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MCGRAW-HILL FINANCIAL: THE PERFECT STORM: TRANSFORMATION, OUTSOURCING AND AN ERP IMPLEMENTATION

The Hackett Group

October 3, 2013

GBS Executive Advisory Program | 3© 2013 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

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The Hackett’s Group 2013 European Best Practices Conference

Join a select group of senior executives for this exciting event that provides opportunities to:

Reduce costs and improve effectiveness. Learn proven cost-saving strategies and business improvement examples that yield actionable next steps that can have an immediate return on your investment.

Leverage the experience of your peers. Hear real-life case studies with ample opportunities to network with other senior executives and thought leaders representing the most successful companies and recognised brands in the world.

Access The Hackett Group's full breadth of research and expertise, including the latest data, metrics and models aligned with your job function.

Gain excellent value for the level of intensive education. Experience nearly 10 hours of keynote and practitioner sessions and more than 10 hours of networking.

http://www.google.com/url?sa=i&rct=j&q=germany+flag&source=images&cd=&cad=rja&docid=d1psl3txyMepeM&tbnid=09SajIdIHSLSMM:&ved=0CAUQjRw&url=http://debutantedebris.blogspot.com/2012/12/germany-flag.html&ei=fNCsUbbZOobqrQe_woGIBQ&bvm=bv.47244034,d.bmk&psig=AFQjCNEjHLKAjTMYMVxAg3Tu9Kz9aaDymw&ust=1370366456695836

Speakers:

Kelli Skaff, Global Director Process Transformation Office, Boston Scientific

Dorota Maciaszek, Director Mondelez International Enterprise Shared Services,

Mondelez

Michelle Ferguson, Senior Vice President, McGraw Hill Financial

Honorio Padron, Principal & Global Practice Leader, Global Business Services, The Hackett

Group

Vin Kumar, Associate Principal & GBS Global Operations Leader, The Hackett Group

Penny Weller, Global Business Services North American Practice Leader, The Hackett Group

Patrick Connaughton, Senior Director GBS Advisory, The Hackett Group

2013 Global Business Services Advisory Leadership Forum

Achieving World-class GBSGlobalization & Outsourcing

Service Management Executive & BU Buy-in

C-Level KPIsGovernance, Migration

November 19, 2013Westin Diplomat | Hollywood, FL

The Hackett Group's 2014 Annual GBS Performance Study is open fromOctober 8 – December 6, 2013

Global Shared Services/Shared Services: Is your organization keeping pace or getting left behind?

Participants in this study will: How your organization compares with

World-class performance Learn how GBS/shared services can

enhance the enterprise value it delivers Receive a report with key research findings

and an assessment of your GBS/shared services’ performance

Have a one-on-one session with Hackett’s GBS Advisors to review your performance

Participate by using the link on the GBS portal or contacting [email protected]

12th Annual Global Business Services (GBS) Performance Study

| 7© 2012 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

GBS Advisory - Save the dates (webcasts & in person events)

Jan ‘13 Feb ‘13 Mar ‘13 Apr ‘13 May ‘13 Jun ‘13

Jul ‘13 Aug ‘13 Sep ‘13 Oct ‘13 Nov ‘13 Dec ‘13

Hackett: GBS Performance Study - IT Highlights – July 9Hackett: GBS Performance Study - Finance Highlights – July 15

United Airlines: Using Lean & Six Sigma to Keep a Business Process in House– August 15

GBS in Poland, Key Benefits & LearningsSeptember 5

Dow Chemical: Service ManagementJanuary 24

Boston Scientific: Human Capital Metrics Drive Data-Based Decisions Across a Global Organization February 14

Pitney Bowes: Hidden Benefits of the Cloud February 21

Hackett: GBS Talent Approach - March 19TRW: Single Instance ERP Not a Reality At The Moment? - March 21

ATOS: Leveraging Social Media Collaboration Tools - April 16Cytec: Implementing GBS by the Book!April 18

North American Best Practices Conference in Review - June 13Corning: Performance Excellence Approach (Six Sigma/DMAIC, Lean, and DESGN) June 20

2013

Unisys: Social Collaboration Tools – November 7Coca-Cola Enterprises : The Value Proposition – November 21

Hackett GBS Performance Study Results PresentationMarch 7

North American GBS Leadership Forum (Hollywood, Florida) - Speakers: Hackett, Boston Scientific, Mondelez Intl, McGraw Hill Financial & Panel Discussions - November 19

EU GBS Leadership Forum (London) June 19

EU Best Practice Conference (Berlin) – October 30-31

CINDE: Costa Rica Trends, Location DetailsApril 23

Hackett: Hackett GBS Payroll Study August 27

Unisys: Creating a COE for Knowledge Management & Reporting September 26

Hackett: European Best Practices Conference Highlights – December 5

Hackett: GBS Performance Study - Procurement Highlights - July 24Hackett: GBS Performance Study – HR Highlights – July 30

McGraw Hill Financial -The Perfect Storm: Transformation, Outsourcing and an ERP Implementation – October 3US Navy Makes Progress On Their Journey – October 10Hackett: Effective Sourcing Strategy Study Results – October 24

Hertz – End-to-End Process DesignDecember 19

North American Best Practices Conference (Miami) – May 20-22

Global Business Services Workshop (Miami) – May 20

Note: Past events are recorded and available on the GBS portal


GBS Advisory - Save the dates (webcasts & in person events)

Jan ‘14 Feb ‘14 Mar ‘14 Apr ‘14 May ‘14 Jun ‘14

Jul ‘14 Aug ‘14 Sep ‘14 Oct ‘14 Nov ‘14 Dec ‘14

Hackett: GBS Performance Study – HR Highlights July 17

Hackett: GBS Performance Study – IT HighlightsAugust 14

Hackett: GBS Performance Study – Finance Highlights September 18

Hackett: Continuous Improvement; Developing a Global Framework for SuccessOctober 16

Cisco: Building Collaborative BPO Relationships; Guiding Principles for Success - January 16

Boston Scientific: Service Infrastructure February 20

Available

Hackett: Global Business Services Performance Study March 13

Hackett: How to Make GBS Stick! – Honorio PadronApril 17

2014

Hackett: GBS Trends – Key Learnings & Global Location Update – November 13

National Grid: Using KPIs/Metrics Dashboard to Motivate and Drive Performance – March 20

North American GBS Leadership Forum (Location) November

EU GBS Leadership Forum (London) June

EU Best Practice Conference (Location) – October

JD Irving: Senior Leadership Required for Effective Change Management – April 10

British American Tobacco: Finance Shared Services, Global SAP roll-out, and Advanced A2R ServicesSeptember 4

Hackett: European Best Practices Conference Highlights – December

Available

December 18

North American Best Practices Conference (Location) – May

Kiewit: KPIs - C-Level, Key Stakeholders, & Operational - May 15

Mondelez International: Technology Rollout & Transitioning WorkJune 12Hackett: Best Practices Conference Highlights – Sean Kracklauer June 19

Hackett: GBS Advisory 2013 Top Inquiries – Vin Kumar - January 23

Hackett: GBS Performance Study – Procurement Highlights August 21

Available - November 20

Member Profile | 9© 2013 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

GBS Member Profile – McGraw Hill FinancialsMcGraw Hill Financial Global Business Services

Industry: MediaRevenue: $4.4 Billion (2012)Employees: 17,000Countries: 200

Vision: To excel as a global shared services organization by delivering high quality, consistent services at the lowest, most flexible cost.

Mission: Global Business Services supports McGraw Hill Financial by:• Providing superior and expanding services to our colleagues• Delivering financial value and innovation• Maximizing the effectiveness of our systems and processes• Partnering with world class service providers

Shared Service Centers:

Outsourced Processes:

GBS organization consists of four captive locations and multiple outsourcing arrangements:Captive: Hightstown, New Jersey (170 fte) services USA Captive: London, England (35 fte) services EMEA (UK, France, Germany, Spain, Italy)Captive: Singapore (20 fte) services APAC (India, Singapore, China, Malaysia) Captive: Mexico City, Mexico (2 fte) services Latin America (Argentina, Mexico)Outsourced: Finance (AP, OTC, R2R) – Genpact - Hyderabad, India; Dalian, China; Bucharest, Romania;

Juarez, MexicoOutsourced: Global Payroll – NorthgateArinso – Manila, PhilippinesOutsourced: HR Services – AON Hewitt - Customer Service Support: Portal, Taleo, Success Factors, Workday

– Charlotte, North Carolina, Gurgaon, IndiaOutsourced: System Development – Tata – Oracle – Kolkata, IndiaOutsourced: Quality Control – Wipro – Oracle – Chennai, Bangalore, India

Services Provided: Finance & Accounting: AP, T&E, HR Financial ReportingHuman Resources: Payroll, Employee Care, Global MobilityInformation Technology: Oracle ERP SystemProcurement: Global Sourcing and ProcurementOther Services: Global Real Estate

Hightstown, NJ, USA

London, UK

SingaporeMexico City, MX


Presenter

Michelle Ferguson

Senior Vice President, Global Business Services

Michelle has developed a shared services strategy as part of the organizations Growth and Value Plan and now leads that organization. It includes Financial, Human Resources, Shared Services and Real Estate. Her responsibilities also include leading a multi-phase Oracle implementation.

She has held senior leadership roles in Real Estate, Human Resources, Corporate Finance and McGraw-Hill Education. Most recently as SVP of International Operations at MHE, Michelle led the Latin American business, managed financial reporting for international operations, and improved service workflows.

Michelle is founder and President of WINS (and the corporations first and largest ERG). She was co-founder of a mentoring program, which has expanded to included world-side employees. She continues to be a role model and advocate for women at McGraw-Hill Financial.

Michelle holds a BBA from the University of Notre Dame and an MBA from Columbia Business School.

McGraw Hill Financial | Global Business Services

Michelle R. FergusonSr. Vice President – Global Business Services

The Perfect Storm: Transformation, Outsourcing and an ERP Implementation

12McGraw Hill Financial | Global Business Services

Today I will Discuss

A New Company with 125 Year Heritage

Global Business Services

Transformation

Outsourcing

ERP Implementation

Challenges / Lessons Learned

5 Rules NOT to Follow

Q & A


A New Company: McGraw Hill Financial

New name, new vision, new look, and a new ticker — MHFI


• A new company, with a 125 year old heritage, focused on ‐ ‐providing essential intelligence

• Our vision is to be the foremost provider of ratings, benchmarks, and analytics in the global capital and commodity markets

• Strong balance sheet enables financial flexibility• Will continue to invest in businesses while returning cash to

shareholders• Solid track record of top and bottom line growth‐ ‐• 2013 guidance indicates solid growth:

High single digit, top line growth‐ ‐ Adjusted diluted EPS guidance of $3.15 $3.25‐

McGraw Hill Financial


A Global Network

17,425 FTEs


Harold McGraw III Douglas L. Peterson

• Transition – Ensure a seamless and smooth transition• Meet with leaders around the company to better understand:

– Strategy– Corporate governance & planning process– Regulation– Capital allocation

• Key balance of year priorities to prepare for 2014:– Refined corporate vision– Ensure alignment of individual business strategies– Realign leadership as necessary– Set 2014 performance targets and initiatives

McGraw Hill Financial — Leadership Change


McGraw Hill Financial: Exceptional Growth Continues

($ in millions) 2Q 2013 2Q 2012 Change

Revenue $1,250 $1,072 +17%

Adj. Operating Profit $446 $347 +29%

Adj. Operating Margin 35.7% 32.3% +340 bps

Diluted Adjusted EPS $0.92 $0.70 +31%


• Senior Vice President, Global Business Services• Finance• Human Resources• ERP System• Global Real Estate

• BBA – University of Notre Dame• Advisory Council for DeBartolo Performing Arts Council• Member of Alumni Board

• MBA – Columbia Business School

About Michelle


Michelle R. Ferguson

Global Real Estate ERP Shared Services

Payroll

P2P

HR Employee Care

Contract Administration

GBS Organization Chart


Global Business Services• Three process “towers” with cross functional support

– Global Payroll– Global Employee Care / Special Programs– Global Sourcing and Disbursements– Special project support (e.g., People Fluent, Physical Separation)– Cross tower support (financial planning/estimating, contract administration, service delivery and

governance)

• OBJECTIVE: Deliver predictable, scalable, lower cost HR/Finance service consistently across company. Outsource transactional activities

– Relationships with industry leading providers that have global capabilities – Strong governance – Measurements focused (e.g., service level agreements, process health)– Aligned to support our businesses – Process improvement mindset – Opportunities for direct access, self service


Performance: Enhance enterprise impact

People: Become a high-performance employer of choice

Cost: Reshape to be fit for growth

Operating Model: Increase speed, agility and global connectivity, while building selective enterprise capability

Growth: Position great businesses for scalable growth

Transformation Requires a Focus on Growth and Required Capabilities

MHFI Transformation Goals & Enterprise Value Creation

Transformation Goals

Achieve higher and sustained global growth

Capture horizontal synergies across businesses

Drive scalability in cost structure

Treat talent and data as strategic corporate assets


Enabled by Management Process and Cultural Change…

Theme “Evolving” “Sustained High Performance”

Organization Architecture Vertical and layered Flatter and compressed

P&Ls Competing metrics and opaque allocations Transparent, consistent, precise

Governance & Decision-Making Uneven criteria and pace Clear, selective shifts to align on emerging

enterprise decision rights

Capabilities & Talent Individual business-based Selective shared enterprise capabilities & talent

Collaboration & Alignment Shifting to greater flexibility and cross-business leverage

Leadership alignment, with mechanisms established and integration underway

Culture Publishing heritage, avoidance of risk Market orientation with risk management

Change Orientation Hesitant but building momentum Shared common purpose and vision

Geographic Leadership US-focused with shifting focus to global – Limited accountability for regional results

Regional measurement with cross-LoB management and accountability by geographic sub-region (i.e., ex-Americas)

Critical Metrics Revenue and profits Financial and strategic metrics, with clear accountability

Stand Up MHFIGrowth & Value Plan


Transition Begins

Transition Ends

Provider Selection

Solution Development

RFP Responses & down-selection

Rapid Outsourcing Approach and Timeline

Outsourcing Approach: A swift yet structured process

Provider Selected Contract Awarded

Change and Risk Management

Providers Down Selected

Month 1 Month 2 Month 4 Month 5 Month 8

Provider Selection & Contract Development

Joint activities with Provider

MH specific activities

Specifications Package & MSA to Pre- Selected

Providers

Communication and Change Management

Governance Design & Transition Planning

Base Case

To be Vision

Outsourcing Objectives

RFP/SpecPackage

Site Visits & Inbound Due

Diligence/BAFO

Outbound Due Diligence

Negotiations and Contract Award

24

Outsourcing summary accomplishments


Function Position Scope (MHP)

% Annual Savings

(Compensation ONLY)

Approach Year 1 Highlights (achieved/targeted)

Finance & Accounting

295 41% • “Lift and Shift”• FTE model for staffing;

dedicated to McGraw-Hill• Timeline driven by stand

up of Education and rollout of Oracle

• Split of shared accounting functions with Education

• Super storm Sandy coverage• Provisioned access to ~100 applications

across all service towers• Strong executive level governance• SLA improvements in areas of OTC• Six Sigma projects initiated

HR / Payroll 50 17% • Fix, eliminate and ship• Shared resource model • Timeline driven by rollout

of Workday

• Global HR portal• New customer service tools• Coverage for other markets outside of the US

and UK• Reporting and analytics on employee care

25

Meetings Framework – Governance (FAO example)


Category Name Frequency Tower Timeline

Executive Reviews

Steering Committee Bi-annual All Q2 and Q4

Management Committee Quarterly All Q1 and Q3

Operational Reviews

Service Delivery Committee Monthly(Global)

AP and T&E 2nd Monday

OTC 20th of the month

R2R 4th Tuesday

Contract Administration Weekly All Every Friday

Progress Meeting Weekly(Regional)

R2R US Every Wednesday

R2R EMEA Every Wednesday

R2R & AP – APAC Every Friday

AP (Global) Every Tuesday

OTC Daily


Outsourcing Partners

Business Focus Area

What they do for us

Locations

Finance AP, OTC, R2R Hyderabad, IndiaDalian, ChinaBucharest, RomaniaJuarez, Mexico

Payroll Global Payroll Manila, Philippines

HR services Customer ServiceSupport: Portal, Taleo, Success Factors, Workday

Charlotte, NCWoodland Hills, TXGurgaon, India

System development Oracle Kolkata, India

Quality control Oracle Chennai, IndiaBangalore, India


ERP Implementation• Atlas ERP Implementation

– Project One launched June 2010; Go-live July 2012– Replacement of Lawson Financials

with Oracle 12 e-Business Suite– Chart of Accounts

• Atlas Hard Separation– Project launch March 2012; go-live

January 2013– Financial and operational segregation– Separate and distinct bank accounts and

ledgers• Atlas Physical Separation

– Project launch January 2013; go-live February 2014

– Two independent Oracle environments


Challenges & Lessons Learned• Challenges were many…

- Outsourcing Finance and going live with a new ERP system the same day- Outsourcing Payroll, a new Human Capital Management System for MHE at the

same time- Understanding key controls early in the project lifecycle

• Lessons Learned were many…- Communicate, communicate, communicate- Coordination - Project management

- Know a Project Manager when you see one- Need different skill set in the leadership team- Don’t panic, overreact to anecdotal and isolated issues- One group does contract administration

- Pricing, SOW, MSA, IT Requirements


When you become your own worst enemy5 RULES NOT TO FOLLOW

1. Rebuilding legacy systems2. Allowing consultants / experts to drive your projects3. Aiming for perfection4. Hobbling the project5. Asking internal resources to provide their time to a project and maintain

their daily responsibilities

Don’t hesitate to break virtually every rule held sacred by conventional wisdom


Q & A


Office Locations and ContactsMiami - Corporate Headquarters

1001 Brickell Bay Drive30th Floor

Miami, Florida 33131TEL: +1 305 375 8005

AmsterdamCamerastraat 25

1322 BB Almere AmsterdamTEL: + 31 36 535 00 82

Atlanta1000 Abernathy Road NW

Suite 1400Atlanta, GA 30328

TEL: +1 770 225 3600

Chicago525 W. Monroe Street, Suite 1550

Chicago, IL 60661TEL: +1 312 325 2900

FrankfurtTorhaus WesthafenSpeicherstrasse 59

60327 Frankfurt am MainTEL: +49 69 900 217 0

Hyderabad8-2-120/112/88&89

1st Floor, Aparna CrestRoad #2, Banjara Hills

Hyderabad 500034TEL: +91 40 66544000

LondonMartin House, 5 Martin Lane

London EC4R 0DPTEL: +44 20 7398 9100

MelbourneSuite 122B & 122C, Level 1

530 Little Collins StreetMelbourne Vic 3000

TEL: +61 3 99097657

New York110 Wall Street, 17th Floor

New York, NY 10005TEL: +1 646 354 4400

Paris8, rue de Port Mahon

75002 ParisTEL: +33 1 53 43 0400

Philadelphia225 Washington Street

Conshohocken, PA 19428TEL: +1 610 234 5500

San Francisco100 Montgomery Street, Suite 2225

San Francisco, CA 94104TEL: +1 415 249 3500

Sydney35 Lime Street, Suite 403

Sydney, NSW2000, AustraliaTEL: +61 2 9299 8830

Penny WellerNA GBS Advisory Practice Leader

Phone: 269 345 [email protected]

Lindsay MurphyGBS Account Manager

Phone: 904 374 1478 [email protected]

mailto:[email protected]

mailto:[email protected]