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GPO: there are two sides to every process

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GPO: there are two sides to every process
In large businesses, where all processes are heavily siloed and separated, the need to create chains of processes that connect all tasks related to a given issue from A to Z (End to End — E2E) is clearly visible — regardless of the team in which these problems are solved.

On the one hand it stems from the need for employees’ development and creating awareness in which part of a bigger process they are — what information they receive and to whom they deliver the results of their work. It is important to understand where it came from, how it was prepared (built, bought, bred) in order to know how to process it, what to expect, why it is like this and not different, what are its properties, which of them can be changed and to which one should adapt. It is essential in order to have a better ability to work on a product that is in front of us.

On the other hand, in the commercial environment, in this part of our time that we can call the professional life, we are usually in the middle of various processes. As opposed to the so-called private life, where we are mostly consumers and end recipients, our job is to deliver. We are hence in a situation where we have a recipient of our work and it is good to know what their needs are; in today’s world changes take place rapidly, also those concerning preferences of the recipients of our work.

It happens in the production process (where do bauxite, caustic soda and diodes necessary for electrorefining of aluminium come from), in classic services (from what type of glass is the glass that we are to clean made of, what are the properties of the glass cleaner, at what time is it best to deliver sandwiches and at what time to deliver lunch sets), and therefore it also happens in the business and outsourcing services industry.

There is an evident tendency to monitor the capabilities and limits of suppliers, as well as the needs of the recipient of our work. It is a cultural change that started quite a long time ago, however, as it happens with cultural changes, it will take a lot of time before it can be said that a given company has gone from silo management to E2E management.

In the business services sector it additionally requires detachment from the traditional approach, where the finance department has dealt with everything related to money, the HR department focused on people, the purchase department handled everything related to receiving raw materials and products, and the sales department engaged in finding and serving a client. Even though everyone sees the connections between departments, individual parts of the company still focus on their traditionally understood areas. It does not matter that the HR department knows that in order to employ a person they need a permission for his remuneration and purchase of the equipment necessary for him if these tasks are still launched and carried out separately.

In many companies, it is still difficult to think that in the case of employment the first “E” (in E2E) appears along with a vacancy (or when a decision about creating a new post is made) and the last “E” appears when employee remuneration bank transfers are prepared, they have received their workspace (a desk, office supplies), as well as working tools (a computer with installed applications, all necessary access). Only then we can say that the process has ended. Only such understanding of the process will allow to say that the task is complete and that the needs of the internal customer have been met. It often changes the perspective. Sometimes, in order to start working like this, all you have to do is change the order of tasks, remember to start some things beforehand. Sometimes, however, it requires better cooperation between teams or even some changes in internal policies and regulations.  Without proper changes the IT department cannot even start ordering a computer for an unemployed person (“a non-existent user”) and the purchase department cannot place orders for office supplies if the requestor does not appear in the cost structure. It is all easy to make up when the computer and pens can be bought off-the-shelf and the necessary access can be granted by a colleague next door. Most often, however, employing a person results in creating a few (a dozen or so?) requests, which will land up at the ends of different queues in different parts of the globe and which require time (to be processed). The full of enthusiasm and motivation newly-employed goes to, not always necessary, trainings (the time fillers) and weaves between copying machines and borrowed desks, while the supervisors navigate between user policy regulations, passwords and equipment use.

In some processes the need for changes and adjustment of policies and procedures goes much further. There are more and more movements that build bridges between fossilized production, purchase, sales and accounting department silos. They start to notice that the purchase does not end with the order being placed and that the sale does not end with the disposition to deliver a product. In international structures this task is hugely simplified by the process centralization in Shared Service Centres, in which process members work on the same floor of a building and can solve current problems on occasional (ad hoc) meetings. They can also exchange opinions, insights and suggestions over a cup of coffee in the kitchen. Such knowledge diffusion takes place if there are no antagonisms and changes are within the reach of employees. However, often the diffusion has to be aided as the changes concern distant local units, different regions, taking into account legal aspects, policies and regulations.

Hence the need for a position responsible for the process from the beginning to the end and empowered high enough to influence the organization on the global level. Such a Global Process Owner (GPO) impacts the organization by means of improvement and harmonization projects (unifying the approach), adjusts global policies, as well as controls indicators crucial for the company from the global perspective. They often manage a virtual team spread among the most important places in the world and have their collaborators and sub-process owners in particular regions.

A globally empowered GPO has also the ability to make global decisions, which gives a chance to eliminate mutually annulling activities. For example, owners of the procurement process, apart from ensuring the best compromise between the price and the quality of purchased commodities and services, also look after positive relations with the key company suppliers. It is not only related to the Corporate Social Responsibility (CSR) but also to care for maintaining the quality and timeliness of deliveries. This is also often reflected in ensuring that invoices are paid as quickly as possible. For the same suppliers the owners of the commitment and payment process, besides guaranteeing correctness of accounting and compliance with the fiscal and financial provisions, they secure the level of the company acting capital. Therefore, this translates into assurance of as late payment of invoices as possible, as well as increasing the Days Payable Outstanding (DPO) ratio. Although these two departments work in one purchasing process — from procurement to payment (Purchase to Pay — P2P) — their silo isolation and traditional division result in mutually annulling efforts. In fact, both teams work for the benefit of the company, however, when maximizing their efforts they create internal conflicts and misunderstanding.

How to avoid that? A GPO with CFO and O2C (Order to Cash) access will be able to strike an appropriate balance between the company policy and good practice in the sector, as well as ensure later on that all departments follow the top-down payment period.

The activities of the GPO dealing with P2P may not be sufficient to increase the level of the acting capital — apart from increasing the DPO it is also necessary to shorten the terms of loans for clients (reduce the DSO — Days Sales Outstanding). Here again, the risk of a conflict is eliminated by the GPO — this time handling the O2C (Order to Cash) — who will strike the right balance ensuring the appropriate capital level.

In companies of a scale which makes it impossible for all employees to comprehend all processes, the roles that control the processes top-down are crucial. One of such roles is the Global Process Owner who cares for the correct and optimal flow from the beginning to the end and therefore for achieving the strategic goals of the company.

Michał Ejchman
Program Manager & Senior Consultant Adaptive Group

 

Article originally published in the Outsourcing & More magazine, issue 42 (pages 38-41).

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