Four ways for Shared Services to remain focused on serving their Strategic Business Units

One of the biggest fears of business unit managers when discussing the move to Shared Services is that they'll lose control of their processes to a bureaucratic nightmare.  And it is not completely unfounded.  For too many years corporate services has provided too little value for too much cost.

While a Shared Service Organization can take serve their business units in a variety of ways, there are some essential elements that must be incorporated to ensure long-term responsiveness to the business units and to ensure that the Shared Service Organization is focused on those activities that are truely valued by the business.

1. Implement a sound governance structure that properly represents business unit interests.  Having the appropriate level of business unit representation will go a long way to ensuring the the SSO understands and is meeting the needs of the business.  These BU representatives should have strong organizational and political authority to represent the business.  Business Unit representatives should be high enough in the organizational hierarchy that they are taken seriously.
2. Clearly define what success looks like.  There should be clearly defined metrics that measure specific goals, such as cycle times and costs.  There should also be clear agreement with the business on how these metrics are collected, and how often, so that there aren't arguments over who's data is correct.
3. Regularly reevaluate what has value for the business.  As a general rule, business units value analysis and insight over pure transaction processing; however, that isn't to say that transaction processing isn't important.  It must be done efficiently and with sufficient control to maintain integrity of financial and management information.  But if the SSO is cranking out a monthly management reporting package that no one uses, then the business units has not only spent money needlessly, but they have been deprived of the time spent that could have been allocated towards value-added activities.
4. Regularly reevaluate the organization structure and responsibilities of the Shared Services Organization.  Markets and businesses change over time.  And these days that happens much faster.  As 3rd party service providers mature, it may make sense to move activities out of the captive SSO and to these 3rd party providers.  Or maybe it makes sense to move an activity back to the business units if the goals for that process haven't been reached after a set amount of time.  The point is that nothing stays the same, and Shared Service Organizations should constantly be looking at how they can reinvent themselves.

By focusing on these four areas, the captive Shared Service Organization can ensure that it remains relevant to the needs of the business it's serving.

Featured Discussion on Toolbox for Finance on Wednesday, May 18, 2011

I will be hosting a featured discussion on Toolbox for Finance on Wednesday, May 18, 2011.  The topic will be globalization and its impact on the development and execution of finance strategy.  The discussion will be located in the Strategy Development group.

Please join us and contribute your questions and comments.

Transforming Finance into a True Business Partner: 7 Lessons from CA Technologies

If you've been involved in a corporate finance or accounting group, chances are you've heard your company's senior leadership discuss the challenges of transforming the finance organization into a value-added business partner.  When executives say that, they typically are thinking about moving the finance group away from the "bean counter" mentality and towards a group that can provide fresh and meaningful insight into the inner workings of their business.

While this transformation is a worthy goal, it is far easier said than done.  Fortunately, there are leaders and finance organizations who have gone down this path.  One example is Nancy Cooper with CA Technologies.  The Treasury and Risk website has a profile on Ms. Cooper and how she helped turn the fortunes of CA Technologies around through a transformation of the finance group.  It's a great story and worth your time to read.  Here are the main points I gathered from the story along with my commentary.  A link to the article is provided at the end of this post.

1. Start with the end in mind.  Every great transformation story starts with a vision of the future.  In this case, Ms. Cooper's goal was to turn accountants into analysts, and fundamentally change the culture of the finance organization from one focused on transaction processing to one that provides actionable insight for the company's managers.  She focused on changing the capabilities and the identity of her finance organization.

1. Create a leadership culture.  No great leader accomplishes meaningful transformation on their own.  They understand that their ability to drive transformational change occurs through other people.  Ms. Cooper focused on getting the right leaders in place to set the stage for transformation.

1. Define your mission.  Any transformation plan should have a clear goal to reach.  A strong focus on a particular mission greatly increases the chance of success.  In Ms. Cooper's case, she defined the ability of creating and providing strategic information to her organization as the goal of transformation.
2. Incorporate organizational development.  As part of the transformation journey, Ms. Cooper had to identify existing Finance skills, determine what the required skills were for the future state vision, and implement a training and development program to bridge the gap.  Every organization undergoing transformation must incorporate organizational development goals to fulfill the vision and reduce risk during the transition process.
3. Enhance the governance structure.  Creating new processes and organizational structures is a necessary but insufficient model for transformation.  The transformation process must be guided and maintained by an appropriate governance structure.  In the case of CA Technologies, Ms. Cooper assembled a governance council comprised of V.P.'s, Senior Directors and Directors to enable oversight and control of the transformation process.
4. Build capacity in the finance organization.  As part of the transformation, Ms. Cooper developed depth in the organization, primarily due to the leadership development program implemented as part of the transformation effort.  The organization today is less dependent on any one person, including Ms. Cooper.
5. Develop an agile organization.  Through the transformation effort, CA Technologies and Ms. Cooper have increased the agility of their finance organization.  Greater leadership at all levels, better defined performance goals, and personnel that have clear expectations and the skills to accomplish their goals enable the company to better respond to the challenges and opportunities that will inevitably be encountered.

What other lessons would you add?  Please use the comment section below to contribute your ideas.

Read the full article at Turning Accountants into Analysts.

If you enjoyed this post, you might enjoy reading the Global Finance 360 article: The CFO as Transformational Leader.

Five mistakes that damage the effectiveness of Shared Services and how to avoid them - Part 2

Note: This is Part 2 in a 5-part series.  You can read Part 1 here.

2.  The vision for Shared Services is not clear and compelling

Once a comprehensive strategy has been developed and the role of the Shared Service Organization in that strategy has been defined, it's essential to craft the vision of the captive service organization.  Too many companies move directly into the execution phase without clearly defining the vision around Shared Services.  A clear and compelling vision will paint a picture of the future, provide a high-level direction for change and create a reason for people to engage in behavior that will enable the achievement of that vision. 

An engaging Shared Service vision is one that is ultimately desirable for the company and its major stakeholder groups, even if it involves short-term sacrifice.  The vision should be realistic and concrete enough that people understand the goals of Shared Services.  The vision should be easily communicated to and understood by disparate stakeholder groups.

Without taking the time to create a clear and compelling vision of the future, it will be difficult to motivate people to commit to the change necessary to be successful.  It's essential that the Executive Sponsor of the initiative create a sense of urgency for moving forward.  People need to understand that there will be some short-term pain for long-term gain, but that the sacrifices are necessary to better position the company in a competitive market.

Harvard professor John Kotter sums it up well in his book Leading Change.  He identifies six attributes for an effective vision:

• Imaginable: Conveys a picture of what the future will look like
• Desirable: Appeals to the long-term interests of employees, customers, stockholders,and others who have a stake in the enterprise
• Feasible: Comprises realistic, attainable goals
• Focused: Is clear enough to provide guidance in decision making
• Flexible: Is general enough to allow individual initiatives and alternative responses in light of changing conditions
• Communicable: Is easy to communicate; can be successfully explained within five minutes

By creating a clear and compelling vision for Shared Services, the business case can be effectively communicated to all relevant stakeholders.  This increases the probability of successfully achieving the goals of the Shared Service Organization.

Five mistakes that damage the effectiveness of Shared Services and how to avoid them - Part 1

Leading companies have leveraged captive shared service centers to drive process standardization, improve service delivery and dramatically reduce costs. Yet many companies continue to struggle with the role of a captive service organization in their overall delivery strategy. Despite upbeat predictions from their business case, some companies have failed to realize the anticipated benefits from their Shared Service Organization. How is it that some companies fail to realize the benefits of Shared Services that many other companies have successfully realized? While every organization is different, there are common traits among companies that are not achieving the goals of their captive Shared Service Organization. Five of these mistakes include:

1. Shared Services is not evaluated as part of a comprehensive delivery strategy
2. The vision for Shared Services is not clear and compelling
3. Processes are consolidated into Shared Services without the required transformation
4. Comprehensive change management is not a priority
5. A strong governance structure is not implemented

In this first post, I'll address the issue of including Shared Services as part of a comprehensive strategy:

1. Shared Services is not evaluated as part of a comprehensive delivery strategy

A Shared Service Organization developed apart from a comprehensive delivery strategy will not effectively support the company’s corporate strategy. Depending on a company's previous success handling specific activities and its overall strategy, some processes that might move to a captive service center would be better of handled by a 3rd party, either onshore or offshore.

High performing companies focus on building a comprehensive delivery strategy that incorporates both captive and 3rd party suppliers. An organization’s service delivery strategy should support the overall corporate strategy and includes a consideration of the company’s existing and planned business lines and geographic presence. It also includes an objective analysis of the supplier-side capabilities from both the captive service organization and 3rd party service providers. Another consideration is the global distribution of support services including an analysis of onshore and offshore delivery options.

One of the major steps in determining where an activity will reside is to document the end-to-end process to include not only the individual activities in the process but also the department (such as Accounts Payable) that will be performing the task.  Once the totality of the individual tasks is understood and documented, a company can make a more informed decision regarding its ability to handle those activities in-house.  A number of factors will go into this decision including the company's ability to handle that specific activity, the effectiveness of handling it and the anticipated cost.  These metrics and others can be evaluated against 3rd party service providers.   When the decision to move to Shared Services is made in conjunction with a comprehensive delivery strategy, rational decisions can be made around the placement and delivery of services.

Creating the Finance strategy that drives performance

Finance strategy is now more important than ever.  Global competition, cost pressures, sourcing alternatives, global compliance, reporting convergence, acquisition analysis and integration – today’s Finance organization must continue to find new ways to partner with their business to deliver the value-added services required to remain competitive. 

Unfortunately, in today’s complex operating environment it can be a challenge to create and execute the strategy required to accomplish these goals.  A comprehensive and mature Finance strategy should be:

• Actionable.  A strategy must be realistic and detail specific behaviors to bring the strategy to fruition.  Actionable plans at each level of the organization must cascade downwards so that personnel on the front lines understand corporate and financial objectives and how their activities support those objectives.
• Flexible.  In a world marked by globalization and quickly changing opportunities, businesses and their Finance organizations should be characterized by a flexibility that enables them to respond to those new opportunities in a pragmatic and disciplined manner.  This includes establishing the proper cost structure, balancing fixed and variable costs that maintain cost discipline yet enables the flexibility required.
• Scalable.  High performing Finance organizations have the systems, processes, organization and governance structures in place that enable them to scale as their business grows.  Acquisitions are effectively integrated into the organization and anticipated ROIs are achieved on schedule.  There is a defined approach that enables Finance to support expansion into new geographic markets.
• Supportable.  A strategy that cannot be supported by existing or planned resources is worse than ineffective; it will lead the Finance organization down the wrong path instead of generating the value-added delivery capabilities their company requires. 
• Measurable.  A well-crafted strategy has specific and measurable outcomes.  Finance strategy should have an integrated set of key performance indicators that assist in the evaluation of Finance’s effectiveness and efficiency in delivering the services that support corporate objectives.

Ultimately, an organization’s financial strategy must be aligned with the corporate strategy. It is no longer sufficient to be the scorekeeper who reports historical results.  Today’s Finance organization must be an equal partner in the formation of corporate strategy and provide the intelligence, analysis and insight necessary to support the corporate vision for growth and profitability.