target operating model - v070809

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Deloitte Consulting LLP Deloitte Consulting LLP July 2009 Target Operating Model (TOM) Discussion Document

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Page 1: Target Operating Model - V070809

Deloitte Consulting LLP

July 2009

Target Operating Model (TOM)Discussion Document

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Contents

Introduction and Background 3

Deloitte’s Point-of-View and Market Intelligence 4

Our Approach and Methodology 13

Project Timeline and Resources 16

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Meeting Objectives

Gain consensus on project objectives and goals

Share our perspective on developing and institutionalizing operating models and key success factors

Describe the proposed approach to develop and implement a new operating model

Provide an overview of how Deloitte’s methods can be used to accelerate the project

Discuss next steps to initiate the project

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Background – GIFT and TOM

The Target Operating Model (TOM) project is a key component of AIU Holding’s Finance General Insurance Finance Transformation (GIFT) Program Guardian and will be targeted towards increasing capabilities and decreasing costs.

GIFT Program Imperatives

Increase Transparency – Significantly improve walk-back capabilities from financial reports to source transactions

Greater Standardization of Technology - Create a common financial language and technology platform

Improve Information - Improve quality and timeliness of information available to stakeholders

Standardize Processes - Standardize accounting processes, rules, and controls

Leverage Operating Model - Leverage shared services and centers of excellences

TOM Project Objectives

Develop baseline – Develop single source of truth “current state footprint” to support proactive future workforce planning

Define future state operating model – Develop future state Operating Model which meets the goals of capability improvement and cost savings

Achieve business benefits – Demonstrate measurable business value and success; realize benefits through the rationalization of headcount, locations, process and labor arbitrage

Create business and employee buy-in – Gain leadership alignment around the Operating Model design, benefits and roadmap; gain employee buy-in to the new ways of working, roles and responsibilities and governance

Implement future state design– Implement the future state operating model via a standard systematic and repeatable methodology

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Background – AIUH Finance Organization Design Project

Since the TOM project was originally scoped, in support of project ATLAS, a Finance Organization design initiative has been started to conduct current state analysis, evaluate organization design options and define key function activities. Goals of this initiative include:

Identify core responsibilities of AIUH Finance (i.e., which functions should exist at the AIUH level)

Conduct current state analysis to determine which functions exist within Domestic Insurance and Finance Insurance

Define governance and control model for AIUH functions

Develop recommendations for sub-functions that should reside with AIUH vs. Business segments

Support Function Leads in developing detailed organizational models and check against high level cost baseline

While the scope of the two initiatives might appear to overlap, we believe that both initiatives are complimentary and key in achieving the organization’s goals as related to the future state operating model ,and the two initiatives in conjunction can answer the following key questions:

How can Finance most effectively support / interact with the rest of the organization ?

What is the optimal global Finance organization / operating model (Local vs. COE vs. Shared Services)?

How will current on-going initiatives impact and optimally be integrated with the future Finance service delivery model?

What capabilities are needed to support the future Finance operating model?

SHOW APPROACH HERE?

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Initiatives are underway that will demand significant time and attention of leadership and key knowledge resources

GIFT Program will …

ATLAS will…

Separation will…

Reinsurance will…

Global Claims Initiative

The broader landscape of in-flight and planned initiatives across the enterprise will both be impactful to and impacted by TOM

2010 2011 2012 2013 2014

AIU Holdings Separation (IPO)

GIFT Release 1:

CFP for CI

GIFT Release 3:

CFP / CD (EUR)

ATLAS - Investments

Finance Organizational

Model

ATLAS – Treasury

Reinsurance – Release 1

ATLAS - Other

GIFT Release 2:

CFP / CD (UK)

OneClaim (UK) – Auto

GIFT Release 4:

CFP / CD (JAP)

Reinsurance – Release 2

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The project goals for TOM include the following:

Design and implement the appropriate operating model which best meet the requirements, state of readiness and maturity of both AIU and CI’s finance functions

Identify key functions and/or processes for redesign to conform with the new organization model (e.g., CoE’s, Shared Services) and enabling technology infrastructure

Identify and realize business benefits through cost optimization, capabilities development and controls management

Identify opportunities for outsourcing across the finance organization, including Finance IT, business processes, and functions

Align TOM to overall corporate strategies, organizational vision, and impactful initiatives as necessary, as they affect the design and implementation of the program

The objective of the Target Operating Model (TOM) project is to design a world-class Finance organization for AIU Holdings

Now overlapping with slide 4 – Just a few deltas that we maybe can incorporate into the earlier slide

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Deloitte’s Point-of-View and Market Intelligence

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Deloitte is uniquely qualified to assist AIU Holdings with this TOM effort

Deloitte received the highest rating of “Strong” across all Finance Management Core Capabilities, across categories of “CFO Vision & Strategy”, “Finance Organization”, “F&A Processes”, “F&A Technology”, “Execution”, and “Value Enhancement”

Deloitte is a leader for global shared services combining process, technical knowledge, change management capabilities, understanding of technology, and insight on labor and tax issues

Deloitte is the only provider rated strongest in 14 of 16 FT core categories and assessed as having advanced depth and breadth of capabilities

Deloitte has an advantage in meeting the needs for clients to engage a tax strategy advisor as they consider global business integration strategies

Key Highlights

*Source: Kennedy; Finance Management Consulting Marketplace 2009-2012; © BNA Subsidiaries, LLC; reproduced under license.

Deloitte’s Finance Transformation offering has been recognized as the market leader by Kennedy Information’s evaluation of the FT market and competitive landscape.

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From our experiences with AIG and in industry, we understand both the key success factors and challenges in the design and execution of TOM

Cultural

Competing Priorities

Alignment with Other Strategic

Initiatives

Decision Making

Inability to Execute Strategy

Complexity and Speed of Change

Unclear Scope and Objectives

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Decentralized Semi-Autonomous Balanced Centralized

Owens Illinois

Procter & Gamble

Campbell

Pepsi

S.C Johnson

General Mills

Land O’Lakes

Sara Lee

Limited

NikeGap

Hanes Brands

Levi Strauss

Merck

Shell

CargillAetna

Wells FargoAgilent

HPNissan NA

IBM Ford

GM RaytheonTextron

GEHoneywell

Cardinal HealthJ&J

PfizerBMS

DuPontAir Products

Rohm & Haas

Mars, Inc

Consumer Business

Consumer Packaged

Goods

Other Fortune 500

Other Manufacturing

Pharmaceuticals

Process Manufacturing

Verizon

Time Warner CableComcast

AT&T Rogers CommunicationsMSO and Communications

T-Mobile

Many Fortune 500 Companies Have Moved Or Are Moving To A Balanced And Centralized Finance Delivery Models To Gain Synergies

We have assisted many clients in redesigning their operating models, and are seeing a trend towards a more centralized F&A Organization

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Insurance companies have some unique learnings to gain from their operating model redesign efforts

Independent Business

Unit

Centralized CFO

Insurance Company #1:

Finance is decentralized by line of business - each business unit

submits its own 10K filing

Insurance Company #2 & #3:

Financial reporting activities centralized at corporate level but remaining functions decentralized

Finance Company #1:

An Independent product line BU Org structure with a strong focus on outsourced shared services

Finance Company #2:

An Independent product line BU Org structure with a strong focus on outsourced shared services

Insurance Company #4:

Strong control over external reporting functions and other key

functions centralized

Finance Company #3:

Historically, an Independent product line BU Org structure,

evolving into a centralized finance function

Within the Financial Service Industry, varying organization structures exists. Examples of decentralized, centralized and hybrid models exists across leading insurance and finance companies.

Both Finance Company #1 and Insurance Company #1 are moving towards more centralized models:

Finance Company #1: A finance transformation initiative underway, to move transaction activities offshore and allow onshore resources to focus more advisory activities

Insurance Company #1: While the current structure provides the opportunity to produce results quickly, there are multiple redundancies and less consistency across the organization. As a result, the company is considering moving to a more centralized operating model

Finance Company #4:

Centralized organization with strong CFO control over financial

and regulatory reporting

Controllership Carve-out

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We have also seen a growth in F&A outsourcing activity

Key:

Requisition Materials

Purchasing / Procurement

Order Entry

Benefits Admin. / Accounting

Inquiry HandlingRegulatory Reporting

Rating Agency Relations

Premium Accounting (Ins)

Re-insurance Accounting (Ins)

Investment Accounting/

Securities Pricing (FS)

Daily P&L / Mark to Market /Middle

Office

Procurement. Card Admin

Treasury / Trust Management

Investor Relations

General Leger

AccountingConsolidations

Monthly / Quarterly Close

Financial Reconciliation

BillingLegal Entity Reporting

Statutory Reporting

Fixed Asset Accounting

Tax Planning / Accounting

Payment Processing

Accounts Payable Cash Application Collections

T&E

Accounting / Reimbursement

Bank Reconciliation

Transaction Processing External Reporting

Source to SettleAccounting to Reporting (General Accounting) Order to Cash

Strategic Planning

Budgeting & Financial Planning

ForecastingAccounting / Tax

PolicyInternal Audit Financial Analysis

Internal Consulting

Finance Function Management

Human Performance Management

Training & Development

Business Liaison

Expense / Revenue

Allocations

Performance Measurements

Multi-Dimensional Reporting

Profit Center / Customer / Producer

Profitability

Acquisitions & Divestitures

Risk Management (CM)

Actuarial Analysis / Reserving (Ins)

Real Estate Mgmt.

Project Management

Business Decision Support Finance ManagementPlanning Control

Management Reporting Specialized Expertise

Not Typically

Outsourced

Less Commonly Outsourced

Most commonly

Outsourced

KeySource: Deloitte Research, IDC

F&A Sourcing Scope

F&A continues to grow because of the breadth of business processes that are sourcing candidates; the F&A business outsourcing market size has grown to approximately $32 billion

AP, AR, and GA appear in more than 80 percent of right sourcing strategies, and more than 70 percent have an offshore component

Mainland Europe is currently adopting services as quickly as North America and the U.K.

Approximately 85 percent of Sourcing contracts have 5- to 10-year terms (the average is 6.8 years)

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Our Approach and Methodology

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Deloitte has experience in implementing Target Operating Models, and can leverage methodologies and toolsets that encompass people, process and technology

A proven toolkit of established TOM accelerators and tools: Deloitte has a significant knowledge base that will be invaluable for

this project. This includes best practice operating models, process models/processes, organization designs and governance

frameworks as well as numerous examples of these from recent client experiences. We also have a suite of tools and methods that

our teams use to ensure consistent quality outcomes on our engagements and often enable us to accelerate project timelines. The

table below outlines some of our key materials and tools which are relevant to this engagement.

Deloitte’s Cultural DNA assessment

\

Provides a “hard” and tangible way to understand the “soft” and complex issue

of culture. It is a rigorous and statistically valid tool which provides insights into behaviors, behavioral

drivers and barriers for change.

Process Design

Deloitte’s process design approach includes a number of tools to support specific parts of the design process.

These include:

RACI modelling for establishing clarity around roles, responsibilities and

interfaces.

Governance structure design.

Capability mapping tools.

Leadership

Mission, Vision, Values

Physical Work Environment

Programmes, Policies, Processes, Practices

Brand Promise

Business Strategy and Structure

People Profile, Assumptions and Behaviours

Leadership

Mission, Vision, Values

Physical Work Environment

Programmes, Policies, Processes, Practices

Brand Promise

Business Strategy and Structure

People Profile, Assumptions and Behaviours

Target Operating Model Design

Deloitte’s Target Operating methodology provides an end-to-end view of the

required target functions and capabilities of an IT Organization.

Organisation Design

Deloitte has an established business design group that specializes in the

detailed design and implementation of organizational structures

Our approach goes significantly beyond ‘wiring diagrams’ and job mapping. We

adopt a hypothesis driven approach that defines the capabilities required to deliver against strategic objectives.

Rapid IT Service Diagnostic tool

Deloitte’s diagnostic tool is an ITIL version 3 aligned assessment tool which

provides a structured and comprehensive approach to quickly

understanding current state maturity across the entire IT process, control,

organizational, and supporting technology spectrum.

Maturity Stages by Process

0

1

2

3

4

5Strategy Generation

Financial ManagementService Portfolio Management

Demand Management

Service Catalogue Management

Service Level Management

Capacity Management

Availability Management

IT Service Continuity Management

Information Security Management

Supplier Management

Transition Planning & Support

Change Management

Service Asset & Config MgmtRelease & Deployment Mgmt

Service Validation & TestingEvaluation

Knowledge Management

Service Desk

Incident Management

Event Management

Request Fulfilment

Problem Management

Access Management

Technical Management

IT Operations Management

Applications Management

7 Step Improvement Process

Service ReportingService Measurement

Key:Maturity Stage Score by Process AreaDesired State

The following provides summary descriptions for the measured maturity stages.

Level 1 – ChaoticProcesses and roles are not defined. Activities in this area are largely unstructured and uncoordinated.

Level 2 – ReactiveBasic processes are defined and followed to some extent. Processes can often be bypassed and there is a lack of ownership. Activities are largely reactive and inefficient in nature.

Level 3 – ProactiveProcesses are agreed, well documented, communicated and enforced. Roles are defined and individuals are suitably trained. Supporting technology is used to help deliver process objectives. Service Levels are in place and agreed

Level 4 – Service DrivenProcesses have clear end-to-end service oriented targets associated to them, and efforts are made to continually improve. Advanced technologies are used to assist.

Level 5 – Value DrivenProcesses are highly mature and very well integrated into the Business requirements. The Business and IT work together to improve.

Maturity Stage SummaryMaturity Stage by I TIL v3 Process Area

Vision & Mission

Target Operating Model Principles

Functional Target Operating ModelFunctional Operating Model

Organisation

Process

Governance & Performance Reporting

Vision and objectives of the TOM, e.g.:• Business goals. IT strategy aims such as cost

reduction, risk reduction, greater agility • Sourcing options, strategic sourcing, single source,

multi-vendor etc.

Definition of Governance:• Governance forums

responsibilities, escalation• Reporting requirements• IT metrics & targets• Balanced scorecard

Definition of the retained IT org:• Level 1 Roles descriptions• Level 2 Role responsibilities, skills &

capabilities• Performance Measures & Targets

Definition of the high-level principles e.g.: • Multi-supplier/Service Integrator model • TOM design principles• Lean management & control • ITIL-aligned processes etc

Definition of functional TOM:• Design of future state functional

groups in TOM• Description of functions and key

responsibilities

Definition of processes e.g.:• Level 1 to 3 process design• RACI responsibility matrix• Process metrics & targets

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Deloitte IT Skills Framework

Deloitte’s Skills Framework tool assesses the skills capabilities in an organization,

and aligns this to the organization’s needs.

We can also draw on a best practice framework called Skills Framework for

the Information Age (SFIA).

©2007 Deloitte MCS Limited. Private and Confidential.

Ogier I T Skills Assessment – Overall View

Observations

The IT skills assessment identifies those areas where training could be provided as well as areas where staff possess skills which are not being used.

The skills assessment uses a standard list of applications from the Deloitte database. This represents a wide-ranging skill set of preferred skills.

The main skill set is centred around Infrastructure Applications and Ogier known applications (those named on Ogier’s Application Matrix).

However, there are several areas of skills where staff possess skills that they are not using. These are mainly around Infrastructure, Development and Desktop Tools, as well as some Ogier known apps.

In some areas such as Security, there are no experts – but there are staff who have skills in that area and are not using them.

In some areas such as Voice Services, Requirements Gathering and Data Warehousing there are only basic skills with no Experts or Advanced level staff.

Further detailed information can be found in the Skills Matrix. This contains a detailed breakdown of skills, graphs of skill levels and an overview of skill clusters.

Review skills matrix and identify areas where further training is needed. Each high level category (left) is broken down into specific applications. Resources should centre on Ogier known applications as these are the apps Ogier identified as necessary to the Business. There are also ‘Ogier added apps’ which are those applications identified by staff as being part of their everyday skillset.

For areas where further training or recruitment has been identified, the skills matrix has also highlighted any staff who have skills in an area where they are not using them in their job role. This may fill adevelopment need for Ogier in terms of utilising an existing skillset.

Key Recommendations

Background

The skills available to the IT departments are diverse. These are mainly centred around Infrastructure and Ogier known applications (those named on Ogier’s Application Matrix). However there are also many skills available which are not being used.

AMBER

0

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100

150

200

250

300

350

400

450

500

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Expert

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Intermediate

Beginner

Ogier IT function and Application Support Team (AST) were presented with a skills assessment matrix to complete. This consisted of an industry standard list of application skills plus the option to add in additional skills, which were then incorporated into the overall results. Staff were asked to rate themselves according to their skills in each area i.e. Not Used, Beginner, Intermediate, Advanced and Expert and results collated and charted across overall skills areas. The results are available in their entirety via the completed Skills Matrix.

SBU Column

Regional GSS IT Column

Global GSS IT Column

SBU CIO Column

Vendor Activities

Changes to activities not yet reviewed

Individual steps which link to other processes

Track and Manage Vendor Contracts –managed by GSS IT

R=Responsible, A=Accountable

C = Consult, I = Inform

1 Receive finalised contract after negotiation I I I - - - - - A,R - I - - - - -

A,R

I - - - - - - I - - - -

2 Receive vendor performance metrics and analysis from Service Management - - - - - - - - - - - - R - - -

A,R

I - I - - - - - - - - -

3 Discuss vendor performance between SM & VM - R - - - - - - - - - -

A,R

- - - R C - - - - - - C - - - -

4 Review performance (metrics) with vendors on a periodic basis I I I I I - - I A,R I C C I,C C C -

A,R

C - - - - - C C R R R R

5 Analyse service level credit regime and identify applicable penalties / incentives - R - - - C - C A,R - - - C C C -

A,R

C - - - - - C C - - -

6 Discuss applicable penalties and incentives C R R - C C - C A,R - - - - - - -

A,R

C - - - - - - C - - -

7 Execute penalty / incentive payment - - - - - - - A,R - - - - - - -A,R

- - - - - - - - I I I I

8 Distribute financial impact of penalties/incentives across SBU C R R - R C - - A,R - - - - - - -

A,R

C - - - - - - C - - -

9 Evaluate contract value and adjust if necessary C C - C - - - - A,R - - - - - - -

A,R

C - - - - - - C C C C C

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Deloitte Intelligent PMO

Deployment of a standard PMO often does not provide the necessary insight

to steer a program intelligently and highlight the real risks and issues ahead

of time.

Deloitte’s iPMO is designed to deliver complex technology programs ensuring

integration, Information-lead and intelligent management of programmes.

Programme SupportFinancial Control

Quality Control

Change Control

Configuration Control

Secretariat

Organisation Chart

Filing Structure

Contact List

Programme Design & Control

Stakeholder Management &

Communications

Outcome Management

PMO

Planning & Progress Reporting

Programme Support

Risk & Issue Management

Outcome ManagementBusiness Case/ Investment Appraisal

Key Performance Indicators

Metrics

Realisation plan and tracking tool

Owner/Responsibility alignment

Post programme review

Programme Design Governance Structure

Vision Design

Approach

Risk & Issue ManagementRisk Awareness

Risk and I ssues log

Escalation process

Mitigation Activity

Contingency planning

Reporting

Planning & Progress ReportingScope Management

I ntegrated plan

Dependency tracking

Resource Estimating

Reporting templates, process and schedule

Exception reporting

Stakeholder Management & CommunicationsStakeholder Mapping

Contact tracker and calendar

Communication products

& ControlStrategy Chart

Board Control

Assurance

Programme SupportFinancial Control

Quality Control

Change Control

Configuration Control

Secretariat

Organisation Chart

Filing Structure

Contact List

Programme Design & Control

Stakeholder Management &

Communications

Outcome Management

PMO

Planning & Progress Reporting

Programme Support

Risk & Issue Management

Programme Design & Control

Stakeholder Management &

Communications

Outcome Management

PMO

Planning & Progress Reporting

Programme Support

Risk & Issue Management

Outcome ManagementBusiness Case/ Investment Appraisal

Key Performance Indicators

Metrics

Realisation plan and tracking tool

Owner/Responsibility alignment

Post programme review

Programme Design Governance Structure

Vision Design

Approach

Risk & Issue ManagementRisk Awareness

Risk and I ssues log

Escalation process

Mitigation Activity

Contingency planning

Reporting

Planning & Progress ReportingScope Management

I ntegrated plan

Dependency tracking

Resource Estimating

Reporting templates, process and schedule

Exception reporting

Stakeholder Management & CommunicationsStakeholder Mapping

Contact tracker and calendar

Communication products

& ControlStrategy Chart

Board Control

Assurance

Best Practice/ Benchmarking

Deloitte research and our substantial experience of IT organizations allow us

to offer comparisons across all industries, Our practitioners are highly

skilled in implementing leading practices and technologies.

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Approach framework

Organizational Strategy

Current State Assessment

Future State Vision

Service Delivery Analysis & Selection

Design Implementation

Conducting an assessment across functions within the Finance organization will help identify opportunities and key activities that need to be incorporated in developing a future target operating model

Identifying and aligning the finance function behind an organizational strategy is the critical first step in developing a Target Operating Model strategy

Create a common set of service delivery design principles, and formulate a supporting future state vision. Benchmark the vision to internal and external data points.

Determine the future shape of the operation by using the previously defined design principles and strategy to create service delivery options. Analyze , prioritize and select the most viable option for subsequent implementation.

Design and completion of detailed architectures for the selected Target Operating model, e.g. detailed IT, people, process etc. architecture underlying the TOM, including a detailed business case and financial impact assessment.

With a target operating model design in place, a detailed implementation plan and roadmap clearly highlighting responsibilities, dependencies and sequencing of steps is needed to execute and deliver the future state operating model

Our approach is designed to help you define options and gain stakeholder consensus

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Business specific finance

functions and processes

Shared financial

processes

Enterprise-wide finance functions and

processes

Controllership

Financial Planning & Analysis

Tax

Treasury

Required Functions

Possible Locations

of Required

Functions

Risk & Compliance

Other

Holding Company Finance

Operating CompanyFinance

Shared Services

Group

Organizational Strategy

Goals & Objectives

Activities & Deliverables

Toolsets & Accelerators

Organization Design

Balanced scorecard

Operation Model Value Chain

Voice of the Customer Surveys

Product & Service Segmentation

Objectives List: Conduct executive interviews and/or workshops to identify and confirm strategy objectives

Align Objectives: Review vision and organization structure designs from the Finance Org Model team and revise to fit with finance strategy objectives

Voice of the Customer Analysis: Conduct surveys across functions and business units to understand issues and needs regarding Customers, Products and Channels

Confirmation of the strategy, objectives and critical success factors (CSFs) developed by the Finance Org Model project

Rationalization of functions across regions

Leadership consensus and alignment

Understanding the consistency with which these have been communicated, understood & applied

Sample Output – Charter with Guiding Principles

Organizational Strategy

Current State Assessment

Future State Vision

Service Delivery Analysis & Selection

Design Implementation

Identifying and aligning the finance function behind an organizational strategy is the critical first step in developing a Target Operating Model strategy

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Current State Assessment

Goals & Objectives

Activities & Deliverables

Toolsets & Accelerators

Cultural DNA Assessment

Rapid IT Service Diagnostic Tool

Value chain analysis

Maturity Model

Resource/Skill/Function Database

Current State Footprint Analysis: Understand, validate and map the current organization and processes to help in developing the TOM definition

Change Management Documentation: Capture current and planned change management activities

Function Analysis: Assess performance across functions using an industry maturity model and identify deficiencies

Establish definition of current operating model and architecture (e.g., process, org, technology), including opportunities to leverage shared services and outsourcing

Identify where existing initiates on-going/planned impact TOM

Capture key FTE, Business and Financial metrics and identify duplications, costs, and system constraints

Sample Output – Functional Analysis

Organizational Strategy

Current State Assessment

Future State Vision

Service Delivery Analysis & Selection

Design Implementation

N2Bus. UnitExternal Audit PlanningAudit

N5CorporateInternal Audit

N3Bus. UnitInternal/External Audit Support

Y1Enterprise Consolidation

N3CorporateExecuting the Corp/OC Close

N1CorporateEliminations

N1CorporateForeign Exchange Translations

Y1Shared SvcOverhead Allocations

N1Bus. UnitAccounting Procedures

N1CorporateAccounting Policies

Y5Shared SvcManage G/L (Posting JEs)

N2Bus. UnitManage G/L (Initiating JEs)

N6CorporateManage G/L (Top Side JE)

YShared SvcOC Consolidation

General

Shared ServiceFTEsLocationFunctionRole

Con

trol

lers

hip

2

Corporate

Conducting an assessment across functions within the Finance organization will help identify opportunities and key activities that need to be incorporated in developing a future target operating model

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Goals & Objectives

Activities & Deliverables

Toolsets & Accelerators

Finance Transform Maturity Matrices

Best Practice Benchmarking

Sourcing Matrix

Key Design Principles

Confirmed Future State Vision: clearly defined operational design principles and confirm through executive workshops

Benchmarking Study: analysis of gaps in key design principles as compared to industry leading standards

Financial Model 2x2 Matrices: analysis of to-be states across all finance functions

Establish future state vision for service delivery channels (e.g., COE, shared services, regionalization, etc.)

Align to Finance Org Model initiative vision and confirm design principles for TOM

Compare vision to industry practices through benchmarking

Sample Output – 2x2

Organizational Strategy

Current State Assessment

Future State Vision

Service Delivery Analysis & Selection

Design Implementation

Future State Vision

Create a common set of service delivery design principles, and formulate a supporting future state vision. Benchmark the vision to internal and external data points.

Expertise focus — ability to leverage

“Best practice” development

Issue/knowledge intensive

Often organized by region

Consolidated organization

Operational focus

Process intensive with standardized services

Could cover countries or region

Transaction ProcessingHigh volume, low value add

Knowledge-basedLow-volume, high-value activities

Method Of Adding Value

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ic

( Site

, uni

t, r

egio

n)

Gen

eric

(C

om

pan

y w

ide)

Shared Services Center Of Excellence/Corp.

Aligned with a function or BU or management team

Knowledge transfer services

Decision/action Intensive

Distributed to location(s) for local service needs

Specialized services for each site

Manual or end-user Intensive

Site Support Business Partner

An operating model matrix, as shown below, can be used to illustrate the focus of Finance’s strategic choices. For example, a cost efficient transaction processor’s likely focus will be the “Shared Services” quadrant.

Page 20: Target Operating Model - V070809

- 20 -

Service Delivery Analysis & Selection

Goals & Objectives

Activities & Deliverables

Toolsets & Accelerators

Prioritization Matrix

Process Rationalization

Location Feasibility Study

Shared Services / COEs / Sourcing Strategy

TOM Options: identify viable TOM options showing functions, sub-functions, location / region and use of COEs / shared services

Scorecard and Evaluation Criteria: create criteria for evaluation and prioritization of TOM options

Prioritized Options List:: facilitate workshop with key stakeholders to discuss and rank options by priority

Develop options based on previously defined vision and design principles

Analyze the opportunity and costs implications associated with each option and review with stakeholders

Make the final selection for future state TOM model

Organizational Strategy

Current State Assessment

Future State Vision

Service Delivery Analysis & Selection

Design Implementation

Sample Output – Process Rationalization

Page 1

Maturity Lead Generation As-Is Value Stream Map

Previous claimsPolicy changes

1.0

1 IS

ru

n a

rep

ort

on

OB

sys

tem

1.0

2 IS

ch

eck

slip

s ge

ne

rate

d

1.0

3 IS

pa

ss to

po

st t

eam

1.0

4 P

ost

de

live

red

to m

atur

ity t

eam

1.0

5 M

atu

rity

tea

m r

ece

ive

s &

sto

res

che

ck

slip

1.0

6 M

atu

rity

Te

am a

cce

ss E

DM

fo

r le

gacy

d

ocu

me

nta

tion

1.0

7 M

atu

rity

Te

am c

om

pa

re c

he

ck s

lip

ag

ains

t E

DM

do

cum

en

t

1.1

0 M

atu

rity

Te

am s

ign

off

che

ck s

lip

1.1

1 M

atu

rity

Te

am s

tore

slip

s in

cu

pb

oard

1.0

8 M

atu

rity

Te

am a

men

d r

eco

rd o

n

We

bse

rie

s

1.0

9 M

atu

rity

Te

am s

tore

oth

er

in O

dd

me

nts

Tu

b

2 days 1 day2 days

(100 items per batch takes one person 1 hour to process = 50 man hours to process 5000)

1 day(2 mins per Keymaster record

amendments * c.1000 amendments)1 hour

Every 2 weeks

1 hour

Every 2 weeks

Report run on maturities in 4 months time

1.1

2 IS

ru

n r

ep

ort

on

OB

an

d p

rod

uce

XL

S

rep

ort

1.1

3 IS

pro

duce

au

thor

isa

tion

s sl

ips

1.1

4 IS

pa

ss to

ma

turi

ty t

eam

1.1

5 M

atu

rity

tea

m p

ass

to

Act

ua

rial T

eam

Page 2

Error – can

Change (c.20%)

2 days

Report run on maturities in 2 months time

Name; Address; Policy; Agency Number; Estimated Value

Slip per customer

Check passed (c.70-75%)

Error – cannot Change (5-10%)

12 3 4 5

6

2425

26

Sample size 40

Actuarial

QA Actuarial

Determine the future shape of the operation by using the previously defined design principles and strategy to create service delivery options. Analyze , prioritize and select the most viable option for subsequent implementation.

Page 21: Target Operating Model - V070809

- 21 -

Design

Goals & Objectives

Activities & Deliverables

Toolsets & Accelerators

Operating Model Design

Diagnostic Process Blueprint

Business Case / Financial Model Framework

Key Metrics Measurement and Tracking Tool

Lean 6 Sigma methodology

Detailed TOM Design: create detailed organizational charts showing functional, systems and resource architecture models, including governance and accountability

Business Case: create opportunity cost and benefit analysis, including financial impact assessment

Based upon the selected service delivery option, develop the detailed IT, people, process etc. architecture underlying the selected TOM

Identify the related metrics (cost, financials etc.), create a cost / benefit analysis and create the detailed business case and funding request

Sample Output – Future TOM Design

Organizational Strategy

Current State Assessment

Future State Vision

Service Delivery Analysis & Selection

Design Implementation

Design and completion of detailed architectures for the selected Target Operating model, e.g. detailed IT, people, process etc. architecture underlying the TOM, including a detailed business case and financial impact assessment.

CFO

Finance Exec

Head of Transaction Processing

Head of Business Partners

Head of Treasury

Head of Process Control and

Improvement

Head of Tax

Systems Analyst2 FTE

BP Exec.

BP Exec.

BP Exec. Offshore

BP Exec. ESS & EBS

Treasury Assistant1 FTE

Indirect Tax Manager

Direct Tax Manager

Head of FAC

Commissions1 FTE

Management Accountant (Inv.

Perpetual)2 FTE

Management Accountant 2 FTE

Senior Transaction Processing

AR 1 FTE

Accounts Assistant (Feesharing)

Accounts Assistant (VAT)

AP 5 FTE

AP/FA 1 FTE

Direct Tax Accountant

2 FTE

Management Accountant (Offshore)

2 FTE

BP Exec. ECS2 FTE

Cash Processing1 FTE

Transactions Assistant

Corporate -General

Corporate -Aligned to Business

Region

Key

Financial Controller

Non IP UK Business Units

2 FTE

Financial accountant

2 FTE

Page 22: Target Operating Model - V070809

- 22 -

Implementation

Goals & Objectives

Activities & Deliverables

Toolsets & Accelerators

Portfolio management methodology (PMM)

Program Interdependency Planning

Change Readiness Assessment

Key Industry Benchmarks

Prince 2???

Roadmap: Develop roadmap detailing activities, sequencing of steps, desired outcomes, and dependencies

KPI Documentation: Identify key performance indicators (KPIs) to track the success of the implementation

Project Management Office Charter: Agree / achieve roadmap sign off and establish project management authority

Deployment: Begin to execute on the roadmap by clearly defining short-term next steps and responsibilities

Design an implementation plan and roadmap based on TOM analysis, highlighting sequencing and dependencies

Review project portfolio for consistency & alignment

Design authority established to govern the implementation and identify milestones

Implementation work initiated

Sample Output – Implementation Plan

Organizational Strategy

Current State Assessment

Future State Vision

Service Delivery Analysis & Selection

Design Implementation

With a target operating model design in place, a detailed implementation plan and roadmap clearly highlighting responsibilities, dependencies and sequencing of steps is needed to execute and deliver the future state operating model

Year 5Year 4Year 3Year 2Year 1 Year 5Year 4Year 3Year 2Year 1

Organisational Change

Marketing

Product Design and Manufacture

Operations and I T I nfrastructure

Risk

Payments

Shared Services

Collections and Recoveries

Sales and Service

Organisational Change

Marketing

Product Design and Manufacture

Operations and I T I nfrastructure

Risk

Payments

Shared Services

Collections and Recoveries

Sales and Service

Outsource Recoveries Recoveries outsourced to low cost provider

Implement regional salary weighting

Regional salary weighting introduced

Implement white-labelled product design and manufacture, IT and operations for non core products

Migrate processing to alternative supplier (TBC) for product design and manufacture, IT and operations for non core products

White-labelled supplier utilised for non-core products

Alternative sourcing (TBC) utilised for core product design, manufacture, operations and IT

Outsource Payments Payments outsourced to low cost provider

Outsource simple, transactional processing Simple Shared Service processing outsourced to low cost provider

Re-engineer product dev processes for core products

Product development processes optimised for core products

Re-organise functions to align with new organisational structure

I llustrative

Page 23: Target Operating Model - V070809

Project Timeline and Resources

Page 24: Target Operating Model - V070809

- 24 -

Project Timeline

Timeline (weeks/months)

Milestone

1 2 3 4 5 6 7 8 9 10 11 12

Organizational Strategy

Current State Assessment

Future State Vision

Service Delivery Analysis & Selection

Design

Identify and confirm strategy objectives

Align objectives to fit with finance strategy objectives

Conduct surveys to understand issues and needs regarding Customers, Products and Channels

Understand, validate and map the current organization and processes

Capture current and planned change management activities

Assess performance across functions using an industry maturity model and identify deficiencies

Confirm Future State Vision through executive workshops

Conduct benchmark analysis of gaps in key design principles as compared to industry leading standards

Analyze of to-be states across all finance functions using financial 2x2 matrices

Identify viable TOM options showing functions, sub-functions, location / region and use of COEs / shared services

Create criteria for evaluation and prioritization of TOM options

Facilitate workshop with key stakeholders to discuss and rank options by priority

Create detailed organizational charts showing functional, systems and resource architecture models, including governance and accountability

Create opportunity cost and benefit analysis, including financial impact assessment

Page 25: Target Operating Model - V070809

- 25 -

Organization chart

Line 1

Line 2

Label

Line 1

Line 2

Label

Line 1

Line 2

Label

Line 1

Line 2

Label

Line 1

Line 2

Label

Line 1

Line 2

Label

Line 1

Line 2

Label

Line 1

Line 2

Label

Line 1

Line 2

Label

Line 1

Line 2

Label

Descriptive header

Page 26: Target Operating Model - V070809

- 26 -

Key Success Factor / Our Experience (Sameer Shah)

General market success factors

Pitfalls to avoid given our knowledge of AIU Holdings

Potentially highlight regulatory and tax concerns (e.g., data may need to reside in Japan)

Page 27: Target Operating Model - V070809

Copyright © 2008 Deloitte Development LLC. All rights reserved.