After slogging through six years of architectural school, I took away several lessons for life, not the least of which came from Daniel Burnham. In 1909, Burnham, one of the most notable of American architects, published “The Plan of Chicago,” which laid out a strategy for the city’s long term development. He is famous for these words, “Make no little plans. They have no magic to stir men’s blood and probably themselves will not be realized. Make big plans; aim high in hope and work, remembering that a noble, logical diagram once recorded will never die.”
What does Burnham’s quote have to do with outsourcing and shared services implementation? After variously laying the blame at the feet of recalcitrant business units or geographies, poor systems, or seemingly incompetent providers, the root cause of the failure to implement enterprise-wide change may lie in the inability of the sponsors or business owners to understand that what they ultimately get is the change they aspire to have. Without a predefined business architecture upon which to build, organizations find themselves with ad hoc operations all over the world, with no implementation or operations synergies, duplicative management, and higher cost.
Why are big globalization plans so very important? Quite simply, their scale, and only their scale, has the power to move the dial. Think about big initiatives: would GE’s operating model be where it is today if Jack Welch had not made his 70/70 declaration (70 percent outsourced; 70 percent toIndia)? Or would P&G’s services model have radically changed the delivery and cost structure of back office functions encompassing everything from facilities to finance and accounting?
Corporate change must have context to deliver the maximum stream of benefit Without a line of sight into an operating model’s end state, functions generally move offshore singly, rather than as vital component of a business architecture designed to affect cost, increase productivity and change ways of working across the enterprise. To push the architectural analogy a bit farther, the majority of organizations remodel a function or process at a time without an overarching blueprint for change, with each division making its own decisions about what goes where based on criteria that are most relevant to them, not as a component of the whole. What results is a finance shared services center in Manila, accounts payable outsourced to Prague, IT to Bangalore, analytics to Delhi, customer service operations set up in South Dakota, and human resources administration sourced in Chennai. No synergies, scale, leverage, connectivity—just proverbial closets and rooms scattered across the landscape.
Commitment is synonymous with scale. If the organization is truly committed to changing its architecture, it understands the importance of scale. If not, the planning quantum is merely an experiment which can be quickly stopped when resistance crops up, or other corporate initiatives seem more critical. Here’s a case in point: about a year ago, I spent time with the executive leadership of a multinational which has a goal to globalize its operating model. At that time, the company had offshored 1600 positions out of a global workforce of almost 100,000, and had a stated plan to set up a center of excellence to top up that number by another 1700, resulting in a mere three plus percent of staff offshore in the next few years. To sum, that’s a hobby, not a program.
Small programs do not get business line or functional leaders’ attention. Why would a business line exec, or a corporate HR vice president, sign on to big and potentially messy change and personal career risk if executive management is tepid about the imperative for action and sets forth no ambitious plan? If he or she sees a lack of commitment to outsourcing or offshoring at the top, if it is not a topic in most executive meetings or communiqués, or if there is no penalty for opting out, participating in changing the operating model through globalization is seen as purely optional.
Attrition is a natural consequence of all globalization programs Corporate leaders experienced in outsourcing and shared services know that program shrinkage is a fact of life. Whether it occurs during the first filtering of program design: as a result of a geography opting out; the sale of a division midway during scoping; a further examination of regulatory requirements making the sourcing of certain processes untenable; or avoiding irritate workers councils, scope could decline to as much as 50 percent or more of original estimates.
Attrition can also results later in the process from the deeper examination of processes and from the politics of work. Most organizations develop high level scopes based on assumptions which are subject to further due diligence, when the outsourcing provider or the internal transformation team start to evaluate volumes, handoffs and exceptions. And add the vagaries of organizational politics; scope is always affected by the give and take of stakeholders who reject new processes and delivery models, often just because they are allowed to.
If your executive management sees sourcing services as a unit-by-unit exercise, that’s not to say that benefits won’t accrue to the organization. Reduction in cost, however small, ability to tap into markets flush with talent, standardizing processes through a move offshore—all have a salutary effect on corporate operations. But without a vision and a plan to govern the investment in management time and capital, delivery centers scattered around the landscape don’t add up
I wonder what Chicago would look like today if Burnham had restricted his vision to a just a few acres near Lake Michigan? For those of you who know Chicago, there would have been no Grant Park, Museum of Science and Industry, Millenium Park, Soldiers Field, Navy Pier or Meigs field, just to name a few landmarks linked by Lake Shore Drive. Chicago might not have become the railway hub of the Midwest, or the vital heart of a metropolitan area stretching from southern Wisconsin to northeast Indiana. (And if you’ve never been to Chicago, think about Haussmann’s Paris—without his grand scheme, no Place de l’Etoile, Arc de Triomphe, Opera Garnier, Bois de Boulogne, Boulevard St Michel or the famous sewer system). Burnham’s 1909 plan still shapes the development of the city today; will we be able to say the same about corporate outsourcing and shared services initiatives some years hence?