Outsourcing Excellence Award – Most Strategic – Rhodia and Accenture
One is French, the other American. One is young and a dreamer, the other has been around the block several times and is wise in experience. On the surface they seem to be an unlikely couple, but in their hearts beats a driving force that drew them together -- both are risk-takers. Both challenge boundaries.
A spinoff in 1998, Rhodia, the France-headquartered global specialty chemical company, is known for its technical innovation in industrial products for the automotive, healthcare, environmental, personal care and construction areas. It's a young company with driving objectives for speed to market with new products (more than 20 patents filed per year by Rhodia) and an ambitious growth strategy.
Even so, Paul Van Beveren, finance change manger, says two-thirds of Rhodia's senior management decided his plan to build a shared services center in Central Europe for finance and accounting process would be "a complete disaster."
The Strategic Plan
A benchmarking initiative revealed Rhodia's support functions were "worse than average" in its market. They identified the need to centralize and standardize finance and accounting processes spread across multiple production facilities in Europe as a crucial component in the solution. Rhodia was already successfully operating from a U.S.-based shared services center for 30 U.S. plants, so Van Beveren believed in the model and proposed creation of a shared services center for Rhodia's 60 European facilities.
But the business case for his idea didn't work. Social costs -- not all employees would be happy to move to another location -- would be high. Even more compelling, the company's disparate information systems would not allow enough productivity gains.
"So I decided we should de-locate, moving to a Central European location where salaries and operational expenses are about three-fourths less than here in Western Europe," explains Van Beveren. "I was one of the 20 business unit CFOs, and at least 10 of my colleagues said I went completely crazy when I proposed this strategy. We had no business activity in that region of Europe, no experience there and no resources there."
The poor business case wasn't a brick wall to Van Beveren. "I proposed then that we consider outsourcing, to find a partner that would go with us to such a Central European location."
That was two years ago. Today, Rhodia has a shared services center in Prague, thanks to its alliance with outsourcing service provider, Accenture.
It was a completely green-field approach. Although Accenture had multi-client service centers, the one built for Rhodia would be the first in Europe and, more significantly, the first to be multi-country.
Rhodia wisely went a further step to ensure a continued risk-taking approach to achieve objectives. Beyond their fixed-price agreement for services, the chemical company designed a performance-based incentive plan to motivate continuous process improvements. For each continued improvement action, the parties do a business case analysis, and Accenture receives part of the net present value as a reward.
Transitioning to the newly built shared services center in Prague was a phased approach, starting with all the U.K. units and following with several waves (30-50 people at a time) from the French locations. Knowledge transfer framework for the U.K. move took four months, Van Beveren reports; then they took two months for stabilization. All progressed smoothly due, in part, to the fact that it was a single-system, single-language move.
They encountered some glitches with the first wave of the French transition efforts and subsequently modified their training periods. There were also "social" delays. At one site, employees were on strike for a week. At another, they encountered a restructuring initiative already underway, which provoked some confusion once the outsourcing initiative began there.
Ninety percent of the transition was completed by the December 2002 target date. The final enterprise, with four sites, is scheduled to transition in May 2003. Accenture's expertise in planning for the transition was invaluable. Even with the delays and modifications to plan, their transition phase stayed within budget. In fact, Van Beveren reports Rhodia enjoyed a 10 percent "profit" because the technology upgrades went so smoothly that not all of the budgeted funds were necessary.
However, finding the best way to manage service delivery proved to be a challenge. Accenture moved forward with its normal methodologies for handling the site and the business functions via a process-oriented management. It worked well with just the U.K. phase. But France, with 15 enterprises spread over 40 sites, was a different story. Here, the teams that shadowed one site for different processes was split when it arrived in Prague -- some going into accounts payable, the others into accounts receivable. Because the complex, non-standardized systems had been transferred "as-is" from the various business units, this approach became too difficult to manage.
Accenture did an about-face, switching to a different management approach. Pleased with the partnership characteristics Accenture demonstrates, Van Beveren says the provider did not ask for more money because of the change, even though it's a fixed-price agreement.
"We are in a contract that, in France, is called 'engagement on the result,'" says Rhodia's finance manager. "So when the issues were identified, they very rapidly put in place sufficient support that would treat the complexity that we had in the French enterprises." But both companies had underestimated the complexities of the French operation, so Rhodia demonstrated its own flexibility and partnership attitude by adding additional resources to cope with the situation. Together, they also agreed to additional time for stabilization of the French transition.
Van Beveren adds that the first full closing in Prague was successful.
The manner in which a partnership is built is very important, he believes. "It must go beyond the contract. "We talked about this with Accenture at the time we signed the contract; but afterward it has been much more important than we thought it would be." Neither party has referred to the contract during the two years of their alliance, he says. Where they have needed to adapt and do things differently than anticipated, both have done so. "We do that in a relationship of complete trust," claims Van Beveren. "Of course, it is helpful that I was there from the first day, and the people from Accenture were also there from the first day; you could say we are almost married to each other professionally. Our relationship works very, very well."
Their operations are very visible in Europe, and Van Beveren reports at least two groups contact him every month for advice on how to duplicate their model. He continues: "You may say, 'But this is just another shared service center, and there are hundreds of shared service centers in the world and dozens of outsourced ones.' But they are very driven out of the United States by United States-based groups" The Rhodia / Accenture venture was the first European one.
It is significant. In the U.S., even if a shared service center operates across multiple states, finance and accounting work is still performed in English and uses GAAP accounting principles. "It makes sense and is even obvious that shared services in the U.S. can create a lot of value and high performance at low cost," Van Beveren explains. "But to bring that idea to the whole of Europe -- a multi-cultural region with perhaps 15 different languages in the EU and at least five to 10 different accounting projects -- is quite another thing."
Theirs was the first such outsourcing project in Europe, designed by a "non-Anglo Saxon" group, and built in Central Europe. Others now are starting to successfully follow in their footsteps.