Changes in telecom industry regulation have prompted rural telcos to seek creative ways to trim cost structures while keeping pace with market demands. An enterprising collective in Oregon has risen to the challenge by establishing a separate company – Consolidated Business Services (CBS) – through which they’ve consolidated some administrative operations, shared resources and opened their doors to business from other telcos. Their journey is an inspiration for those who might follow in their footsteps.
The story began in 2010 when Canby Telephone Association (a.k.a. DirectLink) faced the daunting task of replacing its CFO/controller. They soon discovered candidates with the requisite skills and experience were few and far between outside the major metropolitan areas. Senior leadership made contact with their peers at Beaver Creek Cooperative Telephone Company and Stayton Cooperative Telephone Company to assess interest in sharing accounting resources. Those discussions led to a formal planning effort, and they looked to Aldrich to facilitate a process assessment to augment their planning for the shared resources model that had been planned by the three companies in the preceding two years.
The group opted to focus their initial foray into shared services on accounting. While they all used the same back-office billing system, each company had a customized version of it. Further, they each had a distinct rendition of the chart of accounts and associated treatment for coding expenses.
The first order of business was to establish a set of standards that would enable them to maximize efficiency and minimize error. They spent a year designing the system and processes for all accounting functions – payroll, purchasing, accounts payable, accounts receivable, investment management, and financial statement preparation.
CBS opened for business in September 2012 using leased office space in Mount Angel, Oregon. This neutral ground was a sign that no company would have an edge over the others. From the start, there were savings and significant improvements in the quality of the work. In 2016, Clear Creek Communications began using CBS’s accounting services due to their controller’s retirement. The CBS pricing model delivered savings on Clear Creek’s former back-office costs. The whole concept is to provide quality services at cost savings from the original independent model.
Having achieved success with accounting, the three partners decided to add human resources to their shared services, early on. As with accounting functions, the initial planning efforts focused on developing standards for company policies and benefits. CBS opted to outsource human resource administration to a third party. That firm provides a dedicated specialist who rotates office hours across the three companies. She provides oversight of employee management functions (personnel guidelines, recruiting, hiring, salary and benefits administration) as well as regulatory compliance.
The three partner companies have shared other resources using intercompany billing rates – for example, field operations manager, field technicians, and marketing experts. If and when it makes sense to do so, these employees will be transferred to CBS.
Based on the CBS experience, the following critical success factors might inform efforts by other rural telco providers.
Partner companies must be committed to the enterprise.
The board and senior management must be willing to compromise on establishing standards that will benefit all parties. They must supply skilled resources and commit to procuring services from the enterprise. CBS’s founding partners solidified their commitment by agreeing that any request to leave the partnership required a unanimous vote of all three partners.
Partner companies need to be all in.
It takes more than an awareness of the necessity of change to survive the industry’s shifting tides. Long-term success calls for an ongoing effort to identify and take action on opportunities to realize efficiencies, improve competitive position and bolster financial health. As such, shared services could ultimately lead to a merger of their collective business interests.
Senior leadership needs to help employees see the bigger picture.
It’s very difficult to embrace change amidst concerns over loss of influence or control. Employees may even fear the loss of their livelihoods. Yet, the very nature of change within the industry demands the ability to adapt to a new environment.
Clear communication can outline the impetus for change while letting employees know how it will affect their current positions and what is expected of them going forward. Hopefully, they’ll feel energized by the possibilities and contribute to the organization’s long-term success.
Questions? Contact our team of advisors.