Centralising services: The bigger picture

Lakshman Ratnam, FCMA, CGMA, has been involved in company-changing initiatives during a career spanning more than 30 years at various multinational companies including Burns Philp, Colgate-Palmolive, Coopers and Lybrand, General Electric, and News Corp.

One of his roles was to maintain a cohesive workforce and workflow even as hundreds of accounting jobs were shifted across country borders at a large employer. The change was an attempt to get ahead of a foreboding economic cloud that eventually would stall top-line growth in many industries.

When things were still good, the company's leaders decided to make changes. "They knew, inevitably, that financial pressures would come," Ratnam said. The company was following behind some competitors in its dramatic reorganisation, but, he said, "Like all followers, we were able to learn from others' mistakes and do better."

The strategy included a move towards shared services, including accounting. More than a way to cut costs, centralisation provided a blank slate for Ratnam and other leaders, he said.

The initial challenge was to set up a functioning accounting centre — no simple feat, with operations from 20-plus countries in Europe to be centralised in a greenfield centre. "But then our objective, always, was not just to add transactional work to the centre but to make the centre a real value-adding unit," said Ratnam, who at the time was a business transformation specialist. Today, he is a consultant and a lecturer.

Here's what he and his colleagues learned from the transformation.

Setting clear expectations

First, companies should set aside plenty of time for the project, in some cases including over a year of design validation and pilot-testing before the real migration begins, Ratnam said.

In the Europe centralisation project, 15 new accounting recruits were hired in the initial wave. That small-scale start would prove crucial in surprising ways.

"We were preparing the quarterly accounts and 5 o'clock came, and some of the centre staff stood up," Ratnam recalled of one particular evening. "And we said, "'Where are you going?' There was this confused look on people's faces."

While it was simply expected that current staff would know that quarterly reports have to be done by deadline, some of the new staff didn't know that.

"We assumed that they would know — but you know, these were junior staff," he said. "We ordered some food, and everyone stayed behind."

That night lived on as a popular anecdote at the centre, and it was a reminder that it's important to explicitly reinforce workplace expectations in times of structural change.

Those conflicting expectations might have caused chaos, Ratnam said, except that the team intentionally balanced the new recruits in each new wave with a nearly equivalent-size group of experienced staff who could set the course straight.

"Mostly, it was about communicating things that were common knowledge if you had worked in the company: where to go to seek certain information, how to resolve queries, who to talk to."

Ratnam's team also used the fresh start to proactively meet new financial requirements.

Aiming for something bigger

The shift to the new shared-services centre would result in the departure of more than 50% of staff in the affected offices, due in part to the geographic relocation of the offices, Ratnam said.

In such instances, Ratnam said, it's important to take a more strategic approach to redundancies: Instead of targeting younger employees who might be cheaper to terminate, it's best to focus on the roles of the employees.

This not only satisfies the regulatory requirements in most countries, but it also leaves "a good taste in people's mouth", he said, noting that it also preserved young leadership. "... It goes a long way in sustaining company morale."

Ratnam's team also tamped down suspicion and anger with pre-meetings and documentation, with an open and honest strategy for change management, he said. And the company assigned an experienced project team to act as a conduit between the shared-services centre and the various departments.

Once that was done, the work of building a new culture could begin. Ratnam saw great potential in the structure of the new shared-services centre. While before it might have taken weeks to agree on any improvements to intercompany accounts, now that fix could happen in days.

"On Monday morning, you meet up in the shared-service [meeting room] with representatives from every single country there, and literally within a week you've figured out what you want to do," he said.

The key was convincing everyone else. Ratnam relied in part on the reputation he had built in numerous cross-functional, global roles. He felt it was important to communicate why the change was important, before getting into the "what" and "how". But part of the solution was simple patience and the belief that the new unit would show its value.

"You have to have bigger goals than simply making compliance more efficient or cutting costs, and then you can ultimately create a well-structured and well-trained labour force at the centre," Ratnam said. "... The critical mass was in the centre, and you could actually get things done."

Andrew Kenney is an FM magazine contributing editor. To comment on this article or to suggest an idea for another article, contact Jack Hagel, an FM magazine editorial director, at Jack.Hagel@aicpa-cima.com.