© 2011 hcl axon – proprietary & confidential oracle financials in emea – day 2 building the...

© 2011 HCL AXON – Proprietary & Confidential

Oracle Financials in EMEA – Day 2

Building the Case for ChangeFinance Shared Service Centres

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Financial Shared Service Centres

Building the Case for Change in EMEA

Introductions and HCL

Appendices

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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

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Appendices

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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

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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

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Transformational Change Approach

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• 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

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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

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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

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Appendices

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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

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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

https://www.phly.com/index.aspx?nav=logo

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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

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Why a Shared Service Centre?

? Covered in Tim’s section?

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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

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HCL’s Shared Service Approach

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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

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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


HCL’s Target Operating Model Approach

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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

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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?

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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)

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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


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


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?

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Technology

Tim / Terry is there anything we want to draw out from the Day 1 session here?

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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


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

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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

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The Change Mgmt slides could go here under ‘implementation’ instead of upfront?

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Could put benefits section here to fit in the model?


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.

© 2011 hcl axon – proprietary & confidential oracle financials in emea – day 2 building the...

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