Detailing the new landscape for global business services
To ensure the long-term
success of shared-services programs, leaders must develop new digital
capabilities and account for a changing geopolitical environment.
To those companies still trying to
determine whether the global business services (GBS) model still matters, the evidence favoring the model
is compelling. Consider the insurance company that reduced its incidence of
claims fraud by 15 percent, in part because of the data-analytics program and
streamlined processes provided by its GBS unit. The unit’s process expertise
helped the company reduce by 30 percent the cost to serve associated with an
existing product. This reduction made it possible for the company to offer the
product to a broader customer base.
The insurer is among
the nearly 80 percent of global companies in the Fortune 500 deploying some
form of a GBS model, according to published studies. GBS units manage a range
of functions, from basic tasks like processing invoices and answering
customers’ inquiries online to more-complicated tasks like underwriting
commercial loans and managing budgeting and planning initiatives. They are
typically configured as centralized units within a company, although
third-party providers may also provide some of the services. Companies that use
them seek to support business operations more efficiently while also developing
next-generation leaders. Our conversations with executives suggest that nearly
one-third of operations leaders in companies have been part of a GBS unit at
some point in their careers.
The benefits associated
with the GBS model are clear. When it comes to actually deploying the model,
however, companies face several potentially disruptive forces. For one, digital tools and technologies as well as agile test-and-learn management
approaches could dramatically affect the way GBS units are organized and the
daily work they perform. Because some back-office tasks can now be automated,
for instance, GBS units might want to focus on higher-level business-support
tasks and might need fewer people to accomplish them. Just as disruptive, GBS
leaders are facing a new geopolitical environment that might restrict their
opportunities and change the way they configure their service networks. Control
measures being explored by governments worldwide could affect GBS teams’
ability to hire the required talent and establish service centers in low-cost
locations—potentially affecting the quality and scope of the services they can
provide.
How exactly should GBS
units’ service-provision and governance methods change to incorporate these
trends? Our work with GBS organizations across a range of industries points to
several actions, such as the following, that these units can take to adapt
successfully to the changing environment:
·
Reimagine the scope and
culture of GBS units.
·
Incubate the company’s
digital capabilities and talent within GBS units.
·
Manage disparate GBS
units as a network across the organization.
·
Build strong
relationships with external providers to augment GBS units’ capabilities.
·
Pursue a “three in one”
organization for GBS units (using various elements of traditional,
transformative, and disruptive operating models).
Some of these steps might
seem obvious for addressing technological and geopolitical disruptions, others
less so. We believe that these actions, when taken together, can help GBS units
establish for themselves a new organizational operating model that can
withstand current and future disruptions. Indeed, the GBS units that can
successfully adapt to emerging macro forces might be able to work more
efficiently, attract more and better talent, and react to market changes more
quickly than competitors can.
Understanding the disruptions
GBS leaders and
business stakeholders face many potential disruptions to the business status
quo. Among them are digital technologies, the geopolitical landscape,
service-provision and governance methods, and sourcing trends. All these
factors have the potential to affect the way companies build and manage their
service networks.
Digital technologies
Many companies are
experimenting with automation and analytics programs, and they are beginning to
gain insights from the deep troves of data at their disposal. Advances in these
technologies have led some to reconsider the need for GBS—why go through the arduous exercise of building a
centralized unit to perform services that can be automated? For some business
and IT leaders, automation increasingly makes sense because the cost of
deploying automation technologies has come down significantly, and performance—particularly
for comparable transactional tasks—can be dramatically enhanced. Missing from
the argument, however, is the fact that automation is best deployed from and
managed within a GBS environment. GBS units are designed to impose discipline
in operations, measure and manage internal performance, and implement standard
processes to ensure that they can successfully deliver on service requests.
Anticipating this
opportunity, some companies’ GBS units have started to invest in strengthening
their digital capabilities. The GBS unit at one technology-services company,
for instance, has built and manages a cognitive bot that lets business users
enter free-text queries and create financial reports on demand. The bot uses
natural-language processing to assess a user’s query, pushes it to the
business-intelligence system to access the appropriate data, and delivers the
report to the user by email. Each step happens seamlessly, in real time. Under
a traditional GBS model, the same query would take 24 hours to process and be
costly to fulfill.
The geopolitical landscape
Recent changes in the
geopolitical environment might affect the operating model of the typical GBS
organization. For instance, the United States is seeking stricter visa norms,
which could affect the mobility of workers from outside the country.
Legislative and regulatory changes in other countries have raised uncertainty
among global businesses, prompting them to delay their pursuit of large-scale,
multiyear GBS transformation programs. Instead, these businesses may prioritize
digitization and automation projects within the business units themselves. In
this way, they could streamline operations while avoiding potential issues with
labor mobility. Moreover, companies might move operations closer to home
markets rather than engage far-flung service groups—a potentially costly
proposition for those companies whose GBS units make heavy use of low-cost
labor locations.
Service provision and governance
Many GBS units still
use a service-factory approach that shifts high-volume, repetitive tasks to GBS
teams in lower-cost locations. This old-school method can thwart innovation if
teams use particular methods for providing services, charging services back to
the business, and measuring end-user satisfaction simply because they have
always done so. Without realizing it, GBS units can find themselves failing to
meet stakeholders’ expectations: day-to-day tasks might get done, but the
overall end user experience might end up being less than satisfactory.
GBS leaders will need
to emphasize quick customer service, as most digital players now do. They will
need to explore alternatives to the factory approach, such as deploying
skill-driven centers of excellence to provide services with greater speed. GBS
teams could be organized according to area of expertise rather than location or
function. Under this approach, talent profiles would need to change; skills
such as design thinking and advanced analytics would become critical, and GBS
units would need to be sited where such pools of talent exist, not necessarily
in the lowest-cost labor locations. A good example of this method comes from a
financial-services company that is using its GBS organization in Bangalore as
an incubator for digital capabilities. More than 500 employees with a range of
digital skill sets are co-located in Bangalore. From that outpost, they closely
coordinate with the company’s other digital hubs in Europe and North America to
incubate and pilot automation projects.
Sourcing
The question of whether
to keep certain GBS tasks in house versus outsourcing them to an external
service provider has typically been answered based on whether the tasks in
question are core to the business or not. Noncore tasks traditionally would be
given to external service providers, with modified expectations about
turnaround times and capabilities. However, the provider landscape is changing.
Companies now have a wider range of capabilities and commercial arrangements to
choose from. Within the finance function, for instance, third-party providers
go beyond helping process invoices by helping with financial-budgeting and
financial-reporting activities (traditional in-house tasks). Additionally,
third-party providers are adopting more aggressive commercial strategies
designed to own outcomes rather than simply provide resources. Thus, companies
are being forced to rethink their sourcing strategies and the impact of
sourcing on their GBS programs.
Addressing the disruptions
To weather these
disruptions, leaders of GBS organizations need to look beyond traditional
operating models and ways of working. They must focus not only on the usual
internal process metrics but also on users’ needs and the world beyond GBS
walls. Specifically, we believe they need to follow five core principles to
build successful service-delivery networks.
Reimagine the scope and culture of GBS units
In the face of the
digitization and geopolitical changes, GBS leaders will need to be clear about
how their teams can continue to add value to the business. They must not only
help accelerate the digitization journey for the parent organization but also
identify the unique capabilities they can offer in this quest—capabilities that
require deep judgment and expertise and cannot be easily automated. A new
definition of scope might be necessary. The GBS unit at a European bank, for
example, set out to transform more than 100 customer journeys in 18 months. The
unit held deep expertise about the product domains and technologies required to
support the various elements of the standard customer experience, such as
account creation, online payments, and trade settlements. Because of this
expertise, the GBS unit could collaborate directly with the product teams to
explore digital initiatives that would simplify processes. The result was a
significant increase in customer-satisfaction scores as well as increased
productivity.
To achieve a new,
broader set of objectives, GBS units might also need to alter their service
cultures by pivoting from a long-held back-office orientation to a customer
orientation. To do this, GBS and business-unit leaders must commit to change.
That commitment means assertively communicating new objectives for GBS and
aggressively investing in talent, whether hiring for new skill sets or
developing existing capabilities. The GBS unit at a consumer-goods company
successfully managed these hurdles. For a long time, its focus had been on
managing internal service-level agreements with the business units. The metric
for success of the GBS team in the finance function, for instance, had been the
timeliness and accuracy of receivable processing. But this metric often had no
material impact on the business. A more important figure would be the number
and value of receivables outstanding with customers. Armed with this feedback,
the GBS unit transformed the accounts-receivable process across all business
units, looking externally and incorporating business outcomes. It hired finance
specialists and analytics experts to derive more insights, such as outstanding value
per customer and propensity to delay payments, from customer data. The team
rolled out changes over a six-month period, and the result was improved
recoveries and more efficient use of working capital.
Incubate the company’s digital capabilities
and talent
GBS units should take
the lead on developing digital capabilities (such as design thinking and agile
processes) and talent for the company. Leaders and managers within GBS units
own or interact daily with a range of the company’s products, processes, and
supporting technologies. They handle much of the core data that business
executives need to make critical business decisions, and they constantly
encounter much of the company’s workforce. Therefore, these personnel are in a
unique position to help the company experiment with new capabilities,
facilitate the spread of best practices, and accelerate digital
transformations. The GBS organization at a European bank, for instance, serves
as the test bed for digital initiatives that are then rolled out more broadly
across the company. It has launched and managed several pilot projects,
including building a data-analytics program to help prevent fraud and designing
automated self-service features to improve customers’ transactions with the
bank. Senior stakeholders in the bank tacitly sponsor this incubator approach.
Of course, incubating
digital capabilities for their companies will require GBS units to find or
develop employees with next-generation skills—such as advanced-analytics
expertise or user-experience design. GBS units can invest in training programs
that bring existing employees up to speed on emerging tools and approaches and,
hopefully, incentivize people—in particular, middle managers—to stay with the
company longer. Our research indicates that the capability and stability of a
GBS unit’s middle managers strongly correlate to customer satisfaction.1That is why the GBS
unit at a global financial-services company is offering its middle managers
training on two tracks: a deeper dive into functional and product-development
expertise and hands-on instruction in digital skills. Both are critical for
creating value in a changing business environment.
Manage disparate GBS units as a network
across the organization
Given geopolitical limitations—such
as where teams can be sited and where talent comes from—and changes in sourcing
and service provision, GBS units must actively break down functional and
operational silos to coordinate service requests successfully across multiple
global sites and with third-party service providers. The GBS unit at one
consumer-goods company, for instance, received responsibility for coordinating
the demand and supply for the organization’s IT projects across all locations,
an assignment that included working with external service providers. This group
now handles resource allocation for the range of IT projects that various
business units are pursuing and monitors the performance of each project. The
task means frequently communicating with multiple stakeholders—business heads,
IT leaders, and GBS units in other parts of the company. By integrating GBS
units from across the organization, senior leaders have more visibility into
the skill pool and the company can complete IT projects faster. Of course,
shifting to this approach requires clear definition of roles and
responsibilities as well as rigorous coordination of processes across sites and
business units.
Build strong relationships with external
providers to augment GBS units’ capabilities
Networks and ecosystems
are driving today’s digital initiatives. To provide comprehensive support
services, GBS units cannot rely solely on in-house expertise. They must also
reach out to specialists outside the organization. Indeed, strong relationships
with ecosystem partners are no longer just nice to have but a requirement. For
instance, the GBS team at a financial-services company regularly hosts a forum
for technology start-ups so it can solicit new ideas for transforming
operations. The team has collaborated with these start-ups to pilot innovative
technologies, such as using the machine-learning-based tool from one start-up
to analyze customer feedback and understand root causes of customer
dissatisfaction.
Pursue a three-in-one organization for GBS
units
The disruptions we have
outlined will inevitably compel GBS units to update their operating models. But
which model is the right one: traditional, transformative, or disruptive? In
fact, some GBS units might need a combination of all three to get things done.
We have seen GBS organizations use a traditional model to deliver
business-as-usual services; a transformative model to implement change
programs, such as improvements to the customer experience; and a disruptive
model to encourage out-of-the-box thinking and foster an entrepreneurial
culture. The GBS unit at one retail company has convened a few highly skilled,
cross-functional teams with digital expertise to focus solely on change
initiatives. These teams are ring-fenced from the rest of the GBS unit and are
encouraged to experiment—with new forms of customer on-boarding, for instance,
or data-driven methods for improving employee retention.
GBS units are facing
strong headwinds from digital disruption, a changing geopolitical landscape,
and a new emphasis on different sourcing strategies and methods for providing
services. To thrive in this environment, GBS leaders and their teams will need
to shift their focus outward, toward the value they can provide by ensuring
that end-customers’ requirements are fulfilled. They must partner more closely
with business-unit leaders and ecosystem partners. Those that do so will be
well positioned to improve customer transactions and work more efficiently.
By Puneet Chandok, Hiren Chheda, and Martin Rosendahl
https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/detailing-the-new-landscape-for-global-business-services?cid=other-eml-alt-mip-mck-oth-1802&hlkid=22fd4b534eed43a3a0b4c822afce9fd3&hctky=1627601&hdpid=34dd2a8c-d3a1-4ce6-8f1f-bacfd091372a
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