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© 2011 HCL AXON – Proprietary & Confidential
Oracle Financials in EMEA – Day 2
Building the Case for ChangeFinance Shared Service Centres
2
Financial Shared Service Centres
Building the Case for Change in EMEA
Introductions and HCL
Appendices
3
Your HCL AXON team
Ruth King – Head of Transformational Change, Europe17 years of international consultancy experience in large scale business transformationExpertise in all programme phases and the design, development, implementation and optimisation of Shared Services Key clients include: Birmingham City Council, Royal Mail, Tetra Pak, Electrolux, Amoco, Cadbury,
Paul Knowles – Executive Sponsor HCL Executive Vice President and is Managing Director for HCL’s Enterprise Application Services practice in Europe and Asia Pacific 17 years experience leading transformation initiatives Key clients include GSK, Electrolux, Xerox, BP, Vodafone, Deutsche Bank, Linde, Fonterra, Lloyds Bank
4
Financial Shared Service Centres
Building the Case for Change in EMEA
Introductions and HCL
Appendices
5
Gaining Buy-in using a Benefits-Led Approach - Potential Finance Benefits Source Examples for Sonoco Typical Opportunities
Process Standardisation (ERP)
• Process automation & reduction in manual reconciliation
• 3rd party integration (e.g. bank recon)• Period end efficiency gains• Tax harmonisation and reduction in effort to
provide data• Working capital reductions due to better AP and AR
finance integration
• 10 % to 30% of headcount (excluding SSC gains)
• Reduction in debtor days• Faster Period Close• Improved Data Quality and
Management Information• Less Management time spent on
reconciliation, more on decision-making
Centralisation (SSC) • Pooling of resources and critical mass allowing rounding of heads
• Additional headcount reductions due to standardisation across geo’s
• 10 % additional headcount• Reduced Management Overheads
Lower Cost Locations or BPO (SSC)
• Labour arbitrage cost savings • Further 10 to 30 % of salary costs – cost to company (variable pending location)
Upstream Efficiency Gains e.g. PTP
• Strategic Sourcing (better data, leverage) • 5 - 8% on external spend for particular categories
• 10 % additional headcount effort
6© 2013 HCL – Proprietary & Confidential
A comprehensive case for change, supported by Change Management is a pre-requisite to a successful program
Project PrepDevelop/review
BlueprintValidate with owners
Final Prep + Go-liveConfirm measures
Operate and Improve
RealisationDetail enablers & dependencies
Governance modelBenefits case/ReviewBenefits Sources
Benefits CardsDependenciesCard validations
Realisation plansDependencies agreedBest practices agreed
Personal Objectives updatedBudgets updated
Track & monitor Targeted actionsNew opportunities
Benefit descriptionRationale Metric
Benefittype
Benefit rangeBaseline
Target range Target rangeLow High Low High Low High
Reduction in payroll queries to HR
•Integrated HR systems will remove data inconsistencies and transcription errors-
reducing the number of payroll errors
•Managers will review payroll input data and results, being able to act to remove errors•Managers will resolve the
majority of queries directly with their team member
Number of payroll queries requiring resolution by HR
FTE saving
£ xxx,xxx £ xxx,xxx # payroll queries to HR
Reduce number of payroll queries to HR
Reduce number of payroll queries to HR
Reduce # of minutes per query
Reduce # of minutes per query
yy,yyy ll% hh% mm nn
An example …
Benefit description
Identifying information about the benefit
(where, what type, etc.)
Calculations
Dependencies
Sign-off
Benefit values:base & stretch
Unique Code identifiesbenefits card
Multiplier assumptions
Assumptions on targets
0.11 8.50 152.34 0.64Trend -8.90% Trend -7.06% Trend -1.09% Trend 6.25%
Baseline 0.10 Baseline 11.50 Baseline 128.00£ Baseline 0.56Target 0.12 Target 9.00 Target 150.00£ Target 0.8Previous 0.12 9.1 154 0.6
Repeat Sales Percentage Benefits Profile Against Target Forecast Benefits Realised
Target
Customer Satisfaction
Baseline 58
Target 70
9% Highly Satisfied42% Satisfied28% Partially Satisfied10% Partially Dissatisfied9% Dissatisfied2% Highly Dissatisfied
Benefit Target to Date (£M) 1,565£ BaselineBenefit Realised to Date (£M) 1,485£ Target95%
KPI 1 KPI 1 KPI 1 KPI 1
72
4.26
75%Target
New Returning
0 100 200 300 400 500 600
Benefit 1
Benefit 2
Benefit 3
Benefit 4
Benefit 5
Benefit 6
Benefit 7
Benefit 8
Actual To Date Target To Date Total Target
Integrated Change
Communications and Stakeholder Engagement
The case for change is applicable for Process Standardisation or Shared Service Centres
7
Each of the Sonoco business units will experience a different change journey but all will need to manage similar issues
Our core focus is to ensure a capable organisation at go-live that is ready to deliver benefits
8
Transformational Change Approach
8
• Create an efficient and logical split of activities between FSSC and the retained finance organisation and create a platform for growth
• Achieve long term process conformance
Transform the Business
• Minimal impact to key clients• Operations continue throughout• Partners are managed and involved
Maintain Business as Usual
• People are ready for Go Live• ‘No surprises’ measureable approach to the management of the
change• People processes are transparent and legally and policy conformant;
Employee and Union engagement and consultation is managed
Predictable Programme Outcomes
Step Change
Minimal Business Impact
Manage Programme
Change
• Single way of working• Clear performance metrics
• Performance dip minimised• Key partners maintained
• Predictable Go Live• Competent and confident
staff• Motivation maintained
9
HCL’s Approach to Managing Transformational Change
Understand change
Proj Definition /
Design & Blueprint
Create change
Realisation
Embed change
Final Prep / Stabilisation
Organisational Design
Integrated Change
Benefits Realisation
Communications and Stakeholder Engagement
Outcomes
Enabling and engaging organisations to face and overcome the challenges of large scale change and embed new ways of working to achieve benefits realisation.
Optimal-sized & efficient organisation in place with clear roles and responsibilities
Impacted audience is competent and confident
Impacted audience own and believe in the change
Impacts of the change are understood, planned for and mitigated
Learning and Development
Programme benefits and process metrics are clear, measured and achieved
IntegratedIntegrated Outcome DrivenOutcome Driven PragmaticPragmatic FocusedFocused
Delete
10
This Change Management approach focuses on the achievement of business readiness
Aware SponsorUnderstand Support Involved Committed
Understood
Accountable
Low risk
Enabled
Capable
Understand the change Create the change Embed the change
11
Financial Shared Service Centres
Building the Case for Change in EMEA
Introductions and HCL
Appendices
12
Financial Shared Services Centres
HCL’s credentials and case studies Why a Shared Service Centre? Target operating model approach FSSC solution development Typical implementation approach
13
HCL Shared Service Credentials
Client IndustryFinance Shared Service
Location of SSC Region supportedSSC
Design & Creation
SSC Expansion
Public Sector UK UK
Transport UK UK
Financial Services Hong Kong Asia
Logistics UK UK
Pharma. Global Global
Manufacturing Poland Europe
Telecoms Hungary Global
Financial Services USA North America
Manufacturing Ireland Europe
Pharma. UK Europe
14
Case Study• £883M of benefits over 10 years (£43.6M in headcount)• Champs2 method built – based on iGDM• SSCs for Finance, Customer Service, HR• SSC so successful this is now a monetised service –services sold to other
Councils• Rebuilt redeployment service
• HR Transformation programme ‘a platform for modernisation and privatisation’ according to CEO Moya Green
• Enabled 1/3 reduction in Managers• Method adopted as standard transformation approach across the business• Spans of control significantly reduced• Professionalised HR function and automated transactional activity• Managers forced to manage – reducing employee reliance on Union
representatives
• Low cost global SSC set up in Poland – headcount reduced by 25%• HCL’s method used across all IT enabled transformation programmes• Created a business partner function in retained organisation• Staff retention increased and reduction in successful grievances• Common global processes
15
Financial Shared Services Centres
HCL’s credentials and case studies Why a Shared Service Centre? Target operating model approach FSSC solution development Typical implementation approach
16
Why a Shared Service Centre?
? Covered in Tim’s section?
17
Financial Shared Services Centres
HCL’s credentials and case studies Why a Shared Service Centre? Target operating model approach FSSC solution development Typical implementation approach
18
3 Main Implementation OptionsClient Strategy Key Issues
1 Xerox SSC before ERP go-live
•Typically requires “lift and shift” of existing processes and technology •Technology can’t enable split processing effectively (processing in multiple systems, physical limitations)•No process harmonisation can lead to internal quality issues •Business change challenge with incumbent staff
2 GSK SSC and ERP parallel implementation
•Large scale change at go live & increase in operational risk•Existing staff not motivated to stay until go live, attrition issues•High programme management investment required
3 TfL SSC Post ERP go live
•Reduced risk for the ERP go live, spread change challenge•Delay in getting headcount benefits due to longer running of country staff•Need to change processes at point of SSC roll in•Risk or revisiting access and roles as SSC is designed
19
HCL’s Shared Service Approach
20
Assessing the Finance Vision
The first step in any operating model transformation is understanding the key elements of the Finance vision
Lever Flexible requirements, phased Implementation
Current & Target Template driven, Industrialised Roll out
Organisational Structure
Priorities set centrally and Finance team managed centrally
Federal Structure – Autonomous Finance functions in country
Process / Process
Commonality
Common consistent process / policy model across all channels, except for legally required variances
Locally Specific - Multiple processes / multiple data models / non-standard policies
Culture of the Finance
Organisation
Proactive provision of Finance expertise and guidance on Pan European level, Partnering the business
Finance teams focused on supporting LOB within country
Physical Location
(Retained)
Single Pan-European Finance centre of excellence with small retained local teams
Centralised Finance centres of excellence in each European country
Outsource Model
Single Pan-European FIN outsource provider, managed through specific service framework
All processes performed in house with cost centre charging of services provided
Performance Measurement
Single, targeted list of Finance measures, with common interpretation across all countries
Country defined and implemented Finance performance measures
21
Defining the Finance TOM
Perf
orm
ance
gap
Create a blueprint for the future
Plan and embed the change
What is the vision for Finance?
What are the CSFs?
What services must we deliver to our customers?
What performance measures need to be implemented?
What skill sets are needed?
What is the ‘right’ organisation structure?
How do we release early cash benefits?
How do we ensure integration of tactical and long-term solutions?
How do we bring our people with us?
How do we ensure compliance to legislation / regulatory requirements?
How do we integrate organisational and cultural change?
What level of process conformity exists across Europe for Finance?
Are all policies interpreted / applied consistently?
Are the right things being measured?
Are the right skills in the Finance teams?
What is the cost of the Finance function?
Confront current reality
22© 2013 HCL – Proprietary & Confidential
HCL’s Target Operating Model Approach
22
The Target Operating Model (TOM) provides a representation of how the organisation proposes to operate in the future, in alignment with its business objectives. It provides the framework and reference point for business process design and roll-out.
Defining a TOM is split into 3 key areas that together form a comprehensive view of the to-be organisation:
External Context – Guides consideration of the factors outside immediate business operations that will shape the future operating model (Stakeholders, Market Context, External Factors)
Business Model – Describes the internal processes and structures that will underpin the organisation vision.
Enabling Technology – Describes how and what technology will underpin the operating model
23
Typical Shared Service Models
Centralised Approach In this model, all business-support services are concentrated in a single centre. This centre provides services to a company’s operations throughout Europe. The most cost-efficient model, it is also the most demanding to execute because it requires the most extensive operational restructuring.
Centres of Excellence ApproachIn this model, specific business processes are located in different locales based on a company’s strongest concentrations of experience. Accounts Payable, for example, might be delivered throughout Europe from Germany, while Credit functions are administered from Sweden.
Country Cluster ApproachIn this model, shared services are provided on a country by country basis. One SSC, for example, might provide business support to 4 countries while another would deliver services to another 4. Typically a stepping stone to a centralised shared services model.
Will the FSSC be vertically integrated with Finance or operate as a standalone service / entity?
24
Financial Shared Services Centres
HCL’s credentials and case studies Why a Shared Service Centre? Target operating model approach FSSC solution development Typical implementation approach
25
Critical Success Factors to Building a Shared Service Centre
Understand your Business objectives
– Reduce processing costs for standard transactions/advice
– Optimise the use of Finance resources and reduce Finance headcount over time
– Free Finance professionals’ time for more value-added activities
– Increase effectiveness, quality and consistency of the Finance processes and data
– Create a critical mass of Finance skills allowing for “deep” expertise and continuity
– Define a career path and ‘professionalise’ the service
Understand the components needed to implement
– Location
– Legal & regulatory requirements
– Organisation & People
– Processes
– Technology (Delivery tools; User Experience)
26
Regulatory & Legal Shared services is well established in Sonoco’s
American markets
In Europe there are specific challenges to overcome
There are over 25 nation states
At least 15 distinct languages are used
Some of the legal and regulatory issues : – No common legal framework that governs all
“in scope” countries. – For countries within the EU, there is a mix of
European and country legislation– In many countries, employee files can not be
taken out of the country– No consistent acceptance or usage of scanned
documentation– Legal constraints on who can sign contractual
documentation– No consistent acceptance or usage of
electronic signatures– Country specific documentation has to be
completed and submitted to Government agencies
– Data protection is an issue with different laws in different countries
– Works Councils have a significant involvement in some countries but not others
27© 2013 HCL – Proprietary & Confidential
Processes
Process Design
• Design the processes in detail for both the Shared Service Centre and the retained organisation
• Determine which transactions will be performed in Oracle, require a manual step or will continue to use a legacy solution
• Ensure the process design contains minimal hand-offs and that the end-to-end process is considered
• Build detailed swim lane diagrams that will be used to validate this design and are a direct feed into the detailed organisation design
Governance
• Determine and induct Process Owners who will have the long-term responsibility of continuous improvement and process conformance
Knowledge
• Create detailed ‘play back’ sessions to drive business understanding of the new processes and ways of working and surface change impacts
• Ensure all partners are identified and have a managed journey through go live and into stabilisation
The Process aspect requires definition of scope, segmentation across organisational components and thorough re-design
Initially this involves determining which processes will be performed in the shared service, versus retained in the business
28© 2013 HCL – Proprietary & Confidential
Determining Process Scope
Is there future business demand for this process/service
Is there future business demand for this process/service
Is the process performed across
multiple functions or business units?
Is the process performed across
multiple functions or business units?
Could this process benefit from
economies of scale?
Could this process benefit from
economies of scale?
Does this activity have similar skill-set /
competencies to other services
Does this activity have similar skill-set /
competencies to other services
Is this process external customer
facing?
Is this process external customer
facing?
Transactional Centre of Excellence
Execute as a Shared Service
no
yesyes
yes
yesyes
no
no
Execute Locally
Perform in Corporate HQ
yes
Does activity require some specialist
knowledge/expertise
Does activity require little skill to execute
yes
nono
Eliminateno
Does the process, when executed well,
provide a competitive advantage?
no
Does the activity support Corporate or
business-wide strategy and control?
29
Technology
Tim / Terry is there anything we want to draw out from the Day 1 session here?
30
Organisation & People
Shared Service implementation has a high people impact as parts of the business are moved into a single new organisation unit
For the Shared Service Centre to be successful, the (potentially brand new) individuals need to be able to :
– Assimilate and work with transferred knowledge & skills
– Learn how to work with new technologies
– Demonstrate new levels of efficiency and effectiveness to their customers, the Governance bodies and their peers
– Work together with new colleagues as a high performing team
And the activities (and roles) left behind need to be re-assembled and re-filled – retained organisation design
People Transition Considerations
• Engage the Head of Shared Service early so they can own the development of the new function
• Perform up front planning of the consultation and engagement process
• Carefully manage key personnel to ensure essential knowledge is not lost
• Perform activity analysis to ensure the organisation is right sized
• Consider flexible staffing to cope with activity peaks and troughs
• Ensure shared service staff are engaged early enough to train up
• Ensure training and performance support approach is both appropriate and cost effective in creating confident and competent staff
31© 2013 HCL – Proprietary & Confidential
Site
A growing trend is to base location on quality rather than cost as it lends itself better to continuous improvement e.g. Krakow, Prague
Carry out a structured location decision process based on defined criteria:
Carefully consider SSC operating languages because while more languages is good for customer service it also drives effort exponentially as you need to maintain documentation, training materials, on line resources etc.
– Quality Criteria - workforce availability, language skills, flexibility, country political stability, international accessibility, quality of life, legal issues, real estate development
– Cost Criteria – labour cost, incentives, training, recruitment, infrastructure -telecom, IT, networks, facility
– Business Case – feasibility study, onsite process analysis (e.g. data protection and case hand-off)
At least 18 SSC enabled European cities
32
Financial Shared Services Centres
HCL’s credentials and case studies Why a Shared Service Centre? Target operating model approach FSSC solution development Typical implementation approach
33
Typical SSC Design & Implementation Phases
Service vision and high level service principles
•Baseline situation analysis
•Activity selection and placement• Location• Outsourcing• COEs• Shared Services• Virtual Organisation•Local•Corporate
•Technology solution
•Roll-out and communication plan
• Business and benefits case
• Agreed service proposition through core process modelling
•Detailed service definition and organisation design
•Detailed process and system design
•System design and migration
•Building design and fit-out
•Staffing / people transition (S&A)
•Service level agreements
•Working pilots
•Cutover strategy and contingency
• Training
• Business readiness assessment
•Roll-out pilot across organisation
•Benefits realisation•Continuous improvement
•Reengineering opportunities
Phase 1Opportunity Assessment
Phase 2Design and Pilot
Phase 3Implementation
Phase 4Optimisation
1-3 months 6-10 months Determined in phase 1 Continuous
34
The Change Mgmt slides could go here under ‘implementation’ instead of upfront?
35
Could put benefits section here to fit in the model?
36© 2013 HCL – Proprietary & Confidential
Critical Success Factors
1. Establishing a clear global organisational structure before implementing the SSC makes implementation easier
2. Provide authority to senior organisational roles responsible for SSC development and empower them to make changes to company structure
3. Introduce global process owners responsible for ensuring consistency of practice across all centres and in line with the delivery strategy.
4. Set up the SSC as (or as if it were) a separate legal entity to ensure the policies, practices and pricing are competitive with external service providers.
5. Relentlessly focus on the customer creating a commercial mind-set and a centre of excellence approach
6. Go fast – implementation speed is critical as momentum is hard to sustain over long distance.
8. Carefully consider SSC operating languages because while more languages is good for customer service it also drives effort exponentially as you need to maintain documentation, training materials, on line resources etc.
9. Pilot in more than one country - It is the only way to find our how to do multi country.