By Pablo Peralta
Managing Director of Resources at Accenture
We have heard many times that corporative functions must play a key role in the transformation of energy companies and that they should promote the organization’s innovation and agility through new operative models, new work methods or managing the evolution of talent.
We come from a paradigm in which “large” corporation means inefficient corporation which, to me, is not necessarily the case. It is true that, in some cases, corporate functions have earned a bad reputation and are the main focus of restructuring. The irony is that if we analyze the correlation between the company’s results, measured as retribution to the shareholder, and the scale of corporative functions, measured as their costs, there is no direct relation.
Therefore, we should wonder whether corporative functions are more effective than efficient and, more importantly, what is the role that each organization wants its corporate functions to have. This role will be primarily determined by the shareholders’ strategic vision for the company, competitive positioning, and the staff’s profile.
Energy companies must rethink which role they expect from corporate functions
The three main roles that can be expected from corporate functions
Firstly, the role of governing body whose mission is to protect the rights of shareholders and employees, managing legal, regulatory, financial, and labor risks, among others. The typical functions attached to that role are financial planning and capital allocation, control, legal, fiscal, treasury, relationship with investors, audit or compliance. The main risk is that corporate functions under this role can become adverse to risk or focus excessively on control and therefore, increase bureaucracy.
The second role is what I call Generator of Scale Economies. Under this role, corporate functions are aimed at making non-business facing more efficient by standardizing processes or consolidating to obtain scale economies in the respective organizational model (shared services by functions, multifunctional shared services, internal, external, etc.). Typical functions of this role include IT, general management, and expenses (RRHH, accounting, commercial, etc.). The main problem is, many times, corporate functions do not provide an answer to business needs, generating “mirror” functions and causing the process of standardization to never take place.
It is in this role where the Digital Transformation, with the incorporation of the latest ERP platforms, smart automation or the application of analytical capacities, are changing the paradigm in corporate function management, deeply transforming their processes, improving productivity and efficiency.
The corporation makes the transformation a reality
All companies in the sector are immersed in this shift. However, we must consider, on one hand, if the level of ambition and speed put into this transformation is what every business needs in a competitive environment of complete disruption in which the rules of the game have changed and competitors are not what they used to. Terms like “decouple” and “multispeed” come into play here, which are highly relevant since digital technologies enable to manage changes at a faster pace than would be possible for the transformation of a traditional technology base.
The second point that energy companies must face is whether there is the necessary talent available to approach this transformation. This is where companies like Accenture, with million-dollar investments in the industrialization and digitalization of operations, can accelerate the “journey” to bring about real transformation, ensuring the achievement of the targets set.
The faster the speed in obtaining efficiencies or transactional productivity the more capacity release, not only to be efficient, but to focus on the third role of corporate functions, which I call the Competitive Advantage Accelerator. In this role, corporate functions generate business value beyond what is traditionally expected from them. The typical functions of this role are M&A, corporate marketing, and more recently, digital transformation, data, innovation, agile, and strategic talent management.
The challenge of corporate functions is to demonstrate that value generation is greater than what each business could generate on their own
Rethinking the role expected from corporate functions
When assigning corporate function resources to one or more of these functions each company establishes which it wants as their key competitiveness factors. The challenge of corporate functions is to demonstrate that value generation is greater than what each business could generate on their own. This is where talent turnover turns into the most critical aspect, given that the capacities required by the functions no longer have a transactional or control focus and now have a distinct tendency to add value to the business.
Traditionally, the agreement with third parties has been established by a long-lasting relationship to develop different projects and operative services in mostly transactional tasks.
One of the fundamental changes is the model of relationship with third parties. The trend is to establish on-demand relationships that facilitate the management of profile requirements that allow companies to create said capacities, not just transactional.
In short, the new competitive environment in the energy market, characterized by a complete disruption of the value chain, makes companies in the sector rethink which is the role that they expect from corporate functions and, consequently, its impact on business units. In this sense, utilities must also reflect on the speed that the corporate functions must have in the transformation process in order to provide an agile and flexible response to the needs of the business, if they have the talent to face this transformation and what companies like Accenture can bring to the table in terms of acceleration and scale of each company’s transformation process.
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