5 Differentiated talent capabilities of Pinnacle Shared Services / Global In-house Centers: Talent strategy, talent acquisition, and talent development, technology, and performance management
3 ways Pinnacle Shared Services / Global In-house Centers Outperform Others: cost, operational, and business impact
Talent strategies of Pinnacle GICs™ produce superior business outcomes and a ‘future ready’ workforce.
Shared services organizations are also known as Global In-house Centers (GICs), and in its recently released report, “Talent Strategy in Global In-house Centers (GICs): Pinnacle Model™ Analysis 2019,” Everest Group assessed the talent strategies of 43 GICs. Five GICs who rated highest in terms of the maturity of their capabilities and the impact delivered were deemed Pinnacle GICs™. In comparison to other GICs, Pinnacle GICs have achieved significant impact in three key areas:
- Cost optimization: Twice as many Pinnacle GICs (as compared to other GICs) have kept their human resources (HR) costs to less than 5 percent of overall GIC costs.
- Operational impact: The talent programs of Pinnacle GICs have improved operational metrics two to three times greater than other GICs.
- Business impact: Pinnacle GICs deliver 1.5 times greater satisfaction from their talent programs than other GICs.
“With unemployment levels reaching generational lows in the US and other regions of the world, enterprises are desperate to know what talent strategies are delivering the most impact,” said Michel Janssen, chief research guru for Everest Group. “Our research on Pinnacle GICs shows that there is a cause-and-effect relationship between advanced capabilities and advanced outcomes. This means there are definitely concrete things enterprises can do to get the talent results they are looking for.”
Specifically, GICs are investing in five key capability areas to drive superior outcomes:
- Talent strategy. Pinnacle GICs have a 2.6 times higher proportion of their programs targeted to high-performing talent as compared to other GICs.
- Talent acquisition. Compared to others, Pinnacle GICs invest considerably more in partnering with educational institutions, hiring from adjacent industries and leveraging social media.
- Talent development. Pinnacle GICs are much more likely than other GICs to focus on developing in-house talent to be future ready. Examples include investing in learning and development tools such as gamification-based learning and employee-to-employee networks.
- Performance management and employee value proposition. Compared to other GICs, Pinnacle GICs are twice as dedicated to adopting structured career paths for most employees and are 1.6 times as likely to have invested in 360-degree appraisal approaches for performance management.
- Relative to other GICs, twice as many Pinnacle GICs have adopted cloud-based HR systems and 2.3 times as many Pinnacle GICs have invested more than 20 percent of their overall HR spend in next-generation technologies such as artificial intelligence (AI) and robotic process automation (RPA).
“One of the important takeaways of our research is that the talent strategies of Pinnacle GICs do not involve any secret tools and techniques that other shared services organizations lack,” said Rohitashwa Aggarwal, practice director of Global Sourcing at Everest Group, “Rather, what Pinnacle GICs have that others do not is a higher commitment to investing in talent strategies and a greater dedication to thorough execution of those strategies.’
More detail on the differentiating talent capabilities of Pinnacle GICs is provided in an Everest Group webinar, “Is Your Shared Services Strategy Future Ready? 5 Differentiating Talent Capabilities.”
About the Pinnacle Model™
Everest Group’s Pinnacle Model™ approach explores what the very best organizations are doing in terms of optimizing costs, improving operations, and delivering strategic impact. The journeys of these best-of-the-best companies provide insights into the key enablers needed to achieve desired outcomes and point to the investments required for the greatest speed to impact. By examining what Pinnacle Enterprises have in common, others can learn how to succeed, whether they desire to make incremental changes or achieve major transformations.
The shared services market is growing quickly. US and European firms are either expanding their existing shared service centers (also referred to as “Global in-house Centers” (GICs)) or building new centers. Let’s look at what’s happening and the factors that are driving the growth.
Is upskilling and reskilling little more than a thinly disguised attempt by HR departments to rebrand Learning and Development (L&D)? The answer, as one practitioner pointed out at a conference in Poland, is “no.”
I recently presented to the Association of Business Services Leaders (ABSL) Chapter in Krakow, Poland about the talent acquisition challenges that digitization poses to Shared Services Centers (SSCs.) The argument runs roughly like this:
- Robotic Process Automation (RPA) is replacing human agents in transactional roles, freeing up capacity in the workforce. This can mean lay-offs at worst, or unqualified internal candidates reapplying for roles at best
- There is greater demand for people with new skills both technological (design thinking, robotics, autonomics, analytics) and soft (pattern-recognition, complex problem solving, leadership, intuition) than can be met by simply recruiting externally
- As automation takes care of transactional processes, organizations can enhance the value of their brands and the service they provide by having more people in roles which emphasize first contact resolution, emotional intelligence, listening, etc.
- This new value chain focuses on outcomes: people are measured against quality of outcome rather than throughput (for instance, a shift from average handling time to CSat), which in turn requires new management thinking around staff incentives, culture, and business model.
The data in the presentation was based on the Everest Group survey of 81 SSC leaders in Poland, the Philippines, and India, published earlier this year (see “Building a Workforce of the Future – Upskilling/Reskilling in Global In-house Centers.”)
So obvious was the message that emerged from the survey that one or two skeptics in the audience questioned why retraining that part of the workforce most affected by the trend of automation was even worthy of discussion. Is it not just good L&D practice? And surely survey respondents would not admit to anything other than good practice when asked the question?
Not quite true: there were survey respondents, albeit no more than 10 percent of them, who said that they were not planning to undertake upskilling and reskilling as a means of addressing talent shortages. A small majority, 58 percent, said upskilling/reskilling was the highest priority in addressing this same problem, while 10 percent, possibly the same nagging 10 percent, said it was a low priority.
The discussion continued after the presentation. Without experience as a practitioner, I wrestled with an explanation as to why this 10 percent stubbornly refused to fit the theory. Thankfully, the HR head of a Krakow-based SSC rode to my rescue and gave the answer.
This is the group, she said, which understands that reskilling and upskilling is indeed good L&D practice but remains wedded to external hiring of permanent and temporary staff. It is the group that fails to see that existing employees must be recognized as the key pool to meet scarce talent requirements in SSCs.
Her explanation, thankfully, echoed our contention that successful application of reskilling/upskilling to talent acquisition needs:
- Senior leadership backing to ensure adequate resource and profile within the organization
- Implementation of a skill-specific talent acquisition strategy to identify both critical areas of shortage and those most suitable for reskilling/upskilling
- Quick roll-out of pilots in critical areas of shortage to build confidence and to learn
- Breaking down of functional barriers and giving employees wider exposure to functional roles
- A combination of effective duration and appropriate method (job rotation, on-the-job training, mentoring, peer-to-peer learning, and specialist external providers)
- Clear communication of career paths, internal opportunity, incentive, and compensation
- Patience and persistence!
She explained further. In her experience, the real difference between reskilling/upskilling as good L&D practice and reskilling/upskilling as a talent acquisition solution is simple. The talent acquisition solution approach is not considered aspirational, “something that HR does,” or nice to have. Rather, it is a strategic imperative.
How nice to have somebody who really knows what they are talking about answer a difficult question on my behalf!
Clients considering establishing a shared services center – or what we refer to as a Global In-house Center (GIC) – to deliver services, almost invariably ask us how successful the model is and whether it delivers on the expected business impacts.
To set the stage for answering the first question – how successful is the model? – the following chart shows that the number of new annual GIC set-ups has increased from <100 centers in 2015 to 145 centers in 2017, indicating a preference by companies to join the DIY bandwagon.
Multiple factors contribute to this DIY trend, including: the need/desire to take a digital-first approach to service delivery; capacity/growth constraints in onshore locations; challenges with service provider performance; increased adoption of agile/DevOps; pressure to replicate the success of early adopters; and focus on end-to-end ownership in internal delivery.
But that chart only tells part of the pervasiveness story. While it would be reasonable to state that the primary adopters of the GIC model are large enterprises, almost half of the new centers set up since 2014 have been established by small (USD <1.5 billion revenue) and mid-sized (USD <10 billion revenue) enterprises. This adoption – seen across technology, telecom, manufacturing, healthcare, and BFSI verticals – reflects that small and small and medium enterprises recognize the successes the large organizations in their sectors have achieved with the model. By all accounts and measures, it’s clear that use of GICs is becoming truly broad-based.
Expected Business Impacts
Here are a few examples of the business impact real-world GICs are delivering beyond arbitrage.
- Improve Customer Experience – a European insurance firm’s GIC developed a mobile app for auto insurance customers; the app has reduced claims turnaround time from 2-5 days to 3-6 hours
- Drive Innovation – a leading snacks company’s GIC developed an app for selling in-store displays to retailers; the app has reduced the rejection rate by 20 percent
- Contribute to Revenue – a financial services firm’s GIC has helped increase product revenue by 17 percent through analytics on product positioning in the retail market
- Drive Operational Excellence – a leading bank’s GIC has delivered savings of ~40 percent with substantial reduction in end-to-end delivery time for the customer by deploying robotic process automation
- Reduce Errors – a leading financial institution’s GIC has improved the commercial lending analytical models, resulting in identification of additional US$15 million worth of deals that would otherwise have been ignored.
Getting Intentional with Business Impacts
Of course, the only way to ensure business impact beyond arbitrage is by intentionally establishing the GIC to deliver business impact.
For example, we’re currently supporting a global investment management firm through the “impact-first” approach to its GIC set-up. Instead of starting operations with low-value transactional processing, the GIC will predominantly deliver high-end technology services to build tools and systems for quantitative research. The talent model is skill-centric, not scale-centric, and geared to build high-end skills in a sustainable manner. And because a key enabler of delivering business impact is ownership, the GIC will have end-to-end delivery ownership and a seat at the parent’s table to shape its evolution journey from the beginning. All these intentional actions will give the GIC a head-start in delivering business impact, and enable it to leapfrog its more tenured peers.
Overall, having an intentional approach during set-up can significantly influence and enhance the type of business impact the GIC delivers, and how soon it kicks in. And a well-thought-out approach is more likely to keep the expectations from the GIC in check, and its performance assessment objective.
Have you taken an intentional business impact approach with your GIC? Please share your experiences with us at [email protected] or [email protected]. To learn more about how we serve GICs, click here.
Lessons from Digital Pinnacle GICs™: What GICs and their parent enterprises can learn from the Pinnacle, or best-performing, GICs