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Operational Excellence

Pitfalls of Globalization

Spreading Shared Services Beyond National Borders

Patricia Tyre wrote, “Although shared services originated in the United States, it is within the global marketplace that it has grown in sophistication. American companies with overseas manufacturing or service operations are now in direct competition with Europe and Pacific Rim companies in the drive to migrate their organizations to an effective shared services model.”

Patricia Tyre, “Pitfalls of Globalisation: Spreading Shared Services Beyond National Borders,” Shared Services News, Volume 3, Issues 4 & 5, July/August 2001, pp. 28-29.

Implementing shared services outside of one’s geographical or cultural boundaries is not a standard “plug and play” exercise. Woe to the CEO or shared services project manager who thinks that what works in one part of the world is easily translatable to another. Implementing a shared services strategy, with concepts such as efficiency, service delivery/responsiveness, performance measures, self-directed teams and continual improvement, may end in failure unless thorough consideration is given to strategy, process, organi-sation and technological and knowledge issues.

This article highlights some of the more critical strategic, organizational and technological errors incumbent in global shared services projects.

Going global without project management procedures.

A globalization team might create documents using different word processing and graphics program resulting in incompatibilities and the inability to easily understand the business case or business model. When critical persons on the team have to struggle over words and phrasing, commitment to the project is sacrificed and performance is at risk. Globalization project management without standard automation, standard communication practices and standard delivery quality is prone to failure. For an effective project, form a diverse, cross-functional group including subject matter expert contributors, information technology professionals, regulatory in-country office representatives and globalization consultants. Integrate the project with opportunities for checking cultural clarity and allow flexibility for new laws or locales, or reorganizations.

Globalising without first internationalizing effectively.

Effectively implementing a shared services center across multiple languages and cultures requires significant preparation to ensure that the globalization of the processes, policies, human resources and critical applications will fully support content in multiple languages and cultures. This preparation, called internationalization, avoids the following pitfalls: the difficulty of localizing sites in Asian countries due to incompatibility with the written character sets; failure to handle bi-directional languages (eg, that read from right to left, like Hebrew or Arabic), and failure to consider currency variances.

Underestimating the political turbulence that may exist.

National or economic sources may lie at the root of feuding functional executives, active subversion or failure by one or more business units to participate with a shared services implementation. Sometimes it is hard to understand what motivates these actions. Whatever the source, immediate intervention and re-integration of the sponsors is required to reinforce the strategy. With everyone trying to steer the shared services operation to optimize his or her own agenda, global suboptimisation will almost certainly occur.

Under-communicating & contracting translation on the cheap.

Although the concept of shared services is not new, it represents an overwhelming change to business units. Development of a global communications plan should be a priority. The structure and content of the communications plan should pass the approval of country representatives before it is activated.

Current machine translation technology can produce comical or downright disastrous results which don’t address the nuances of varying languages. Use professional translators who are natives of the target locale. Ideally, they should know enough about the initiative to communicate your key messages.

Ignoring local regulatory or statutory requirement for commerce.

A delicate balance exists between commercial progress, operational effectiveness, and regulatory requirements. Petitioning local or centralized governmental bodies for relief can absorb an inordinate amount of time.

Form a team dedicated to examining these topics. Allow them the latitude to leverage the technology to find solutions. There are answers—they just might not be immediate or direct.

Not recognizing local employment protocols and organizational design norms.

Each country—maybe each business unit—has its own structures and policies regarding treatment of employees. Implementation of a shared service operation will, in some way, affect everyone. Work closely with the HR personnel in that business unit, or that country, to understand the requirements, especially the legal implications, before any action is taken. This will affect the business case and the implementation plan.

Not focusing on globalisation technology.

Some multinational companies have translated their shared services applications into multiple languages for distributive information. However, technical upgrades can cause severe setbacks, because of inadequate technological globalization infrastructure. This is never truer than in the development of global self-service HR web-sites, where the direct value is almost person specific. Be sure that your ERP and legacy applications can be translated efficiently, as required.

Use globalization software that has the scalability to handle concurrent content changes and review by hundreds of global site contributors. Also, look for easy-to-use collaboration features, the most advanced linguistic technologies, and the ability to access content from legacy applications.

Ignoring the “last step” of global commerce.

Business success depends on consideration of tax, shipping calculations, currency and payment methods. For the EU, the primary consumption tax is VAT, implementation of which varies among member states. There’s a trade-off between how many currencies a company can accept and how many its systems can support. Shipping cost calculations are complex—consider specialty software. Cultural differences determine payment preferences. Credit cards, procurement cards, debit cards, direct billing and cash vary across countries.

Ignoring the risks

“Risk” represents the greatest uncertainty. It manifests itself at a variety of levels, eg: executive risk, project management risk, technical risk and organizational risk. Full risk identification and disclosure is vital for a successful shared services implementation. Also important is an environment which escalates potential risk issues and mitigates them appropriately. Convening a risk advisory team as part of a global implementation may prevent serious peril.

While some of the above recommendations may seem to further complicate an already difficult endeavor, you cannot afford to overlook them in your implementation plan. Failure to escalate these issues may threaten the likelihood of success, when you could be well into project implementation.

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