Many surveys have shown the rationale behind using either a shared service centre or outsourced function to improve business processes. In its 2010 survey of global chief financial officers, The New Value Integrator, technology giant IBM found that the use of alternative delivery models, such as shared services centres or outsourcing, for financial transaction processing is 69% more common in efficient finance organisations than their counterparts.
Where the projects have been successful, they will be built upon. Accenture, in its 2009 review of global shared services, Achieving high performance through shared services: lessons from the masters, found that seven out of 10 respondents with shared service centres (SSCs) planned to expand the geographic coverage of their SSCs within the next three years.
Continue to succeed
But this same report highlighted something that needs to be constantly addressed if the business process outsourcing (BPO) and SSC movement is to continue to succeed. It said: ‘Shared service centres face a number of challenges once the migrations are over, including stabilising the service after the go-live date, establishing a service culture quickly, creating compelling shared services career paths and building continuous improvement with material results, regardless of how the external environment changes.’
In other words, SSCs and outsourcers need to invest in their people if benefits are to continue to accrue to their ‘parent’ organisations. At the same time, there is clear evidence that as outsourcing and SSCs mature, the level of work carried out in these centres will shift up the value chain so that more companies will use them for high-value, knowledge-based processes. This presents both a challenge and an opportunity for those working in such environments.
As Michael Corbett, chairman of the International Association of Outsourcing Professionals (IAOP), says: ‘Companies are outsourcing to do more than cut costs but to add value, increase business flexibility and prepare for future growth.’
The IAOP has found that knowledge-based outsourcing is becoming more important to companies, and the industry is filling this demand. In both the autumn of 2009 and January 2010, in a survey of its members, more than 40% indicated that outsourcing at their organisations was increasingly focused on knowledge based activities, compared with less than 30% who said they were increasing the outsourcing of lower-skill-level positions. Arguably, the finance function, either outsourced or in a SSC, onshore, near-shore or offshore, should lead this movement, so it is more important than ever to focus on ‘people’ aspects.
There are, of course, socio-economic effects of SSC and outsourcing hubs. Many cities have benefited from providing the staff for these services, enjoying economic prosperity.
As Nick Atkin, PricewaterhouseCoopers partner in finance business services, says: ‘There is a significant effect, and it is different by region. In central and eastern Europe, you see traditional university towns with a growing population of students who are more aligned to BPO or working in SSCs. You also see the influx of diversity into these cities, where clients want to have European language skills.’ Atkin cites as examples Prague, Budapest and Krakow, where financially literate professionals have migrated, working and setting up home there.
However, despite this influx and the availability of local talent, there is still a shortage of suitably qualified accountants to carry out some of the high-end functions that SSCs and outsourced functions are looking to deliver. Upward pressure on salaries, and therefore costs, follows.
‘The story changes in India,’ Atkin says, ‘where the scale of the population means that those sorts of skills are more readily available. Large BPO organisations are working with universities a year or two before students graduate to train them in financial management, and to provide support for talented people. They will sponsor them through the latter stages of university so they go to work for the likes of Infosys, Wipro or Genpac.’
But that said, Atkin observes that really good, well-qualified accountants are still hot property. ‘BPO providers and their clients don’t want to give up individuals very readily so therefore the price goes up, attrition rates go up, and these can cause problems for BPO providers and shared services.’
Chris Davies, managing director of Diageo Business Services – the financial shared service centre for the drinks giant, based in Budapest, Hungary – has seen first hand the effect the improved financial capabilities can have in a particular location, and how that can be of benefit to that location. He now argues that cost is not the driving factor in locating a BPO organisation or SSC in Budapest. ‘Hungary is starting to get out of the trap of wage arbitrage; it now competes on the quality of the labour pool,’ he says.
Out of sight?
There is still a concern that once a part, if not most, of the finance function is moved out of the core operation and into either a SSC or outsourced entirely, then it becomes out of sight, out of mind – training and continuing professional development could fall by the wayside, careers are stalled, and opportunities to move back into the central organisation will be limited, if not non-existent.
Not so, says Jackie Gittins, people and change director at PwC. ‘The large organisations are doing a lot of things virtually.’ Gittins adds that progress can be monitored through staff surveys – most high-performing organisations will carry out surveys at least once a year. ‘Engagement is really important; high engagement drives value to the business,’ he argues. In other words, those that are prepared to invest in their people will reap the benefits. If people feel they are not being developed, coached or given opportunities they usually say so. ‘FDs are asking what is happening in the business, what they think of the finance function,’ says Gittins.
Global mobility raises a number of issues. There is no doubt that the outsourcing movement has opened up opportunities that previously did not exist for professionals in emerging economies. As Davies says: ‘My junior staff are hugely sought after and are in demand all around the world.’ But he adds that at more senior levels, people might be at a different stage in their lives. And he also believes that the leaderships skills that are required of more senior professionals might not be as finely tuned as they could be.
Marieke ten Houte de Lange, Shell’s human resources manager for finance operations, says it might not be necessary to travel to get international experience: ‘There is an element of increased global exposure for finance professionals, but we tap into local talent markets, which is one of the drivers of moving into a shared services environment. One attractive part for the finance professional is that one can gain experience in different industries in a more global and virtual environment than in the past.’
Her collegue, Karthik Selvaraj, in Chennai, India, agrees: ‘It has increased the exposure for people to work in a global environment because they interface with global, multinational, multicultural customers, but the reason why there might not be opportunities [for physical mobility] is that activities are migrating to a centralised, consolidated Shell Business Service Centre environment. Jobs are getting done in fewer locations. But the exposure is tremendous.’
In terms of the importance of working with an outsourced function and SSC as part of career development, ten Houte de Lange is clear. She says: 'There are four dimensions of experience a well-rounded finance professional requires here, affecting both the breadth and the depth of experience. These are: professional, business, leadership and stakeholder management experience. The people that have the best potential to become future leaders in the organisation should have experience both in the operations environment in shared services as well as in the business and in the central function.’
Philip Smith, journalist
CASE STUDY: IBM SCC, MALAYSIA
Jason Crimson is the manager of balance sheet accounting in the Asia Pacific Accounting Centre at IBM in Bandar Utama, Malaysia. The shared service centre (SSC) provides centralised accounting services and support to IBM’s leaders, and management in the region. Other areas supported include Sarbanes Oxley compliance, business controls and financial systems support.
He sees a number of career patterns emerging in the shared services environment: ‘Finance SSC leaders are the pipeline for internal key financial leadership positions such as controllers and CFOs. These leaders also form the talent pool for recruiters for leadership for start-up or growth-stage finance SSCs.’
Typically, finance professionals can expect to rotate between roles at a faster pace than normal, averaging between one and one and a half years in one role. ‘There are incredible opportunities for a professional to work “in-house” in a SSC due to the increased complexity of work that gets centralized into the finance SSCs,’ he says, adding: ‘This is compounded by increased leadership and management opportunities that provide upward mobility for individuals.’
Crimson says finance professionals have the option to pursue careers in other SSCs within the organisation or even in non-SSC functions. This career path flexibility plays a key role in ensuring a variety of opportunities and is managed via periodic employee development and career discussions.
‘Periodic job rotations with clear developmental goals are required to retain talent within the SSC,’ Crimson says. This includes a career roadmap to enable employees to chart their own courses within and outside the SSC. Specific training requirements are determined at each level within the roadmap to steer progressive professional development for the individual employee. A minimum number of training hours is determined and embedded within the job requirements. Training also covers management and leadership skills, together with business acumen and integrity.
Crimson appreciates the breadth and depth that working in a SSC can give to finance professionals. ‘It allows you to develop process expertise and compare and contrast practices across various countries and regions. You are exposed to and take with you the best practices that have been developed and are always expected to further refine the processes in order to achieve optimisation, which is a key skill an individual garners from working in a SSC. It is required within global organisations in the present day and also for the future.
CASE STUDY: SHELL
Global energy and petrochemicals company Royal Dutch Shell employs 101,000 people in more than 90 countries and territories. Of these, 10% are in the group’s finance function, with almost half working in finance operations run out of Shell Business Service Centres (SBSCs) worldwide.
The SBSCs are based in six main locations – Glasgow in the UK, Krakow in Poland, Kuala Lumpur in Malaysia, Chennai in India and Manila in the Philippines, and Cape Town in South Africa. The majority of finance operations people are based in Chennai and Manila. Finance operations covers a wide range of activities, from transactional processes such as accounts payable and receivable, through reporting processes and data management up to management‑information services.
‘We are continually improving the quality, effectiveness and efficiency of our operations to what we call world-class finance. To do this we need the right people with the right skills working in our centres,’ says Marieke ten Houte de Lange, Shell’s Human Resources manager for finance operations.
In terms of career progression, ten Houte de Lange’s colleague, Karthik Selvaraj, based in Chennai, India, says: ‘The centres offer a variety of roles, starting from transactional activities to high-end work, therefore you could start working in accounts payable and then progress higher up the value chain, for instance into management reporting activities. ‘There is a complete learning and development programme for finance staff, which includes on-the-job training and lateral moves from one process area to another.’
Staff are encouraged to take internationally recognised qualifications, such as those offered by ACCA and the Chartered Institute of Management Accountants (CIMA) - such qualifications can help them to move up the value chain.
Ten Houte de Lange acknowledges that while they operate in an environment that has a high turnover of staff, she believes that the turnover of staff in the SBSC compares favourably with that in outsourced operations. To ensure that top talent is retained and good retention rates are achieved, structured talent development, progression opportunities, monetary and non-monetary remuneration, learning opportunities and professional accreditation and development, are in place.
‘We have developed competency profiles for roles in finance operations,’ says ten Houte de Lange. ‘All staff have the opportunity, together with their line managers, to review where they are in terms of their competency assessment. This contains both financial professional qualifications as well as leadership and personal business competencies. There is a finance operations learning curriculum, with both face-to-face courses and virtual programmes to enable finance operations staff to develop themselves.’