Transforming service performance Sharing services in a federated business

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1 Transforming service performance Sharing services in a federated business Industry case study: Industrial Products Business Services Business services transformation helping our clients support functions deliver

2 Industry Industrial products and business services Geography UK PwC Services Design and transition to a shared service centre for HR and Finance Benefits of using PwC Change management expertise focus on strong business case and communications to secure buy-in. Insight and experience in transforming business services. 2 Transforming service performance

3 Business background Balfour Beatty was founded in 1909 by a Scottish engineer and an English accountant who combined practical capabilities and management skills to deliver successful infrastructure projects. Now operating in 80 countries, Balfour Beatty is a leading global infrastructure business in every stage of the infrastructure lifecycle, from financing to planning and design, to construction, maintenance and support. (see When PwC was invited to present on the benefits of shared services at a Balfour Beatty Senior Management Conference, the content resonated with the audience on two levels. Managers were interested in how a UK Customer Support Centre for business services such as finance and HR could reduce cost and increase process efficiency across its twelve independent operating companies. And they were also aware that transforming internal business services would demonstrate the organisation s capability to advise its own customers, who are increasingly looking to Balfour Beatty for joined up solutions. It took Balfour Beatty just 16 months from that 50 minute PwC presentation on the Art of the Possible, to launch a Customer Support Centre in Newcastle, fitted out and staffed from scratch, with more than 300 new employees supporting half of its UK operating companies and turnover. The operating companies now enjoy higher service levels and their costs are set to fall as processes are continually refined, new technology is rolled out and the remaining operating companies adopt shared services. Was it easy? No but was it worth it? Definitely. This initiative, along with parallel technology and supply chain programmes, will deliver initial estimated savings of 30million. This initiative is now referred to internally as Platform for Growth as our senior UK management have really come to recognise the strategic, long term benefits for our profitability, our capabilities and our customers of changing the way we work. David Osborn, Shared Services Design Authority Lead Transforming service performance 3

4 A new era of service delivery If you want change, you have to sell change Many organisations with a federated structure or culture worry that shared services will be too difficult or even impossible to adopt, especially when executives talk about how specific certain processes are to individual businesses. For some activities this may be true but on closer inspection, the vast majority of transactional processes are by necessity the same and are well suited to a shared services model. Balfour Beatty s implementation of its Customer Support Centre is an example of how, if the benefits of a major change are communicated clearly and logically to the right people, rather than meeting resistance you can win support even enthusiasm from proudly autonomous business leaders. The success of this kind of programme therefore depends initially on the quality, relevance and clarity of the business case. The joint Balfour Beatty and PwC team started working on this in October We used a detailed questionnaire to collect the information we needed to build a compelling, fact-based business case for transforming the way we run business services. By taking a really structured approach we could collate the right data really efficiently and at the same time listen to stakeholders views. It meant we had confidence that if challenged, we could justify our findings, said David Osborn, Shared Services Design Authority Lead. Within two months, a draft target operating model was developed, and after extensive consultation with the business and functional leaders the business case was presented for Board consideration. Having completed a validation process, it was approved just weeks later. The journey towards shared services was now real, with a deadline for delivery. I was somewhat surprised at our ability to move so quickly on such a major undertaking. I now recognise that this was because what we presented made perfect sense to those we needed to get and keep onside. Malcolm Mullins, Director Strategic Projects There was no good reason for us to have as many different transactional processes across our 12 operating companies as we did they had just evolved over time. Malcolm Mullins, Director Strategic Projects Planning and executing the transition Once the Customer Support Centre plan was announced, Balfour Beatty was aware that they would have to work quickly to minimise the impact of the change on the organisation. A small, joint PwC and Balfour Beatty team was tasked with mapping out the exact details of how the transition would happen. To do this the team used the PwC transition assessment approach to produce a clear, practical plan, and to uncover the nuances, risks and interdependencies in the programme. Balfour Beatty chose to mainly lift and shift existing processes so that they could move quickly to establish the shared services organisation and to facilitate a more effective roll out of an already-planned Oracle implementation. They produced desktop procedures outlining how things were currently done. At this point the team also identified which roles needed to be work shadowed by the new employees who would be taking on the existing processes in the new centre. 4 Transforming service performance

5 We guaranteed to each operating company that they would see an improvement in the internal services they receive. Within the Customer Support Centre we have established metrics that track every aspect of service delivery, offering data that the operating companies did not have before, such as how long an invoice would take from receipt to payment or the error rate on payroll and timesheet processing. I believe one of the many benefits of shared services is this focus on metrics and process improvement. Malcolm Mullins, Director Strategic Projects When PwC explained the work shadowing process that new employees would shadow and learn their roles from those who were about to leave we were nervous about how this would work. Guided by PwC s advice on how to approach this, we were delighted with how smoothly the current experts signed off the newcomers competency, Malcolm Mullins, said Director of Strategic Projects. When the Customer Support Centre was ready, Balfour Beatty did not flick a switch to execute a transfer of business services to Newcastle. Instead, they chose to validate and build confidence in the programme by transferring some of the more straightforward processes for three of the operating companies first. Each of the companies was asked to verify that they were happy with each Customer Support Centre processes before it became business as usual. The transformation team also kept all relevant stakeholders informed throughout the project with: nineteen sets of company-wide communications designed to give operating companies regular project updates and reviews. This ensured that the management of each operating company could disseminate consistent information. The communications documentation also included anticipated question and answer sections based on our experience of similar projects. the creation of the Review of Shared Services Opportunities (ROSSO) operating committee including a representative from each operating company and the project sponsor during the transition the creation of a Customer Support Centre board when the project moved to implementation project governance meetings where the transformation team was challenged on project timescales and deliverables, and regular phone meetings with the FD/MD of each operating company to discuss any issues with their team s interaction with the Customer Support Centre. Getting the location right Whilst the transition team was gathering data, another small team was looking for the right location for the Customer Support Centre. With the Company s commitment to the UK, offshore locations were not considered. The team evaluated six possible UK locations and Newcastle proved an excellent choice. Not only does the city have an outstanding labour pool, the building itself offered the right flexible space, commuting links, resilience and communications access, and with the addition of intelligent building controls, satisfied the team s environmental goals and met recycling targets. The office fit was so successful that the Customer Support Centre has become a showcase site for Balfour Beatty customers. Bearing in mind the speed with which we set up the office from scratch, we are delighted with the result. It just shows what can be achieved in less than three months with strong project management and the desire to push the programme forward, said Malcolm Mullins. Balfour Beatty felt that creating the Customer Support Centre on a new site helped to create the right management structure and staff culture necessary to deliver the target operating model. Balfour Beatty was keen not to create a place where back office functions just quietly happened out of sight. The team were eager to create a new entity synonymous with excellent service and continuous performance improvement. We guaranteed to each operating company that they would see an improvement in the internal services they receive. Within the Customer Support Centre we have established metrics that track every aspect of service delivery, offering data that the operating companies did not have before, such as how long an invoice would take from receipt to payment or the error rate on payroll and timesheet processing. I believe one of the many benefits of shared services is this focus on metrics Transforming service performance 5

6 and process improvement. The scale within a shared service centre allows this to be a priority and a continual focus, rather than just being an element of an operating company FD s role. We now have a group of process professionals in one place which means that you can get very scientific about process improvement, said Malcolm Mullins. Keeping technology in line with best process not driving it Shared services initiatives rarely, if ever, take place without technology issues raising their head. Eliminating manual processes and establishing a standard approach are key to optimising shared services, and technology can help deliver these. Before embarking on the shared services programme, Balfour Beatty had started an upgrade to Oracle R12 to take advantage of specific functionality. This upgrade project ran in parallel with the shared services initiative and only on the successful implementation of the Customer Support Centre did the shared services and the technology programme come together, along with a supply chain initiative, to form an integrated change programme branded as Balfour Beatty s Platform for Growth. It was a deliberate decision at the outset not to create a joint programme. Uncoupling these elements meant that any delays to technology go-live dates would not impact the transition process and approach. We managed the change to Shared Services without specific reliance on ERP but Oracle R12 will enable us to drive further process optimisation and standardisation as we move ever closer to our target operating model, said David Osborn. Why it worked Passion and belief in what is possible No organisation finds changing the way internal business services are provided easy. But having witnessed even the most complex, diverse operations take on the challenge and reap the rewards, we are passionate about the benefits of transforming business services. Knowing what we know, we helped to anticipate and mitigate risks to this project that may have thrown it off course and maintain energy and momentum especially at those inevitable points where the going got tough. Close working relationships from conception to completion We worked with Balfour Beatty from the first hypothetical discussions in local coffee shops to delivering a fully operational Customer Support Centre. The trust built as we worked together on every element of this project meant we could challenge decision making to ensure the project consistently achieved the best results. Use of a proven project management and governance framework Balfour Beatty has excellent processes, a wide range of project management skills and an eye for detail. They were eager to adopt our proven approach to implementing shared services to deliver value in shortest, most cost effective way. Investment in the right people to manage the change Balfour Beatty recruited experienced people with a proven track record to ensure the transition team had the knowledge and credibility to make the Customer Support Centre a success. Once the transition was complete they became the service centre management team committed to the long term vision of continuous performance improvement and creation of a service culture. Willingness to refine project scope Balfour Beatty understood the importance of momentum and showing value to the business. For this reason the project team made strategic decisions to reduce some areas of the project scope rather than suffer delays and miss deadlines which may have impacted confidence in the project. The team s view was that it was better to be successful with room for future development than risk not getting the service centre up and running on time and on budget. Determination not to get hung up on technology Balfour Beatty knew that getting the right technology was an important element in establishing optimised, standard business processes. Even with this knowledge the project team did not allow technology to slow things down or drive decision making choosing to run the technology development as a parallel project. 6 Transforming service performance

7 Achieving successful business services transformation Balfour Beatty quickly grasped the scale of change required to achieve the target business benefits and cost savings. Defining the value of transforming business services enabled their team to secure the right investment in planning and resources to make the programme a success. The organisation approached this transformational programme with endless energy and high levels of stakeholder support maintained throughout the project by clearly communicating the vision behind the Customer Support Centre as well as the detailed plan of how the target operating model would be achieved. At PwC, we have worked with clients across industries and locations and of various sizes, to consider how transforming their business services can bring them both cost reductions and performance improvement improvement in the support they give, and in the wider business as a result of that support. Transformation can vary in both structure and scope. It may involve outsourcing, shared service centres, offshoring, or combinations of the three. And it may involve one business function, such as finance, or look to transform several functions bringing consistency to the operating model and technology across the organisation. Our approach is to help our clients to really understand their current situation, and identify the value and set the scope, vision and set of strategies for what they could achieve from business services transformation. We help them plan their implementation and support them as they deliver and implement the change, so it is properly and permanently bedded in to their organisation. Our aim is that our clients can deliver high quality work to their organisation, generate real efficiencies and free up time to support better business decisions. Transforming service performance 7

8 Contact Nick Atkin 44 (0) Rob Banham +44 (0) Peter Kurtz +44 (0) This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it PricewaterhouseCoopers LLP. All rights reserved. In this document, PwC refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom), which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity. Design ML GA