso@deloitte.comMichel Baptista da SilvaDeloitte BrazilSao Paulomicsilva@deloitte.comEMEANick PrangnellDeloitte UKNottinghamnprangnell@deloitte.co.ukJean-Michel DemaisonDeloitte FranceParisjdemaison@deloitte.frNeville NounsomDeloitte South AfricaJohannesburgnhounsom@deloitte.co.za603
ContactsContacts0102Federico ChavarriaDeloitte Costa RicaSan Josefechavarria@deloitte.comAPACPaul ZankerDeloitte AustraliaSydneypzanker@deloitte.comParag SaigaonkarDeloitte IndiaHermitagepsaigaonkar@deloitte.comCiara EscobarDeloitte PanamaPanama Cityciescobar@deloitte.comJez HeathDeloitte ChinaHong Kongjerheath@deloitte.com.hkGupta GauravDeloitte IndiaDelhigugaurav@deloitte.comJason A. DessDeloitte CanadaTorontojadess@deloitte.caSai Weng HoDeloitte MalaysiaKuala Lumpurswho@deloitte.comTimothy Koh Wah HoDeloitte SingaporeSingaporekwho@deloitte.comYasushi NobukuniDeloitte JapanTokyoynobukuni@tohmatsu.co.jp703
Contents01Chapter 1: GBS operations:Aligning with the bigger pictureLeap ahead or lag behind?by Aprajita RathoreThe value of global process ownersby Richard SarkissianStruggling with unfinished business?by David Brainer and Susan HoganTowards a portfolio approachby Mark Klender and Aprajita RathoreGetting the retained organization rightby Susan Hogan and Beth Thiebaulth8021123293952Chapter 2: Next-generationGBS capabilities: Capturing the full value10 ways to get moreby Susan Hogan and Jessica Golden64Developing a financial planning &analysis capabilityby Adam Cogley81Sharing internal expertiseby Susan Hogan and Peter Miller89Where will GBS go next?by Mark Klender and Darin Buelow97Show me the money–autonomicsby Simon Tarsh and Marc Mancher107
Contents03Chapter 3: GBS as a business within abusiness: Instilling a commercial mindsetUsing outsourcers’ secrets to achievecommercial competenceby Richard Sarkissian, Peter Lowesand Omar Aguilar112Page 10The price is right—or is it?by Peter Miller and Richard Sarkissian119Understanding total cost of ownershipby Adam Cogley129The myth that could be costing you bigby Peter Miller and Richard Sarkissian133Page 639Page 111
Chapter: 1GBS operations: Aligningwith the bigger picture010203
GBS operations: Aligning with the bigger pictureLeap ahead or lag behind?Enhancing value from yourservice delivery organizationIncreased competition, economic uncertainty, andglobalization are among the forces that are drivingcompanies to seek to reduce the cost and improveThe effectiveness of their G&A functions. In our view,companies can greatly enhance their pursuit of thesegoals by thoughtfully managing their service deliveryorganizations according to leading marketplace practices.Yet our experience suggests that many companies couldbenefit from greater focus and planning with respect toservice delivery.11010203
GBS operations: Aligning with the bigger pictureCompanies typically start their service deliveryorganization by moving a single G&A function into globalbusiness services (GBS). They then expand incrementallybased on internal customer requests rather than followinga strategic plan. This ad hoc evolution often gives rise tothe following issues: Lack of strategy, which can result in misalignmentbetween the service delivery organization’s objectivesand the company’s overall vision and strategy Lack of continuous improvement, which can hampereffectiveness due to a failure to look inward to correctmistakes and look outward to incorporate leadingpractices Lack of people development and management, whichcan make it more difficult to attract and retain thetalent needed for effective service delivery Lack of effective operations and technology, whichcan increase process inefficiencies and decreaseproductivity Lack of discipline and standardization, which may leadto performance inefficienciesOver time, these issues can limit a GBS organization’sability to operate cost effectively and meet therequirements of its internal customers.While some companies facing such issues have alreadymade great strides in improving their GBS organization,others are asking how they can take their service deliveryefforts to the next level. Executives in these organizationsare asking: What is the next level and how do I get there? Whatshould be my short-term and long-term goals? How does my company’s service delivery strategycompare to the strategies used by other companies? Am I leveraging leading practices? Where should I focus my scarce resources? How can I continue to improve operations?To help answer these questions, leaders can benefitfrom using a framework as a yardstick against whichto assess their GBS organization against internal andexternal practices. Key elements of such an assessmentshould include four dimensions: strategy, service delivery,organization, and operations and technology (see sidebar,“Deloitte’s service delivery maturity model”). These fourdimensions encompass 20 capability areas that we believerepresent the spectrum of competencies that an effectiveGBS organization should possess.Because every company is unique, leaders should carefullyevaluate their company’s individual set of capabilitiesand organizational requirements to determine whichof these 20 capability areas should receive the highestpriority for improvement. That said, we believe that fourparticular capability areas stand out as realms where manyGBS organizations could gain significant benefits fromimprovement: Expand scope of services Enhance internal customer management Create a strong service culture Rethink facilities and infrastructureAs used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structureof Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.12010203
GBS operations: Aligning with the bigger pictureBelow, we discuss innovative approaches to each of these areas and give examples of how a variety of companieshave addressed them.Deloitte’s service delivery maturity modelDeloitte has developed a service delivery maturity model that can serve as a diagnostic tool to help a companyquickly understand the current state of its GBS organization, envision its target state in both the short term andthe long term, and apply a combination of levers to make progress and measure results. The model measures thematurity of a service delivery organization along four key dimensions that encompass 20 corresponding capabilityareas, as illustrated in the diagram below.The maturity model compares a GBS organization’s current practices across 20 capability areas with leadingmarketplace practices. Using stakeholder input to rate the service delivery organization along a five-point capabilitymaturity scale, the model assesses the GBS organization’s current state and forecasts its future state in each ofthe 20 capability areas. Armed with this assessment, a GBS organization can develop a multi-year plan to generateadditional value by increasing its effectiveness in key capability areas.StrategyService deliveryOrganizationOperations and technology Scope of services Performance management Process Location ofservices Governance and issueresolution Organizationalstructure Business planning Customer relationshipmanagement Mission/vision Value Sourcing and vendorrelationship management Technology People management Controls People development Program management Culture Facilities and infrastructure Recruiting Continuous improvementIt is important to recognize that a GBS organization need not achieve the highest possible maturity scores in alldimensions and capability areas to be successful. Rather, service delivery leaders should aim for a mix of maturitylevels across the capability areas that most effectively align the GBS organization with the company’s broader shortand long-term goals.13What do successful servicedelivery organizationsdo differently? What setscompanies that leapfrog thecompetition apart from thosethat lag behind?010203
GBS operations: Aligning with the bigger picture01Expand scope of servicesMarket forces impose a constant pressure on companiesto improve operating margins and productivity. Expandinga service organization’s functional scope can helpcompanies meet these demands by allowing it to achieveeconomies of scale by spreading its service deliveryinfrastructure across more functions.Over time, companies tend to expand the scope of theirservice delivery organizations to include more processes,serve more internal business units, and cover a greatergeographical area. In Deloitte’s 2011 survey, 82 percent ofrespondents expected that their company would increasethe number of transactional processes in their sharedservices organizations over the next three to five years,while 76 percent expected it would increase the numberof business units being served.140203
GBS operations: Aligning with the bigger pictureAs companies become more mature in their GBS efforts,many also begin to extend the model to additionalfunctions and to employ multifunctional service deliveryorganizations. These newer shared functions may includefleet management, marketing expense management,commercial finance, earnings optimization, equipmentmaintenance, transportation planning, and R&D. Inaddition, companies are increasingly including advisoryas well as transactional processes in their service deliveryorganizations. Companies that expand shared services’functional scope should do so in a planned manner thatenables the service delivery organization to better pursuethe company’s goals and vision. Whether the goal is to cutcosts, reduce errors, or standardize processes—or all ofthe above— a successful scope expansion typically hasa well-defined business case endorsed by both businessand service delivery leaders. It rarely occurs in an ad hocmanner.Expand scope of services: ExamplesIncreasing the service delivery organization’s functional scopehelped a major food and beverage company to meet its CEO’s goalof reducing annual operating expenses by 500 million. By includingHR in addition to finance in its service delivery organization, thecompany was able to realize close to 50 percent of the expected costreduction. In its efforts to meet the target of 500 million in reducedoperating expenses, the company is also considering moving somenontraditional activities, such as marketing expe
Common approach to service management: Set up a common approach to service management, overcoming the mish-mash of service level agreements and reporting structures. A consistent approach across functions and regions improves customer satisfaction and reduces the effort required for reporting. Common approach to continuous improvement:
continuous improvement process. Central to this is the requirement for services to have an effective self-assessment and quality improvement process. All services must have a quality improvement plan. Next assessment and ratings The results of next assessment and ratings show services are demonstrating a commitment to ongoing quality improvement.
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Manager of Business Improvement District Programs, Commerce Department, City of Philadelphia Acknowledgments Special thanks to the NYC Department of Small Business Services for allowing us to use "Starting a Business Improvement District: A Step-By-Step Guide" as the starting point for this document.
