This article was first published in the February 2013 International edition of Accounting and Business magazine.
Essentially, global business services, or GBS, represent the next phase in outsourced or shared service models. GBS aggregates key functions such as finance, HR, IT, customer care, property and facilities – and sometimes vertical business processes such as claims processing – into one organisational structure and governance model, providing business support across the entire enterprise.
It sounds like the mother of all shared services arrangements and in a sense it is. Whether delivered through internal operations or outsourcing relationships, GBS becomes the corporate back-office entity. With a single governance structure and reporting lines that span all functions, feeding into one corporate leader often with a seat at the management table, it turns the responsibility for delivery of finance upside down. In a mature GBS model, processes take precedence over functions. Traditional functional silos are broken down and transactional processes are managed end to end.
CFOs may react in one of two ways to news of the ‘next big thing’ in finance delivery – by punching the air in delight or rolling their eyes in exasperation. But for CFOs in organisations with the aspiration to move to a GBS model, their ability to harness shared service and outsourcing models has become a double-edged sword. Given the evolution of the finance function compared to other corporate functions (more than 70% of Fortune 500 companies have already consolidated some part of the finance function at a country, regional or global level), finance becomes a key GBS building block.
Look under the covers of the majority of GBS organisations, and you’ll find that the transformed finance function serves as the foundation. The model is predicated on the realisation that finance not only touches every aspect of the business, but has been taken to the next level through consolidation and transformation.
At the very least then, CFOs should understand how the GBS model works and its implications. With this in mind, we have produced an ACCA report, Global business services: a game changer for the finance organisation? that discusses GBS and its potential impact on the finance function.
Is it worth it?
The overarching question for the CFO is whether GBS is worth doing. The advantages of finance moving to a GBS model are that it may be just the opening for the CFO to prove how finance touches almost every corporate function, and may deliver hitherto unimagined insights to enhance business performance across the enterprise. In a mature GBS model, finance resources are unleashed and refocused to perform higher-level tasks, giving greater business impact through cross-functional collaboration.
GBS makes it conceivably possible to harness the power of analytics through a more collaborative, end-to-end process delivery model at scale, linking, for example, finance data to customer and sales data. No longer is finance positioned as the bill payer or rules maker, but a real source of insight that drives business growth.
In theory, GBS will deliver more business model agility, quicker market entry and business integration. With better insights, organisations should also be able to increase efficiencies that show up in the bottom line. And there’s no arguing with a streamlined administrative cost structure with all enabling functions linked together and housed in one corporate organisation.
The downside of moving to GBS is that it could become an expensive and time-consuming distraction. It may also mean an uncomfortable rethink of the finance function, calling into question what the CFO must control and what finance can consume as a customer of GBS. Since the GBS leader, not the CFO, is directly responsible for finance process delivery, some processes that have traditionally fallen under the finance remit may no longer be considered part of finance under a new model.
GBS also represents an enormous cultural shift for finance, particularly for those organisations that have not moved to shared services or outsourcing models. It will change the way the finance function operates at almost every level and place new demands on finance professionals.
In the GBS construct, retained finance interacts closely with other functions, which requires finance professionals to be adept at working cross-functionally with a broad business perspective. GBS demands that finance professionals think differently and deploy a wider range of business skills than many have at the moment.
The use of finance delivery models as a basis for GBS by many organisations begs the question: to whom should GBS report? The knee-jerk answer is the CFO, given his or her track record of successful transformation via shared services and/or outsourcing. But would GBS, which is essentially the organisation’s enabling factory, be better placed under an operations leader such as a COO, or even a chief administrative officer?
The GBS model will not be right for everyone. It represents a major organisational change and investment. Some organisations are simply too small to benefit, while others will find that moving to GBS is too big a political challenge. But for organisations that have embraced process delivery through shared services or outsourcing, or a combination of the two, the trend toward GBS will be difficult to ignore. The question is whether these organisations would be better served by extending their investment in shared services or outsourcing, or by embracing GBS.
It is early days for GBS, but it could be a game changer for finance, finally providing a leadership opportunity to add demonstrable strategic value beyond risk management across the enterprise. It remains to be seen how many organisations will take the leap. Each CFO will have to answer the question: is GBS the friend or foe of the finance function?
career-limiting or role-promoting?
ACCA’s Jamie Lyon looks at the significant implications that a move to a global business services model could have for the career paths of finance professionals
A move to GBS may result in a shift in focus for the retained team away from managing processes – even in a shared services or outsourced model – and toward business partnering and corporate finance. Finance professionals in a GBS structure may see their responsibilities shift from managing single functions to managing across functions.
Is GBS good for the finance professional? Finance’s move to a GBS model could be viewed as providing another step on the finance professional’s career arc. In all respects, the change started some years ago, as finance departments segregated strategic, management and execution finance tasks, and then industrialised rules-based transactions work by consolidating it into delivery centres.
The implementation of GBS will call into question the role of the retained finance team, including those embedded in the business. It may change responsibilities, reallocating roles previously under the purview of the CFO’s team.
If, for example, transactional finance processes shift out of the control of the CFO, the traditional career path upward may be more limited; it will certainly be disrupted because the linear functional relationship between transactional finance and the rest of the finance organisation ceases to exist.
The finance professional may not be able to gain sufficient technical experience unless there is a defined path through GBS, and this may not necessarily route them back through the finance function; at the same time, the finance leaders in the retained finance organisation may be further removed from transactional finance process delivery.
GBS further stratifies career paths. The greatest career benefit of GBS may accrue to the retained team. Implemented fully, it may free finance professionals to spend more time with the business. For the ‘top end’ of finance, GBS theoretically provides better data and one version of the truth across the business. This should result in less rework and facilitate the development of capabilities in business partnering, corporate finance and strategic planning.
Without the distraction of running shared services or governing outsourcing, the retained team’s remit becomes more focused. The retained team may also have further advantages for career advancement, with more focus on building the commercial skills and capabilities increasingly prized for finance leadership roles.
Implications for career paths do not stop at the retained team. At the operational level GBS offers new opportunities for finance professionals, particularly given its focus on end-to-end processes. Professionals in GBS organisations may find they no longer occupy finance leadership roles, but rather take responsibility for end-to-end processes. They will be presented with the opportunity to master new technologies, improve workflows, and develop new process solutions.
Will GBS open up new career paths to the top for finance talent or will it limit opportunity? If the effects of shared services for finance career paths are any indication, there will be limited movement between GBS and retained finance. Even though the shared services – and GBS – experience gives finance professionals unique skills, allowing them to operate in virtual, global environments and manage large teams, finance career paths have not yet been designed to take full advantage of shared services rotations. As a result, GBS finance professionals are unlikely to move into retained and ultimately CFO roles, whereas those in the retained team may be better placed to take up GBS roles, then transition back out.
Could GBS challenge the development of a robust finance talent pipeline? Will high-end finance be defined so narrowly that true finance experts – those who do not care to pursue mastery of broader business skills – feel they are shut out of rewarding career opportunities? Will there be sufficient career path movement within GBS for finance professionals who have no interest in cross-functional opportunities or the attainment of broader business skills?
Jamie Lyon FCCA is ACCA head of corporate sector