FSN: Business transformation in the 21st Century

Business transformation in the 21st Century

28th January 2008
In a highly competitive trading environment where limited pricing power leaves little room for manoeuvre, multinational companies are under sustained pressure to maximise process efficiency and reduce their cost base in order to maintain slender margins. In recent years this has lead most large enterprises to consider the possibility of finance transformation in one guise or another.

Business process transformation, shared services centres and off-shoring have all played their part in enhancing business performance as companies seek to streamline their processes and relocate their finance and administration operations to lower cost environments in Eastern Europe , India and the Far East . Reorganisations on this scale cannot be taken lightly yet few companies can boast the in-house skills to deliver competently a change programme on a multinational scale.

The challenge of major process transformation is a multifaceted problem often accompanied by new technology and significant cultural and language barriers. Change management may have become a glib term but in practice people issues loom large in projects of this type. So what skills are required to successfully deliver finance transformation? Like many complex business problems the answer is that “it depends”!

According to James Bradshaw, CEO of Systems Accountants, a specialist in supporting large scale business transformation, it depends on the stage of project maturity, the breadth of applications within its scope and the geographies in which the project is expected to operate. “One of the greatest challenges for these projects is that the skills mix is constantly changing as the projects progress. Most companies seem to travel a well worn path starting with relatively simple process transformation, leading into domestic or regional shared services centres followed by re-location off-shore,” he told FSN.

“The competencies needed at each stage are different and it is not possible to find managers that have all of the required skills and experience but we have noticed that individuals that have had consulting experience backed by line management experience in industry are particularly well suited to this kind of environment. The formality and rigour of training in consultancy allied to hard won ‘real life' experience in industry is an attractive combination,” he adds.

“For example, an appreciation of the formal methodologies which drive process change and their implications for people and systems is a major advantage, but there is nothing like having done it for yourself in a global enterprise,” he remarks.

The importance of global experience should not be underestimated. Working in a foreign environment is not just about language, it is also about taking on board the cultural issues that can make or break a project. For instance a project director working on the implementation of a shared services centre in Hong Kong was amazed to discover the lack of progress until he introduced a Cantonese speaking project leader. It transpired that the new processes and enabling systems were perfect but local employees fearing their jobs were on the line continued to work in parallel long after the system was ready to go live simply to stall progress.

Knowledge about local practice, law and custom is also invaluable. Programme managers in China well know the special challenge of working in an environment where legislation and local authority decisions can be invoked and repealed with breathtaking speed. Understanding the decision making process and how to influence it is vital to success – as is a mind set that expects the unexpected!

According to Bradshaw, the boundaries of transformation projects are in a constant state of flux as further applications are added and the demands on shared services centres are increased. “Companies are increasingly turning to their finance functions to do more than process transactions. Boards are looking for business partners that can interpret performance in the context of market developments, help set priorities and deliver on strategic objectives,” he says.

These later stage requirements are very different from the skills required during the early phases of business transformation. “The initial stages often revolve around process skills, change management and systems implementation. However, as shared services become established, companies need people familiar with setting and monitoring Service Level Agreements. But when projects re-locate then another set of competencies of a completely different order of magnitude come into play.”

“It's the practical experience of managing multidisciplinary teams operating in different time zones that can makes such a huge difference to delivery on the ground,” says Bradshaw. “Knowing which nationalities will work well together and understanding the delicate political balance between local resourcing and ‘corporate' resourcing can make the difference between team harmony and a dysfunctional project. Taking care of ‘pay and rations' for the programme team on a global basis is another vital skill that should be part of the programme manager's tool bag,” he adds.

Structural change in the global outsourcing market is adding to the complexity of major transformation. The growing trend towards captive or DIY (Do It Yourself) outsourcing means that companies are taking on the full commercial risk of migrating key operations off shore with the added complication of attracting and retaining staff in far flung locations. At the other end of the spectrum companies are de-risking transformation by parcelling up outsourcing arrangements into smaller bundles with different specialist providers. In this instance, the programme manager requires the skills to manage multiple projects and supplier organisations simultaneously.

But programme change is not just about identifying and buying in the skills you need. “Companies have to take into account what happens when the programme is delivered. How well positioned is the company to take ownership of the end result? A good programme manager will ensure that skills transfer has been sufficient to render the company self sufficient,” comments Bradshaw.

Finding all of these skills represents a sizeable challenge. Few companies have all of these resources permanently on tap – if at all. Yet resources of the right calibre in the market are in short supply. “Responding to this challenge means that companies have to start planning early for change and be creative in the way they recruit and apply their resources,” concludes Bradshaw.

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