A step towards finance transformation

By Kiyoshi Berman

The Association of Chartered Certified Accountants (ACCA – Sri Lanka) together with the Sri Lanka Association of Software and Service Companies (SLASSCOM) last week held a knowledge sharing event titled ‘Global Best Practices in Finance Transformation’.

This event focused on the importance of finance transformation in the rapidly changing business process management industry. Experts from globally renowned organisations such as Tesco, Rio Tinto and Concentrix were present to discuss how their organisations facilitate finance transformation to drive sustainable competitive advantage.

Rio Tinto operating model

Rio Tinto GBS Finance Services Managing Director Sanjay Patel in his presentation explained the Rio Tinto operating model based on three pillars which clearly define what the roles of all members should be.

Sanjay is responsible for leading the global finance shared services, helping shape the finance organisation and leads the execution of finance services for Rio Tinto, with a primary focus on managing and implementing the new service model while delivering a breadth of high-quality finance services.

“For a company like ours with $ 9.3 billion earnings we have very small teams. The Rio Tinto operating model includes the use of shared services and this began 17 years ago. Shared services are used to support the business in process delivery. These are focused on efficient and effective delivery of transactional, professional or specialised services to our entire business. Shared services work relates to business processes which are not unique to Rio Tinto, and so we use a heavily outsourced model,” he said.

“We always tell our customers and shareholders that we are doing shared services but we don’t tell them if we’re doing shared services for shared services. The back office support team of GBS plays the role of centralised shared services across the GBS tower. So we don’t duplicate activities. Shared services are expanded across business planning, project management; process excellence and business improvement perspective and are all provided by a central team,” he added.

Business Process Outsourcing

He further explained about Business Process Outsourcing (BPO) and how Rio Tinto is gaining advantage from them. BPO involves outsourcing business processes to third parties who have the resources and expertise to manage the process so that the organisation doesn’t have to do it in-house.

Sanjay pointed out that their aim is to have the right work, right resources at the right location. “The principles that apply are very simple. BPO is a part of our group operating model. We involve business people and share holders. We are moving as much as we can from our financial services to our shared environment. Secondly, we stay focused on the financial transformation program. Third, stay focused on HR, financial processes, IT and other activities.”

How we can move a business to a partner-centric organisation is to use BPOs and offshore outsourcing. He emphasised that there is a lot of data gathered from these processes and we need to mine the data carefully to gain valuable business insights.

Sanjay mentioned that, the three steps of handling processes is to decide if these need to be centralised; whether these need to be done onshore or offshore or can be given to a BPO. There is no one correct answer as it depends on the appetite for transformation of the particular organisation. A decision on whether to use the captive model or outsourced model will be informed by the tradeoffs of the two models.

Finally, he summarised the key points and mentioned the critical success factors which are sponsorship, alignment, trust and shared values and objectives.

Dealing with Information Technology

Tesco HSC Director (Group IT) and Chief Information Officer, Member of the board Tesco HSC, Bangalore Vinod Bidarkoppa, shared some of his experience in dealing with aspects of Information Technology including retail applications, digital commerce and infrastructure to UK, US, Central and Eastern Europe and Asia operations of Tesco.

“We operate mainly in the UK and in 12 countries in Europe, Asia and the US. It’s a very large business comprising predominantly retail stores and Tesco banking business which is a retail bank. It’s also into mobile that is a mobile operator in the UK and a number of other industries. In terms of revenue, last year we have made about $ 100 billion and about 60% comes from the UK, 20% Central Europe and 20% from Asia. We have 500,000 people working in 12 markets and we’re the second largest private company in the UK after the government,” he said.

“If you look at the last 10 years or so, there is a big shift in the way user behaviour has changed. Most people used to love to drive by the city and do shopping but now they like to do their shopping online. The reason I’m taking this example is because it’s very similar to how business processes work. Most of the companies are starting up their shared services and changing their business models. I think it’s very important for shared services to change or us to adapt to business model changes.

“So how can service providers of our business make this change happen in a very agile fashion? We may be in BPO, Finance or IT we need to re-imagine our business and we need to fall from the first curve to the second curve. The first curve is all about having a very strong store network but now it’s all about anytime, anywhere and anyhow that is mobile and online services.”

Vinod highlighted how important it is to keep up with the trends to cater to the needs of the customers and provide them with better value.

Strategic processes and outsourcing

He emphasised that strategic processes what we call the crown jewels of the organisation should not be outsourced. He took an example of investment banks where the retail margin is very small and light. In these banks the data is mined using very sophisticated algorithms with a large number of small variables. This allows the tool to move from point A to point B with all the values at the same time keeping the availability high for the customers; giving the right range, right rates and great price and so on. These are the kind of algorithms and processes that need to be kept in-house.

“When we started our journey at Tesco around 10 years ago, we looked at many options to establish our operations centre and then we decided on India. Now it’s located in Bangalore and is the global services arm for Tesco worldwide, providing key business services for Tesco operations globally. The idea is to get the more work done with minimum number of people. Tesco HSC has about 6,500 workforce which is not much considering the scale of the company,” he added.

Developing the BPO industry

Concentrix India Global Delivery Lead of Healthcare Rajaram Natarajan was the final guest speaker of the event. “The reason I accepted the invitation to speak today is because I see the passion in Sri Lanka to develop the BPO industry and that’s the key ingredient each and every one of you needs to have,” he began.

“Concentrix is primarily a value driven Services Company unlike many BPO companies. We do services for many other companies. Our key differentiators are that this is primarily a cultural engagement; how you engage with customers, how you show value to those customers. The story of Concentrix is important from a Sri Lankan context. Why is it important? Because Concentrix was a company with 6,000+ employees around two years back and at that point IBM Daksh had 25,000 employees.

“Usually a large organisation would buy a small one but here a small organisation bought the large organisation. Who would have seen that coming? We now have 50,000+ employees. In a similar context people will come and say that Sri Lanka has the skills but not the scale but should that be an issue?” he said rhetorically.

He also explained how Concentrix got to that level: “When a customer asks you for a pilot for 20, it doesn’t mean he is asking for pricing of 20; rather he is asking for pricing for 500 or 1,000. You may say that 1,000 is a large number and how can I achieve it, but remember, it’s not to be done overnight but over a period of time. For example, for a very large health insurance player in the US, we started with 20 people in 2002 in one geography but today it’s 2,000 people in four geographies and just yesterday they confirmed another 50. The reason the customer wants to do a pilot is to find out if you’re passionate about it,” he added.

Favourable conditions in Sri Lanka

Highlighting the other favourable conditions in Sri Lanka he asserted, “In India the attrition rate is about 35-40% whereas in Sri Lanka it is 50-60%, which means people tend to stay longer in the company. If people stay longer there is a very high probability that you can get people to higher end value chain. Therefore, domain is critical in businesses such as health insurance. Customers are looking for the experience you’ve got in the particular domain.”

Then he presented a chart with pricing models and discussed how customers are priced. He showed that 80-90% of the customers prefer the transaction based pricing yet is evolving towards outcome based pricing.

He also explained how complexity of a job is matched with salary scales. He stated that in every line of work, employees believe that theirs is the most complex job. Therefore, a matrix has been created based on the average training period determining the complexity of the job and matching that with salaries. He showed that complexity and high salaries do not always go together and there are instances where low complex jobs get paid more than high complex jobs and so on.

Panel discussion

The ACCA-SLASSCOM event included a panel discussion with Millennium IT CFO Fadil Jiffry; Hayleys Industrial Solutions Managing Director, Hayleys BPO and shared services Director and SLASSCOM Vice Chairman Dr. Arul Sivagananathan, Hemas Holdings PLC Chief Process Officer Chandima Cooray and the three guest speakers. The panel was moderated by H Connect Director Business Development and SLASSCOM Director Hariharan Padmanaban.

The opening question was, ‘In layman’s terms what is financial transformation?’ Answering that Arul said, “The role of finance is changing with the environment in which we are operating. Traditionally the CFO’s role was to focus on corporate financing and managing financial risks but now the CFOs are expected to play the role of strategists as well. The role of finance is transforming helping you to focus more on the strategy by bring catalysts for change, catalysts for driving transformation.”

A question was posed to Rajaram about how the management dealt with the transition when Concentrix a small company took over a larger company, IBM Daksh. In reply he said, “It was an anxiety to everybody because we didn’t know what will happen to our jobs. Something the management did very well was communication. The other thing was to lay out a roadmap and say we could complete this transition within year and half max. Also, there was an assurance given that nothing would happen and things would remain the same, from reporting relationships to communication perspective, no changes were made in the following year. We also had to communicate this with our customers with confidence saying we can handle this transition well... From a soft skill perspective we have to ask if we’re ready for a change, are we ready to take another route.”

Answering a question on the challenges in investing in family owned businesses Chandima said, “Most of the businesses start as family owned businesses and then become registered companies. The number of people doesn’t determine the size of the organisation anymore because of world-class processing and technology, solutions and mobile robotics. These may not be available in Sri Lanka yet, however the economy here inflects very fast. We have done some other projects for family owned businesses like Hirdarmani. It’s a challenge but sometimes I find it easier because decisions pass through very quickly, one email from the chairman and it’s done whereas in other setups, decisions would need to be reached through a consensus.”

Adding on to that, Hariharan said that the general notion about family owned businesses is that they are deep pockets with short hands meaning they have a lot of money to invest but decisions take time due to the lack of skills.

With a few more questions and ideas the event came to a close and was followed by a networking session.  

 

– Pix by Lasantha Kumara