Project title Outsourcing of business processes to low-wage countries (“Business Process Outsourcing“)
Company International logistics group (private equity)
Industry Contract Logistics, Freight Management, Private Equity Shareholders, eight companies and 60 sites in Central European Sub-Region (Germany, Austria, Switzerland)
Revenues About EUR 380m in Central Europe (CE)
Number of employees About 2.900 in CE
Own area of responsibility
Budget Budget of finance area of about EUR 1.5m
Number of employees

 

 

 Leadership:

  • Management of about 30 employees, thereof 5 direct reports
  • SSC (Shared Service Center) Finance (Onshore SSC)
  • SSC transactional finance and accounting processes in India (Offshore Accounting Factory)
Background for the assignment

 

 

 No implementation of an exit strategy, neither IPO nor outright sale of the company

  • Participation of further financial investors in the company
  • Implementation of cost reductions in the administrative area (overhead)
  • Outsourcing of transactional finance and accounting activities to external shared service centers (SSC) of a non-Group service provider in India and Romania
Situation within the company
  • Group-wide decentralized F&A structures
  • Heterogeneous IT system landscapes
Customer Private equity shareholders
Autonomous role
  • Director Finance (authorized representative) Central Europe
  • Regional project manager, part of a global project team
Assignment

 

 

 

 

 Outsourcing of transactional finance & accounting activities to low-wage countries (BPO)

  • Realization of cost-cutting potential, reduction of approx. 2/3 of the workforce in the F&A area
  • Establishment of a coordination team at regional level (so-called “retained finance organization”)
  • Implementation of the project while maintaining ongoing business operations, i.e. timely preparation of monthly, quarterly and annual financial statements in accordance with IFRS, including reporting
  • Increasing, or at least maintaining, the original quality of the finance and accounting department
Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Business case modeling

  • Calculation of the benefits of the project
  • No exclusive consideration of wage arbitrage that diminishes over time

 

Negotiation of contracts with BPO service provider

  • among others: Quality Level; Service Agreement (SA); Service Level Agreement (SLA); KPIs; Operational Level Agreement (OLA); Business Continuity Plan (BCP), Emergency Plan

 

Scope definition/“activity split“

  • Definition of the scope of activities to be outsourced
  • Outsourcing of the following transactional processes:
    • Purchasing and procurement process: Procure-to-Pay (PtP)
    • Sales process: Order-to-Cash (OtC)
    • Month-end closing and reporting process: Record-to-Report (RtR)
    • Asset accounting: Asset Management (ASM)
    • Intercompany accounting: Intercompany (IC)
  • Preventing the “atomization” of individual activities and achieving the desired proportionate outsourcing

Takeover of communication

  • Contact for internal and external communication; ensuring clear, regular and consistent communication

Risk management

  • Risk inventory and creation of a risk matrix, ongoing monitoring of risks
  • Definition and initiation of countermeasures
  • Clarification and management of liability issues

Compliance

  • Ensuring compliance with the legal regulations associated with the BPO, e.g. tax approvals, data protection, labor law aspects
  • Embedding in the company’s compliance management system, e.g. internal control system (ICS)

Stakeholder management/supervisory bodies

  • Contact for all stakeholders, in particular shareholders, supervisory and representative bodies, works council, group works council

Location analysis and site selection

  • Clarification of the location issue for the coordination team
  • Negotiation of balance of interests and social plan
  • Closure of the previous finance location

Ensuring operational continuity (“business continuity management”)

  • Maintaining ongoing operations and full functionality during the transition phase
  • Establishing emergency and crisis management
  • Preparation for dealing with loss events and disaster scenarios
  • Ensuring that business processes are not interrupted in critical situations or emergencies

Retained Finance Organization

  • Design and structure of the future finance organization
  • Adaptation of job descriptions (job design)
  • Establishment of employees for ongoing management and optimization of outsourced processes
  • Ensuring proper fulfillment of tasks at the home location

Cultural Change

  • Implementation of training/coaching for key personnel
  • Preparation of the organization for very far-reaching changes in procedures, workflows and processes

Leadership/Organization

  • Managing and supporting employees affected by downsizing measures in particular throughout the entire process
Achieved results/outcomes

 

 

 

 

 

 

 

 
  • Successful implementation and orchestration of all aspects of the project (planning, control and monitoring)
  • Realization of the objectives documented in the business case:
    • Adherence to time frame, restructuring budget
    • Reduction of overhead costs, 2/3 staff reduction
    • Maintaining ongoing operations during the transition and transformation phase (business continuity)
  • Implementation of a new financial architecture
    • Definition of target processes (“To Be Processes”)
    • Internal control system (ICS) and internal control environment
Special feature of the project

 

 

 
  • Business process outsourcing represents a massive change for the entire company
  • Transformation and transition pose considerable financial and resource requirements
  • Processes and workflows no longer function as before during the transition phase
  • New process flows not necessarily already implemented
  • Difficult to reverse outsourcing due to contract terms to be adhered to
  • Major personnel management challenges
  • “Open-heart surgery”, as outsourcing must be implemented while maintaining ongoing operations

 

 

Special features with regards to the style of leadership:

I sensitized the organization's employees to the topic of BPO.
  • Business Process Outsourcing is associated with significant changes
  • Fundamental change affects structures, processes, culture, roles and responsibilities
  • Change activities therefore have to fight against considerable resistance
  • Sensitive and respectful treatment, especially of the “losers” of the project
  • Effective Change Management accompanies employees through this change process and is crucial for success
I pursued a clear communication strategy.
  • Conveying clear messages to support and increase acceptance
  • Preventing a state of limbo from paralyzing the entire company
  • Explaining the purpose of the project to prevent resistance, e.g. leadership alignment meetings
  • Continuous and consistent reporting on the status of the project
  • Message that the staff reduction is not based on individual performance, but on a strategic decision
I ensured good cooperation even in this difficult project.
  • Clarification that the development of a completely new financial architecture represents a great opportunity and a meaningful project that is definitely worth participating in
  • Viewing business transactions in a process-oriented manner and from the perspective of international division of labor
  • Cross-company project that can only be implemented jointly
  • Knowledge transfer (e.g. “Shadowing”), presentations and training sessions
  • Implementation and management of regular transition calls to discuss performance
I provided clarity via “Job Design & Assignment Control”.
  • Adaptation of the organization to a higher degree of international division of labor
  • Updating job descriptions/implementing new job profiles
  • Clear assignment of activities and responsibilities
  • Implementation of a “retained finance organization” at the home location
  • Promotion of personal responsibility, intensive coaching and training of employees
I improved the framework conditions for success.
  • Timely establishment of a qualified coordination team that is not too small and can manage the external service provider
  • Ensured that the new processes are understood and “lived”
  • Ensured that the coordination team supports the external service provider during the transition phase
  • Ensured that key personnel do not leave the company
  • Avoiding cultural conflicts, implementing escalation processes across several levels to resolve problems (pyramid of escalation)
I ensured that stress and additional emotional strain were dealt with constructively.
  • I made no secret of the fact that the creation of new structures in an SSC or the outsourcing of business processes also meant staff restructuring and downsizing
  • Dealing with uncertainty by taking employees’ fears and anxieties, anger and disappointment seriously and understanding them
  • Constructively bringing about clarification and decisions in conflict situations
  • Acting as a “mediator”, creating a balance between any conflicting interests of the “virtual team” off-shore and those of the “coordination team” at the home base
  • Ensuring relaxation/de-escalation in stress and conflict situations
I used meetings as an effective management tool.
  • Limiting the number of meetings to what is necessary, “jour fixe meetings”
  • Improving cooperation in the teams, creating a sense of “we”
  • Preparation of meetings; e.g. preparation and coordination of the agenda
  • Tight meeting management; achieving a high quality of problem solving, a truly sustainable consensus, creating the opportunity to openly express dissent
  • Follow-up of meetings; minutes of results, no agenda item without action, monitoring of implementation through consistent follow-up
I approached the problems with a positive and constructive attitude.
  • Not focusing solely on problems, but also recognizing opportunities that can arise from a seemingly hopeless situation (positive thinking)
  • The investigation into the origin of the losses took place under extreme time pressure and in a tense working environment
  • This was only possible because I trusted involved and affected individuals and gave them confidence in their own abilities and the solvability of the task
  • Counteracting subliminal conflict through constructive participation in psycho-social processes resulting from the changes; providing project acceptance
  • Ability to draw enough “inner strength” from a few successes to last the entire day and to transfer this inner strength to others
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