Shared, Services, Gamble, Procter, Business

Enterprising services: the case for automated shared services

01 Sep 2003 | (Interview)

Peter Adye is Vice President, Europe Global Business Services, of Procter and Gamble. Peter joined Procter and Gamble in 1969. He has held a number of positions of increasing responsibility in the Manufacturing and Product Supply organizations across a number of Procter and Gamble’s business sectors in both Cincinnati and Memphis.

In Cincinnati he was Vice President, Product Supply, Laundry and Cleaning Products, Worldwide. Today, Peter has responsibility for the design and establishment of the European Global Business Services Organization, based in Brussels, Belgium. This is part of Procter and Gamble’s overall “Organization 2005” restructuring, with similar efforts taking place simultaneously in North America, Latin America, and Asia. The scope of the Global Business Services organization includes Workplace Services (Technology Infrastructure and Hardware, Facilities Management), Employee Services (Compensation & Benefits, Employee Data base, Travel Services, Relocation), Accounting and Financial Reporting, Customer Logistics and Financial Services (Order Management, Customer Financial Management, Outbound Logistics), Business Intelligence Services, Purchasing Services, and IT Business Solutions Services. Approximately 3500 people are involved in this work throughout the EMEA region. Peter Adye is Co-Chairman of the European Shared Services Council as well as Board member of the Brussels Focus Career Services program.

sharedxpertise.org: What has the Procter and Gamble experience in Belgium taught you about shared services in an increasingly virtual business environment where the location of a shared services centre may seem less important than the technology?



Peter Adye: I don’t think we’re in a virtual business environment yet. The key question is how quickly companies will be able to leverage the new technology. To some extent that depends on the practices of different European countries, their tax and legal frameworks and how comfortable people are in using new technology. The rate of growth in domestic and corporate use of the internet is also a factor. The whole concept of a fully automated “lights out solution” is quite a long way off.



Companies really do need an integrated Enterprise Resource Planning (ERP) system and a standardized approach to maximize the benefits of shared services. Certainly from our experience, we’ve found that it’s much easier to establish and maintain standard approaches in a physical shared services centre environment. Without the physical consolidation, different local practices develop, and you become non-standard very quickly - even if you started out with common systems. In addition, there are still significant cost differentials in Western Europe, and more importantly, across the globe. This favours consolidation to a physical centre.



I think that as long as a significant number of people are required in the operations there are going to be major savings to be achieved by consolidating operations to countries with low wage and other costs (such as telecommunications). I think that that’s going to continue to be an important factor for at least nother five years.



sharedxpertise.org: What’s the Procter and Gamble experience and perspective on locating shared services centres with a view to radically redefining mindsets and service levels?



Peter Adye: There’s no doubt that it’s much easier to establish a new culture in a “greenfield” site. This has been proven numerous times, initially in our manufacturing environment and now again in our shared services environment. It’s extremely difficult to establish a customer service mindset in an organization that has historically been populated with central staff. Most of these people don’t know who the customers are, let alone know how to serve them.

With a new site and a predominantly new organization you can create the right culture from day one. We’ve got experience now with a brand-new centre in Costa Rica that has been staffed with new people - and one in Newcastle, where we’ve moved some people about six to eight miles from their old location to the new one, and also moved in a lot of new people. Even in that environment we’ve found that it’s much easier to convert the existing employees to the new culture than it would have been if we’d stayed in the old location. If you’re in shared services your job is service and you can’t separate the job from the culture. If you don’t have the service mindset then you can’t do the job properly.

“We’ve found that it’s much easier to convert existing employees to a new culture by moving to a new location, rather than trying to do this while staying the old location. If you’re in shared services your job is service and you can’t separate the job from the culture. If you don’t have the service mindset then you can’t do the job properly.”

It’s important to set the right culture, but is it an overriding consideration? I don’t think so - because you may not be able to afford a “greenfield” location and there may be other issues to take into account - such as expertise embodied in the existing organization that you can’t afford to lose. If, from a total project point of view, you can’t afford to move to a “greenfield” site then you need to allow for higher operating costs because you’re going to need to devote a lot more time and attention to changing the existing culture of the organization.



The centre in Costa Rica was an interesting location for Procter and Gamble because it’s a low wage cost area and in the same time zone as the bulk of the Americas. The country is stable and has a good telecommunications infrastructure. They also have fairly good English language skills because the government decided to abandon the military about 20 years ago and plough their financial resources into education. It was an attractive site as their native language is Spanish, enabling them to support the Latin American countries. And, with the predominance of English skills, they can support North America as well.



sharedxpertise.org: What motivated Procter and Gamble in its choice of a location and how would you say locations in Benelux compare with other European locations?



Peter Adye: We were faced with a situation where we needed to accommodate a wide range of services, from accounting and financial reporting to employee services, workplace services and customer order management logistics. These have very different requirements for language skills and for the degree of centralization.



If you take accounting and financial reporting, they have relatively little need for language skills because they interface with Procter and Gamble finance people in the various European, Middle Eastern and African (EMEA) countries where the official business language is English. Customer order management, on the other hand, interfaces with our retail trade customers in every country, where native language skills are essential.



Employee services need to be able to interface with all employees, many of whom can’t speak English, but they tend to be more tolerant and to accommodate fluent, rather than native, language skills. Most of our workplace service operations have to be carried out at the physical sites they serve and consolidation is not an option for that part of our operation.



So when we looked at the sites for our centres a key consideration was availability of language skills. This enabled us to go to Newcastle for our accounting, financial reporting and employee services, where there’s a reasonable supply of fluent language speakers, fitting our needs for these services. Newcastle also has the additional advantage of being a relatively low-cost wage environment as well as having good incentives for establishing an operation like shared services.



When you look at customer order management, where you’ve got an interface with the retail trade and you need to recruit and retain a high percentage of native language speakers, this really restricts you to a couple of high-cost areas such as Brussels and London. We chose Brussels because it was less expensive. We obviously considered all the other usual things such as telecommunications infrastructure and how well developed the area was in shared services and call-centre operations. We excluded some of the hot spots that we considered were already overheated or in danger of becoming overheated, like Dublin and some of the cities in Holland like Rotterdam and Amsterdam. These areas are fast becoming saturated, companies are finding it very difficult to get staff and costs are increasing rather quickly.



sharedxpertise.org: What advice can you give companies now, seeking locations in a very competitive market?



Peter Adye: If you pick a location in which there is little competition and it’s a good choice, others will probably follow and the competition will increase. You have to be prepared for high turnover and have the training and other systems in place before it becomes a major issue.

I know that a number of companies established in Rotterdam in the early days enjoyed a “honeymoon” period of four or five years when they were (decreasingly) the only game in town, but still the predominant player. When the labour market heated up they suddenly encountered very high turnover and weren’t ready to deal with it.

"If you pick a location in which there is little competition and it’s a good choice, others will probably follow and the competition will increase. You have to be prepared for high turnover and have the training and other systems in place before it becomes a major issue”.

The other thing to think about is not to over-invest in bricks and mortar as the global scene and technology is changing so quickly. The right solution today is probably going to be outmoded in three to five years. When setting up global shared services you have to look ahead at the possibility of

(a) operating fewer centres globally,

(b) becoming more virtual, and

(c) considering the possibility that you’ll outsource some of your operations as the whole business process outsourcing (BPO) industry becomes more developed.

That may well have an impact on how much real estate you need to occupy, and could in fact encourage some organizations to go for outsourcing rather than doing it themselves. In this case, location issues become the BPO company’s problem. Before outsourcing, you should consider the conventional wisdom that a company is likely to get the best savings out of a shared services operation if they take the initial steps themselves, get the benefits themselves of the consolidation, standardization and streamlining - and then outsource. There are competing dynamics and it’s a difficult area in which to predict how quickly these trends will develop.

“The other thing to think about is not to over-invest in bricks and mortar as the global scene and technology is changing so quickly. The right solution today is probably going to be outmoded in three to five years”.

sharedxpertise.org: To what extent do you believe that shared services locations can be globalized?



Peter Adye: I think there are some services that lend themselves more than others to being globalized. General Electric’s establishment of a major operation in India for a lot of its accounting processes is the sort of situation that will be likely to be replicated by other companies. On the other hand, think about operating a logistics and order management operation and interfacing with trade customers. Can you find one place in the world that you can run seven days a week, 24 hours a day, and staff it with all of the languages that you need in every part of the globe? I think that’s a bit of a stretch!

I think that that same thought applies to HR services. You’re likely to need a centre within similar time zones and almost certainly the choice is going to be driven by the sheer availability of the language skills you need to employ. So I think it’s highly dependent on the nature of the services that

you’re offering.



If I compare other organizations in Europe to Procter and Gamble’s experience in the US, then we’re certainly talking about different dynamics. You can globalize solutions to a point, but you really can’t afford to have a mindset where you think, “if it works in the US it will work everywhere else”. Europeanorganizations need adequate representation in global design teams, rather than rolling out a US-derived solution”.

Procter and Gamble is already ahead of the game to some extent in keeping pace with change in shared services developments. I know of no other company that has expanded globally with such a wide range of services at the same time. We’ve got shared service centres in Costa Rica for the Americas, in Manila and Singapore for Asia, in Newcastle for Europe, Middle East and Africa, with the establishment of the Brussels centre dependent on the rate of development of new technology.

“You can globalize solutions to a point, but you really can’t afford to have a mindset where you think, ‘if it works in the US it will work everywhere else’. European organizations need adequate representation in global design teams, rather than rolling out a US-derived solution”.

We’re already looking at which services could be candidates for global service provision, rather than being handled by each region, and which of our other services could benefit from alternate sourcing approaches, including moving some of our IT work to India for example. Procter and Gamble will, based on the strategic fit with our overall direction and ability to be competitive, constantly be benchmarking and making choices between outsourcing and continuing to provide services ourselves. In addition we’ll of course be constantly looking for technology to help make our service provision as cost-effective as possible, which will enable us to move our focus further up the value chain for our customers.



sharedxpertise.org: Do you have any final thoughts on start-up “must do’s” for shared services centres, irrespective of the location challenges?



Peter Adye: Getting total commitment from the top of the company is essential. Getting support to minimize the inevitable turf battles when you start up and decide what’s going to be part of the scope of shared services is extremely important. Top management need to make tough decisions when it comes to setting up a centre so that over-fragmentation of functions is avoided. It’s a question of how committed the senior management is to the concept and how willing they are to really take a tough stand when the current organization puts up a fight to keep control of its own destiny.



Finally, it’s extremely important for the new shared services organization to develop a passion for meeting the needs of their customers. Even if the initial services offered are less than ideal, the manner in which they’re delivered can make or break the organization.

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