Benefit Group

For businesses around the world, the impact of the past two years of change has rested on a few questions. Can employees work productively and efficiently from home? How can advanced technologies drive seamless operations? How should organizations leverage existing platforms, such as global business-services (GBS) and regional shared-services models, to build newer capabilities that advance their digital agendas?

There’s encouraging news. In our research of almost 50 GBS organizations, more than 90 percent report that they had effectively scaled up the remote-delivery model, with virtually no loss of productivity—and without harming client-service experience or employee experience.

As vaccinations move the COVID-19 pandemic from an emergency to an ongoing, potentially manageable concern, businesses are working to find the next normal. GBS organizations’ current challenge is to determine how they will work, evolving to incorporate more work-from-home arrangements while continuing to deliver value. New, distributed ways of working—and transforming processes end to end—may become the norm rather than a one-off response to a crisis.

GBS is a critical enterprise backbone, delivering a range of support functions, as well as back- and middle-office operations. Clients’ expectations of GBS organizations continue to rise, with stakeholders expecting greater efficiency and continuously improving service effectiveness. For instance, they expect that GBS organizations will use automation to accelerate manual work, apply technology to eliminate potentially unnecessary processes, and create self-serve ways for users to get what they need quickly and on their own schedules.

Digitization moves fast, a truism that has both complicated existing ways of working and presented opportunities to deliver more value. And the COVID-19 pandemic tested GBS organizations’ ability to pivot to a remote operating environment.

Now technology and digitization are taking center stage as GBS operations work to integrate multiple changes to the business environment—such as customer preference for digital-first solutions, as well as the need to redesign processes to support that digital-first model and integrate a globally distributed workforce, some of whom are working from home. At the same time, these operations are pursuing end-to-end process optimization and other strategies that drive economies of scale.

Automation is a key focus area for GBS. Research from the McKinsey Global Institute suggests that by 2030, automation is likely to affect around 60 percent of all jobs—meaning that at least 30 percent of those jobs’ constituent activities were found to be automatable using demonstrated technologies. Within the finance function, for example, our colleagues estimate that more than 40 percent of jobs can be either partially or fully automated in the next decade. At an estimated 80 percent of Fortune 500 companies, many of the automatable tasks—general accounting and learning administration, for instance—are already within a GBS model. This provides a great platform for GBS organizations to deliver value by reducing cost of ownership while funding innovation, such as by automatically creating customer invoices as soon as delivery is accepted and proof is reconciled.

The challenges in GBS operations

To thrive in the coming months and years, comprehensive digital capabilities will be increasingly essential. GBS organizations are already facing a flood of data from digital processes, the Internet of Things, visual AI, and other new, digital input sources. New pressures are adding to the challenges.

Distributed-working

Research suggests that, in advanced economies, around 20 to 25 percent of the workforce could work from home between three and five days a week. That’s between four and five times higher than typical prepandemic levels. A scalable remote model highlights additional needs: to instill self-starting behaviors, boost employee morale and productivity, and redesign workflows for seamless operations.

One global financial institution’s GBS organization set up a control tower that helped it rapidly scale up remote work in response to the pandemic. The control tower’s job was to balance demand and supply as it integrated workflow across six global sites. That meant not only defining a blueprint for scaling up remote work but also strengthening data-security and risk-management practices across a large, widely distributed workforce—all critical to the institution’s successful scale-up of a remote-delivery model in just three weeks.

Human and technology interoperability

As digital adoption continues to rise, enterprises look for their GBS organizations to provide both thought leadership and execution muscle in adopting technology across key processes. They expect mature GBS organizations to serve as a nerve center for building digital capability, driving automation at scale, and developing software that builds and repairs other software.

Delivery accuracy and timeliness

Working from home and remote delivery are becoming the norms, pushing organizations to reconsider long-term location strategies to optimize cost, resiliency, and access to the right talent. They are also reassessing the role of the vendors that manage critical services. How dependent should they be on today’s relationships, such as with a business-process-outsourcing partner that provides a managed service for orders to cash—a people-, process- and systems-enabling platform?

How GBS can help solve current challenges

The current situation could well be the turning point in how organizations create and deliver digital-native services. Six themes can help GBS organizations manage the challenges (exhibit).

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Scope: Integrating business, digital, and operations strategies

As global-delivery models and expectations converge, it can be difficult to separate business strategies from digital strategies. Some organizations have found quick work-arounds to digitize operations at times, often using point-automation solutions—such as simple tools that enable customized billing designs for certain customers without creating structural alignment across systems.

This type of ad hoc solution tends to generate even more problems over time, impeding scalability. By contrast, lasting transformation of a GBS organization typically starts with agreement on foundational goals and technologies. A medical-distribution company, for example, started its transformation by assembling a sponsorship committee composed of leaders from IT, business strategy, and finance. The discussion took some additional time and effort up front, but the resulting agreement helped ensure that the company’s global-delivery model could integrate the requirements from all stakeholders, cementing their support and giving the transformation additional credibility.

Footprint: Segmenting scale

Economies of scale continue to drive efficiencies, but they aren’t a sufficient solution for all business needs. Those requiring more tailoring will encourage newer ways of working, such as agile delivery models and design thinking, based on a much deeper understanding of user needs. Already, GBS organizations often comprise multiple centers of varied size that are built to house specific functions; the new opportunity is to treat the centers as a single, integrated network so that work can more easily cross functional- and business-unit boundaries as needed.

This new approach segments work by complexity, talent, and service-level requirements rather than only by department, and it enables GBS organizations to expand the range of the business outcomes that they can efficiently and effectively deliver. A large European bank, for instance, funnels transactional activities to large centers located in off- and nearshore locations. At the same time, it maintains an analytics hub near its home in Western Europe, where it can easily find specialized talent and be closer to demanding end customers.

Sourcing: Integrating service as a true business partner

GBS organizations have an opportunity to operate as strategic-sourcing orchestrators. This shift may require GBS leaders to rethink traditional patterns, however. Outsourcing or automating commoditized activities (such as accounts payable) while keeping control functions (such as tax and treasury) in-house isn’t necessarily the best fit going forward, depending on the new capabilities that GBS can bring to bear.

Tech-enabled start-ups, for example, could help manage at least a portion of control functions by providing automated tools for financial close.
End-to-end delivery ecosystems offer further potential efficiencies, whether via in-house capabilities, managed delivery, or software vendors, possibly leading to new GBS service lines focusing on tech enablement.

Possibilities such as these led the GBS arm of a large Middle East–based conglomerate to rethink its operating model. Instead of providing the entire range of services itself, it increasingly functions as a managing agent for global-delivery functions. The GBS organization retains responsibility for delivery but partners with a strategic vendor and a range of ad hoc suppliers to integrate capabilities as needed.

Target: Customizing solutions for each function

Even as a GBS organization drives the standardization and automation of the individual components that it offers, the portfolio of its offerings will likely become increasingly bespoke, with customization specific to each client function’s requirements. For instance, invoice processing could include optical character recognition, language translators, and the ability to apply local considerations (such as value-added tax) to processing. HR services could include self-service tools for frequent queries, a chatbot to assist with information in real time, and an interactive-voice-response system to connect to a service agent, as required.

A large industrial company illustrates how some advanced GBS organizations are creating digital “factories” (which rapidly identify customized solutions) and using a cookbook approach to scale up deployment. First, an automation center of excellence helped GBS leaders define use cases and the set of automation technologies that would apply across the company’s different general and administrative functions. The cookbook approach helped it rapidly evaluate specific automation solutions, including digital workflows to enable paperless invoicing; self-serve tools, such as chatbots, to address standardized supplier queries; and platform solutions to integrate with enterprise resource planning, such as streamlining reconciliation.

Talent: Reorienting talent management

Access to the right talent is undoubtedly critical to transformation. Yet in the United Kingdom, for example, our colleagues estimate that it is between 20 and 30 percent more cost-effective to upskill existing employees than to replace them. Continuous upskilling also drives higher productivity and throughput from the retained workforce.

Moreover, improving people’s technical capabilities is just part of the task. Today’s volatility means that organizations also face a rising need for softer skills, such as leading virtually, thinking critically, and solving problems (rather than just following predefined workflows). Caring policies that are supportive of hybrid work are also increasingly essential, as are commitments to inclusion, equity, and diversity.

We see this leadership in a leading medical-distribution organization that has widened its hiring channels to include hackathons and submissions to an open-source community of technology professionals. Although it still uses traditional hiring channels, such as social media and job portals, the organization realized that the open-source-community channels were more productive, particularly in attracting workers with expertise in niche technologies.

Transformation approach: Leading and executing innovation

Many GBS organizations are beginning to make better use of data and process-mining analytics to drive detailed activity insights. However, the majority we have seen are restricted to basic use cases, such as standardized reports and descriptive analytics that drive information “drill downs,” leaving much of analytics’ value on the table.

A few GBS organizations are finding ways to pilot newer technologies and demonstrate more ambitious use cases, such as assessing root causes through statistical analysis, forecasting and predicting complex trends, and prescribing the best next actions under decision uncertainty. These sorts of outputs can have dramatic impact on results. By deploying advanced digital capabilities, a global utility’s HR function delivered an overall savings of at least 20 percent. It automated nearly 80 percent of manual tasks, such as pension transfer and employee onboarding, and reduced turnaround times by between 20 and 50 percent across other processes. Perhaps even more important for the future, these improvements enabled the GBS organization to change its business model: it now operates as a service through a usage-based charge-back mechanism, giving its clients more flexibility and better aligning incentives.

Rapid digitization and the disruption of the past couple of years have created unique challenges and opportunities. GBS organizations must continue to support change, scaling up their transformational agendas for a very different next normal.