Case Study: Big AI
Big Problems with Big Al’s GBS
I had been anticipating the Tough Meeting with my new GBS boss at Big Al’s Aluminum Products Inc. for a few days now. I knew the meeting would be hard. What I didn’t know was what the meeting would be about. Was I going to be fired? Moved to another function? Given a different responsibility within Big Al’s Global Business Services (GBS)?
Change was in the air for Big Al’s GBS, and as VP for GBS Strategy and Operations it would probably start with me.
Introduction to Big Al’s GBS
Sorry, let me rewind a bit. I’m Rebecca Weismann, a 25-year veteran manager at Big Al’s. You all know Big Al’s I’m sure. They are a $10 billion company based in South Haven, Michigan. We make aluminum cans. Anywhere from 50-80% of the cans in any US household are made by us. We’re very focused – one product and one country. Big Al’s, founded by CEO Al Burton III’s grandfather, has been incredibly successful. Until now. Profitability has declined 90% over the past eight years. A new organization called Global Business Services was created three years ago to help reduce internal operating costs.
An ambitious new GBS leader, my previous boss, Jim Nakagawa, was hired. The new GBS organization took people, budget and work from Big Al’s Finance and HR functions and set about offshoring it to Mexico. Although GBS was able to reduce some costs, there was a ton of turmoil generated by this change, especially with the Controller of the company. So, when an embarrassing accounting error was encountered and had to be declared to Wall Street, Jim was fired. His job went to his political nemesis, the previous Controller of the company, and now my new boss, Finn Nance.
Big Al’s Needs to Fix the GBS Mess
Finn Nance (yes, that’s his real name; his parents had clearly been planning his career in Finance since his birth) had been in his new job for one month now. After some initial on boarding meetings with his new organization he had hired a Big Four Consulting firm, and spent most of his time externally on what other Shared Services organizations did. Most of us had been cut off from the Big Four firm’s work and from Finn’s external assessment.
The CEO had asked Finn to “fix the mess”. Whether that meant fix the workings of GBS or to disband GBS, was the big question. Knowing that Finn and Jim had been at loggerheads for the past three years, most of us believed that GBS would be disbanded.
Surprise at the ‘Tough Meeting’
When Finn popped his head into my cubicle at 5pm on a Monday, and said “Rebecca, I’d like to talk to you now if you have the time”, I steeled myself and followed him to his office. I was prepared for bad news. What I wasn’t prepared for was his next words, “Rebecca, I need your help.”
Finn leaned over his desk and said, “You need to keep this to yourself. When I first got this job, I was fairly confident that GBS was a mistake and had to be disbanded. But Al, our CEO, wanted me to keep an open mind and suggested that I hire the consultants. The Consultants have been very consistent and persuasive in their data that our problem hasn’t been with the idea of shared services but in the botched execution of GBS. I like to be data based. So, for the past month, I’ve met with three dozen leaders of shared services, consulting companies, shared services industry experts and technology gurus.”
Finn continued, “I’ve decided on two things. One, the consultants were correct. And two, that the reason why our GBS failed was because there’s mass confusion in the industry on what a proper, professionally run GBS is.”
Is There a Method to This Madness?
“Look”, he said, “I’m a Finance professional. In Finance, words and processes have clear standards. The GAAP defines standards for all accounting. A debtor is different from a creditor. Laws in the country and the world dictate what’s right and wrong.”
“Oh, I know there’s always the unscrupulous folks and the creative accounting, but that’s why we have “certifications” and audits. GBS, on the other hand, seems to be in the early stages of being a practice and therefore has unclear processes.”
“I talked to a classmate of mine, who is now the CEO of the country’s biggest bank. You know what she said? ‘We have not one, but several GBS’. Every function has its own GBS”. But another CEO said, “You have to consolidate all scalable work and the IT function into one GBS. Beware of any fragmentation”. I’m confused.”
“One GBS industry expert said, “GBS is a bit like the history of Europe. Groups come together into big unions or empires, and then break up. And repeat it over and over again”. That’s just ridiculous. That’s not an industry or business operating model, it’s political power play. That can’t be true”.
“On the other hand, I know that several companies like GE, Shell, GM, Boeing and others have changed their GBS models over the past two decades. Some sold their shared service centers, some restated their GBS organizations back into the Functions. They are all happy with their respective decisions, and yet they followed different strategies.”
“One GBS leader of a global food company swore by the use of the global BPO company Acme. Another GBS leader said that they chose not to use any BPO providers but have created their own offshore centers in Malaysia, Prague and Colombia because internal centers deliver better results. Again, there must be a method to such decisions.”
“Then there’s the variety of definitions for GBS itself. One Fortune 20 GBS leader said, “GBS is clear and simple. We deliver cost savings only. And that’s it!” Another said,”We deliver cost savings, value creation like Sales growth and asset efficiency and are considered to be the digital transformation engine of the company”. There’s a big variation in what type of work is moved to GBS as well. My feeling is that among the GBS leaders that I spoke to, it’s all political – all transactional work is moved to GBS when the GBS leader is a smooth political operator, but is not when they are not.”
“Rebecca,” he said, “I know there’s a method to this madness, but I need help to figure it out.”
Key Questions on Big Al’s GBS Strategy
Finn paused to sip from his water bottle, and I took the opportunity to shut my jaw from its open position. So, I was not being fired?
“I know the Consultants have their GBS model. Doesn’t that answer the question about the GBS methods and operating model?”, I asked.
Finn looked at me with a smile. “That’s just it. They do. And I also talked to a couple of their competitors. And those have their own models too. All three are conceptually correct. That’s like saying the VHS, Betamax and DVD standards are all conceptually correct. I don’t need a conceptually correct answer. I need an “applied knowledge” answer. I need to know the best GBS operating model. And I need to know how to “apply” it to Big Al’s. And that’s where you come in.”
“I’ve always been impressed with your judgment. You’re open minded, balanced and business oriented. You and I are going to work together on the next stage of my GBS recommendation. To start with, in the next week I need your help to answer three questions.
- What is the goal of having a GBS for Big Al’s
- Why are some GBS organizations incredibly successful and why do others fail?
- What’s the first thing I need to do to implement a highly successful new GBS model for Big Al’s.
“Rebecca” he smiled and said, “are you up for it?”
Instructions for pre-reading:
- Please read the case study carefully. What observations do you have from your own experience that would either support or invalidate Finn’s observations on GBS (in the middle part of the write up).
- Make your own notes on the 3 questions at the end of the write up. You’ll need to discuss this during the training.