Can Value Engineering of an SSC Help Save Jobs?

It can! And, it did!! For one of our customers.

The key principle behind an M&A is to create shareholder value. However, an M&A creates a tremendous amount of turbulence. Regardless of the reasons and the type of M&A, the whole theory of realizing benefits through M&A is dependent on how successfully the strategy is implemented. Apart from the benefits realized through the implementation, there are definitely elements of truth – such as restructuring, leading to jobless employees.

One of my value engineering studies for a customer actually saved jobs.

I always wondered if layoff effects of M&A could be minimized – until I did a value engineering study for one of our customers in Pharma space – a company called Pharbax (client name changed for confidentiality). Pharbax got acquired by Snofax, forming a new $4 Billion plus entity. All Pharbax departments, including the Shared Service Center (SSC), were determined to prove their value, competing for mindshare of the new management.

Our company (Newgen) had performed an SSC (Shared Service Center) automation followed by centralization and standardization of business processes for Pharbax. We, at Newgen had also embarked on developing our in-house capabilities around value assessments with the goal to be recognized as a Value Creator by our customers. The need at Pharbax SSC presented a real opportunity. I really relished the opportunity – to examine a customer business and technology and find out if we had really made a difference.

Challenges and Methodology

The journey however was cumbersome. Many organizations fail to understand that value assessment engagements deal with multiple stakeholders across the organization. Furthermore, extracting value at multiple levels, cutting across multiple business functions and gathering organization sensitive data/information are substantial tasks, and Pharbax was no different.

Some of the key challenges I faced at Pharbax were:

• “Explain value engineering” – requested every stakeholder – “will it really help me showcase business value?” I was welcomed with skepticism and had to explain to every stakeholder what it was about.
• Fear & Uncertainty – what if the study backfired, and we were unable to show substantial value; what would happen then? Would all hard gained credit be lost?
• Getting the right data – Data is an essential asset of any organization. While Pharbax did have lots of metrics, it was really hard to get hold of ‘useful data’ – data that showed an impact on business performance.

So I handled the study constantly trying to move our customer stakeholders away from uncertainty and fear towards well defined methodology and structure. We deployed key measures as part of the Value Engineering to allay the challenges and reduce fears among stakeholders.

• Structured methodology – Deployed a 4 phased approach to conduct study with well-defined process steps and deliverables at each of the phase
• Predefined Outcomes – Developed predefined outcomes for each of the phases
• Socialization of outcomes with key stakeholders – Ensured socialization of outcomes at the end of each phase with key stakeholders for validation and to ensure expectation alignment.

Can ROI really be measured

I am of the opinion that real business impact can really not be measured. However, through the value assessment study, I could assist Pharbax SSC realize and demonstrate its potential at multiple levels. The study looked at the various processes (F&A) and how they had matured over the last few years. We looked at:

• Pharbax initiatives across departmental boundaries – HR, operations, services and IT – in all cases we found improvement in efficiency and effectiveness. E.g. Reward & recognition based on employee performances, establishing customer service center and integration of PO workflow and in all of these there were integrations with core IT systems.
• Accounts Payable process maturity – Organizations simplified and streamlined AP process at the start; down the line, AP process analytics provided excellent visibility as well as information for key decisions.
• Potential via Value Realization – The process maturity enabled through automation, integration and optimization enabled Pharbax realize operational improvements and financial benefits across the time period.

The outcomes of this study resulted in adoption of the target process and best practices across the acquiring organization. The entire team of Pharbax SSC became the core team enabling this adoption.

Though, there were other job losses at Pharbax, I am happy that value assessment engagement could not only help SSC demonstrate its true potential but also elevate our relationship to that of a value partner.

My Learning – It important to not only be able to create value but also to showcase value. And that is too often ignored.