May 23, 2013

Good, Cheap, Fast: they say you can have any two.

May 23, 2013 - In the recent SSON gathering in Melbourne, Australia, Tom Bangemann of Hackett pulled up a slide with the old sign below.

His – quite witty indeed - point was that we internal and external clients must be conscious of limitations of business process operations.

The bigger question is if global business services can help existing organizations get better on all three. The short answer is that they might, depending on the baseline of the current operations. But indeed, asking the “what do you really want” is a crucial step. And that doesn’t mean three people in steering committee…it means ensuring that those who have the clout can have their voice in finding that “true north” for the transformation.

Many CXOs of large enterprises have responded to volatile market conditions by transforming their roles and functions. The rise of the Global Business Services (GBS) model, where multiple F&A operation processes (and, often, other functions) are shared in a unified global operating entity – an industrialized operation – demonstrates how CFOs can lead enterprise strategy by enabling a new business model. The smart decoupling of business functions, advanced use of metrics, data-driven process management, specialized HR/ organizational design, and effective IT enablement can form the blueprint for success and translate into superior scale, lower costs, and optimized processes. Cutting costs by as much as 40 percent is only the start.

The real benefit is a more agile enterprise and stronger process-management skills that can be deployed in many other enterprise operations. However, the highly variable results to date indicate that both strategy and execution aren’t easy to master.

What levels of efficiency, effectiveness, risk, and standardization are acceptable during and after transformation? Asking the “big why” question at the beginning does help in focusing the efforts for both the design of the organization (target operating model) and the operational DNA (target process model). That provides a better shot at hitting the expected results. Companies need to “introspect” and know their boundary conditions – that is, the collective will of the key stakeholders, whether they are regional, functional, or business line. Today, better understanding of efficiency and effectiveness drivers point to specific business practices that can help organizations meet desired outcomes. For example, a pharmaceutical company can redesign its finance operating models to enable a standardized organization structure across regions. A bank might use a GBS model for regulatory compliance with controlling functions. Or an insurer could redefine its operating models for financial planning and analysis (FP&A) to reduce costs and drive standardization. Answering the “big why” question helps you then answer the rest:

  • Resource redirection. Will resources released from transaction processing and control be reoriented towards decision support?
  • Organizational choices. What structure and operating model should the Finance organization have to support the emerging business model?
  • New delivery DNA. What new processes, people practices and technologies are required to achieve the desired objective?

In our work with clients who embark in the pursuit of GBS transformation, typically in hybrid-model (in-house and outsourced) environment, we tend to drive a significant amount of detailed conversation about the three points above. However, the results are much better when the client has taken the time to introspect on the “big why” part of the story – in a granular way as well. After all, even Lean Six-Sigma practice advocate asking why to find root causes – in this case, the exercise just looks for the root. No small feat.

About the author

Gianni Giacomelli

Gianni Giacomelli

Chief Innovation Leader

Gianni serves as Chief Innovation Leader where he drives and sponsors Genpact’s strategic initiatives aimed at sustaining clients’ transformation into digitally-enabled companies. He also co-leads the Massachusetts Institute of Technology (MIT) efforts to set up a Collective Intelligence Design Lab.