Peter Barta, Everest - When is Shared Services not Shared Services

When is “Shared Services” not “Shared Services”

S S & OAustralasia Shared Services & Outsourcing WeekSydney

10 – 12 May 2010

Index

The issue of Shared Services Value Leakage

Approaches to maximise Shared Services ROITransitionService Improvement

Proprietary & Confidential. © 2010, Everest Global, Inc.2

The importance of improving value from servicesThe evolving business landscape emphasizes the importance of capturing service value

Market developments

capturing service value

Unprecedented economic pressures permeate the marketCompanies face enormous pressure to achieve “more withpressure to achieve more with less”

SSO users’ developments

SSO’s must mature –t “l h i

SSO developments

Cost pressure is more i t th dmost “low-hanging

fruit” has already been pickedExpectations from SSO’s are more

intense than ever, and SSO’s are seeking to further consolidate work among fewer centres / processes

Importance of improving value

sophisticated –complexity of scope has increasedSSO users are focused on ensuring value

pAdvanced technology has become “table stakes”, while innovation has emerged as a key

from SSO services


on ensuring value capture

emerged as a key value add

The Shared Services strategy typically creates key expectations around cost savings, quality of service, and risk control … and risk control …

Expected benefits Description

The SSO business case sets specific expectations regarding cost savings and how / when it will achieve those savings

Cost savings

Quality of service expectations are typically defined in the form of SLAs, however a collaborative approach between users and the SSO is best to ensure business goals are met

Quality of serviceSSO obligations

SSO is best to ensure business goals are met

Risk allocation is determined by factors within the SSO’s accountabilities, SLAs, and associated responsibilities It is important to

Risk controlassociated responsibilities. It is important to embed oversight into the quality and efficiency of the services being delivered


… however, common pitfalls often limit the ability of SSO’s to realise expected benefits from the strategy

Shadow organizations

ILLUSTRATIVE

gcreate duplicate effort and costs

A fragmented work Inadequate system Reduced b fit fA fragmented work

environment leads to suboptimal utilisation of resources

q yand tools to enable the to-be processes may result in savings leakage

benefits from the SSO’s

efforts


Index

The problem of Shared Services Value Leakage

Approaches to maximise Shared Services ROI TransitionService Improvement


Enterprises typically seek ~20-30% cost savings through their SS strategy

ILLUSTRATIVEBenefits from SS strategyPercentage of cost

55

15

100 95

5 5

6070

Before SSO

Business case


Shadow organisations create duplicate effort, reducing the savings benefit


55 Example: A stakeholder community that was

receiving local customised reports from the 15

100 95

5 5affected organisation. To ensure they continue to receive these reports, they hire an additional FTE to continue this effort

6070

Before SSO

Business case

Shadow organis-ation


A fragmented work environment creates duplication of effort, further eroding savings


55

Example: In a specific country (wave) where processes are redundant across multiple divisions, with multiple people in each division performing a small part of the in-scope processes. To achieve savings, some di isions ill need to red ce staff hile15

100 95

5 5divisions will need to reduce staff while others hold constant. How to rationalise the effort across divisions become a difficult problem to solve

6070

Before SSO

Business case


Fragmen-ted workenviron-ment


Lack of systems and tools to enable the to-be processes may result in savings leakage


55

Example: Technology is not available in some locations to enable automated payments requests from the financial system to the local bank. As a result, the buyer retains an organisation to15

100 95

5 5the buyer retains an organisation to perform this task

6070

Before SSO

Business case



Systemsand tools


These common pitfalls, if not controlled, can undermine the cost savings identified in the SSO business casebusiness case ILLUSTRATIVEBenefits from SS strategyPercentage of cost

55

15

100 95

5 5

6070

Before SSO

Business case



Systemsand tools

Cost without managed transition


Furthermore, a rigorously managed transition can help target additional savings opportunities such as process improvementsprocess improvements ILLUSTRATIVEBenefits from SS strategyPercentage of cost

55

Example: When headering invoices in an AP process, it was no longer required to capture date of invoice because of the timeliness of the invoice scanning process

15

100 95

5 5

g p

6070

Before SSO

Business case



Systemsand tools


Process improv-ements


Tools and experience also can be leveraged to increase savings through additional SSO scope

Example: SSO brings central scanning and electronic invoice


55

scanning and electronic invoice technology to the solution, enabling transfer of a larger portion of the process and additional savings

15

100 95

5 5

6070

Before SSO

Business case



Systemsand tools



SSO improve-ments


By actively managing the transition, SSO’s can expect to meet or exceed the benefits identified in the business casebusiness case ILLUSTRATIVEBenefits from SS strategyPercentage of cost

55

15

100 95

5 5

6070

Cost with managedtransition

Before SSO

Business case



Systemsand tools



SSO improve-ments


The transition plan should strengthen the alignment to the business plan and key business needs by improving process effectiveness while driving out costsprocess effectiveness while driving out costs

Formulate TransitionStrategy

Migrate to TargetOperating Model

Manage ContinuousImprovement Ethic

1. Map to-be environmentProcessPeopleTechnology

2 Id tif i t

1. Validate Target Operating Model in local context

2. Assess delivery readiness3. Transfer knowledge4 I l t i ti

1. Establish continuous improvement infrastructure and programs

2. Execute core programs3 M it d i t2. Identify improvement

opportunities vs. current state3. Prioritise and sequence

opportunities (business case)

4. Implement migration 3. Monitor and communicate results

Drive Process with Active Program Management

Manage Stakeholder Expectations and Organisational Change

Drive out unnecessary costs

Define most efficient process while maintaining compliance integrityRationalise roles to ensure

Ensure quality of service

Rationalise processes to meet stakeholder needsWork with stakeholders to

Ensure appropriate controls

Foster collaborative team approach between users and SSO to share and manage risks


appropriate skill sets and trainingDefine scope to minimize shadow organisations

maximise process effectiveness within construct of Target Operating Model

Index

The problem of Shared Services Value Leakage

Approaches to maximise Shared Services ROI TransitionService Improvement


Service Improvement ChallengesSubstantial improvement can be achieved by pulling four key performance levers but several barriers must be addressedperformance levers, but several barriers must be addressed

Minimize value leakage Disjointed functions and processes

Performance Levers Barriers to Success1

Minimize value leakage across SSO portfolio (including transferred and retained in-house work)

Disjointed functions and processes lead to shadow organisations that are created to account for perceived gaps in operations

2Create a culture of innovation and continuous improvement

Users and SSO’s have divergent agendas – users request increased investments in innovation, while SSO’s seek funding to investImproving

value from 3Ensure consistency and quality across service delivery

Lack of end-to-end service visibility causes parties to be unaware of the repercussions of service changes and reduces ability to make positive impact

value from SSO services

3

Build a collaborative relationship between users and SSO

y p p

Users and SSO’s become occupied with adhering to the “contract” (rules) and are not able to focus on achieving

t ll l

4


a greater overall value

An effective Service Improvement process involves distinct phases to identify opportunities, capture benefits, and sustain value over timebenefits, and sustain value over timePhase 0 Phase 1 Phase 2 Phase 3

Implement Service Improvement

Establish Collaboration Lock in

sustainabilityAssess OpportunitiesAssess Opportunities

ObjectivesSet ground rules for collaboration

Assess and identify improvement areas

Ensure quality of services & optimal service model

Support ongoing innovation & continuous improvement

ImprovementFramework sustainabilityOpportunitiesOpportunities

Define the to-be operating environmentImplement service i t i iti ti th t

Identify expectations & implement programs that embed innovation &

ti i t

Identify comprehensive list of service improvement initiativesC t li i

p

Key activitiesDetermine improvement opportunities evaluation criteria to ensure

h i l improvement initiatives that achieve/exceed benefit expectations Create detailed work plans to direct effort & communicate to

continuous improvement into daily processesCapture a comprehensive list of key inputs to identify innovation opportunities

Create preliminary business case based on facts and market realitiesPrioritize & sequence initiatives into implementation waves

comprehensive value captureDefine framework to ensure improvement opportunity investments and benefits are shared equitably

stakeholders

Major outcomes

Visibility into the end-to-end process; identifies,

i iti &

Implemented initiatives that meet or exceed expected b fit th h i

Organisational approach with regular cadence that

i ti &

Rules of engagement & accountability defined to

i i S i


prioritises & sequences improvement initiatives

benefits through rigorous implementation program management

ensures innovation & continuous improvement

maximise Service Improvement results

Service Improvement drives substantial value for the SSO and users alike

User benefits SSO benefits

CLIENT EXAMPLE

Business case improved Short term: 70 additional FTEs t iti d t SSO t

Operating scope expanded by 13% (FTE basis); visibility into ~50% dditi l thtransitioned to SSO at

substantial savingsLonger term: visibility of opportunity to shift over 300 dditi l FTE’

additional growth

Secured substantial user engagement t t d t d300 additional FTE’s

roles to offshore SS

Compliance risk reduced d t t l it d

to support end-to-end process optimisationefforts

D li i k d d ddue to stronger clarity and accountability for key activities (for both user and SSO responsibilities)

Delivery risk reduced due to visibility into user-retained activities and clarity on all handoffs


Service ImprovementTM resultsA facilitated collaborative approach between users and SSO to produce a mutually beneficial outcome1produce a mutually beneficial outcome

Reduced overall delivery cost Innovation delivered

Eliminated redundant activities Aligned objectives

1 2

Everest Service ImprovementTM

Eliminated redundant activitiesStreamlined communications and handoffsEnhanced automation

Aligned objectivesStructured environment for fostering innovationTransparency

Process and interface

optimisation

Organisational tuning / skill

rationalisation

Technology and Governance and fautomation

improvementsperformance management

Business case improvement

Business-aligned services Meaningful partnerships

Clear definition of roles and responsibilitiesIncreased visibility and control across services

Optimised scopeAligned interestsValue-based expectations

3 4


3 4

1 Service Improvement is a Trademark of Everest Global Inc.

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