a long journey to rapid outsourcing

A long journey to rapid outsourcing

March 2011

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A summary of what I’ll cover today

• Molson Coors overview

• The project in context

• Outsourcing specifics

• The benefits we realized

• The lessons we learned

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Overview of Molson Coors

• Leading global brewer with 14,500 employees*, 18 breweries*, andoperations in more than 30 countries

• 2009 annual sales of $8 billion including our share of MillerCoors.

• Embodies more than 350 years of pioneering spirit & family brewing heritage with Molson and Coors families retaining significant ownership in the business

• Diverse portfolio of more than 65 strategic and partner brands, including signature brands Coors, Coors Light, Molson Canadian and Carling

• Strong presence and brand momentum in three of the world’s largest markets

− Growth profile in the U.S. through MillerCoors (JV with SABMiller)

− A leading brewer in Canada via Molson

− Top tier brewer in U.K. & Ireland through Molson Coors (UK)

* Includes employees at all partially and wholly owned subsidiaries.

There are two great things in the beer business

The beer!MillerCoors

Molson CoorsCanada

Molson CoorsUK

In total, our journey took longer than a year

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Feb 2005Merger of

Molson and

Coors

Identification

of synergy opportunity to

reduce G&A Expense

2005 200820072006

Benchmarking

Study Project Wins

In-house Shared Service

Approach

Project Wins

Re-shaped

Internal &

Outsourcing

RFI and RFP for

F&A, HR and IT

to reduce G&A

Expense and

improve

certainty of

benefit delivery

Feb 1, 2008

Commencement Date

Project Wins

Re-shaped Internal & Outsourcing

Services

July 1, 2008

First go live

We set out to get $180m in synergies

• Part was to come from streamlining the back office, where several areas drove the opportunities for Molson Coors

− Process standardization

− Technology and process efficiency

− Centralization that will drive and continue to improve process standardization and efficiency

− Labor arbitrage

Shared services was our path to achieving this

We considered what was important to us

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HR

1. Organizational Scope

2. Process Scope

3. Geographic Scope

10. Affected Employees

End-to-End

TransformationSingle Process

Transaction Services

Enterprise Wide Small Number of Legal Entities50% of Enterprise

Global

Areas

Country

4. Languages English Local Languages

5. Desired Process Maturity New World

ClassExisting Legacy Process

New Competitive

6. Delivery Style Self-Service

Supported Self Reliance

Concierge

7. Delivery Channels On-LineTelephone

On-Line & Telephone

8. Service Delivery LocationsOffshore Client Site

Mixed

9. Delivery Consistency Totally

Consistent

Vary by Geography

Optimize Cost

Savings

Minimize Social Costs

Pragmatically Consistent

F&A + AO

We also thought about our strategy

• Future direction

− Where is the company going?

− What are the goals?

• Status quo and capabilities

− What does the current environment look like?

− How easily can we change?

− What skills do we have?

We targeted the following processes

• HR

− HRIS Data Management

− Compensation Administration

− Benefits Administration

− Vendor Management

− Payroll

− Recruiting

• Finance

− Accounts Payable, T&E, Accounts Receivable, Credit and Collections

− General Accounting and General Ledger Management

− Product Costing and Profitability Analysis

− Cash Management/Tax Administration

• IT

− Application Configuration, Maintenance & Support

− Project Management Office

− Architecture & Security

− Vendor Management

Two ways to build Shared Services

• Internal

− This would require MCBC to build and maintain the internal model

− The location, to contain costs, would need to be close to one ofthe Divisions

• External

− The outsourcer is an expert at centralization and already has leveraged centers

− We believed that they could offer a lower cost, lower risk solution

In fact, we ended up with some of each

� Reliant on current organization to achieve

and sustain change

� Requires a long-term mindset within the

function/organization

In-source Outsource

� Benefits limited by scale and assets of

MCBC

� Function/organization to create and own

assets

� Timing and level of costs and savings can

be targeted

� All Capital Expenditure borne by MCBC

� Multiple service providers and delegated

authorities

� Fixed costs limit flexibility

� MCBC responsible for transformation

and delivery

� Reliance on in-house resources (which

may not be scalable)

ScaleScale

and Assetsand Assets

Cost Cost

and Riskand Risk

Control andControl and

FlexibilityFlexibility

FocusFocus

� Acts as a catalyst for change – ‘there is

no choice’ but to progress

� Contractual protection for the change

agenda

� Use of existing Provider assets to

achieve gains faster

� Leverages the Providers’ book of

business

� Certainty of cost - implementation

overruns borne by Provider

� Provider meets certain capex

� Enhanced control and single point of

accountability

� Adjustment speed to altered volumes

� Cross-functional governance focused

on change and operations

� Need to establish outsourcing

management organization

MCBC comparative insource vs. outsource

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ChangeChange

CapabilityCapability

Fix it first or outsource?

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There are no absolute right answer to this dilemma

We took a hard, honest look at the improvements we could realistically achieve with respect to cost, time, and probability (certainty of benefit)

�With the leverage of technology and labor arbitrage, it is no longer necessary to reengineer all business processes before outsourcing

�Cost & Time: Examine the track record for making changes

• Certainty of benefits

• Getting to benefit run rate

�Culture: Consider which scenario is the best fit for your company’s culture

• Will senior management invest in reengineering a back-office process?

• Is there a burning platform for outsourcing?

• Is there companywide support?

�Feasibility: Will it work if we lift and shift (in our case, not for HR)

Total Cost

CurrentCostStructure

DomainExpertise

ProcessOptimization

Labor Savings/ Productivity

Technology Scale/ Leverage

Significant

Cost

Savings

FutureCostStructure

Five “Pillars” of Full-Value BPO

• Reengineering to standard/ best practice

• Continuous improvement

• Proprietary/ commercial offering

• Effective architecture

• Partners

• Depth of bench

• Global secure network

• Capacity management

• Reusable solutions

• On-Near-Off Shore Model

• Operating metrics, SLAs & governance

• Subject-matter expertise

• Compliance and controls

• Innovation

Full-value BPO –value proposition

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Scope of Multi-Tower MCBC deal is positioned to deliver the full spectrum of value

HP sites providing service to Molson Coors

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Toronto, Canada

IT

San Jose, Costa Rica

HR, IT

Chennai, IndiaFinance, IT

Puerto Rico

Finance

Wroclaw, Poland HR

Kirkland, Canada

HR, Finance

• Single, common delivery process & toolset across centers

• 24 X 7 and follow the sun flexibility

• Blended model: right work at the right location

• Far shore, near shore & specialized delivery centers

• Optimized proximity, language & cultural fit

Timeline re: F&A outsourcing

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Feb 2008 Contract

Date

20092008

US Ramp

Up

Canada

UK

Knowledge

Transfer“Go-Live” Stabilization

Ramp

UpKnowledge


Ramp

UpKnowledge


So, what benefits were realized?

• Financial

− We saved millions of dollars with a strong IRR

− This included places where we had to spend more

• Capability

− We gained new systems and tools

− We developed a platform we can add upon

− We learned how to run COEs

• Discipline

− We cleaned up messy processes

Outsourcing lessons learned

� Ensure the support of senior executives

� Involve key business stakeholders at beginning of project in assessing the scope and business impact of the transition to outsourcing (especially BU CXOs)

� Understand your current state: people, costs, technologies, processes

� Select your multi-functional team (the best, not who’s available)

− Leader, SME’s / process Owners, IT, Finance, Procurement & Legal

� Conduct some benchmarking versus your peers

� Hire some external help experienced with outsourcing (contract &legal)

� Define your best internal case (Get real!)

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� Have retained group in place before you outsource. Define your future state

� Strategy work and mission critical delivery requiring tight control is best kept inside

� Management of change – be honest with the people who are leaving

� Insist on continuity of supplier personnel

� Full documentation of standard operating procedures

� Extensive testing of connectivity and integration with ERP systems to ensure proper system access

� Involve auditors and managers of Internal Controls in the early stages of the outsourcing project

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� A clearly defined escalation process and communication plan implemented before go-live dates

� Clearly defined roles for interaction and communication with BPOrepresentatives

� A comprehensive process scorecard, with accurate metrics such asbacklogs, available for all newly outsourced process

� Set clear expectations on timing of transition and on the learning curve of both client and outsource provider

� YOU must lead and manage the journey to excellence – you cannot delegate

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� Outsourcing providers and contracts must be managed on an ongoing basis – it is hard work to make outsourcing arrangements work over the long haul

� Don’t under estimate the internal resources required to manage BPO once transition is complete – a formal team is required

� Understand the Indian culture up front, they want to please and will not challenge deliverables in order to please – in the end, due dates are missed

� BPO will not fix broken processes – it only highlights the issues!

� Turnover in Chennai is a key issue – not only at the processor level, but also the management level

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To drive efficiency with HP going forward we must address three areas of opportunity:

1. Standardization

� We must eliminate what feels like 3 co-located shared services centers in Chennai, eventually moving to one Global MCBC Center.

2. Best Practices (“Innovation”)

� Currently great Shared Service Centers have adopted many processes/automation (enabling Technology) we do not have.

3. Next Generation Outsourcing

� We must revisit our blended service delivery model to re-examine what work should take place, where, and by whom.

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Next Steps on our Journey

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Questions?

a long journey to rapid outsourcing

Business