the journey to world-class defining and enabling world-class performance in public sector v2.0

The Journey to World-Class

Defining and Enabling World-Class Performance in Public Sector

V2.0

The Journey to World-Class © 2008 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

The Hackett Group Defines and Enables World-Class Performance

The use of our intellectual capital enables our clients to implement change to affect their ability to attain and sustain world-class performance

– We provide strategic advice and implementation assistance based on 4,000 benchmarks with leading global companies

– Our implementation tools allow our clients to achieve results from proven best practices of world-class companies

Our recommendations address both efficiency and effectiveness of world-class performance

Our efforts have delivered over $90 billion in sustainable cost savings and $25 billion of improved cash flow improvement through REL, our working capital group for clients across the globe

Operating in the Americas, Europe and Asia, we have served clients in 66 countries

Our unique intellectual capital is unparalleled in driving successful performance improvement


Hackett Insights Leverage Our Work with Over 2,700 of the World’s Leading Organizations and …..

97% of the Dow Jones Industrials

73% of the Fortune 100

88% of the Dow Jones Global Titans

73% of the DAX 30

45% of the FTSE 100


…..Leading Government/Public Sector and Higher Ed Institutions through the Benchmarking Program

Government/Public Sector

H Higher Ed Institutions

H

H

H

H

H


The List of Participating Public Sector Organizations are GrowingOrganization Function and Status

C=complete, IP=in progress, P=pending

Finance HR Procurement IT

State of TN C C C C

State of AZ C

State of Delaware C C

State of CO C

Commonwealth of MA C IP IP

State of MS C C C C

State of AK C

State of GA C C

State of AL C C C

State of NJ C C C

State of OK C

State of OH C C C C

State of WV C C C

State of MI IP

UNC Chapel Hill C

UVA C

Ohio University* C C C C

Yale University C C C

Georgia Board of Regents C

Nassau County, NY C C C

Miami-Dade County, FL C

King County, WA C C C


There are Many, and Different, Reasons for Public Sector to Benchmark

1. Compare Performance for Continuous Improvement - use of standard definitions, data collection and metrics to learn from other public sector organizations as well as World-Class organizations

2. Baseline Measurement - Provides a baseline, supporting a “before and after” comparisons when undertaking an improvement project (such as a new ERP)

3. Foundation for Business Case - Provides insight and data into areas that are performing well and into areas for improvement that will yield the highest ROI, and to prioritize best practices initiatives


Hackett Value Grid™ − The Foundation for How Hackett Defines World-Class Performance

Hackett Value Grid™ (Finance example)

EFFECTIVENESS

Days sales outstanding

Days payables outstanding

Accounts payable rework rate

Customer billing rework rate

Accuracy of forecasts and analysis

Functional role in strategic decision making

Percent of time analytic focus in on proactive decision making

Percent of time spent collecting and compiling data for analysis

Percent of analysts with acumen to function as business partners

EFFICIENCY

Overall function cost as a % of revenue

Process cost as a % of revenue

Technology cost per function FTE

Staffing levels by process

Cycle times and iterations

Unit cost of transactions

Utilization of self-service for inquiry

Application complexity

Automation of transactions

Reliance on spreadsheets

Percent of business reports distributed electronically


Hackett uses Actual Data to Identify World-Class Performers in Human Resources

Hackett Value Grid™ (HR example)

EFFECTIVENESS

HR linkage to business strategy Sourcing utilization Workforce management alignment Quality metrics (HR transactions) Linkages between employee

development and business strategy Percent internal promotions HR partnering on organizational issues HR Generalist allocation of time Use of organizational metrics in HR-

managed projects Retention plans for key employees Termination rates Ratio of strategic workforce planning

process costs to Total HR process costs

Skills & education of HR staff

EFFICIENCY

Total HR cost per employee Total HR staffing Staffing levels by process Technology allocation Degree of application integration Process automation Automation of reports HR self-service utilization Resource allocation Integration of HR systems Productivity per FTE Days to fill positions Ratio of technology cost to transaction

process labor cost Overall HR span of control

Where would you place yourself?


Hackett uses Actual Data to Identify World-Class Performers in Procurement

Hackett Value Grid™ (Procurement example)

EFFECTIVENESS

Economic return Supply base leverage & performance Role of procurement Process quality Information & analysisExamples: Spend cost reduction and avoidance

savings as a percent of spend Percent of suppliers comprising the top

80% of spend On-time supplier delivery percentage Internal customer satisfaction ratings Percent of spend formally influenced

by procurement Percent of transactions requiring post-

issuance activity Ability to view detailed spend data on

an enterprise-wide basis

EFFICIENCY

Process costs Productivity Cycle times Technology leverage Costs per transaction Staffing LevelsExamples: Procurement process costs as a

percent of spend Number of POs processed per FTE Receipt processing cycle time Percent of RFx’s submitted

electronically Ratio of labor to technology cost Cost per PO FTEs per $1B of spend



Our Benchmark Capability uses Actual Data to Identify World-Class Performers in Information Technology

Hackett Value Grid™ (IT example)

EFFECTIVENESS

Member of Executive Committee Reporting relationship Percentage of budget control Planning and strategy resource

commitment Business transactions automated Projects meeting requirements Percent SLA being met (internally and

externally) Standard adherence Vendor & supplier rationalization Simplification of information access Usage of self-service Degree of turnover Advanced business degrees

EFFICIENCY

IT cost per end-user Process costs per end user Technology Investments Number of FTEs FTEs per processing groups Spans of control Number of Help Desk Calls Projects meeting budget FTE productivity - Applications Projects delivered on time Help Desk 1st call resolution Number of data centers Number of applications



The Impact of World-Class Performance on Terms of Cost Savings is Significant….

Hackett 2007 Functional Performance Data - Select SG&A Functions

Overall IT costper end user

Median WC

5%

World-class are investing more in IT

$8,701$9,198

Overall Finance costas a % of revenue

/budget

Median WC

51%

$6.3 million in savings per $1 billion

of revenue / budget

1.24%

0.61%

Overall HR costper employee

Median WC

9%

$1.7 million in savings per 10,000

employees

1,995

1,822

Overall Procurement cost as a % of spend

Median WC

23%

$1.9 million in cost savings per $1 billion of spend

0.63%

0.82%

What are your performance improvement opportunities?


Enterprise Performance Management (EPM)

Working Capital Talent Management

…..and We Believe that the Effectiveness Opportunity is a Significant Multiple Cost Opportunity

World-class EPM organizations deliver 2.4 times the equity market returns of industry-peer companies

A strong correlation of $462 million in additional EBITDA for companies with

top-performing talent management programs versus their industry peers

Top performing organizations are able to free up $2.9 billion more in

working capital than the typical Global 1000 organization

Receivables$1,329

Inventory$798

1.0

2.40

$3,102

$3,564

Peer Group World-Class Peer Group World-Class


Quartile 1

Quartile 2

Quartile 3

Quartile 4

Our Data Shows that Public Sector Can Attain World-Class Performance Levels

Cross Functional PeerCross Functional Peer

NASACT/PublicSector

Peer Group World-Class

Labor Outsourcing Technology Other

Finance Cost as a % of Operating Budget Quartile Breakdown as a % of Operating Budget

World-Class World-Class

1.9%

0.3%

Public Sector PeerPublic Sector Peer


Performance Management • Linked departmental & operational goals to objectives• Develop performance measurement scorecards

• Financial performance• Operational performance• Customer satisfaction

• Measure according to established and shared metrics• Reward the behavior you desire

Business Intelligence• The right data at the right level• High degree of automation allows for drill down to sub ledger

data• Data Warehouse to provide analytics and feed standard

reporting

Control and Risk Management• Optimized Cycle Times• Integrated transaction system feeding data

warehouse to provide full visibility for decision support

• Information from core transaction system and date warehouse provided via Portal

Shared Services• Transaction Processing performed in centralized

Service Organization• Performance efficiency and customer service

driven• Perform standardized transaction processing

Transaction Processing • Cost efficient and effective fully

leveraging integrated systems for speed and accuracy

• Processing though out the business cycle

• Streamlined processes - automated transactions, maintaining data in the core transaction system, touching things once

• Integrated sub systems• Do it right the first time approach

Whether Public or Private, World-Class Organizations Have Common Opportunities


Methodology


Unique Process Taxonomy Spans SG&A8 functions across 59 process groups

Finance

Cash disbursements Revenue cycle Accounting and external reporting Tax management Treasury management

Compliance Management Planning & Performance

Management Business Analysis Function Management

Hackett’s taxonomy ensures an apples-to-apples comparison

Information Technology

Infrastructure Management End User Support Infrastructure Development Application Maintenance Application Development &

Implementation

Quality Assurance Risk Management IT Business Planning Enterprise Architecture Planning Emerging Technologies Function Management

Human Resources

Total Rewards Administration Payroll Services Data Management, Reporting &

Compliance Staffing Services

Workforce Development Services Organizational Effectiveness Total Rewards Planning Strategic Workforce Planning Function Management

Procurement

Supply Data Management Requisition & PO Processing Supplier Scheduling Receipt Processing Compliance Management Customer Management

Sourcing Execution Supplier Management &

Development Function Strategy & Performance

Management Sourcing & Supply Base Strategy Function Management

Executive and Corporate Services

General Administration Mgt Travel & Transportation Services Real Estate & Facilities Mgt Government Affairs Legal

Quality Management Risk & Security Management Corporate Communications Planning & Strategy Executive Office

Service

Order & Contract Management Service Execution Service Operations

Planning & Strategy Function Management

Marketing

Marketing Communication & Program Management

Brand & Product Management

Planning & Strategy Market Research & Analytics Function Management

Sales

Sales Execution Sales Operations

Planning & Strategy Function Management


Hackett’s Process Taxonomy Ensures “Apples-to-Apples” comparisons

Accounts payable Travel and expense

Supplier set-up Pre-processing Verification / approval Processing Discrepancy resolution Payments Inquiry response File / store / retrieve Reconciliation/

accrual/compliance

Processing and routing of incoming mail specific to cash disbursements process, including handling of invoices, bills of lading & receiving documents and expense reports

Matching of supplier invoice, purchase order, receipt acknowledgement and other required documents or information to validate and verify payment can be made to suppliers

(More)

Activities

Sub-Processes

Processes

Process Groups

Cash disbursements

Data collected based on work performed, not on reporting structures or functions


Entity (University-wide)

Central Departments Finance Human Resources ProcurementInformation Technology

Office of Finance

Office of Technology

Purchasing Department

Provost Office

College A

College B

College C

College D

College A

College B

College C

College D

College A

College B

College C

College D

College A

College B

College C

College D

Locations can be set up in parent / child structures to allow function and department/college coordinators to see progress of locations for which they are responsible

Hackett’s Toolset has been Tested in Thousands of Engagements and Facilitates Rapid, Accurate Data Collection


Overall program features

Standardized approach and taxonomy – aligned for public sector

Results are based on objective facts and documented in a report to include:

– Evaluation of efficiency and effectiveness

– Understanding on use of best practices

– Quantify opportunities for improvement

Comparisons included:

– Public Sector (after 7 states, counties and/or higher eds complete their data submission for each function – now available in the finance function)

The first 7 states will get an updated report that includes the State peer group when available

– Hackett World-class and peer group organizations

An organization may decide to participate in one or more benchmark studies at any time

An organization may complete a first benchmark, with contract allowing for another benchmark in 2-3 years


Hackett’s Portfolio


Hackett Solution PortfolioAdvisory, Benchmarking and Business Transformation Services

Deliverables Benefits

AdvisoryInsight into World-Class Performance

Best Practice Research

Advisor Access

Best Practice Intelligence Center

Peer Interaction

*World-Class Progress Report (*Executive Advisory only)

Identify the strategies and practices employed by Leaders

Validation of Current Initiatives

Determining What’s Possible (World-Class Performance Metrics)

Process Implementation Support

Continuous Best Practice Adoption

BenchmarkingAssess World-Class Performance

Peer & World-Class comparison Performance metrics

Detailed analysis

Stakeholder Survey

Executive Presentation

Objective comparison to peer group and world-class performers

Quantify performance Gaps

Uncover hidden costs

Prioritization of improvement initiatives

Business TransformationTransforms Performance

into World-Class

Strategic Direction

Detailed Business Case

Initiative Plans & Detailed Designs

Implementation of Best Practices

Reduced Cost

Working Capital Optimization

Enhanced Service Delivery

Business Insight

Sustainable Benefits

Speed of Solution Delivery

Risk Mitigation

Working Capital SolutionsTransforms Performance

into World-Class


Trained and Motivated Organization

Key Metrics to Track Performance

A Focus on Continuous Improvement

Reduced Working Capital

Reduced Costs



Increased Flexibility

Risk Mitigation


Hackett Advisory Program PortfolioResearch-centric membership programs that support continuous improvement initiatives

Executive Advisory Programs – Enterprise– Finance– Human Resources– Information Technology– Procurement Executive

Executive Advisory Programs – Finance Operations

Purchase-to-Pay Account-to-Report Finance Shared Services Payroll Invoice-to-Cash


AdvisoryInsight into World-Class Performance

Best Practice Research

Advisor Access

Best Practice Intelligence Center

Peer Interaction

*World-Class Progress Report (*Executive Advisory only)

Identify the strategies and practices employed by Leaders

Validation of Current Initiatives

Determining What’s Possible (World-Class Performance Metrics)

Process Implementation Support

Continuous Best Practice Adoption

Why do clients engage us for Advisory services?


Hackett Benchmark Solutions PortfolioPerformance metrics that assess both efficiency and effectiveness

Benchmark Programs – SG&A– G&A– Merger & Integration Analysis

Benchmark Programs– Finance– Human Resources– Information Technology– Procurement– Marketing, Sales & Service


BenchmarkingAssess World-Class Performance

Peer & World-Class comparison Performance metrics

Detailed analysis

Stakeholder Survey

Executive Presentation

Objective comparison to peer group and world-class performers

Quantify performance Gaps

Uncover hidden costs

Prioritization of improvement initiatives

Are you performing at a world-class level?


Hackett Transformation Solutions PortfolioInitiative-based strategy, design and implementation services

Functional Expertise– Finance– Human Resources– Procurement– Information Technology– Planning & Performance Management– Workforce Management– Working capital management

Featured Solutions– Shared Services design and implementation– Transaction processing optimization– Planning, budgeting and forecasting– Business process sourcing– IT Strategy– Globalization impact analysis– Business performance management & reporting


Business TransformationTransforms Performance into World-Class

Strategic Direction

Detailed Business Case

Initiative Plans & Detailed Designs


Reduced Cost

Working Capital Optimization


Business Insight


Speed of Solution Delivery

Risk Mitigation

Why do clients engage The Hackett Group for transformation scopes of work?


For further information please contact

Paul GoodwinHackett Account DirectorRaleigh, [email protected]

Statement of Confidentiality and Usage Restrictions

This document contains trade secrets and other information that is company sensitive, proprietary, and confidential, the disclosure of which would provide a competitive advantage to others. As a result, the reproduction, copying, or redistribution of this document or the contents contained herein, in whole or in part, for any purpose is strictly prohibited without the prior written consent of The Hackett Group.

Copyright © 2008 The Hackett Group, Inc. All rights reserved. World-Class Defined and Enabled.

the journey to world-class defining and enabling world-class performance in public sector v2.0

Documents

hackett group

worldclass organizations

worldclass defining

hackett insights

prior written consent

waccc slide

working capital group

public sector v2