Part 1: Global Business Services: Fleeting Fad or Lasting Trend?

Bob Cecil, Principal, Shared Services and Outsourcing Advisory, KPMG LLP

Put on your skinny jeans and size up your GBS’s sustainability

Major corporations and public sector organizations alike have been establishing integrated multifunctional, global business services organizations (GBS). While GBSs are more mature than the single-functional shared services, not everyone can utilize them as well as others. Many GBS models have been true success stories, but we have also been curious to see a few companies revert back to the more conventional, functional shared service models. 

A simple reason may be one of definition. There is an active debate within the shared services community to adopt the GBS moniker instead of the shared services sobriquet. However, we believe there are important differences—much like all BMWs are cars, but not all cars are BMWs. It is an idea worth considering, but it does not come close to describing the real differences between a functional shared service and a highly integrated, global, commercialized service that makes up a true a GBS. So for purposes of this discussion, let us not debate terms, but understand the fundamental differences.

Taking a step back

We have identified more than 40 large global companies who have adopted a GBS model, and we are currently working with a number of other companies that are exploring or adopting the model to one extent or another. However, we have also seen a recent case where one of our clients disassembled their GBS due to difficulties associated with cross-functional governance. Admittedly, this client has undergone some significant issues with a very large acquisition, prompting a complete overhaul in structure, leadership, and technology platforms. With these major shifts, perhaps GBS is cyclical. Or is it?

Cyclical and/or sustainable?

The end-game value proposition of GBS is compelling. There are a number of GBS exemplars such as P&G, HP, and Dow, who by all objective measures have established the success of a GBS model, noting enviable improvements: 

  • Over 30 percent cost savings, often in the hundreds of millions of cumulative dollars for each company
  • Dramatic service level improvement in the range of 98 percent of “perfect”
  • Cutting in half the time to complete a merger integration
  • Dramatic increases in both employee and customer satisfaction scores

However, we understand how easy it is for companies who have adopted GBS to become sidetracked or tripped up along the journey, falling off the improvement path. 

Beyond an organizational strategy

Upon hearing of the many success stories, often organizations begin the GBS journey with great expectations. A natural starting point is to gain administrative control over the GBS activities by aligning them under a common leader, thereby removing them from individual functional shared services organizations and/or embedded activities in the business units. Then they stop.

Unfortunately, by stopping there, they have typically created an organization that is large, clumsy, expensive, and slow. 

Join us next time for a discussion on how to go beyond initial organizational issues to gain the opportunities inherent in a GBS.

For more on Global Business Services visit the KPMG Shared Services and Outsourcing Institute.

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