Managing Director & Senior Partner
BCG in Düsseldorf
Faced with extreme economic uncertainty, growing cost pressures, rapid technological change, and rising customer service expectations, companies are looking hard for a fresh competitive edge—preferably without having to make a huge investment up front.
But with expenses already cut to the bone, investor appetite for new ventures limited, and the times unfavorable for entering new markets or introducing new products, what’s left?
One low-cost strategy that can work even in a challenging market is to enhance the performance of support functions, sometimes referred to as corporate functions. Often dismissed as a cost center, most companies’ support functions now represent a tremendous, multifaceted opportunity. Excellent functional level strategies can yield cost savings and greater customer satisfaction as well as provide a more responsive platform for driving transformation.
Why Focus on Support Functions?
Because business support functions tend to be seen as providers of necessary but generally undifferentiated services with little competitive significance, they are often undervalued. They also tend to be thought of as isolated units—even though, at most companies, support functions represent 10% to 25% of full-time labor costs and a substantial share of selling, general, and administrative expenses.
In fact, support functions can provide value that far outweighs their share of the budget. For example, because advanced support functions can easily scale up or down in line with supply and demand, they can help companies eliminate excess costs and take greater advantage of opportunities. What’s more, an optimized functional level strategy offers management a clearer view of the company and its external business environment and thus can help drive transformative company-wide changes.
What Makes a Support Function Excellent
Excellent business support functions do things differently. (See Exhibit 1.)
Exceptional, value-aware corporate functions provide the data, information, and analysis necessary to make decisions about the right way to pursue a strategic agenda. They also provide the tools needed to execute those decisions. First-rate functions enhance the following three attributes as well.
Efficiency. Excellent business support functions deliver their services at competitive and continuously improving cost because they can scale resources to external conditions and respond quickly to supply disruptions. Achieving an excellent functional level strategy can lead to:
Customer Experience. Advanced business support functions focus intensely on the customer. Drawing on customer feedback and best practices for online user experiences, such units strive to deliver flawless service. Their processes are streamlined to meet the needs of both internal and external customers and to evolve easily as those needs change.
Value. Optimized support functions unite business strategy, people, and technology to promote fast and efficient action. By operating with a deep understanding of customers and employees, such functions generate insights that help executives prune outdated legacy processes and launch new initiatives that add more value.
Regardless of the industry, raising the quality of a business support function to a level of excellence can have a powerful ripple effect throughout the company. (See the sidebar “Powerful Medicine.”) For example:
How to Get There
To upgrade your business support function, begin with a four-step exercise that defines your service ambitions (see Exhibit 2):
The success of this four-step program depends on a number of factors. Start by using a proven diagnostic program to create a strong fact base for understanding the current performance level of your corporate functions. Make sure that top managers are committed to the program. Dedicated teams within each functional unit should develop their own sets of specific blueprints and identify their ultimate service delivery goals. Finally, establish a small, central team equipped with the right tools to ensure progress and compliance with defined design principles.
Much of the development work will entail integrating more digital technology into the system. Technology will take on an increasing share of the workload in most functions. In HR, for instance, we believe technology will soon handle more than half the work, freeing employees for more strategic tasks while cutting error rates and expenses. (See Exhibit 3.)
The cost? Ultimately, this effort should be not only self-funding but also profitable, as unnecessary processes are eliminated and error-prone manual processes are replaced by more accurate and cost-effective digital systems.
Better and Best
In a tough economy, organizational choices often seem to fall between bad and worse: the tradeoffs either buy time but compromise your long-term position or raise your short-term risks but position your firm well for the recovery. Transforming your support functions, however, is an exception. Excellent support functions not only help your firm operate more efficiently now, but they also can give you more control over your company’s processes, more insight into its operations, and more data-supported guidance for your next strategic move.