GBS Organzation Design and Talent Development

Global Business Services Executive Insight I The Hackett Group I 1© 2016The Hackett Group, Inc.; All Rights Reserved. | ACGP0009
Global business services:The evolution
of organizational designs
Allow GBS deployment strategy and value proposition to drive
organizational design
Organizational structure is one of five main components of the overall design of the GBS
strategy and operating model (Fig. 1). To design the model logically, each component
should be addressed in sequence. Decisions made in each subsequent step are
dependent on the choices made before it.
By Martijn Geerling andTony DiRomualdo
Certified Global Business Services Professionals
Global Business Services Executive Insight
Management Issue
April 2016
Executive summary
Most multifunction global business services (GBS) organizations are designed in a way that aligns the relationship
between the center, the business services functions (such as finance, HR, IT, procurement, supply chain) and the
business units. This design may be the result of deliberate choice or incremental decisions over the years. While the
GBS model is a well-established approach for improving the efficiency and effectiveness of business service delivery,
designing an organizational structure and reporting relationship that satisfies the needs of all stakeholders, yet allows
the GBS to act as a transformation engine for business services functions, can be a challenge.
Research by The Hackett Group reveals that companies are implementing one of three distinct organizational
structures to reconcile the fundamental trade-offs between competing interests. In this report, we examine the key
characteristics of each approach, along with their advantages and disadvantages.
Key takeaways:
• Three GBS organizational designs are prevalent: the integrated model, in which resources are located within and
report to the GBS; the infrastructure model, in which resources are located in the GBS but report to a corporate
function; and the combined model – a mix of the integrated and infrastructure models.
• There is no one-size-fits-all GBS organizational design; a successful design reconciles the sometimes divergent
priorities of the GBS, the functions, the business units and the enterprise.
• Organizational designs evolve as strategies and value propositions change and thus require constant review and
recalibration.
Evolving organizational designs in the world of global business services (GBS)
can help GBS leaders reduce friction from competing interests over resources
Com
plim
entary
Research

1. Mandate: The design starts with a clear mandate for the GBS mission and objectives
as these align to broader functional and enterprise goals. Often, the initial goal is cost
reduction and/or service improvement. As the GBS proves itself through performance,
the mandate will shift to higher-value benefits through new capabilities like analytics
and enablement of strategic business initiatives, such as entry into new markets and
integration of acquisitions.
2. Deployment strategy: Next is determining the value proposition – e.g., cost leader-
ship, compliance, operational excellence or customer intimacy – that will enable the
GBS to best meet functional and enterprise goals.
3. Service portfolio: This step involves defining which processes and activities will be
the responsibility of the GBS and where they will be performed, from both a geograph-
ic (global, regional, local) and make/buy perspective (in-house/captive versus external
vendor).
4. Organization design: The choice of value proposition for the GBS influences the orga-
nization structure needed for successful execution. Budget ownership – that is, report-
ing relationships and control over resources – must strike the right balance between
the goals and expectations of the enterprise, the functions served, and the GBS itself.
5. Enabling capabilities: Finally, the GBS management and performance-enabling capa-
bilities must be chosen. These include service management approach, process owner-
ship model, talent management, technology and process improvement methods.
FIG. 1 GBS strategic design choices
Source:The Hackett Group
What is the value of GBS?
What is the primary strategy to deliver
value through GBS?
Which capabilities are required to
manage GBS service delivery and
create value?
Which services should be delivered
through GBS?
What is the optimal location structure?
Are GBS services better done in-house
or outsourced?
What resources should be located in
the GBS?
What reporting relationships will best
balance the needs of the enterprise,
functions and GBS?
ENABLING
CAPABILITIES
ORGANIZATION
DESIGN
SERVICE
PORTFOLIO
DEPLOYMENT
STRATEGY
MANDATE
Key questions Main relationships and dependencies
Choice of value driver influences
choice of deployment strategy
Choice of value
proposition
influences
operating
model choice
Choice of sourcing
model influences
service management
model design
Choice of
deployment
strategy influences
service portfolio
choices
Choice of
operating
model influences
service
management
model

As GBS organizations evolve from single functions and transactional work to integrated
business services, knowledge and skills become more vital than ever.The Hackett
Group’s research indicates that talent is the single most important critical success factor
of GBS transformation and operational performance.The GBS organizational design
transformation discussed here is no exception.The GBS strategic design choices shown
in Fig. 1 call out talent management as one element in the final phase of enabling
capabilities definition.
Although talent needs must be addressed as an integral part of organizational design
and transformation programs, talent management is not just a one-off project integral
to such transformations. GBS organizations must institutionalize a talent management
capability to continually develop talent as business needs and the available pool of talent
changes; as technology, sourcing models and best practices evolve; and as the GBS itself
progresses to higher levels of maturity and expands the scope of its service portfolio.
On the basis of our experience helping to implement transformations across industries
and regions worldwide, The Hackett Group has developed a framework that can help
GBS leaders define the talent management process within their areas. The process has
four critical components:
1. Identify talent needs
2. Acquire and staff talent
3. Drive performance
4. Develop talent
Developing a holistic GBS talent management capability requires an understanding of how
these processes are interrelated and work together. As GBS organizations are undergoing
continuous change, the need for GBS talent development is becoming continuous in
nature as well. GBS staff needs to have access to learning and development programs
that enable them to keep their skills current.These programs need to be differentiated
and tailored to the needs of GBS staff at different levels in the hierarchy.
GBS organizational design and the
talent imperative

Organizational design: A tool to balance trade-offs among competing
interests
Implementing a GBS operating model beyond a single-function, transactional shared
services model transcends the boundaries of functional ownership and impacts the
enterprise operating model. The principal aspects of GBS organizational design to
consider are:
• Control over resources. Reporting relationships are strong indicators of control. Tradi-
tionally, business units or corporate functions directly controlled resources. However,
with GBS groups increasingly absorbing activities from BUs as well as from the corpo-
rate center, control structures are changing.
• Geographical structure. Companies have been gradually moving transactional activi-
ties to low-cost geographies to take advantage of labor arbitrage opportunities. Many
global entities have established regional hubs to cost-effectively align more closely
with stakeholders.
Regardless of the organizational design, friction is often present as a result of differing
objectives and incentives between principal elements of the enterprise operating
model (Fig 2). Careful design of these elements can mitigate the impact of friction on
the overall effectiveness of the model but will never remove the tension entirely. The
question is, how can the GBS create a productive relationship with the functions and
business units it serves?
Implementation of a GBS model involves several compromises that must be made
through the organizational design. Consistency of cost and execution must be balanced
with alignment to stakeholders’ goals and responsiveness to their changing needs.
Leveraged GBS models, in which resources that are narrowly focused and controlled
by functional and business units are shifted into a single business services function
serving the entire enterprise, are made more difficult when close collaboration with
stakeholders, quick response to changing customer requirements, or the need for the
business to innovate are high priorities. A key test of GBS management is increasing
responsiveness without compromising the benefits of resource leverage.
Virtually every multifunction GBS will ultimately face this challenge at some point in its
evolution. Adjustments in organizational structure may be made to balance improved
alignment with customers with the benefits of standardization and simplification of the
enterprise operating model. Organizational politics come into play as well, for example
when functional leaders and other stakeholders resist giving up control over resources.
They would rather control resources through explicit organizational authority and
reporting relationships than through mechanisms such as service level agreements and
governance committees.
FIG. 2 Enterprise operating model: Principal organizational components and design principles
when leveraging GBS
Retained activities,
providing business
services to business
units locally
Shared entity, providing
business services (e.g.,
ﬁnance, HR, IT, procurement
supply chain) to multiple BUs
and corporate center
Sets strategic direction,
allocates resources and
exercises control over
enterprise goal
achievement by BUs
Corporate
center
Global
business
services
Function
Business
units

This tug-of-war over control of resources may not end even after the GBS has been
established. Many of the largest and most progressive groups have strong leaders who
operate well within the organizational landscape. In some cases, however, when these
leaders move into other roles or leave the organization, the GBS is restructured.
Three GBS organizational designs
There are three primary organizational designs that define the relationship between the
GBS and its stakeholders (Fig. 3):
1. Integrated model: Both transactional and knowledge-centric services report to the
GBS leader and may have a dotted-line relationship with the business function leader
(CXO).
2. Infrastructure model: Both transactional and knowledge-centric services report to the
function leader (CXO) and may have a dotted line to the GBS leader.
3. Combined model: Transactional services report to the GBS leader and may have a
dotted line to the function leader (CXO), while knowledge-centric services report to the
function leader and may have a dotted-line relationship to the GBS leader.
GBS organization design is influenced by several factors:
• Business model and philosophy: Companies with differing revenue models and a
philosophy of decentralized control by either revenue-generating BUs or geographies
may be less likely to adopt a common, integrated GBS operating model.
• Company size: Large GBS groups are able to create scale even when using an
infrastructure model, forgoing some of the benefits of functional or cross-functional
collaboration and a common GBS service management approach.
• Variation in function maturity: Often GBS units are created by combining individual,
function-specific shared services organizations. Adoption of a unified approach may
first require changes in other elements of the service delivery model, delaying or pro-
hibiting adoption of a common model.
• Activity type: Our research shows that, regardless of function, there is a greater
tendency to adopt an integrated model for transactional activities than for higher-value,
knowledge-centric activities.
FIG. 3 Variations in GBS and function reporting lines, by organizational design
Integrated model
CXO GBS leader
Services
CXO GBS leader
Services
Infrastructure model
CXO GBS leader
Services
CXO GBS leader
Services
Combined model
CXO GBS leader
Transactional
Knowledge-
centric

GBS organizational designs: Different reasons, different results
About half of GBS organizations have adopted a combined model, with the remainder
roughly split between the integrated and infrastructure models (Fig. 4). The latter are
most prevalent in Stage 1 GBS organizations. As organizations evolve, a more nuanced
model is needed to effectively deploy strategic services, resulting in greater adoption of
a combined model.
Each of the designs reflects different importance levels of goals and different
effectiveness levels of achieving these goals. Effectiveness varies significantly by
model (Fig. 5). Organizations with an integrated organizational design emphasize
meeting enterprise and BU goals and achieving cost savings and are very effective in
both respects. This model is also quite helpful in achieving compliance goals and in
contributing to enterprise cost agility. This suggests that organizations that have fully
implemented the integrated model are more committed to the advantages of global
leverage and investments in developing the capabilities of the GBS.
FIG. 4 Breakdown of GBS groups by organizational design
Source: GBS Performance Study,The Hackett Group, 2015
Overall
Stage 1
23%
32%
42%
26%
51%
26%
Stage 2
23%
54%
23%
Stage 3
100%
INTEGRATED INFRASTRUCTURE COMBINED

Conclusions and recommendations
Organizational design is an important mechanism for balancing the frequently divergent
interests of the enterprise, the business units, the functions and the GBS. Each of the
three models used has distinct advantages and disadvantages (Fig. 6).
FIG. 5 GBS goal importance vs. effectiveness
Source: GBS Performance Study,The Hackett Group, 2015
Importance Effectiveness
COMBINEDINFRASTRUCTUREINTEGRATED
Be valued as a
business partner
Contribute to
enterprise agility
Contribute to effective
enterprise compliance
with ﬁnancial and operational
rules and regulations
Developing a high-quality
service portfolio
Reducing operating cost
of GBS
Alignment with corporate
and BU strategic goals
None Minor Major CriticalModerate Very
ineffective
Ineffective Effective Very
effective
Mixed
FIG. 6 Advantages and disadvantages of different GBS organizational designs
Integrated design Infrastructure design Combined design
Advantages • Economies of scale
and expertise
• Easier standardization
• Scale enables
investments in talent
management, service
management and
technology
• Enables more seamless
cross-functional service
integration
• Better functional
process integration
• Better alignment to
functional priorities
• Allows functions to
own transformation
initiatives
• Balance of scale and
skills economies
with alignment
to enterprise and
function/BU priorities
• Sufficient scale to
enable investments in
talent management,
service management
and technology
Disadvantages • Stakeholder resistance/
competing stakeholder
demands
• Function integration
challenges
• Friction between enter-
prise and function/BU
priorities
• Limited resource scale
and leverage
• Lack of scale inhibits
investments in talent
management, service
management and
technology
• Some limitations on
leverage
• Added management/
governance complexity

The integrated model is well represented in Stage 1 and Stage 2 organizations and is
the best model for delivering enterprise-level alignment, cost and agility benefits. It is
least effective in enabling customer intimacy strategies and partnerships with individual
business units and functions.
The infrastructure model is most prevalent in early Stage 1 GBS organizations and is
adopted in instances where close alignment with functional agendas and integration
with functional processes are top priorities. It is the least effective of the three models in
delivering cost, compliance and agility benefits.
The combined model has been adopted by a majority of GBS organizations and is the
preferred design in organizations in Stage 2 and Stage 3. It is proving to be a better
model than others for balancing enterprise and functional trade-offs while still producing
substantial cost, quality, agility and customer intimacy benefits.
Organizational design issues can be tricky and should be addressed within the broader
context of the GBS value proposition and service delivery strategy. Consider the
following steps with any design or redesign effort:
• Adopt the best-fitting design based on the GBS mandate and deployment strat-
egy: Design reporting relationships between the GBS, functions and BUs that have the
best chance of realizing the desired GBS value contribution.
• Take a pragmatic approach: Be flexible and prepared to modify the organizational
design as more functions and activities are moved into the GBS and expectations for
value contribution increase.
• Conduct a periodic strategic review of the GBS organizational design integrated
with the company’s enterprise strategic review process: Assess model perfor-
mance and alignment in the context of current enterprise and functional goals.
Additionally, GBS organizations should develop and institutionalize a holistic talent
management capability that supports its needs as the GBS maturity level and
organizational design model evolves. GBS organizations seeking to expand the scope and
sophistication of their services must develop the skills of their staff to be able to support
and deliver these services. This requires training and career development programs
focused on the skills, knowledge and experience needed to take on more sophisticated
roles within the GBS.
Related Hackett Research
“Anatomy of a World-Class Global Business Services Organization,” April 2015.
“Global Business Services Redefined, Part 1: Growth and Expansion of the GBS
Depends on Evolving Its Operating Model,” July 2014.
“Global Business Services Redefined, Part 2: How to Expand the GBS Value Proposition
to Meet Higher Stakeholder Expectations,” October 2014.

About the Advisors
Martijn Geerling
Associate Principal and Practice Leader, GBS Advisory Program, EMEA and Asia
Mr. Geerling has 15 years of consulting experience in strategy
development, business process redesign and implementing sourcing
strategy, both shared services and outsourcing. During this time he
has worked with business services organizations of leading global
companies across various industries. Prior to joining The Hackett Group,
he worked at KPMG Consulting assisting clients in Europe and Asia with
finance function transformation, business process redesign, and risk and compliance
management.
Tony DiRomualdo
Senior Research Director
Mr. DiRomualdo has over 20 years of research and advisory experience
in HR, IT and business strategy. His work has focused on areas including
talent management, organizational structure and governance, technology,
outsourcing, and globalization strategies and practices. Mr. DiRomualdo
has directed several ground-breaking global studies, producing insights
and tools used by major corporations worldwide. He is the author of
numerous reports, case studies and articles appearing in prominent business and
academic publications including MIT’s Sloan Management Review. Before joining
The Hackett Group, Mr. DiRomualdo previously headed his own research firm and ran
research programs at major management consulting firms.

This publication has been prepared for general guidance on the matters addressed herein. It does not constitute professional advice.
You should not act upon the information contained in this publication without obtaining specific professional advice.
© 2016The Hackett Group, Inc.; All Rights Reserved. | ACGP0009
For more papers, perspectives and research, please visit: www.thehackettgroup.com. Or to learn more
about the Association of GBS Professionals and its talent management programs, please contact us
at +1 866 614 6901 (U.S.) or +44 20 7398 9100 (U.K.).
The Hackett Group (NASDAQ: HCKT) is an intellectual property-based strategic consultancy and leading enterprise benchmarking and best practices
implementation firm to global companies. Services include business transformation, enterprise performance management, working capital
management, and global business services.The Hackett Group also provides dedicated expertise in business strategy, operations, finance, human
capital management, strategic sourcing, procurement and information technology, including its award-winning Oracle EPM and SAP practices.
The Hackett Group has completed more than 11,000 benchmarking studies with major corporations and government agencies, including 93% of
the Dow Jones Industrials, 86% of the Fortune 100, 87% of the DAX 30 and 51% of the FTSE 100.These studies drive its Best Practice Intelligence
Center™, which includes the firm’s benchmarking metrics, best practices repository, and best practice configuration guides and process flows. It is
this intellectual capital that enablesThe Hackett Group’s clients and partners to achieve world-class performance.
Email: info@thehackettgroup.com
www.thehackettgroup.com
Atlanta +1 770 225 3600 London +44 20 7398 9100 Sydney +61 2 9299 8830
Atlanta | Chicago | Frankfurt | Hyderabad | London | Miami | Montevideo | New York | Paris | Philadelphia | San Francisco | Sydney | Vancouver
This publication has been prepared for general guidance on the matters addressed herein. It does not constitute professional advice.
You should not act upon the information contained in this publication without obtaining specific professional advice.
About Certified Global Business Services Professionals
The Hackett Group and the Chartered Institute of Management Accountants (CIMA) have
jointly established the Certified Global Business Services Professionals program.
Together, they are addressing the need to provide clear, consistent and structured
professional certification, talent development and lifelong learning for the global business
services (GBS) and shared services sector.
The unique and pioneering program combines the strengths of CIMA’s global
professional development accreditation capabilities with The Hackett Group’s GBS best
practices intellectual property that defines how to achieve world-class performance.
Rooted in the proven best practices that underpin the professional skills and knowledge
needed to achieve and maintain world-class performance standards, the program offers
recognition and accreditation in the form of global designations for world-class multi-
discipline GBS organizations, complemented by current research and lifelong learning.
A programme from

GBS Organzation Design and Talent Development

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to GBS Organzation Design and Talent Development

Similar to GBS Organzation Design and Talent Development (20)

GBS Organzation Design and Talent Development