In an age in which sustainable advantage is increasingly transient, organizations need to adapt endlessly – to the point of embedding innovation in their business DNA. Consequently, the historically predominant CXO “delivery” mindset is shifting to a “business outcome” mindset. Firms that fail to adapt to rapid technological advances, constantly evolving customer expectations and intensifying global competition may find themselves unable to compete.
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.
We just completed our webinar on our shared services or GIC Talent Pinnacle Model. And what were trying to there is understand, what are those key business issues.
So the first thing we looked at is how the talent shortage is becoming chronic. And one of the statistics I used here with clients – I talk about how it used to be that executives were just concerned about the top talent – “how do I get the best talent in the organization” – so they can have an impact on the rest of the organization. But now, as we become more chronic in the numbers – and what I mean by the number is ten years ago, in the US, it used to be 700 people looking for 100 jobs. And right now in the U.S., we have 90 people looking for those same 100 jobs.
And so, what you’re finding is that there is more demand than there is supply in that conversation. But it’s a bit of a tale of two worlds. While you have shortages in the U.S. and Europe you’ve got a very different thing going on in low-cost locations, especially like India. And there, there’s not a shortage of talent, it’s finding the right talent – they’re concerned with, “how do I take the existing pool of people in and upskill them or reskill them into the needed skills for the organization to go forward.
So, what we’ve done is look at the Pinnacle Model, and we have found that there is a very dramatic cause and effect. And what we’re looking at in the Pinnacle Model – the way it works is you’ve got capabilities on the X axis, and you’ve got outcomes on the Y axis. And what you’re looking for is a nice correlation that goes from lower left to upper right. And what we’re trying to do there is establish the things that make a difference. And so, what we did in the rest of the video was talk about those capabilities that made that difference.
So we think those are impactful items, and if people were endeavoring to execute on those items, they got the results they were looking for. So click the link, and take a look.
Shared services delivery has evolved to the point that supporting the enterprise’s innovation agenda is quickly shifting from opportunity to competitive imperative, and Shared Services Centers (SSCs) are exploring opportunities to bring more value to their parent organizations. Recent Everest Group research uncovers key issues for SSC leaders to consider has they make this vital shift.
Supporting enterprises’ innovation agendas is no longer simply an opportunity for in-house shared services centers – what we call global in-house centers (GICs); it’s fast becoming a competitive imperative. And, contrary to popular perception, cracking the innovation code requires much more than just novel ideas. Success entails boarding the right people on the bus, gearing them up with the right mechanisms to drive agile decision making, and reengineering the organization’s cultural DNA to foster innovation. We’ve developed a simple approach that will help you solve this complex problem.
Let’s take a look at the three components.
Innovation is not the product of logical thought, although the result is tied to logical structure – Albert Einstein
The first element is formulation of the right mechanisms to evangelize innovation initiatives. It requires the right idea generation mechanisms to harness unique ideas from both internal (GIC and parent company stakeholders) and external (including startups, academia, and service providers / specialists) ecosystems. A critical part of this is evaluating the strategic rationale for the partnership. While some shared services centers partner with third-party providers and start-ups for talent augmentation and skill acquisition, others leverage the connections to develop domain expertise or increase the speed of innovation.
Another essential component, specifically for GICs, is the right funding mechanism. While we see most shared services centers carving out a separate fund for innovation (which is part of the overall GIC CEO budget), we are increasingly seeing them push for a global/centralized fund where the innovation team within the center operates as an extension of the global innovation team(s), and is funded by centralized global venture funds / programs. For select initiatives, we have also seen GICs securing funding from business units and driving project-based innovation initiatives.
The third component here is timely deployment of robust governance mechanisms. Shared services centers need to adopt a disciplined approach to rigorously track performance and incorporate remedial feedback on a continual basis. This not only helps to assess the effectiveness of activities, but also guides allocation process for resources, and helps assign accountability for actions/responsibilities.
Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about the people you have and how you’re led – Steve Jobs
Involving the right people in the right team structure is the second critical component. Leading GICs involve stakeholders from different parts of the organization, i.e., functional and business teams, central innovation groups, R&D departments, and corporate teams to invest time in exploring adjacent and transformational opportunities. This helps in cross-pollination of teams and enables development of a holistic solution in an accelerated go-to-market timeframe. While we have seen varied designs for innovation teams (based on organizational fit and business alignment), the common thread is the focused top-driven approach to creating structural changes, supplemented by continuous support from middle management to ensure smooth implementation.
Another key initiative leading centers are taking is remodeling their existing talent practices. They are now shifting their focus from hiring for specific “skills” to hiring for “learnability” / “thinking skills”, i.e., the ability to innovate. They are incentivizing innovation, and providing special recognition for outside- the-box thinking. We are also seeing strong innovators recalibrate their existing performance measurement metrics to align with the impact generated against the business objectives.
“Innovation is not something you do for one afternoon a week, it’s got to be in your DNA” – Jasper de Valk and James van Thiel, Google
The third principal tenet to ensuring foundational success on the innovation journey is dedicated investment in developing a customer-centric culture with active CXO-level participation. Shared services centers are deploying multiple tools to reengineer their DNA and develop a culture that breeds innovation. Most successful examples include: gamification of programs and distinctive recognition for positive reinforcement; stimulation of an experimentation mindset and instillation of risk appetite; and adoption of flexible employment models, including remote working, crowdsourcing, and open innovation.
Although new technologies are path-breaking, we believe that the key to a GIC’s success is incremental innovation. They should keep testing small-scale POCs to demonstrate end-client value and build credibility. Successful implementation of pilots can help them instill confidence among parent stakeholders, and ensure adequate support and funding for much larger scale initiatives. This process also presents centers with an opportunity to course-correct early and drive/lead enterprise-wide digital initiatives.
If you’d like detailed insights and real-life case studies on how GICs have effectively driven the innovation agenda for their enterprises, please read our recently published report – Leading Innovation and Creating Value: The 2019 Imperative for GICs. And feel free to reach out to us at [email protected] to explore this further. We will be happy to hear your story, questions, concerns, and successes!
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