the current status of shared services models in japan · type a; concentrate businesses in the hqs...

The current status of shared services models in Japan:

Historical verification and challenges for future growth

Copyright© 2011 Nomura Research Institute, Ltd. All rights reserved.

Historical verification and challenges for future growth

Mitsuyoshi Sudo

Group ManagerGroup ManagerGroup ManagerGroup Manager

Global Shared Services Initiative GroupGlobal Shared Services Initiative GroupGlobal Shared Services Initiative GroupGlobal Shared Services Initiative Group

Management Innovation Consulting DepartmentManagement Innovation Consulting DepartmentManagement Innovation Consulting DepartmentManagement Innovation Consulting Department

Nomura Research Institute, Ltd. (NRI)Nomura Research Institute, Ltd. (NRI)Nomura Research Institute, Ltd. (NRI)Nomura Research Institute, Ltd. (NRI)

Profile

Mitsuyoshi SUDO / [email protected]

<Areas of Expertise>

Innovation of corporate functions,

Shared Services & BPO Implementation, etc.


<Representative Projects>

• Establishment of corporate functions in China

(Conglomerate company)

• Operational reform of indirect services(Semiconductor,

Equipment/Utility, Food)

• Planning of shared services (Telecommunications,

Materials and track records in other industries)

1

1. Trends of shared service reform in Japanese companies

Agenda

Copyright© 2011 Nomura Research Institute, Ltd. All rights reserved.3. Essence of the Japan type shared service reform

2. Issues and emerging examples of shared service reform

2

10

12

14

SSC reform was a peak in 2004 in Japan.

BPO is also active in recent years as well as

SSC. The number of news paper articles picked by keywords of “Shared Service”

Copyright© 2011 Nomura Research Institute, Ltd. All rights reserved.0

2

4

6

8

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

SSC

BPO

3

(Source) NRI creation from Nihon Keizai Shimbun articles

Functions provided to group companies. (multiple answer)

61

60

50

Finance/Accounting

Information Systems

Human Resources

Target Business

Processes

(narrow sense)

Information

Major shared functions are FN, HR and General Major shared functions are FN, HR and General Major shared functions are FN, HR and General Major shared functions are FN, HR and General

Affairs.Affairs.Affairs.Affairs.

Information systems were operated in the Information systems were operated in the Information systems were operated in the Information systems were operated in the

subsidiaries in many cases.subsidiaries in many cases.subsidiaries in many cases.subsidiaries in many cases. (%)


(Source) “NRI Survey on Group Management”(March, 2004); N=253

50

41

29

29

29

26

25

9

Human Resources

General Affirs

Logistics

Legal and IP

Procurement

Audit

PR and IR

Others

Information

systems

subsidiaries

Target Business

Processes

(broad sense)

Both HR and Accounting & Finance functions,

operational processes form a core of SSC services.

Company A B C D E F G H ＩＩＩＩIndustry

Pulp/

PaperFinance Fiber Food

Electroni

cs

Electroni

csSteel

Transport

ation

Chemistr

y

Number of employees 5,000 3,500 7,000 8,500 5,200 176,000 27,000 16,000 17,000

Human

Labor Policy

Personnel

Hiring ○○○○ ○○○○ ○○○○


Human

Resources Education and Training ○○○○ ○○○○ ○○○○Attendance/Salary ○○○○ ○○○○ ○○○○ ○○○○ ○○○○ ○○○○ ○○○○ ○○○○ ○○○○Welfare ○○○○ ○○○○ ○○○○ ○○○○ ○○○○ ○○○○ ○○○○ ○○○○

Accounting

and Finance

Cash planning and

management-

Management

accounting ○○○○ ○○○○ ○○○○ -

Account Close ○○○○ ○○○○ ○○○○ -

Fixed Assets ○○○○ ○○○○ ○○○○ ○○○○ - ○○○○ ○○○○Tax ○○○○ ○○○○ ○○○○ ○○○○ ○○○○ - ○○○○ ○○○○Debts and credits ○○○○ ○○○○ ○○○○ ○○○○ ○○○○ - ○○○○ ○○○○Cashbook ○○○○ ○○○○ ○○○○ ○○○○ ○○○○ - ○○○○ ○○○○

(Source) Web home pages

and newspaper articles

Type A;

concentrate

businesses in

the HQs

Inbound - SSC

It can concentrate on cost reduction without adhering

The operating form of the head office is dragged.

[Merit]

•Large reorganization is unnecessary.

•It can concentrate on cost reduction without adhering

to profits creation.

[Demerit]

•The operating form of the head office is dragged.

There are two kinds of models when an

organization is divided.


Inbound - SSC

Type B;

Concentrate

Businesses in

subsidiaries

Outbound - SSC

The operating form of the head office is dragged. •The operating form of the head office is dragged.

•Performance measurement of SSC is difficult.

Performance measurement is easy and can clarify

Initial investment is larger than a head office section.

[Merit]

•Performance measurement is easy and can clarify

indirect operating cost.

[Demerit]

•Initial investment is larger than a head office section.

•An employee's motivation falls easily.

Period 0: Dawn

(80’s - 90’s)

Period 1: Introductory

(2000 - 2004)

Period 2: Improvement

(2005 - 2008)

•SSC (Type B)

appeared in the

US

•Spread of SSC concepts

•Many SSC companies (Type B)

were established, and published in

•Expansion of organizations

SSC offer services to.

•Active SSC services sales to

SSC (type B) hits its stride in Phase 1.

Moves into a period of improvement in

Phase 2, and now are currently in Phase 3.


Period 3:

(2009 - )

OutlineOutline

Cases

•SSC concept was

not in Japan

•SSC (Type A)

existed

80’s (US)

•GE

90’s (US)

•HP, AT&T, AMEX,

P&G, etc.

were established, and published in

mass media.

•SSC offered services only to some

group companies.

Type A representative case (Japan)

•Sony, Sharp

Type B representative case (Japan)

•NTT, Teijin, Mitsubishi Corp.,

Daikin, Omron, Hitachi, Panasonic,

Kirin, etc.

•Active SSC services sales to

outside companies

•Active improvement

initiatives to solve many

problems in SSCs.

Cases

•Those companies in the left

taken initiatives for improve

•SSC boom shifted to mid-

sized companies from larger

ones

(Source) Home pages


Period 1: Introductory

(2000 - 2004)

ＡＦＴＥＲ

TYPE A

March, 2001 when shifting to a company

based organization and reorganizing whole

group, HQs were divided into "global HUB"

- A global hub, a management platform

and an operation platform was unified

in HQs in June, 2005

From within leading Japanese companies, SONY

classified as Type A (BPO User), and NTT

classified as Type B (Service provider to

external companies).

BPO

?

Direction


TYPE A

SONY

TYPE B

NTT

group, HQs were divided into "global HUB"

of a strategic planning function, and the

"management platform" as a shared

function.

NTT BUSINESS ASSOCIE was establish in

July, 1999. It started as a service provider to

four NTT group companies. Services include

financial & accounting, personnel & payroll,

and general affairs. A local company was

integrated in 2002, and became a service

economy to whole nation.

in HQs in June, 2005

- Personnel operation, payroll and

education & training business were

transferred to "Human Business

Associates" in April, 2010.

- A service menu of finance & accounting

was developed in 2003, and

outsourcing service was started.

Services on personnel and general

affairs were also developed later.

- Now scope is expanded outsourcing

service provider

?

Service

?

Service

provider

?

(Source) Home pages




3. Essence of the Japan type shared service reform


SSC setup with

try and error

Period 1 and 2

(2000 - 2008)

Seek for the best

suited SSC and leap

Period 3

(2009 - )

SSC (type B) hits its stride in Phase 1.

Currently in the growth stage of SSC

reform.


�SSC technique which

was beginning to spread

was adopted as a means

of the cost reduction of

a back-office section.

�The optimal method

was unclear and trials

were made by internal

organ. or subsidiary

with/without external

customers.

�An effect cannot be

demonstrated although

SSC was installed.

�While expanding sale to

external customers,

service level for the

internal customers falls.

�Generating of new

possibilities, such as

development of BPO in

ChinaIntegration of SSC

to HQs

Sustainability of SSC

(Expand external sales)



Use of overseas BPO

Reorganization

of SSC functions

Searching for SSC

suitable for the

situation of Japanese

companies. •Unique businessculture

•Large scale indirectbusinesses

•Difficulties in employ-ment adjustment

HR One Corp was established by

integration of some SSC companies

towards service level improvement

�By investment from Chuo

Mitsui Trust and Banking

Establishment of SSC

By three cross-industrial

companies (2002)

Merger of SSCs and

expansion of external

services (2009)

Service level improvement

locations(2010 -)

Service level improvement

by forming alliances and

setting up base

locations(2010 -)

�Acquired a SSC division of






�Alliance was set with ADP

(USA) in May, 2010

�A base which is entrusted

with payroll calculation

business etc. was set in

Okinawa Prefecture in June,

2011.

Mitsui Trust and Banking

Company, Panasonic and

Kao, HR service consulting

was established.

� In 2005, it came to handle

HR and salary & welfare

services of 60 companies

(105,000 employees)

within three company

groups, and started sale to

external companies.

Human Link, a subsidiary

of Mitsubishi Corp., and

set up HR One Corp.

�The holding-in-custody-

assets number of the

employees reached 320,000,

and aims at improvement

in service quality and

commission cost mitigation.

11

Started in 2005.

Now, services equivalent

BPO (B)

BPO (A)HR

Accounting

Company A(Japan) SSC of Company A(Dalian)BPO venders in Dalian

Use of overseas BPO

Two or more BPO vendors in Dalian are

utilized, and cost reduction is pursued over

setting up SSCs in Japan.


Now, services equivalent

to approx. 200 persons’

is carried out.

About five persons'

amount of services is

made applicable, and

BPO service is promoted.

BPO (B)

BPO (D)

BPO (E)

Accounting

Intellectual Property

Procurement

Services

BPO (C)

Indirect business in Japan was

transferred to Dalian(SSC in overseas)

Re-commission

to BPO venders

・・・

12

Kirin Holdings reorganized to make

the SSC’s original objectives clear

)

Kirin Business

Expert (ＫＢＥ)

Kirin Group Office

(KGO)

400 employees 170 employees

Standard fixed

Strategy planning / promotion and a group corporate function

2007 2010

Reorganization

of SSC functions


“New” Kirin Business“New” Kirin Business

Expert(KBE)

230 employees

Standard fixed form services and special services function

SSC was established under

a holding company.

Concentration of the

indirect businesses of

group companies was

started.

(1)Concentration and standardization of group’s

indirect business were further promoted

(2) Introduction of new personnel and compensation

system, and efficient personnel and management

organization according to a business activity

were built.

(3) Achieving and providing good merchantable

indirect services to group companies at

competitive price.13

(Source) Home pages


Daikin evaluated its SSC as a success.

Changes were made to aim for a

synergistic effect with the HQs

Before 2000

Daikin and each

group company

carried out HR and

general affairs

2000 - 2008

Concentrated indirect businesses

of group companies

2009 -

Businesses in DHS

was transferred

to Daikin.

Integration of SSC

to HQs

Copyright© 2011 Nomura Research Institute, Ltd. All rights reserved.Human Support

Daikin

Human Support

Daikin

Associated

companies

(65 in Japan)

Daikin

Daikin

general affairs

separately.

•Businesses in HR and General

Admin. were directly connected

with corp. strategy.

•Planning was provided in align

with strategy

Fixed form and specialized services

of the whole group were concentrated

人事戦略・企画業務と

実務業務の一体化に

よるシナジーを図る

14

(Source) Home pages




3. Essence of the Japan type shared service reform


35,000

40,000

45,000

50,000

390,000

410,000

430,000

450,000

Sustainable growth is hard to plan after the

Lehman shock, and a re-setup of a mid-term

plan is a major trend in the current fiscal

year

Re-setup

of mid-

term plan

&

Drastic

Revenue (\ billion)Ordinary Profit(\ billion)

Revenue


5,000

10,000

15,000

20,000

25,000

30,000

250,000

270,000

290,000

310,000

330,000

350,000

370,000

20

02

.6

20

02

.9

20

02

.12

20

03

.3

20

03

.6

20

03

.9

20

03

.12

20

04

.3

20

04

.6

20

04

.9

20

04

.12

20

05

.3

20

05

.6

20

05

.9

20

05

.12

20

06

.3

20

06

.6

20

06

.9

20

06

.12

20

07

.3

20

07

.6

20

07

.9

20

07

.12

20

08

.3

20

08

.6

20

08

.9

20

08

.12

20

09

.3

20

09

.6

20

09

.9

20

09

.12

20

10

.3

20

10

.6

20

10

.9

20

10

.12

20

11

.3

16

Drastic

reform of

businesse

s

出所；財務省法人企業統計季報（全産業）

Revenue

Ordinary

profit

Radical company-wide reform becomes a critical

focus for many organizations.

Company NameCompany NameCompany NameCompany Name

Organization Name(* general Organization Name(* general Organization Name(* general Organization Name(* general

translation)translation)translation)translation)

EstablishEstablishEstablishEstablish

edededed

TAKARA SHUZO Co., Ltd. Business-innovations promotion dept, 2008.4

NEC Corp. Operating process reform dept, 2008

Systems and Business-innovations promotion


ISUZU MOTORS Ltd.

Systems and Business-innovations promotion

dept.

2009.2

Jupiter Telecommunications Co.,

Ltd.

Business-innovations promotion dept, 2009.4

Nippon Steel Chemical Co., Ltd. Operating reform project 2010.4

Shimadzu Corp. Operating system generalization dept. 2010.4

Nikkei Inc. Operating reform head office 2010.4

Mitsubishi Chemical Corp. Business-innovations unit 2010.4

Kaneka Corp. Business-innovations head office 2010.4

YKK Corp.

Management and a business value base

construction project

2010.4

NTT DATA Corp. Operating reform promotion dept. 2010.7

(Source) Home pages


Revenue of 50 major Japanese manufactures by region

Japan America Europe

Asia / Newly

Emerging

Companies

Total

\trillio

n

Even in 10-year forecasts, Japan is still viewed

as the main revenue contributor and with the rest

of Asia and other emerging countries as growing

areas of interest


18

n

FY

2000

62% 21% 9% 8% 121

FY

2007

48% 22% 14% 16% 173

FY

2020

40 – 50 %(?) 20 – 40 % (?) 30 – 40 % (?) ??

(Source) NRI creation from the geographical segment information and the foreign-sales

information on each company financial report.

(Notes) Data from 50 top companies in revenue selected from Japan affiliated manufacturing industry

of chemicals, machineries, transportation machineries, electric apparatus, and precision

instruments.

A barrier to adoption is due to Japanese

companies using a non-global standard.

Accounting System of

manufacturing company A


SAP

original

Original

System

Oracle

original

SAP

Unknown

Acquired

Subsidiary

Overseas

subsidiary

Unknown

Unknown

Unknown

Systems transfer

It is very

hard to

shift to SAP

19

There is no quick-fix solution to increase

business efficiency globally.

To be is:

-Application of global standard

A Japanese HQs staff

is a local staff state

Who can perform

only Japanese


-Application of global standard

-Global personnel training

But,

Short-term solution is difficult

Operating process in

Japan is like a state

of “Galapagos Islands”.

(with no innovation)

only Japanese

correspondence.

Essence of Japan type shared

service reform towards 2020.

(1) Construction of global single shared service

is difficult.


(2) Japan's position in 2020 will still be large

and Japan standard shared service will be

necessary.

(3) Except Japan, standardization will progress on

a global level and global SSC will be developed,

too.

From now on, the shared service initiatives of

Japanese companies will be developed through

a Smart model.

HQs and subsidiaries

in Japan

Business operations in

Europe, US and Newly

Emerging Countries


G-SSC

Smart Model

J-SSC

IFRSPersonnel

Master Data

Linkage with necessary minimum functions


Mitsuyoshi SUDO

TEL : +81-(0)3-5533—2660

e-mail : [email protected]

the current status of shared services models in japan · type a; concentrate businesses in the hqs...

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