Real Life Examples: the Shared Services Fiasco

Real Life Examples:  the Shared Services Fiasco 

A long time ago in a far-away land, I was a Pioneer member in the establishment of a Shared Services Center for Accounting (let’s call it SSC) in Buenos Aires, Argentina. The SSC was to replicate the successful model from the Philippines, which was were The Top Leaders where coming from. The General Manager (GM) was an American (apparently with German background) who had lived in the Philippines for 10 years; the Operations Manager (OM) was a Philippine woman; and the HR Manager was a local (Argentinian).  The Pioneer team was composed of 8 Team Leaders, all with background from Big 4 Accounting Firms. The goal was to outsource the operative part of the Accounting Department from other countries in Latin America to Buenos Aires; the most analytical positions would remain at the head offices though.  

Now consider the situation. Outsourcing means costs reduction and lay-offs in the head offices. The Managers want to keep their headcount, a personnel reduction means less power for them and they will of course fear that they are next on the list. To resist, the managers will keep not the most qualified resources of their staff, but those that are most loyal to them. The situation in the job market is important as well. If there is a good market, the resistance will not be so strong. If the employees evaluate that it will be difficult to get a similar job offer if they are laid off, they will cling to the positions. Now this company had a very interesting situation. The CFO for all the Latin-American was a Colombian who was based in Florida. All the Top Managers in the Caribbean Region where Colombian. This secured him politically speaking, since they all responded directly to him. The restructuring meant of course a weakening of his position of power, having to share it now with offices thousands of miles away which would politically respond to another umbrella under the corporation.    

The Business Model from the Philippines, sponsored by the GM and OM, was a complete fiasco. In the Philippines, people work 12 to 14 hours a day with a smile on their faces. In Argentina, more Spanish and Italian culturally speaking, people do work many hours but they will demand a minimum of working conditions. Also, consider that the Philippines37was 300 years under Spanish rule, and was liberated by the USA in WW2. They have a very positive attitude towards Americans since they see them as their saviors. This is not the case in Latin-America where Americans were behind dictatorships that virtually destroyed the region (as explained in my previous book “Revolution 4.0 and the Man of Tomorrow”). Bad feelings persist even today against the Gringos (short for “Green Go Home”, as in the Green Berets the soldiers). By this I mean a Gringo cannot expect to get the same blind obedience in a country like Argentina as they did get in the Philippines. The GM didn’t see this, and thought of himself as a sort of messianic figure. He did not like the fact that the people were resisting his dictatorial leadership style, and was surprised at the high level of emotions displayed by Argentinians. He also did not understand how people wanted to have Easter holiday, work 8 hours, get paid for overtime, get better salaries… He did not confront the people directly. He would send the HR or OM to do the dirty work for him. 

Every week the leadership team had meetings. We expressed our concerns regarding personnel retention. We all knew that rotation would be high in the current conditions. I remember the GM’s exact words: “If this is so bad, why have only 5 of our 60 employees left us? How do I explain this to my boss? How do I not know that this is a complot to get us to pay more salaries?”. As long as rotation levels were low, there would be no action take from Management. The GM was all about keeping the costs down, but did not seem to have a long term perspective. He did not see the resources as an investment and discounted that there would be high rotation levels anyway. I admit he was clever. It was not him who was going to train the new employees but us the Team Leaders, so there was no real additional cost for the company since we did not get paid overtime.  The first wave of candidates who were incorporated in Buenos Aires, including myself, were 8 members of a Pioneer Team all with backgrounds from Big Four Accounting Firms. The second wave was a group of less experienced accountants from different companies. All in all, these totalized 30 people. Now consider that at the interview these 30 people thought that they were joining a top class company with good working conditions, benefits, etc. Lack of clarity in the selection process as to what was to come would play against us, and it is always a key component to a successful recruiting process. 

The first project involved the migration of processes from Colombia to Buenos Aires and I participated as a consultant. I responded to one of the Pioneer members who was in charge of the Internal Accounting (IA) department composed by 4 people, although I also worked closely with another Team Leader responsible for Financial Accounting for Colombia. We completed the first migration successfully but with too many turbulences. The Go Live date was planned for Easter and a group of members of the accounting team “rebelled” demanding overtime pay if they were to work on a sacred holiday. They got it their way but were “black listed” by the HR Manager. The Team Leader for Financials set a bad example for the rest of us by working 72 hours in a row (he even had heart issues because of this). Astounded by the situation I stepped up and asked to take the lead for the Mexico Project. I thought the issues came from the inability from the Team Leader to confront and thought that I could successfully create and environment were people would work 8 to 10 hours a day.

I travelled to Mexico together with one of my colleagues from the IA department, who I will as of now call Number 2. She responded politically to the IA Team Leader and not to me. This came as an issue I had to work around. I could not of course get rid of her since she absorbed the knowledge for the Accounts Payables process. The HR Manager aligned to the IA Team Leader, who appeared as successor to the OM once she went back to the Philippines. A strong division was formed, an internal struggle. On one side, my Philippine boss and her group of 7 leaders (including myself). On the other side, the HR and the IA. The GM was between these two groups. Openly, he showed himself in favor of an 8 hour working day and said that the working culture would come from the people themselves. Secretly, he was only concerned about the costs and expected to squeeze the employees as much as possible.  

We hired 4 unexperienced accountants to complete the Team. We were then 6, including myself and my Number 2. I followed a Team Building model similar to what is described by Bruce Tuckman. This came to fantastic results as to group engagement. Once there an environment of mutual trust is created, things flow naturally. Consider that the 6 people of the Mexico office were replaced by 6 inexperienced people in Buenos Aires. Some of the people in the Mexico office had 20 years of experience. Our learning curve was going to be steep.  

Our first challenge came within invoice processing. We were supposed to process 1500 invoices a month. In the first 3 weeks, we received only half of that. I talked over the phone many times demanding these invoices but they never came in time. Half of the amount of invoices where sent over the last 5 days. According to our Service Level Agreement, we were supposed to cut processing 48 hours before the last day of the month. We stayed overtime the last few days to accelerate processing, and then I gave the instruction to cut processing, do an accounting provision and continue the processing the next week, upholding the Service Level Agreement. My boss (the OM) got angry at me and overruled my instruction. She threatened to fire me if we didn’t stay at the office until those invoices were processed. I told her about making an accounting accrual and continue processing the next month, but she did not seem to understand what that was.  

Under threat, we stayed until 6 am processing those invoices. The following week came the financial closing. Due to the Intercompany process that was done at a mixed pace together with the Mexico office, we had to stay until 6 am again. My team and myself were exhausted. It was not any better for the other teams. On it’s Go Live, the team leader for Financials for the Colombia project worked 72 hours in a row and almost got a heart attack. My boss was always using him as an example of a role model to follow. He was clearly not MY role model. Later on, I found out the truth of what was happening. In Mexico, they got 15 people from different departments to process invoices into the system the last days of the month. We were never informed of this. In a different project, a Team Leader colleague found out that the invoices had been uploaded into the scanning system on the 21st of the month, but were only sent for processing on the 28th. They were obviously doing this on purpose to force the people in Buenos Aires to stay overtime and induce rotation. My colleague informed this to the GM but he pretended nothing was happening. Once, I met him at the bathroom, I remember his words: “I would rather not get involved in the Mexico Project, but I will if I must”. My boss was never physically with me; she had joined another project in the UK. And the GM hid under a table. I was left alone, a 27 year leading 5 unexperienced accountants to fight off Corporate resistance coming from the CFO for Latin-America for one of the largest Corporations in the world.  

I asked my boss for extra resources, we were clearly understaffed. She told me that she had told the GM about this and that she got his approval. They never came on time. I confronted the GM about this in one of the Leadership meetings and he pretended he had not heard anything about this. Someone was lying. I trusted my boss, since she told me that it was the GM that did not want to raise the salaries or hire more people to take care of the costs. I developed my own motivational theory, which I presented to the GM and HR manager several times. People look for a certain balance in companies, to achieve maximum satisfaction. You have to give them some, or many of these to keep them happy and motivated. This was my magic formula: 

  

Consider the implications of my theory. Employees look for satisfaction at work. We have already seen different motivation schemes and theories under Maslow and Herzberg. My theory implies that employees look for a balance between the Salary, Working Pressure, and the Tasks at hand. So if you have to work 15 hours a day in an Operational Position that does not add so much value to your career, you will expect a very high compensation package. On the other hand, if the tasks are interesting and value adding, the job is demanding but not enslaving, you might go for a lower salary than expected. Exposition and pressure also count. A CEO of a company will have to take many pressures in a demanding job. His tasks will be rewarding but his compensation must be high as well.   

To top that off is of course, the work environment. There must be a harmonic environment of people who trust each other. Lack of trust will cause unnecessary stress and tension. Creating a good work environment is solely the responsibility of Management, and should be number 1 of the preoccupations. That is what they are paid for. A bad work environment will always be associated with bad leadership and management. People need to trust each other to achieve maximum performance.  

As I said before, I presented my theory to the GM and HR several times. I mentioned that, if the salaries were so low, we needed to get more cheap resources to bring down the pressure. The tasks were also demotivating. Processing invoices is not something an almost graduated accountant wants to do for a long period of time. But in a good work environment and a 9 to 6 job they might hang around for a while even with a low salary. But now imagine what happens in a context of low salary, boring tasks and high working pressure. The work environment will obviously get resented, as the pressure itself creates tensions as to who is adding value and who is not for the team. If the team building phase was properly executed though, the bonds created within the team members will resist the storm and take off. However, the situation will not be tolerated indefinitely. 

The Management Team never understood my theory and never listened to me. My Team survived the Go Live successfully and some more. But the overtime continued. The project did not seem to be stabilizing any time soon, resistance from Mexico was very strong. After 3 months, 2 of my Team Members resigned the same day. I followed just a few days after, I did not have the energy to recruit new people and go through training again. I had already transferred all my accounting knowledge anyway and my Number 2 was in charge of training for Invoice Processing. My position was eliminated and Mexico project was absorbed into the Colombia project, which made sense to save costs. I kept in touch with some people and found out that of the original 2 first waves of recruiting which accounted for 30 people, only 10% were left after 2 years.    

Mexico was the last project for Latin-America, even if it was originally planned that the expansion of the SSC would continue; the Colombian resistance was too strong. It was just not profitable to migrate positions from Latin-America to Buenos Aires. The expansion continued towards the UK. These projects went by much more smoothly. I took a vacation before I returned to work. I was haunted for years as to why I left this company, which even today I find as a fascinating question. The triple front, a perfect storm, was too much to handle for a 27-year old: a Colombian network of Finance Managers, a Management Team that wanted to implement an Asian business model in a Southern European country, and my treacherous Number 2.  I learned an amazing lot from this experience and am very grateful for it. But as any experience it is best to take the best from it and move on with your life.