Creating more value for the enterprise
In years past, global business services (GBS) leaders could concentrate on scaling services across functions to achieve a cost advantage. While still relevant, it is no longer sufficient as a primary focus as enterprise expectations of GBS continue to evolve and expand. Today, stakeholders expect excellent customer service, year-over-year improvements in areas such as productivity and quality customer experience, and insights from data that are focused on business enablement and create an enterprise competitive advantage.
The Hackett Group’s annual GBS Performance Study analyzes the performance advantage of Digital World Class GBS organizations – those that perform in the top quartile in both operational excellence and business value. In 2023, our study quantified year-over-year improvements in key dimensions that are significantly above those of the peer group.
Value beyond just a cost advantage
The GBS Performance Study found that the peer group is effective in contributing to cost avoidance and working capital improvement, but Digital World Class GBS organizations generate tangible value in more ways – for example, optimizing procurement spend, enabling restructuring and producing analytics for management decision-making. One of the most marked differences is in analytics for management decision-making. More than two-thirds (81%) of Digital World Class GBS organizations deliver “some” or “significant” improvement, compared to just 41% of peer group GBS organizations.
Strategic alignment with corporate and business unit strategic goals, cost leadership, and service excellence are GBS executives’ top three ambitions for 2023. Digital World Class GBS organizations are more effective than the peer group in meeting these and other top objectives. The performance gap between the two groups is particularly pronounced with respect to enabling corporate/business unit strategic goals and delivering digital transformation.
Why Digital World Class matters
Our 2023 GBS Performance Study found that Digital World Class GBS organizations have more mature operating models. They have advanced each dimension of the GBS service delivery model (SDM) to a greater extent than the peer group. Our analysis also revealed notable capabilities in three areas:
- Digital transformation: Clear digital transformation strategy, with functionally aligned funding approach
- Talent management: Greater use of strategic workforce planning practices
- Service management: Significantly more mature and effective capabilities
The Hackett Value Grid™
The Hackett Group defines Digital World Class organizations as those that achieve top-quartile performance in business value (a composite of stakeholder experience, digital enablement and traditional effectiveness metrics) and operational excellence (a composite of efficiency and business process automation metrics).
Built on insights from over 25,000 benchmarking engagements, involving nearly 8,800 major global companies spanning various industries – including 97% of the Dow Jones Industrials, 93% of the Fortune 100, 73% of the DAX 40 and 52% of the FTSE 100 – the Hackett Value Grid is a useful compass for charting the course toward top-quartile performance.
By evaluating their own benchmarking results in the context of industry peers and top-tier performers, companies can gain a unique understanding of their competitive positioning and identify opportunities for growth.
Digital World Class reflects a mature operating model
The GBS Performance Study confirms a correlation between GBS capability maturity and Digital World Class performance outcomes, including greater business value and higher levels of operational excellence. Digital World Class organizations achieve their advantage because they focus on optimizing service delivery, developing leading-edge capabilities, and deploying proven and emerging best practices. This is reflected in greater maturity across all seven dimensions of the GBS service delivery model.
While Digital World Class GBS organizations are ahead of the peer group on each dimension, all GBS organizations have substantial opportunities to continue building maturity – particularly in areas such as engaging service partners for innovation and transformative change, acting as an enterprise data management and advanced analytics hub, and employing service design focused on customer experience.
One-half of Digital World Class GBS organizations have developed a clear strategy for adopting digital technologies, compared to just 15% of the peer group. In fact, 19% of peer group GBS organizations have no clear strategy, and another 29% have a strategy but limited understanding of automation opportunities, types of technology available and change effort required. Change management is critical to helping employees adapt to integration of technologies into functional processes and assuaging fears of job losses.
GBS organizations have varying strategies and sources for funding digital initiatives. However, our analysis identified a notable difference in the funding approach. Digital World Class GBS organizations are more likely to be funded by the function(s) they support. This fosters closer alignment with the finance, human resources, procurement or other functional programs that benefit from GBS services. In contrast, the peer group is more likely to be either self-funded through cost savings or revenue generation from GBS operations or through investments from the technology function.
Digital transformation has had a greater impact on performance
Digital World Class GBS organizations’ transformation has had a “high” impact on efficiency, experience, agility and effectiveness over the past two to three years. In contrast, peer group GBS executives rate the impact as just “moderate” for most metrics. What doesn’t differ is expectations for future impact. Both peer group and Digital World Class GBS executives expect significant increases in efficiency, effectiveness and experience over the next two to three years as a result of ongoing digital transformation.
Deployment and effectiveness of intelligent automation and emerging technologies
All Digital World Class GBS organizations have deployed robotic process automation (RPA), with nearly 70% using it on a large scale to automate more business processes, free up staff to concentrate on higher-value activities, raise productivity and reduce errors. These organizations are also further ahead in using other intelligent automation technologies. Surprisingly, over one-half of peer group GBS organizations have yet to pilot/deploy advanced analytics.
Task mining, agile orchestration and artificial intelligence (AI)/computing are the least adopted of all intelligent automation technologies. Where organizations have adopted them, they are still primarily in pilot/small-scale deployment phases.
Not all investments in intelligent automation and emerging technologies pay off. Although leaders of both peer and Digital World Class GBS organizations believe these technologies meet expectations, there are a few notable exceptions. AI/cognitive computing technology investments fell short of expectations for most peer GBS organizations and one-third of Digital World Class GBS organizations. To a lesser extent, chatbots, process mining and RPA also fell short of expectations.
Greater use of centers of excellence – and those entities are more effective
Adopting enabling technologies as a part of a digital transformation strategy requires specialized expertise. Digital World Class GBS organizations are more likely to have established centers of excellence (COEs) for federated enabling technologies in order to leverage talent, utilize digital assets more efficiently, and accelerate digital transformation at enterprise scale and speed. Only 14% of Digital World Class GBS organizations do not have an enabling technologies COE, compared to one-third of peer group GBS organizations. Additionally, Digital World Class GBS organizations tend to have larger COEs, with 33% more professionals.
Across all GBS organizations, the most offered services include RPA, analytics and dashboards. Digital World Class GBS organizations are far ahead of the peer group in offering a broader set of technology services. At least one-half offer business process management, cognitive automation, low-code/no-code, smart data capture, chatbots, process and task mining, cloud migration, and master data management services.
In terms of value delivered, Digital World Class GBS organizations excel over the peer group in meeting expectations around cost savings, reduction of processing errors, and standardization and simplification. The peer group GBS organizations struggle with standardization and simplification processes and ongoing maintenance. More than one-third did not meet expectations.
Balanced scorecard for digital operations
Digital World Class GBS organizations use a broader array of metrics – covering efficiency, effectiveness and experience – to measure the impact of digitization. For example, 100% of Digital World Class GBS organizations measure employee satisfaction, time to complete tasks and return on investment for some or all GBS services. By contrast, only 68% of the peer group measure employee satisfaction, 59% measure time to complete tasks and 57% measure return on investment.
More than two-thirds (71%) of Digital World Class GBS organizations measure digital adoption rate for some or all services, while barely one-third (39%) of the peer group does so. Other measures employed by at least one-half of Digital World Class GBS organizations include productivity, error rate, payback period, straight-through processing rate, customer satisfaction and Net Promoter Score®.
Having this balanced scorecard enables them to do a better job of pinpointing and acting on improvement opportunities.
Digital World Class GBS organizations have developed a far more sophisticated approach to talent management than the peer group. Most Digital World Class GBS organizations have a fully aligned approach to talent management with competencies, knowledge, skills, abilities, and proficiency levels by job role and level, and individual-level talent assessments with learning and development action plans and inputs to succession and career development. In addition, one-quarter of Digital World Class GBS use strategic workforce planning to manage resource and skill demand.
More effective practices for identifying and retaining talent
While employee referral programs, social media, and employer branding are all very effective at locating and luring candidates, Digital World Class GBS organizations see more success than the peer group. For example, they are more likely than the peer group to target nontraditional talent pools (e.g., workers from other disciplines and/or industries, veterans or people on career breaks). They are also less likely than the peer group to rely on third-party service providers or contractors, as well as specialist recruiting and staffing firms.
About 80% of GBS organizations use job rotation and cross-training as part of their employee value proposition initiatives and see benefits for both management and staff. There is little difference in use between the peer group and Digital World Class GBS organizations. Overall, the functional and horizontal job rotation programs are the most effective.
Digital World Class GBS find employee satisfaction surveys, sentiment analysis, and flexible working to be the most effective practices for identifying and retaining people with critical skills. In contrast, GBS organizations in the peer group see less benefit from employee satisfaction surveys and sentiment analysis. This may be associated with a lack of major initiatives for managing employee satisfaction. One-off, cost-of-living payments is the practice least used by both groups.
Overall and in each geographic region measured, Digital World Class GBS organizations report equivalent or higher employee satisfaction scores than the peer group. That said, both groups have opportunities to improve employee satisfaction in onshore locations such as the United States, Canada and Western Europe.
In simple terms, GBS service management is the set of activities a GBS organization performs to provide services, regardless of the scope of services or sourcing model. Digital World Class GBS organizations have significantly more mature and effective service management capabilities – enabling them to elevate and differentiate their value proposition. One-half of Digital World Class GBS organizations have mature and effective service management capabilities in all 14 areas measured, compared to just 7% of the peer group. In contrast, about one-half of the peer group is still largely focused on service migration, stabilization and continuous improvement.
Digital World Class GBS organizations have significantly stronger and more effective financial management capabilities than the peer group. They also outperform the peer group in business relationship, demand and strategic management. While the capabilities differ less between groups, Digital World Class GBS organizations achieve better outcomes.
Two other areas where Digital World Class GBS organizations outperform the peer group are service continuity and information technology management. These areas registered the highest scores for effectiveness across all capabilities measured. Quality improvement is also a cornerstone of Digital World Class GBS performance.
Finally, knowledge management remains important as employee turnover is among the top current talent challenges for GBS leaders. Retaining knowledge in a well-documented, easily accessible way is essential. Digital World Class GBS organizations are more likely than the peer group to have a formal knowledge management approach.
Strategic management is the process related to establishing GBS strategy, services scope, policies, controls and functional performance improvement. Digital World Class GBS organizations have significantly more mature and effective strategic management capabilities than the peer group. They are far ahead of the peer group in terms of aligning strategic goals with the company’s strategic planning, budgeting and control processes. This includes employing a balanced scorecard-like approach with periodic evaluation of the GBS strategy and taking corrective actions, as well as monitoring actions to achieve goals.
Digital World Class GBS organizations are also more likely to have dedicated business relationship management (BRM) roles, which are crucial to align with business needs and can contribute to a more customer-centric service delivery model. Business relationship managers should have detailed knowledge of GBS services and business operations to enable them to act as an effective bridge between internal customer demands and the GBS organization’s capability to supply services. More than three-fifths of Digital World Class® GBS organizations have dedicated staff for BRM. In contrast, fewer than one-quarter of the peer group have assigned dedicated staff for this role.
Close the gap to Digital World Class performance
To close the gap to Digital World Class, GBS executives should aim to increase maturity in all seven dimensions of the GBS operating model. First, determine where your organization falls currently on each dimension. From there, you can begin to define objectives and strategies for increasing maturity.
Keep in mind that all GBS organizations – even those of advanced maturity performing at a Digital World Class level – have opportunities for improvement. Data-related issues, organizational resistance to change and technology complexity remain key barriers to advancing transformation for both the peer group, as well as top performers.
Are you ready to close the gap to Digital World Class GBS performance?
Backed by our unparalleled benchmarking data and best practices repository, as well as experience across the full transformation life cycle, The Hackett Group is ready to support:
- Performance benchmarking and best practices (SG&A, functional, GBS/ shared services)
- GBS/digital operations service delivery model design, implementation and optimization
- Service management capability development
- Service catalog optimization
- Location/site strategy
- Business process outsourcing advisory support
- GBS voice of the customer survey design and implementation
- GBS scorecard development
- GBS talent management, including training and certification
- Digital transformation strategy, tool selection and support
- Technology road map, cloud migration and modern architecture
- Smart automation opportunity identification and implementation
- Transformation management office, change management and communications programs
To view all supporting charts, download the full report here.
Contact The Hackett Group to start your journey toward Digital World Class success.