2012 Human Capital Conference23–26 October                          Service delivery model                          t    f...
Disclaimer►   Ernst & Young refers to the global organization of member firms of    Ernst & Young Global Limited, each of ...
Presenter►   Tom McCabe    ►    Ernst & Young LLP (UK)    ►    tmccabe@uk.ey.comPage 3               Service delivery mode...
AgendaCurrent trends and recent experience:                            p► Challenges affecting HR today► Anticipated benef...
Challenges affecting HR today     Business imperatives       HR challenges                            • Deliver services l...
Classical HR service delivery model                              Key capability                                           ...
Anticipated benefits of the model (1) Opportunity                         ►   Delivering economies of scale               ...
Anticipated benefits of the model (2)  Opportunity   Standardized        ►   Reduction in variation can reduce complexity ...
HR transformation experience andlessons learned
Challenges our clients are facing in HRservice delivery transformationIssue                                               ...
Why does HR service deliveryunderperform?                                                                                 ...
Emerging models of shared services Shared services center (SSC) second generation Regional shared services                ...
Centers of Expertise (CoE) are more effective ifdesigned for the specific business context  Role definition:  CoEs are ded...
Achieving excellence — assessing the maturity of CoE►   Organization    ► How will the CoE be aligned with the overall HR ...
What do HR business partners need to beable to add value?►   Selection:    ►     e.g., 50% not from HR    ►     “Easier to...
Data analytics leading principles Effective Information Delivery (                              y (EID)                   ...
HR can and should drive measurable value    The key challenge is for HR to improve in all three dimensions while retaining...
QuestionsPage 18     Service delivery model transformation
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EY Human Capital Conference 2012: Service delivery model transformation

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Current trends and recent experience:
► Challenges affecting HR today
► Anticipated benefits from HR service delivery model
transformation
► HR transformation experience and lessons learned

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EY Human Capital Conference 2012: Service delivery model transformation

  1. 1. 2012 Human Capital Conference23–26 October Service delivery model t f ti transformation
  2. 2. Disclaimer► Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited located in the US.► This presentation is © 2012 Ernst & Young LLP. All rights reserved. No part of this document may be reproduced, transmitted or otherwise distributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP. Any reproduction, transmission or LLP reproduction distribution of this form or any of the material herein is prohibited and is in violation of U.S. and international law. Ernst & Young LLP expressly disclaims any liability in connection with use of this presentation or its contents by any third party.► The views expressed by panelists in this session are not necessarily those of Ernst & Young LLP LLP.Page 2 Service delivery model transformation
  3. 3. Presenter► Tom McCabe ► Ernst & Young LLP (UK) ► tmccabe@uk.ey.comPage 3 Service delivery model transformation
  4. 4. AgendaCurrent trends and recent experience: p► Challenges affecting HR today► Anticipated benefits from HR service delivery model transformation► HR transformation experience and lessons learned pPage 4 Service delivery model transformation
  5. 5. Challenges affecting HR today Business imperatives HR challenges • Deliver services locally via a global model Market reach: • Alignment with business expansion and contraction • Source and sustain a global talent pool • Increased complexity of HR regulatory environment • Flexibility of HR operating model to support rapid deployment Operational agility: • Achieve and maintain consistency from transformational efforts y • Data and analytics to support business decisions • Sustain return on investment (ROI) on transformation Cost competitiveness: • Further demand for HR cost reductions • Need for global standardization • Demonstrate strategic and operational value delivered • Prior HR transformation results not sustained Stakeholder confidence: • Customer confusion with HR access points • Protect the brand – manage compliance to minimize riskPage 5 Service delivery model transformation
  6. 6. Classical HR service delivery model Key capability Classical HR service delivery model Shared services/outsourcing Business partnering Centers of Expertise (CoE) Policy and strategy Corporate strategy and policies Centers of Expertise CoE deliver centralized organization with deep capabilities i ti ith d biliti difficult to fund and staff within Value business units; address business added Shared services is the framework for: needs for specialization, framework for cost-effectively delivering common leveraging a critical mass of these and transaction-based services; addresses transaction based capabilities across the enterprise. transaction support requirements, enabling the HR business partners to focus on building a Solutions strategic partnership with their internal business consulting customers. and advisory Nature of activity Life cycle and people care services Transaction processing services Local HR (business partners)Transactional Low Complexity of interaction High Page 6 Service delivery model transformation
  7. 7. Anticipated benefits of the model (1) Opportunity ► Delivering economies of scale ► Delivering efficiencies through process improvement and standardization Reduced costs: ► Reducing cost per head by moving to a low-cost location and eliminating duplication ► Reducing facilities costs by moving away from current location(s) ► Enabling the business to improve capital and expense management ► Centralized infrastructure that is flexible to changes in business need, structure and volumes Greater flexibility: ► Ability to add new value-added business activities without proportional infrastructure costs ► Business unit/front office staff can focus on value-adding activities Increasing ► Improved service levels enhancing customer retention revenues: ► Improved tax positioning ► Specific service levels ► Improved operational risk management ► Focus on continuous improvement Higher quality: ► Improved performance management ► Improved compliance with Sarbanes-Oxley (SOX) through standard processes ► Improved overall governance ► Greater emphasis on value-added activitiesPage 7 Service delivery model transformation
  8. 8. Anticipated benefits of the model (2) Opportunity Standardized ► Reduction in variation can reduce complexity and the level of effort processes: ► Increased opportunities to automate may result from common processes Improved ► Merger and acquisitions demand leverage of synergies and a fast integration responsiveness of the new companies to competitive ► Ability to scale with anticipated growth from improvement in global economy and oil and pressures: g gas sector Global ► Seamless and uniform global corporate services operations: ► Increased flexibility for borderless operations ► Enhance the ROI of existing and new IT implementations Leverage ► Realize cost savings and avoid additional expenditures through elimination of system technology: redundancies Reduce ► Shared processes and responsibilities decrease concerns with SOX compliance compliance risks: ► Changing legal requirements are easier to implement in a shared environmentPage 8 Service delivery model transformation
  9. 9. HR transformation experience andlessons learned
  10. 10. Challenges our clients are facing in HRservice delivery transformationIssue Potential measures to addressShared services: Regionalize Not achieving cost savings Consolidate with other back office Seen as reduced quality service Expand scope Outsource, offshore Support with technology to drive consistent processesCenters of Expertise seen as “iC t fE ti “ivory t tower” and remote f ” d t from Understand U d t d model and purpose t ensure fit f purpose d l d to forbusiness Consider virtual CoEs to maximize talent while keeping close to businessBusiness partners not respected: Upgrade skills with business focus, consulting skills Still undertake administrative work Equip with analytical tools to p q p y provide business insight based on g Do not understand business people information “Follow” business rather than lead and add valueDissatisfaction with outsourcing provider(s) Insource or renegotiate Outsource on point basis not wholesaleLack of take-up/frustration with self-service Review user experience design Consider whether Manager Self-Service (MSS) appropriateHR still perceived as administrative function Outsource value-added roles Use savings to invest in value-added roles rather than taking the profitConfusion or lack of acceptance of model Focus on clarification and communication of designInability to support HR transformation because HR has too Demonstrate and make case for value of transformationmuch else to focus onPage 10 Service delivery model transformation
  11. 11. Why does HR service deliveryunderperform? HR shared services have been seen as a key potential driver behind the decrease in HR operating expense as a percent of revenue over the last 10 years. Typical service center “failure spiral”Service delivery People and skills Strategy and service pimplementation Colocation of processes, no reengineering  Key person dependencies  Deliverymodel not optimized – mix  Inadequate skills – some deep of transaction processing and Continued process “bespoking” technical expertise may exist but expert activity overall insufficient management  Strategicpriorities not defined – Business unit process duplication capability (and not all deployed in model covers both “scale” and right roles) “expertise” activities presenting  Mi i Minimal lb i business k knowledge – littl l d little challenge for further cost/scale Loss of touch and trust with business staff movement to/from business improvements Business areas Service information breakdown Information issues — quality Processes and controls Systems and technology “different versions of the challenge truth” Process  “Processsilos” with significant  Complex and poorly integrated Cost-efficiency Cost efficiency complexity i each – weak li k l i in h k linkages systems environment – d i i i driving breakdown challenge Staff morale declines — across teams significant reconciliation activity “staff sink”  Postmigration process  Weighted or planned investment Control reengineering not completed not delivered – e.g., large scale lost Difficult to  Weak process control and SAP/ ORACLE implementations not respond to associated control environment carried out major change change, complex with weak assurance  Systems standards not adhered to Organically evolved SOX issues new info process HR functions, requests skilled but cost Cost growth inefficient organization and governance Location and site  Governance not robust – seen as  Site not optimized for cost/ability – remote from businesses and/or too unable to attract/retain appropriate Over reliance on consultants and contractors close to Group staffPage 11 Service delivery model transformation
  12. 12. Emerging models of shared services Shared services center (SSC) second generation Regional shared services Global shared services/regional hubs COEs and local/global outsourcingCharacteristics: Characteristics: Characteristics:► Regional SSC are often set up ► Transaction-driven processes are ► Global outsource model leveraging low- independently to leverage internal leading extremely labour intensive. To leverage cost labor p act ces, standardize the eg o a practices, sta da d e t e regional SSC further labor cost a b t age, ce ta u t e abo arbitrage, certain ► Local in-territory outsourcing to selective y g across the globe, improve global processes are provided by a global areas where deep subject-matter governance and to be prepared for future SSC, running 24-hour shifts. Global knowledge is needed locally but where global process realignment; a global SSC centralization improves governance by critical mass is lacking, such as tax and operation or network inaugurates reducing the number of sites and control regulatory compliance additional value. standardization. Results:Results: Results: ► Labor cost arbitrage► Leverage of global leading practices in ► Labor cost arbitrage ► Variable cost base (depending on the organization ► Global synergies contract structure with outsourcer)► Improved global governance ► Reduced governance efforts ► Global synergies► Global processing and additional value ► Lower cost for subject-matter resource add and outsourced compliance risk to subject-matter professionalsPage 12 Service delivery model transformation
  13. 13. Centers of Expertise (CoE) are more effective ifdesigned for the specific business context Role definition: CoEs are dedicated to providing strategic, people-related consultative services to executives and HR business p g g , p p partners. CoEs provide technical, specialized HR talent (e.g., benefits design, compensation design) to develop new HR products and services tailored to meet the needs of the business, at both corporate and business unit levels. CoEs own HR policies and provide Tier 3 support to resolve complex customer queries. Typical characteristics: Common variations based on business context:  Aligned horizontally, shared across business units and  Different organizations choose different content for their grouped by function (e.g., reward, learning, employee CoEs, depending on business strategy ) relations)  Sometime C E li S ti CoE-aligned i di id l sit i specific d individuals it in ifi  Key focus is on understanding the key needs of the business units and provide functionally specific support organization and designing solutions (e.g., reward, learning, recruitment)  Challenged to develop groupwide policies and  Often much delivery responsibility is kept within the CoE products that can be deployed consistently  “Virtual” CoEs are implemented  Responsible for complex or high-profile service  Some double hatting of roles can occur between CoEs delivery (e.g., executive compensation)  Responsible for working with SSC to operationalize new policies li i  Work through HR business partners to develop solutions to business issues and through corporate HR to deliver solutions to groupwide issuesPage 13 Service delivery model transformation
  14. 14. Achieving excellence — assessing the maturity of CoE► Organization ► How will the CoE be aligned with the overall HR function? ► What is the structure of CoE?► People ► What are the critical skills for the CoE? ► Should we look for talent internally or externally?► Process ► Which HR processes should CoE focus on? ► Do we need to change the HR communication flow for CoE?► System S ► Is the current technology platform suitable for CoE? ► What kind of HR IT tools does CoE need to develop?► Location ► Should CoE be a virtual organization? ► In which location should CoE be formed?Page 14 Service delivery model transformation
  15. 15. What do HR business partners need to beable to add value?► Selection: ► e.g., 50% not from HR ► “Easier to train business people in HR than vice versa”► Training: ► Consulting and business (or HR) skills ► Insight into business unit issues► Tools: ► Analytic data to A l ti d t t support business d i i tb i decision-making ki ► Metrics on skills, performance, attrition, absenteeism, pipeline, engagement, labor market, competitors, etc. g g pPage 15 Service delivery model transformation
  16. 16. Data analytics leading principles Effective Information Delivery ( y (EID) ) A clear opportunity around HR data analytics is effective information for each level of management – strategic, operational, etc. EID characteristics: ► At-a-glance metrics on performance ► Summarized retention data on a multidimensional basis ► Drill down detailed labor cost and custom Drill-down, Executives/ reporting managersCustomized knowledge ► Workforce forecasts: actual, plan, prior ► Interactive analysis to investigate and drill- down on issues raised by reports Power users/ ► Ad-hoc analysis across full data set analysts ► Alert pop-ups that repeat automaticallyInteractive information ► Standardized and streamlined reports available via self-service or web-based delivery Business user ► Provides basic information with limited analysis and ad-hoc functionality onStandardized data selected datasets Page 16 Service delivery model transformation
  17. 17. HR can and should drive measurable value The key challenge is for HR to improve in all three dimensions while retaining the right balance for the organization.Efficient transactions/administration (administrativerole): Sample value measures:► Standardize and streamline HR processes for compensation, benefits, ► Increase revenue per full-time employee payroll, hiring, terminations, time and attendance, etc. (FTE)► Streamline data flows and touch points; improve data accuracy ► Improve employee satisfaction► Eliminate redundancies of HR staff ► Reduce voluntary turnover y► Promote HR transactional automation as a leading practice ► Increase retention of key talent ► Increase customer satisfaction levelsEffective HR operations (operational role): ► Reduce time to proficiency ► Improve workforce performance► Improve HR service delivery model through outsourcing, CoE and p y g g ► Reduce HR operating costs per FTE Shared Service ► Decrease manager time per HR► Establish an effective HR control framework transaction► Identify and implement cost-savings initiatives ► Decrease cycle time per HR transaction► Maintain effective vendor management protocols ► Reduce cost per hire► Effective communications and change management for transactions g g ► Decrease person t person i D to inquiries ii► Effective risk and compliance procedures, employee relations, etc. ► Reduce HR headcountStrategic business support (strategic role):► Strengthen business decision-making throughout the organization g g g g through data analytics and timely/accurate reporting► Be responsive to specific business unit needs (e.g., role and competency design, recruitment and on-boarding, deployment strategies, performance management, succession planning)► Be seen as a valued partner to the businessPage 17 Service delivery model transformation
  18. 18. QuestionsPage 18 Service delivery model transformation
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