News

During the start of the coronavirus pandemic, the Global Business Services (GBS) industry performed well, making a relatively smooth and fast transition to remote working without significant disruption to its service delivery. This adaptability has given businesses a little breathing room to try to recover from this shock by focusing on their customers and suppliers, knowing that their core operations will continue to function strongly. But could GBS’s success lead to the reshaping of its operating model? 

At the moment, many multinational companies operate a global network 
of strategically-located GBS centres. 

Increased remote working

GBS centres have hitherto been built on the principles of performance excellence and economies of scale, leading inexorably to the centralisation, standardisation and specialisation of processes and operations, which has led many companies in turn to establish a few larger centres around the world. These centres provided multinationals with advantages such as flexibility, the ability to make changes faster and more cheaply, cost arbitrage and greater control. However, concentrating services in a few locations means that the centres can become rather large, requiring expensive office facilities and potentially straining local recruitment needs. The shift to increased remote working caused by Covid-19 has meant that these expensive office facilities are not being fully utilised, and many centres have had to invest in new hardware to enable home working. This could lead to a potential reduction in the fully-loaded cost advantage of many GBS centres, which have been pursuing an offshoring/nearshoring model. 

The potential reduction in the cost-competitiveness of GBS, due to the impact of Covid-19 on working patterns, can be seen as an extension of the existing trend for GBS centres to gradually shift transactional or routine work to other centres in significantly cheaper countries, or potentially use an outsourced provider to maintain cost-competitiveness. These “more expensive” centres then provide increasingly broad, complex, specialised and higher value-added services with their “freed up” capacity. Ultimately, GBS gradually becomes the operational nerve centre for the multinational company.

Operational challenges
However, in these uncertain times, concentrating key operational processes or specialist activities in one or two GBS centres significantly increases operational risk. GBS organisations have already demonstrated their flexibility and ability to quickly and efficiently overcome significant operational challenges. With this in mind, Centres of Excellence (CoE) could be created both inside and outside the existing GBS locations. These CoEs could be virtual teams spread around the world, rather than a whole team located in one or two sites. As well as avoiding the risks arising from entire business-critical teams being located at a few sites only, the virtual teams spread across many locations would enable the CoEs to be in closer proximity to the business, share common local/regional cultures and languages, and operate 24/7 with existing technology supporting the CoE’s work-sharing globally. Individual GBS centres could thus become smaller, and combine process-based operations with a shift towards more services covered by virtual CoEs. At the same time, the overall GBS organisation could grow, spread, and diversify globally, with GBS performing a broad range of operations as a key business partner integrated even more closely to the business. Some companies have already started to operate their organisations in this way.

Functional leaders
Obviously, this change in the GBS operating model and organisational structure would have a significant impact on its leadership. For example, the existing centre-based leadership structure could be replaced by a more function-based leadership structure. These functional leaders would be responsible for virtual teams distributed around the world. Functional leaders of virtual teams would need an array of core competencies: leadership and motivation, agility and efficiency of service delivery, and talent acquisition and management – the best global talent would be able to join a virtual organisation from almost anywhere.

As in so many areas of life, Covid-19 has crystallised many existing operational matters, and accelerated the need to make changes. Operational sustainability and risk are key factors for most companies today, and agile, efficient, connected and talented GBS organisations are more important than ever, to ensure that businesses can adapt quickly to our rapidly-changing environment.

Multiple global locations
Ultimately, Covid-19 is not the underlying reason for these operational shifts, but it is an all-powerful accelerator. GBS has always sought out the most optimal solutions and environments – and what is most optimal changes over time. The true agent for change is technological progress; digitalisation allows for more efficient and cost-effective ways of working across borders, and literally opens up the world to bring the best talent together. In the near future, we are likely to see fewer large centres in specific low-cost geographies, and far more talent operating from multiple global locations, reporting into geographically distant GBS CoE hubs on a hitherto unprecedented scale. For example, a home-based specialist in Warsaw could be reporting to a manager in Manila, who in turn reports to a CoE Head in Bangalore. This provides companies with greater flexibility and options for serving its internal and external customers across timelines and skill sets (languages being an obvious example).  

If this is the future that is on the cards, dramatic changes are ahead for GBS Talent Management. Indeed, there will be less pressure on specific geographies, but finding the right leadership talent will become a global challenge rather than a local or regional matter. GBS is in for a very exciting future – a future which has been brought closer by Covid-19. Although the virus will be gone someday (we hope), the changes will endure.

Co-Authors:

Paul Inman
Global Head of the Shared Services Practice Group at Pedersen & Partners. Mr. Inman built a strong career over 25 years within the Professional Advisory Services sector having held management roles with PwC and EY in Prague and prior to that with several professional services firms in London. Before beginning his career in Executive Search with Pedersen & Partners, he was the Deputy CFO in the AAA Auto Group and Director of the EMEA Corporate Shared Service Centre of CSC. Mr. Inman has extensive expertise in automotive retail, shared services, leasing, factoring, consumer finance, and professional services provided to multinational and national clients.
paul.inman@pedersenandpartners.com

Peter Lisney
Client Partner, Country Manager Malaysia & Head of Shared Services Practice, Asia Pacific at Pedersen & Partners, based in Kuala Lumpur. Mr. Lisney’s experience spans across Europe, Middle East and Asia and integrates many aspects of operational and organisational management and leadership solutions, with a specific focus on increasing business effectiveness through centralised support centres. He has resided in Asia Pacific since the early 1990s. 
peter.lisney@pedersenandpartners.com

Barbara Keller
Consultant, Central and Eastern Europe at Pedersen & Partners based, in Budapest. Ms. Keller has been working in the Executive Search arena for 15+ years covering Central and Eastern Europe for global recruitment firms across such practices as: Financial Services, Industrial, Technology, and Consumer with special focus on centralised support centres opening in the past decade in the CEE region. 
barbara.keller@pedersenandpartners.com