Factors that underpin success in Global Business Services (GBS) models

In the last 5 articles, we have studied the various facets of Shared Services & Outsourcing (SS&O), and delved into the more contemporary integrated business services models. These integrated models would apply to a company locally as they would to a multinational globally- which is why they are also referred to as GBS models. While GBS is not a panacea, its effectiveness at addressing organisational issues can be enhanced through the following:

1. Selecting the right execution model;

2. Developing an appropriate governance strategy

3. Structuring an effective governance team.

Selecting the Right Execution Model for GBS

While some conglomerates will make a quick leap into a shared service model, they must first understand how the model will contribute to their objectives. An enterprise should only choose a GBS model after understanding and defining the intended benefits, costs and execution objectives.

Selecting the right model can tremendously improve execution of corporate strategy. PwC and HFS Research refer to three basic operating models:

1. “In a facility-centric model, operations – such as HR, finance and IT – are consolidated into a specific facility (or group of facilities) typically in a low labor cost region, and/or in an area where there is great availability of particular skills

2. Some organisations elect an operating model that increases focus on specific processes or customers. These may be centers of excellence (e.g. finance and accounting-specific locations) or regional hubs that bring the delivery model closer to the customers they serve (e.g., language-specific customer service locations).

3. The outsourcing model is the most frequently used – an organisation simply enters into a contractual agreement wherein an external provider delivers the defined services.”

Each of the above models has its pros and cons, spurring the emergence of hybrid models that glean the best of all three models, while minimising the downsides. We start to see GBS arrangements centrally provided from one supplier’s location, chosen because of language affinity /low cost, and having process improvement as a key metric.

Developing a Governance Strategy for Global Business Services

Forming, executing and updating GBS strategies is a significant responsibility requiring a mix of skills that are unique but necessary to achieve the organisation’s goals. Executives are recognising the need to create more strategic global sourcing objectives, exercise more control over GBS decisions, drive more innovation from service providers and more tightly manage increasingly complex contracts.

PwC and HFS research strongly suggest that success is largely based on the degree to which these responsibilities, roles and processes are formalised within a specialized GBS governance team.

“While there is no one-size fits all global sourcing strategy, we believe there is a leading practice standard for a GBS governance team’s organisation design. This standard is based on the following fundamental principles, where governance organisations must:

• Focus on aligning internal stakeholder strategies with the best global business services solution.
• Drive for solutions, not standalone labour or technology services.
• Purposely manage a broad portfolio of services to ensure the services are flexible and scalable.
• Be centrally coordinated. • Have influence over all of the organisation’s global business services activities, applying consistent governance and rigour across all processes.
• Manage results meticulously, with a performance-focused and continuous improvement culture.”

To effectively achieve their objectives, governance teams must perform the functions detailed in the diagram below:

“The two primary challenges for most governance organisations are:

1. Developing sophisticated, mature governance processes;

2. Aligning organisation models optimally to achieve their objectives while vesting the governance team with sufficient decision-making authority.

Most organisations have some form of governance and vendor management, even if it is informal. It may reside in the strategy, procurement, operations, project management or IT organisations – or possibly all of the above! With so many stakeholders managing a global business services strategy, it is not surprising that most organisations suffer from misalignment. The result is that many governance processes are never fully developed to achieve the greatest corporate outcomes. To be successful, each of the governance processes needs defined roles and responsibilities, tools and templates, and must be measured.”

The execution of businesses processes by service providers is commonly intertwined with their clients operations, often beyond the immediate contractual scope (e.g., a call centre canvassing customers for their client’s sales team, and feeding back information to their client’s product design team about previous product faults). For this to happen, goals must be aligned and the internal operations owner must be hands on. Equally, many governance processes require crossfunctional strategic decision-making. Therefore, governance teams should not be order takers for their internal stakeholders. Rather, they need to actively drive the discussion of alignment of initiatives to strategic objectives, enforce contractual requirements, proactively manage change and drive performance management. To do this, they must have the authority to act and drive collaborative discussion within the organization.