Being Future Relevant – Finance Professionals in Shared Services
“What engineers did to manufacturing, finance professionals have done to business services”, said one of the pioneers in the shared services industry.
The primary reason that the finance function has been given an almost pinnacle position amongst the business services is that it has been, and has remained, the most preferred function to experiment and innovate, especially in remote serviceability. American Express pioneered offshoring in mid 90s by transitioning its global finance & accounting processes. The transition proved to be a huge success. The company then expanded their ‘success story’ to many other functions. Thus Finance, in many ways, opened a ‘treasure chest’ of offshoring and created history for Shared Services industry in India and the globe. This new form of servicing also got known as Business Services.
Over the past years, the evolution of consolidated business services has seen the maximum flow of F&A and related processes into centres of excellence and expertise. Most organisations begin their business services transformation journey with F&A processes, which are carved off into globally consolidated centres – as self-owned captive units or outsourced to third party, across both domestic and overseas geographies. In 2020, the value of offshored business services is expected to surpass US$ 225 Bn of annual revenue. As it stands today, more than 80% companies which have embarked upon business services journey in the world have finance shared services, and it constitutes 15% of the total business services industry globally, becoming the ‘seed’ for expanding business services to other functions.
Beyond companies such as American Express and GE, some of the most marquee brands in the world began consolidating their business services, with almost all of them starting with finance, and expanding to other functions. India became the global hub for offshoring and continues to be the leading destination, Many other countries like Philippines, Malaysia, China etc., got added as preferred locations later. Over the last few years, countries in Latin America, Eastern Europe and Africa have also come up as possible destinations, but the clear choices are all Asian.
Processes of all enterprise functions, including finance, can be graded across two dimensions – functional depth and service impact. Functional depth grading represents the Process Chain Pyramid, while service impact represents the Service Chain Rings.
In Finance, the Process Chain Pyramid typically has four levels: Operational, Accounting, Reporting and Analytics, as described in the chart below:
At the base of the pyramid are the core operational processes, e.g. AP, AR, recs etc. Accounting process come next, with revenue recognition, opex documentation, periodic books close, etc. The next stage is reporting and financial management. This part also includes regulatory reporting and compliance. On the top of the pyramid is analytics, where decision support processes such as FP&A sit. This approach to the pinnacle is referred to as ‘BP-to-BP – Business Process to Business Performance’.
The Service Chain Rings has three concentric zones, as complexity and impact move outwards, progressively delivering increased value. At the centre of the rings is the core activity of Transactional Processing, followed by a broader ring of Functional Excellence and finally Value-Added Services, as described in the chart below:
What differentiates these three concentric zones of services is the metrics that are utilised to measure the efficiency and effectiveness of the service. Transactional services are measured by accuracy, timeliness and completeness; Functional Excellence is measured by control, compliance and risk management; and Value-Added Services is measured by the impact delivered on revenue assurance, cost management, balance sheet and business. As the service chain scales up, the outcome and outlook changes from process and service metrics to business metrics and key performance indicators. This approach is referred to as ‘Transaction to Transformation’.
Transfer of processes from host locations to offshoring or consolidation destination locations is a transformation process in itself. For finance professionals, this brings out the opportunity to look at processes afresh and modify them to suit the outcome that is in the best interest of the organisation as a whole. Processes get studied both in their process chain as well as service chain. As service centres mature, a true connect gets established between the finance functional leaders and the business leaders. For that to happen, the functional deliverables have to necessarily be the business impacting metrics.
For the finance professional, this intensifies the opportunity to look at the function that was once considered independent and discrete as inter-connected, to form one composite and seamless picture. The finance shared service centres act as sandboxes to modify broken processes and to harmonise processes across the enterprise. In a situation like this, the function come to be seen as one composite picture with Procure-to-Pay (P2P), Order-to-Cash (O2C), and Record-to-Report (R2R) processes interfacing together with other core parts of the business, giving enormous efficiencies and gains to the corporate, without compromising on their distinct identity or requirements.
Finance function’s ability to toggle quickly between cause and effect makes it one of the most sought after functions to move into a shared service environment. With growth in shared services, several reasons have enabled finance professionals to prefer to manage, lead and transform the function from within. While on the one hand a shared service environment stands to gain the most by enabling finance processes within its services; on the other, the finance function too gains enormously by being in a professionally run shared service environment.
| Benefits to a shared service centre by taking on finance within its realm: | |
|---|---|
| 1. | It is a highly numeric function, and can easily embrace digitisation. |
| 2. | It brings out operational insights and forecasting processes for the business. |
| 3. | The processes are managed as a service, measured from an efficiency and productivity perspective. |
| 4. | The more complex roles such as budgeting, management reporting and treasury makes it a multi-functional operation, focussed on delivering services which directly connect with the business - including becoming custodians of enterprise data and best fit to spot business opportunities. |
| 5. | Can have a direct impact on the business by improving performance and adding value for customers. |
| 6. | The Finance professional is positioned to take a leadership role in a company’s change enablement process, as they develop greater commercial acumen by design and can communicate the value of the change to the enterprise as a whole, than any other area. |
| 7. | Strategic activities such as advances in globalisation, mergers/ acquisitions/ sell-offs and creating new business areas lean heavily on inputs from the F&A world. As such, cutting edge finance applications and tools deployed on company and market data are central in converting information into intelligence. |
| Benefits to finance by being in a shared service environment: | |
|---|---|
| 1. | It eliminates inconsistency from one business unit to another – by standardising, consolidating, and automating processes. |
| 2. | It frees up the organization’s resources, some of them very expensive. |
| 3. | A professionally run best-in-class shared services organisation operates with a gross saving of upto 40% of total finance cost, mostly by eliminating non-value added activities. |
| 4. | It provides an opportunity to improve/re-design back office process and reduce dependencies on expensive resources. |
| 5. | It can help in eliminating various instances of existing technologies, such as ERP etc. and concentrate on one, corporate-wide application. This helps in eliminating waste, control loss, and risk of data mismatch. |
| 6. | Can rapidly implement new-age corporate wide technology integrating initiatives, such as RPA, cognitive & intelligence tools, and predictive modelling. |
| 7. | A sense of urgency in decision-making and a structure for agility can be promoted through efficiency and innovativeness. |
| 8. | Financial compliance can be better managed from a centralised service centre. |
| 9. | Can take advantage of favourable tax regimes by better tax management |
Professionally run business services centres tend to quickly transform into centres of excellence and centres of expertise.
A centre of excellence is when the processes carried out are demonstrating the best possible outputs and the results are comparable to global benchmarks. These centres become the hub of all activities pertaining to the processes and the teams are recognised as functional experts. This can also extend to advanced activities such as transiting, change management, six-sigma, robotics, machine learning and AI.
A centre of expertise is created when the unit becomes proficient in translating functional expertise into useable business knowledge. Such centres create integrated and value added intelligence for the business and has transcended from being a service provider to becoming an integral part of the business itself.
While most organisations have successfully transformed their composite finance functions, this is not universally true. For one, transformation is a continuous process that begins with the first step of consolidation of processes into a shared services centre. After the initial transitions are done, series of business and process transformations continue. Secondly, transformation is a highly complex activity akin to crystal glass gazing. Each gazer can interpret the inferences differently. It is for these reasons that professionals who have been part of their business services operations have faced many barriers in developing their transformational orientation. All of these barriers are mind-set and behavioural issues. Some of these issues are more relevant than others and have been documented below.
Silo view
Most finance professionals tend to focus solely on the functional aspects of finance. Many even view themselves merely as people who are required to perform, control, audit or review accounting and finance related activities. This approach creates an environment of exclusion, believing that the finance is a stand-alone service function. Similarly, there are occasions when some F&A shared services leaders focus only on the business process without fulfilling the requirements from a finance functional perspective. This approach creates a situation where ‘processing’ is complete, say, payment made, but ‘posting’ to the accounting code could be incorrect, leading to reconciliation issues. This limited view seriously affects the mind-set of the professional and gradually becomes a barrier. They fail to look at the larger canvas of the organisation, thereby affecting their own ability to enable transformation.
Creating a transformation focus requires the finance professional to move from ‘silo view to dual focus’, especially across the three critical dimensions mentioned below. These have been identified based on large scale observations of finance professionals in the shared services environment:
- Business Process vs. Function - where the finance leader chooses the function over the business process, or vice versa, as in the above cited example;
- Process vs. Technology – where the leader pursues what the process can deliver without looking at ways and means to optimise the use of technology, or vice versa; and
- Customer vs. Team - where leaders prefer to focus on their customer to the exclusion of the team or vice versa.
Dual focus here means simultaneous focus on both aspects instead of only one. No single factor can take precedence over the other; they need to be taken together.
Narrow Activity Focus
This is somewhat of an extension of the silo view barrier, excepting that this is at the process level. Often people get fixated on their ‘own’ part in the process chain – for example, processing an invoice or doing a three-way match, or passing the payment in an AP process. People may set their mind totally on their piece of the process, which could give only a narrow view of the process. They may not notice other glaring issues such as the invoice may already be beyond due credit period. They may just continue to perform their roles of processing for payment while simply ignoring everything else. Similarly people who operate a particular module of an ERP system, only know the system to the extent they need to perform their process. At times they may not even understand their own module completely, let alone understanding the inter-linkages between various modules.
This mind-set in itself becomes a barrier to transformation since it ignores the ‘end to end’ (E2E) or ‘the big picture’. A successful finance professional needs to go beyond the narrow activity focus to the E2E process to enable transformation. In simple terms, E2E by design goes beyond the piece of any process to provide a holistic view of the full process from where it is initiated to what is the outcome. E2E can also be described as the upstream and downstream of the process. From a systems perspective, E2E will mean connecting the various modules and their inter-linkages at least to the extent it concerns their process, and also, connects with add-on tools.
Getting lost in Transactions
Business services centres, whether finance specific or multi-functional, perform a large volume of transactions – number of vendor invoices, appointment letters, purchase requisitions, contracts, remittances etc. While people must focus on transactions, if they get lost in volumes, it becomes a barrier for transformation.
Successful finance professionals go beyond volumes to metrics orientation that enables an analytical view for transactions, like productivity, weightage for complex transactions, value in monetary terms, etc. and accordingly assign criticality to the process in the context of business. In fact, this metrics orientation gives effect to the phrase ‘Transaction leads to Transformation’. Also, this enables the Service Chain concept and builds an analytical mind-set to move from transactional processing to value-added services, thereby connecting the process, service and the business.
Limiting Beliefs or Past Glory
This is a behavioural barrier, true for all people and situations, both from personal and professional perspectives. From a professional view point, people sometimes have their own psychological perceptions about what they can or cannot do, are good at or not so good at, what roles they can perform or not, and so on.
On the other hand, people continue to live in past glory i.e. accomplishments of the past without becoming future relevant. This limiting belief or living in past glory becomes serious barriers to professionals and deny them the opportunity not only to transform a process or a capability, but also transforming themselves.
People can break free from such limiting beliefs or past glory. Successful professionals adopt an interesting technique to overcome this challenge by going beyond the psychological barrier to develop a ‘learnability mind-set’.
This technique has three elements:
- develop curiosity to understand new roles/opportunities and commit to apply oneself to those new opportunities
- find areas to learn new skills, relearn well known skills that have been set aside, and unlearn practices to move away from an ad hoc approach to a structured way of doing things, and finally,
- go beyond technical skills to hone leadership skills that can enable them to assume new roles – those which will help them lead teams, or will challenge one’s capability to up the performance or abilities to deliver value.
To be fair, this technique of learnability is easier said than done. However, if a committed professional takes these three elements together as ‘future relevant skills’, it will work wonders to enable transformation of self and the organisation.
Finance professionals who integrate well with the shared services unit tend to generate a vast wealth of business knowledge and understanding. They transcend beyond finance to gain inherent commercial acumen. Many finance leaders have moved way beyond their functional call to garner a seat at the table where strategic business decisions are taken. No more do these leaders merely represent a business service, but the organisation in totality. There is no doubt that CFOs who are well grounded in business services and business strategy become the front-runners to the CEO positions.
For a dynamic finance leader, it may well be to his advantage to seek out a career in a dedicated shared service unit. Such a unit is best positioned to catapult the manager into the true workings of the business. As a specific-use unit, it brings out the service front and centre, as opposed to it remaining a ‘back office’.
An important aspect created by the formation of an independent service unit is that the ‘business’ is considered as a ‘customer’ to the service centre. The finance transformation project transforms more than just processes – it transforms the complete service delivery equation. The service manager cannot hide behind large corporate firewalls of process and systems. The service manager is now responsible for output and outcomes. It is for this reason that s/he will have to get closer to the ‘customer’ and understand the requirements deeply.
Several progressive organisations have made it a point to include finance managers as key members of their front-end facing activities. Routinely finance managers meet the company’s customers to understand the core business subtleties.
A curious, open-minded finance professional can perform several roles across a wide range of career opportunities in a shared business services operations – be it a finance or multi-functional centre.
There are possibly five broad role categories:
This wide variety of roles really provides a springboard for the professional to develop and grow in the world of shared business services.
Over the last 30 years or so, finance has dominated the shared service space amongst the various business services – and is likely to continue on this dominance. The look and feel of such service centres have operated under various models – captives, dedicated captives, dedicated JVs, outsourced, BOT, and other assortments. Such models have also undergone various transformations, quickly moving from one form to another. In all of these movements, the common factor has remained the strategic importance of the unit – usually an important input for the company’s competitive advantage and a business partner to be proud of.
Similar to many service functions, finance too is usually segregated into business finance and corporate finance. The business finance unit, also referred to as business finance partners, carry out the functions with specific dedication to their specific business division, while the corporate finance performs the overall functional role for the organisation – covering all enterprise wide roles. While setting up business services centres, processes are identified for consolidation and remote working with the use of technology and those without having a need for proximity.
Due to the complexity of the businesses in the modern world, business services centres establish a continuous linkage between the operations of business finance and that of corporate finance. Business services centres work in tandem with business and corporate finance, as an extension of the business and thereby, be the strategic business partners, with a common corporate goal in mind. A service centre shared between the two ‘finances’ does ensure the existence of interdependency and understanding.
While finance professionals hone multiple skills relating to E2E focus, innovation, new-age technologies and global influencing skills, there are five key traits that can make them true strategic business partners. These traits are denoted as TRACK, elaborated in below:
In the current world of eternal, unprecedented and unpredictable change, a finance professional in the global shared business services space is well poised to scale new peaks and remain future relevant. The five ‘TRACK’ traits mentioned above can prove to be critical to ensure the three Es of service – Process Efficiency, Services Effectiveness and User Experience. Developing a sense of urgency and agility to lead change rather than just deal with change is crucial in today’s post-Covid era.
The global business services space is best suited for a finance professional who is transformation centric, is able to build a big picture perspective, leads with passion, purpose and conviction, and is not afraid to dive into details to effectively execute strategy. There is no doubt that such centres, and hence its leaders, play a strategic role in the governance of corporate objectives and result in providing distinct competitive advantage to the enterprise.
SSF’s research report of 2018, “Breaking Boundaries: The Power of Enterprise Service Management” stated that future is collectively created by what we are doing today, for tomorrow. As individuals, we could well be the recipients of the “future”, but collectively we are its creators. This universal truth is as much valid for the finance function as it is for every aspect of business – in fact, life. Though the future is not predictable in any form of certainty, predictions do get created with a reasonably high sense of probability with observation, dialogue and analysis.
In this report we have taken the concept further and made an attempt to understand the future of finance generally and its relevance to the business, especially in the context of shared services; and the influence that finance professionals can establish in shaping the strategy of the enterprise.
The report is a result of intense research into the world of finance and finance shared services by inputs from four principal sources: Primary Research (interactions with industry leaders), Secondary Research (information available in public domain or industry reports), SSF Intellectual Property (in-house publications, models, frameworks, etc.), and Practitioners’ Experience (insights, knowledge and expert opinions). Leaders from across the world have contributed immensely in validating several practical industry behaviours.
We would especially like to acknowledge that the report got triggered early this year with various insightful conversations between SSF and ACCA, the Association of Chartered Certified Accountants, on this topic. Various ACCA reports have also been used as inputs for putting together this material.
Shared Services Forum (SSF) India – A COMMUNITY ‘FOR PRACTITIONERS, BY PRACTITIONERS’
Shared Services Forum (SSF) India is a pioneering, interactive platform of Industry Practitioners, Experts and Veterans with a vision to create and disseminate knowledge for excellence in Business services, IT & Business Process Management (BPM). Incepted in 2011, SSF’s constant endeavour has been to create and enable exchange of knowledge was initially resident with a few leaders of the shared services and outsourcing industry. This is SSF’s 10th year of ideating and synthesizing ‘Best in Context’ practices for successful transformation of Business Services and has grown from strength to strength and built a strong network of thought leaders, experts, and change agents across all functions and domains .
SSF’s MISSION
- To spread awareness of Value-Delivering Strategies for effective transformation of business processes
- To establish Winning Practices that result from exchange of knowledge
- To acknowledge, award and showcase Organizational Achievements & Professional Excellence
- To build a strong Community of thought leaders, experts, practitioners and change agents
To know more about the activities at SSF and Membership, go to www.sharedservicesforum.in
