How do you let go of finance professionals affected by restructuring? This was the question that faced Lawrance Lee when international law firm Linklaters outsourced its general ledger and account payable processes in 2010. Because the business process outsourcing vendor in India will be doing their job, six finance staffers had to be let go.
The problem was that the outsourcing project took much longer to complete than the promised three months – it took 18 months, to be exact. Lee, the company’s Head of Finance for Asia, had to scramble to keep the staffers temporarily on board.
In Part 2 of an interview with CFO Innovation’s
Angie Mak (read part 1 here)
, Lee discussed the impact of outsourcing on Linklater’s finance staff, both those who were asked to go and those who remained. Excerpts:
At which point did you tell your own finance staff some of them were going to lose their jobs?
I think we told them when we were very close to signing with the outsourcing vendor in India. We communicated the news to all the finance teams globally, because this was a global project, not just an Asia project. London was communicating to their team and I was communicating with my team, all within the same day.
How did they react?
At the beginning, when we first announced the news, there probably was [some concern]. Probably not so much in Asia, but more in London. But prior to signing the contract with this vendor, the discussion on the contract itself also took a very long time, perhaps half a year.
The other issue was about the confidentiality of our data [that we would give to the vendor]. We needed to sort all those issues out, and that dragged on. Our employees already knew the outsourcing would happen, and they were asking, “When is it happening? When are you starting [to replace us]?” And we couldn’t give them the answer because we ourselves didn’t know.
So we had to do a lot of communicating, give them updates on what is happening. By the time the outsourcing started to take place, we said to them, “The vendors are coming in,” before it happened. By then, the staff had already prepared themselves.
How did you motivate the staff so the handover would proceed smoothly?
Telling my staff the news that we were outsourcing and saying how they would be impacted, I thought that would be hard. The implementation stage, the parallel run, turned out to be the hardest.
Knowledge transfer was not hard because the staff already knew how to do their jobs, so it was just a matter of telling the vendor everything that they knew. I thought my challenge would be that my staff would be quite resistant to transfer their knowledge to the outsourcing vendor but that was not the case, so that was great.
The challenge was that the parallel run kept dragging on, and a lot of the staff were frustrated with the quality of the vendors and the errors they made. But I wouldn’t say it was entirely the vendor’s problem. I was quite open with the team and told them that. Of course, I did this very subtly.
Somehow, I’ve trained the team to be very meticulous. They were actually checking every line in the GL and cost centres, and they were becoming very picky. The descriptions in the journal for invoices are quite subjective; anyone can type anything they want. But my staff were used to the way it was entered. To me, that was not inaccurate.
But to my team, that was a big deal. With that kind of issue, I had to tell them it’s not a big deal. I had to go back to them and say, “Guys, you have also made errors before. If the vendor had made errors in 2% of the work, you shouldn’t be screaming at them. You guys do make the same amount of errors too.”
Nevertheless, my team’s job during the transition was to check the vendor’s work to make sure they were doing everything correctly. I was very impressed with their commitment. During this phase, they were working late hours, till midnight, to resolve these issues. They were extremely committed, and at the same time, they were still trying to maintain very high standards.
If some people are impacted [by a layoff], they would think, “Who cares about accuracy? Who cares about working late?” They would just take off. I’ve been quite lucky to have a team [that did not think like that].
It seems you had set up a good system with your team, but part of the process in the outsourcing project is that you have tell them to let go and move on.
Yes. Otherwise, I think this whole project will never, ever go live.
Was money a motivation?
Money was one of the incentives – not just basic pay, but bonuses. We were quite supportive in ensuring that if the team needed to go to [job] interviews or obtain referrals, or help with CVs, we helped them. We were also supportive in terms of recommending them to any open positions internally.
Being Linklaters, we are very mobile. So those staff members in the Hong Kong finance team affected by this outsourcing project were welcome to join or move to positions elsewhere.
Personally, I did help them with the job search. If I heard of anything from the market. I would forward the information to them. I felt that the team knew that we were very supportive, and they did stay on. I’m not sure why they didn’t leave; maybe there weren’t many jobs out there. Also, in 2009, the market wasn’t doing well.
But during that 18-month transition period, the market picked up. My staff were starting to look for jobs and I was a bit nervous. I did ask them if they could stay on for us, and most of them did, with the exception of one. This person had found a job and to be fair to the staff, we should let that person leave.
I assume some of your staff were more needed than others because of their seniority. Did you offer different bonuses for the more crucial staff?
No, it was consistent. The bonus was a percentage of their salary, not a fixed amount, so for a more senior person, the bonus was bigger [than for a junior colleague]. The bonus depended on how many months they stayed on for the transition, and how long the person has been with the firm.
We did tell them to keep it confidential, but of course we can’t control that. Even if they did [discuss with others], because, we applied a consistent way of calculating the stay-on bonus, I don’t think it would create a problem. And it didn’t.
Not everyone got a bonus. Some of the junior team members were brought on as contract staff. We signed them on for one to two years and told them, “This outsourcing is happening. You are going to be contract staff.”
Some of the retained staff were given new roles in advisory and other value-added areas. How did the transition go?
One of the reasons why we did outsourcing was to increase the value of the finance function. Rather than being a very transactional processing team, we wanted them to be finance business partners.
Once we outsourced the work, we expected the retained finance team move up to the next level, where they would take the finance business approach. A number of them were used to doing transactions and dealing with the ERP system, and for them the transition was quite a challenge. It takes time to groom them and train them and emphasise what they should and should not be focusing on.
How did you train them in their new roles?
In [finance at] Linklaters, we use a system of levels: juniors, then advisors, then managers. Most of the [retained staff] are performing close to a finance business advisor level.
Right now, I’m starting to groom or develop the advisor level. Training-wise, it’s very hard because some are used to taking directions, where I would tell them, “Don’t do this, do this, this is what we should be focusing on.”
I work very closely with the other managers [regionally in Linklaters]. There are regular calls to discuss what we should focus on, and how to set examples. So if I do anything for the APAC region that is advisory, I’ll share it with them and say, “This is what we have done,” and thus with some of the partners, they should do the same for their office.
Classroom training is not going to help. At the same time, I have to think about project work and ad hoc work for each of them. I will come up with something and tell them they will help out with regional work, to train them to move away from transactional processes.
At which point did you start grooming them?
For quite some time. It’s been three to five years already. This is before we decided to do the outsourcing. When I implemented the shared service centre in Hong Kong, this was the model we followed. The vision was to be a finance business partner – to move away all the transactional work, so that the local team can start focusing on value-added work.
What was the biggest challenge in moving your staff to the next level?
It depends on the individual person. It’s very hard to tell a person what it means, because I had managers that come back to me and say, “What you do mean by value-added roles?”
That’s one of the hardest things to define. It’s different for different people. For me, it’s that the managers become a close business partner to the practice, providing advice, not data.
It doesn’t matter what you do. It doesn’t mean that there are certain steps you do which make you a business advisor.
Yet I think that’s what the managers were expecting, because they were trained to be transactional people. They process a task by Friday and finish by next Monday. They are very used to step-by-step work.
I know it’s hard to define, but what does it mean for finance to be a business partner in a law firm?
It means for finance to help the partners make right business decisions. It’s not just providing information, but advising them what to look at and what to do.
Our pricing is quite complicated. Some partners would say, “I’m going to do a quotation for a client.” A finance manager could easily pull out historical information. “These are all the things we’ve done; this is how much we charge.”
To me, that isn’t really adding value; that’s just providing information and data. The value-added part is understanding what’s happening in the market, understanding what other partners and other practices are doing, and then providing [the particular] partner with suggestions on the proposal.
Finance should say, “It is best to provide a quote using this fixed rate, or best to quote using a blended rate, or it’s best to quote with further discounts because we want the deal.”
How do you provide your people with the resources to do that? I assume how a deal is structured in another law firm is confidential data.
It is. It is not necessarily that we compare ourselves with other law firms. Even within Linklaters, we should provide excellent advice.
Different partners will do quotations differently. Some partners will be very desperate for the deal, and they might offer extremely high discounts . . . A finance manager should go up to that partner and say, “You shouldn’t do this unless there is a strategic reason to do so, because this is a loss-making deal.” The finance managers can do that even without comparing ourselves to other firms.
It doesn’t make them very popular with the lawyers, so we need to provide them with good advice . . . Imagine if the partner’s portfolio looks bad [because of loss-making deals]. But we are helping [the partner] by coming up with better deals. That’s where I expect them to provide advice, not data.
These skills aren’t something that a person can develop quickly. It takes understanding the business and doing this more regularly until you are more confident.
If I’m doing a deal with a country where they have withholding taxes, the manager should know that. He or she should tell the partner, “If you do this, you lose 10% or 20% of the profits on taxes. That’s a loss to your bottom line. What do you want to do about it? Do you want to recover it?” Sometimes, the partners may not consider these things, and that’s where our value is.
During the crisis, currency fluctuation in Asia was a lot [more volatile] than other regions. In Japan, the currency fluctuated by 40%-50%. That has a big impact on the bottom line and the price will go haywire if we don’t manage it properly. Our job is to tell partners things like that, that they shouldn’t quote in a certain currency, so we don’t get exposed to foreign exchange [volatility].
I think finance managers can add a lot of value with the things that they already know. But I think they were used to providing information and data. That’s where I have been trying to change the behaviour and mindset.
How long does it take to effect the transformation?
At least a year or more, or even longer, depending on the person. Three to six months is tough, unless it’s an external hire, who has already done this. For an in-house [staff], you have to unlearn the culture and past habits.
What I am doing in Linklaters is basically changing the culture.