Filippo Passerini is bringing the back office into the boardroom.
Michael Bloch and Elizabeth C. Lempres
July 2008
P&G’s support services have made a ten-year journey that many global corporations are studying with interest and, perhaps, envy. P&G has saved around $600 million to date by consolidating all back-office functions, such as finance and accounting, HR, facilities management, and IT, into one unit—Global Business Services (GBS)—and by outsourcing many of the nonstrategic activities involved in providing these services. What’s more, GBS played a key role in the speedy integration of Gillette, which P&G acquired in 2005, and it has emerged as a strategic partner with the operating units of the global consumer products group by providing innovative solutions in consumer and customer interactions and in product development.
“It’s all about innovation—at the operating level in the way GBS is structured and in the design of our work processes, as well as upstream, in the IT-driven solutions that we can offer to support P&G’s brands.” So says Filippo Passerini, president of GBS and P&G’s CIO, when describing the transformation of support services into an important contributor to the company’s growth.
P&G has built its current business services platform in phases. In 1999, the company reorganized its small, mostly independent businesses into strategically connected global business units and regional marketing organizations. At the same time, it pulled together local support services (with the exception of IT) into a single global unit—GBS.
In 2003, P&G embarked on a second phase when it entered into $4.2 billion worth of outsourcing partnerships in IT infrastructure, finance and accounting, HR, and facilities management. At that point, HP took over the development of IT applications and the operation of data centers and IT support, as well as key elements of accounts payable. IBM won a contract to provide employee services such as payroll, travel support, and expatriate services. Jones Lang LaSalle took over the management of offices and technical centers, including their maintenance and security, in over 60 countries. But even in these areas, P&G retained the activities that it considered strategic—for instance, IT architecture. Moreover, it chose not to outsource services in business-critical areas such as procurement, logistics, and IT-driven innovation. In 2004, Passerini expanded GBS to incorporate P&G’s IT function.
Recently, Passerini talked with Michael Bloch, a principal in McKinsey’s Paris office, and Elizabeth Lempres, a director in the Boston office, about how the current platform has enabled the shared-services unit to emerge as a strategic partner with P&G’s business units and about the challenges and opportunities that lie ahead as it enters its third phase of development.
Filippo Passerini
Vital Statistics
Born July 30, 1957, in Rome, Italy
Married, with 3 children
Education
Earned Ph.D. in statistics and operating research in 1981 from University of Rome
Career highlights
P&G (1981–present)
* esident of Global Business Services and CIO (2008–present)
* Chief information and global services officer (2004–08)
* Global Business Services officer (2003–04)
* Vice president of business process sourcing study (2002–03)
Fast Facts
IQPC’s (International Quality and Productivity Center) Shared Service Leader of the Year (2006 and 2008)
Named in Information Week’s “Innovators and Influencers Who Will Make a Difference in 2008”
Competition-level chess player and keen mountain climber
The Quarterly: What was the thinking behind creating GBS, in 1999?
Filippo Passerini: It was to eliminate duplication—most operating units at the time were supported by their own local service organizations—and, in doing so, reduce costs and leverage our economies of scale. What we did in the next three years was consolidate and standardize more than 70 services. To provide around-the-clock business support worldwide we built three shared-services centers: in San José, in Costa Rica; in Manila, in the Philippines; and in Newcastle, in the UK. We also integrated numerous IT systems into a much smaller set of global platforms, which enable us to access data faster, make smarter decisions, and track operations anywhere around the globe.
The Quarterly: P&G made a design choice when it set up GBS as one entity rather than letting the various support functions improve performance on their own. Many companies fear that bundling functions might create overhead that would bring more complexity rather than more efficiency.
Filippo Passerini: Our opinion is that if you optimize by function, you will inevitably end up creating silos, which would carry the risk of fragmentation. By integrating all these services into one organization, we can manage them by work process rather than by function and better leverage scale and create synergies. Take purchase-to-payment for suppliers, for example. Some of this work is normally in procurement, some in accounting, and some in finance. We can have one group of people who handle the whole process and so avoid handovers across multiple functions, each with its own management and perhaps different objectives and incentives.
