Global Business Services Drive More Value with a C-Level Exec at the Wheel, Concludes KPMG Survey

Surprisingly few companies plan to put a single senior executive in charge to manage the change, however.

By Patrick Burnson, Executive Editor

December 01, 2014

Within the next three years, most global companies are expected to take up the massive project of centralizing their shared services and outsourcing operations within a single global business services (GBS) organization.

But surprisingly few companies plan to put a single senior executive in charge to manage the change, according to a KPMG International survey. With no one at the wheel globally, companies are unlikely to realize anywhere near the full value that GBS transformation can bring.

“Bringing GBS services into one organization helps maximize efficiency and effectiveness and drive business value,” says David Brown, KPMG’s Global Lead for its Shared Services and Outsourcing Advisory Practice. “Most GBS organizations are still organized and managed by function or geography, but the trend toward greater centralization is clear.”

Brown says that a well-managed GBS organization can drive measurable business value above and beyond cost reduction by:

• Increasing the effectiveness of services delivered
• Providing a better customer experience
• Expanding and synthesizing data analysis to support decision making
• Improving overall supply/service chain efficiency and effectiveness
• Reinforcing overall firm regulatory compliance.

In response to a survey of leading business and IT service providers and sourcing advisory professionals with KPMG International’s member firms, only a minority of respondents surveyed say globally organized and managed GBS management models are common today. However, a strong majority says such models will be common and very common in three years.

Despite this trend, functional and geographic GBS leaders report to a single global GBS executive in only a few organizations. And few companies have a global GBS executive in place now or plan to install one in the next 3 years.

“As globally managed GBS organizations grow more common, the fragmented nature of GBS operational and executive leadership and its relatively diminished stature compared to CXO level roles will continue to impede efforts to drive to high levels of GBS maturity,” says Brown. “GBS leadership is needed to set the vision for the organization and to get buy-in and alignment across the functions.”

Getting buy-in and alignment from other functional leaders can be a GBS leader’s biggest challenge. Senior executives of other functions can be reluctant to cede control over aspects of their responsibilities. They may feel threatened or believe that only they can do the job well.

Robert A. Rudzki, President of Greybeard Advisors LLC, and regular SCMR blogger, notes that companies must adopt and speak the language of the executive suite (the “financial language” of the CFO) in order to be effective in your communications.

KPMG agrees. One of the few people to occupy a C-level GBS executive role – Lee Coulter, Chief Executive Officer, Ascension Health Ministry Service Center – says that elevating GBS leadership to the management suite is crucial. “Consolidating and running GBS services in a single organization is hugely complex. Our organization delivers about 25 separate services, from procurement to HR to IT. The person in charge needs to have the clout to drive decisions across the global GBS organization and the internal clients that it serves.”

“Clients of the GBS organization need to believe it is the best alternative for meeting their service needs,” says Coulter. “And becoming provider of choice means that the GBS organization needs to create a culture distinct from the host organization. GBS needs to operate as a business within a business and provide the best customer experience possible.”

That’s why Coulter says it’s important for GBS executives to have experience running a business. “For the GBS organization to evolve beyond a backroom, cost-cutting role, it needs to be run on the same profit-oriented, customer-focused basis as any other successful service business.”

In terms of the development and spread of a single, CXO-level GBS executive role, the market is in its early stages. The role is new and relatively rare, so finding someone with the right experience and skills can be a challenge. The politics of creating such a new role are significant, and the company’s leadership may need persuading to see GBS as more than a vehicle to cut costs – but as an asset to be nurtured, grown and integrated across functions and geographies.

Organizations that overcome these challenges and move early to define a higher level and more influential role for the GBS executive stand to drive the value of their GBS organization to new heights and win long-term competitive advantage.