INTERVIEWS OF THE MONTH
INTERVIEW WITH NARENDRRA ARORA
Narendrra Arora, B.Com., ACA, ACS, AICWA, ACCA (UK) , CFA (ICFAI, India), currently leads the Shared Services function for Piramal Enterprises as its Vice President. He comes with a rich experience of over 21 years in various areas of Finance & Accounting and managing Shared Services operations of which he has been in Country CFO / Controller roles for over 9 years.
In your experience, what kind of transformation have you seen in the shared service organization in the last two decades? What are really some of the key underlying triggers for this transformation?
The decentralized organizational structure of large multinational corporations led to investment in systems processes and addition of staff at a local geographic level. As these organizations grew through acquisitions, such acquired companies also came along-with their own systems, processes and people. This meant duplication and / integration of processes, systems and job roles leading to operational inefficiencies & higher costs. Further, the data/information generated during the business operation resided within the local business units, thereby delaying timely reporting to the senior leadership. This created a need for consolidation of data processing to improve organizational efficiency. To address this need, enterprises started moving common business services and processes to a central business unit generally referred to as Shared Service Center (SSC). This is how the concept of Shared Services came into being. Based on their needs and organizational maturity, such corporations adopted different models for their SSC’s. Technology was a big driver that helped SSC’s consolidate processes and integrate data across the organization.
Intense global competition, cost pressures, mature IT infrastructure, maturing economies and reduction in availabilty of skilled workforce also led to outsourcing of Shared Services.
In its early days, Shared Services model was deployed for managing non-core and non-strategic processes that were mainly transactional in nature. However the concept caught on rapidly with its users and this led to extension of the concept of Shared services to core and knowledge based services as well.
Besides the above we are noticing the following trends as the concept of SSC continues to evolve:
- Companies are using a hybrid approach to their service architecture that combines internal & external service delivery with a mandate beyond transactional processes. This model of co-creation is not just seen across functions but also across partners.
- These newer SSC models are also able to provide stakeholders corporate services using output based pricing aligned to value created (vs input or FTE based pricing). This is achieved by entering into smarter partnerships with various business process service providers/vendors.
- While Shared Services started with the intent of reduction in cost of transactional processes we are seeing a shift in thinking beyond a focus on cost and reinventing the SSC (and its people) as “value-drivers”. The challenges presented by the limited process scope and volumes (relating to non-core transactional processes), rising wage costs & rapid cost of living increases has made the single minded pursuit of cost reduction very difficult beyond a point. New technologies and service offerings have helped move the Shared Service Centers towards higher value processes. Shared services centers of today are also able to support core business operations and offer stakeholders with newer service models that have continuous improvement and process innovation as part of their organizational DNA.
In your opinion, what will the next generation SSO’s look like? What do you believe is the role that technology will play in framing the next generation SSO?
To survive in tough economies we may see SSC’s moving away from mere process execution. Shared Services will have to fundamentally re-engineer their processes to eliminate needless work while aiming at satisfying customers, reducing cycle times and improving quality at the same time. If needless work is eliminated and processes are standardised and executed in a stable manner, advances in technology can be exploited. This shift would drive down the number of people deployed on transactional processes as low-skilled activities get further automated. On the other hand the required level of skills of the SSC staff working in competence driven processes will increase in the future. Therefore attracting talented people with say finance and accounting skills which cover several accounting frameworks will be the challenge for the recruitment function for SSC’s. As a consequence, the location of the Shared Service Centre will not be as important as it is today, as the skills of staff will be more important than the achieved labour cost savings.
As the market for transactions and expertise based services develops, it is very likely that many services that are currently being performed internally would get outsourced. Shared Services leaders would start managing outsourcing opportunities and the new challenge of outside vendor management. Over time there job would be to manage service capabilities rather than service production.
Technology will play a big role in helping SSC’s automate many activities which are currently still performed by humans. However, exceptions and competence-based decisions are unlikely to be automated completely, as the implementation and maintenance of the IT and algorithms exceed the benefits. Nevertheless we would see that the share of IT costs will switch positions with personnel costs and account for the larger share in the future.
The next big thing could be Shared Services from the cloud. Currently cloud computing is merely delivery of processing power and storage as a service. Processing power and storage can be sourced according to a company’s needs, easily increasing or decreasing storage capacity, for example.
On similar lines as the extent of automation & process standardization increases more tasks can be considered for delivery as a service from the cloud. The SSC then, in one way or another would simply rent the service rather than executing it within the house. With cloud service delivery model the business units will be concerned only about providing the correct input for Shared Services Organisations and receiving the desired outcomes in line with the defined SLAs. The SSC would be able to source several services from other providers on the cloud. However, the end-to-end process responsibility and governance has then to be fully managed by such SSC.
In your opinion, how should SSC’s really measure themselves in the light of these transformations?
Traditionally success for a typical Shared Services initiative is seen through lens of whether or not the actual performance is meeting the SLAs – actuals being better or equal to KPI targets. Another measure for success is how does our performance compare vs peer group benchmarks.
As the SSC model evolves, the focus is moving towards improvement in the overall business metrics and not merely operational KPIs related to Shared Services. For example some of the questions increasingly being asked is how the Shared Services for say Accounts Receivable is helping the organization collect its monies faster and reduce DSOs not merely on operational metrics of the Shared Services team. So the real measure would mean measuring the system as a whole and for this to happen the following must fall into place:
- Sustained improvement in performance requires improvement in systems
- Cost, Service and Quality should be viewed as mutually Reinforcing and there should not be Trade-Offs
- Continuous improvement vs targets
Besides the above, as the extent of automation increases, one more measure for success would be the change in mix of shared services organizational costs – reducing personnel cost vs increasing IT costs. Another measure would be the extent of service delivery that is outsourced vs internally provided.
As shared services move towards higher value process work, one of the ways of capturing success would be to measure the value creation triggered by the Shared Services initiative.
What kind of new talent do you think that SSO’s of the future need to attract and retain to get them closer to their goals? Can you share some best practices on how some of the world’s best SSO’s achieve this?
Its said that Services business is people business. Its because of this that people management at Shared Services requires a different dimension and perspective compared to people management of any other type of business. It’s a no brainer that for a successful Shared Services implementation, it is essential to have not just the right team but also strong leadership besides sponsorship from the Senior stakeholders with the organization.
Process Expertise is essential ingredient for right talent sourcing for managing service delivery in case of non-core transactional processes. However with the standardization and automation of transactional processes and movement of competence driven or core processes into shared services, the skill set expectations within SSC would increase. There would therefore be a need for attracting bright talent which can support core processes across geographies (for example as mentioned earlier accounting & finance skills which cover several accounting frameworks).
Besides, there would be a need to also hire talent who have specialized skillsets in the areas of Innovation & Continuous process improvement – like Lean, Six Sigma, Kaizen, skills to identify & drive automation opportunities and designing meaningful performance dashboards etc.
Here are a few best practices on how some of the worlds best SSOs attract & retain talent:
A) Attracting top talent:
- Focus on company’s brand as an employer of choice: Make sure the company brand accurately reflects the company’s reputation in the marketplace, its employee practices, and benefits.
- Treat hiring as a key business practice: There is no doubt that firms who take hiring talent seriously reap the benefits. Smart firms invest their time, talent, and profit in creating and maintaining a top-notch talent acquisition process.
- Create a total rewards strategy: Employees are looking for much more than a paycheck and companies must utilize cost-effective ways to differentiate their business.
- Conduct a compensation study for market data: Your salaries, even for newly created positions, must be at market while also ensuring internal parity for existing employees.
- Leverage employee referral programs to attract top talent & use this to reward enthusiastic employees who join hands with HR in the war for sourcing best talent.
B) Retaining talent: :
- Restructure the workplace: The Shared Services should be organized in a way that offers motivated & passionate employees a) operating freedom, b) flexibility to innovate & improvise, c) ownership over projects and d) opportunity for personal growth & development. While some structure is essential, a highly hierarchical organization can end up impeding employee engagement.
- Formally measuring employee satisfaction/engagement: Employee Engagement is key for employee satisfaction, customer satisfaction and the competitive edge of a company. The survey makes it easy for everybody in the company to express how they act and what they think and feel about a range of topics such as management culture, internal cooperation and working relationships. It provides feedback from all the company employees as a basis for an organization’s further development and it plays a key role in sustaining success as a company
- Succession planning: Shared Service organizations should have Succession planning for its management functions in accordance with not just the knowledge & experience related requirements of a position but also in line with the business roadmap and management capabilities required for the same. This would help identify and develop internal employees with leadership potential thereby creating a solid pool of people who can take leadership roles within SSO.
- Employee Training & Recognition programs
Can you share some of the innovations that Piramal Enterprises is doing as you mature your SSO? What kind of business impact do you foresee that you’ll realise in this process?
The Global Shared Services initiative for the Healthcare Businesses within Piramal Enterprises is an outcome of Project Good to Great (started in Q3 of FY 2013-14) that was aimed at transforming the functioning of company’s internal service organizations mainly Finance, Supply Chain and Human Resource functions.
So the Shared Services initiative within Piramal’s is fairly new. As an organization we decided to take a phased approach to Shared Services roll-out, starting with those transactional processes within Finance & Accounting and Supply Chain that have a bearing on working capital management. The intent is to use phase 1 as a pilot for establishing credibility for the Shared Services model within the organization before expanding the scope & moving more processes within Shared Services fold as part of wave 2 & possibly wave 3.
As a company we’ve decided to adopt a ‘lift & shift’ model to managing transitions with a view to avoid disruption to business operations as we embark upon the shared services journey.
We’ve also put in significant effort in coming up with robust governance mechanism both at a site level and also at the Business level involving senior Business leadership team.
The company is making significant investments in business process enabling technology solutions (and related IT infrastructural enhancements) to aid Scanning, OCR and Document & work flow to enable & automate the process.
From a people standpoint we’ve decided to staff the organization with a judicious mix of internal talent and external hires who come with domain specific expertise from 3rd Party BPO or MNC Shared Service organizations. While we intend to start the process transformation & continuous process improvement journey post transition and stabilization of wave 1 processes, we are also looking to hire Business Analysts who come with automation and management report designing skill sets. Internally we are also engaging with our Operations Excellence team to seek time & resource commitment on future continuous business process improvement initiatives with a view to maximizing outcomes leveraging in-house capabilities.
All in all while we have just made a beginning we are well positioned to make all the right moves which will not merely improve Shared Services operational metrics but