Driving Global Vision of World Class Finance Management


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Jean Claude De Vera, Lafarge

Driving Global Vision of World Class Finance Management

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Driving Global Vision of World Class Finance Management

  1. 1. World Leader in Building MaterialsSSON: Shared Services Week May 25th 2010 DR Médiathèque Lafarge
  2. 2. Agenda : « Finance Transformation: Driving a Global Vision of World Class Finance Management »  1- LAFARGE  2- What Strategic Objectives for Shared Services ?  3- What Scope for Finance Transformation ?  4- What Delivery Model for Efficiency & Value Added ?  5- How to combine Service to Costs improvements and Value Added ?  6- Summary of Key Success Factors….  7- Questions / Answers2 SSON Finance Transformation May 25th 2010 2
  3. 3. 1- World leader in building materials (1/4)  Leadership positions in all our Businesses  World leader in Cement  No. 2 worldwide in Aggregates & Concrete  No. 3 worldwide in Gypsum  Operating in 78 countries  Employing 78,000 people  2,013 industrial sites worldwide  15.9 billion euros in Sales in 2009  753 millions of Current Operating Income  Listed on Euronext Paris stock exchange (CAC 40)3 SSON Finance Transformation May 25th 2010 3
  4. 4. 1- A worldwide presence to benefit from different markets’ opportunities (2/4) 0,2% 8,0% 10.7% 31.6% 12.5% 34,5% 5.1% 57,3% Sales by Sales by 9.2% business line geographic area 8.5% 22.4% Western Europe North America Cement Aggregates & Concrete Middle East Gypsum Central and Eastern Europe Others Latin America Africa Asia  in 2009 Revenues in emerging markets were > 50% of total Sales4 SSON Finance Transformation May 25th 2010 4
  5. 5. 1- Cultural diversity to enrich the Group’s skills (3/4) France 10,0% Rest of Western Europe 25,0% 11,5% North America Split of Mediterranean Basin employees 5,2% by region Central and Eastern Europe % 17,0% Africa 9,5% Latin America 10,3% 11,5% Asia  About 40% in developed markets / 60% in emerging markets  Making diversity an asset…  for a common performance culture  for sharing knowledge and know-how  for targeting excellence everywhere  for applying our values5 SSON Finance Transformation May 25th 2010 5
  6. 6. (4/4)6 6 SSON Finance Transformation May 25th 2010
  7. 7. 2- Strategic Objectives for Finance Transformation ? 1Q World-Class Transformation’s Strategies : High 2- Value Added strategy 1- Costs reduction only: Process optimisation only may deliver up to 20% savings y teg SSC & Offshoring may deliver t ra > 30% additional savings s s d 1Q ost de 2- Value Added development only: C . Ad Effectiveness e i tiv & V Skills upgrades only may deliver pet Value Added to offset some Costs om C 3- Competitive Costs & 3- Value Added : National SSC to deliver contract’s 1 - Cost reduction strategy Governance (BU & Reg. SSC) & Compliance with local needs (data reliability for decision…) & regulations (statutory, social…) Regional SSC to deliver savings & End to End Process Optimisation, Low Efficiency High Local Business Functions to deliver Value Added through Local Peers Company X Decision support & Performance MonitoringWe target to be Competitive in term of Services Costs Group Functions to monitor& to deliver Value Added to the Group & the Businesses Strategy, Performance, Resources... 7 SSON Finance Transformation May 25th 2010 7
  8. 8. 3- What Scope for Finance Transformation ?(1/2) VALUE ADDED Research & Strategy To Development & Performance develop VA >>>1 Monitoring FLC To develop Production Sales & Decision Finance. Sourcing & Logistics Marketing Support Human Customer’s Resources Supplier’s Order to Cash Purchase to Pay Legal & Tax VA <<<1 FLC IS Company’s Record to Report To develop Service Infrastructure’s Employee’s Governance Install to Support Hire to Retire FULLY LOADED COSTS Strategic Activities are in Businesses/Functions (Strategy, Decision Support & Performance monitoring) and End to End Data & Processes Activities are in Global Shared Services (Alignment, Management of Transactions & Contracts….)8 SSON Finance Transformation May 25th 2010 8
  9. 9. 4- What Service Delivery Model : a Distributed Model (1/3) “Distributed model” to deliver competitive cost & value-added services: 1. Group/Division/BU Finance functions focused on core expertise such as:  Group Budgeting & Controlling, Tax Planning, Treasury & Insurance  Division & BU Budgeting & Controlling in order to provide Decision support (Investment, M&A) and Performance monitoring (Action Plans)  Global SSC & FPO for Data reliability & end to end Process efficiency 2. A Global Shared Services function at Group level ensuring :  SSC Development & Performance Monitoring and Optimization  Data & Process standardization through Business Process & MDM functions  National SSC as front-offices ensuring :  Governance (SLA’s accountability vs. BU and offshore delegated transactions)  Compliance services (e.g. regulation compliance, GL, statutory and management reporting, tax filing, relationship with auditors and administration )  Multi-country back-office SSCs for transactions (e.g. Payables, Expense reports, Intercompany, Receivables, …) with an objective of :  Leveraging cost arbitrage & mitigating the risk of operating too many countries from one location.9 SSON Finance Transformation May 25th 2010 9
  10. 10. 4- What Service Delivery Model : a Distributed Model (2/3) Finance Strategy & Management Finance Strategy & Management Performance monitoring Group / Decision support Division / Budget & Forecasting Business Unit Tax Planning Treasury Credit Management Reporting Value-Added Services Governance & Compliance Data analysis for Decision support Working Capital Contribution Cash Collection National SSC Statutory reporting & Tax Filing General Accounting Transactions control vs General Ledger Delegated Transactions Transactional processes Data entries, Accounts Payable, Expense Reports accounting, Accounts Receivable (Cash application), Fixed Assets, Intercompany reconciliations… Additional administrative activities Multi-Country SSC10 SSON Finance Transformation May 25th 2010 10
  11. 11. 4- What Service Delivery Model : a Distributed Model (3/3) National Shared Services Centers ensuring Front Office Governance vs all Customers (including on delegated transactions to Regional SSC) and Compliance activities such as General Accounting, Statutory reporting, Tax filing … Multi-Country SSC operating low costs transactions for several countries . Locations determined according to capacities, time zones and languages. Multi Country SSC are interacting with National SSC. Global SSC Management team covering Global governance and relationship with Group and Business Divisions, in charge of all SSC developments, Finance, HR, Continuous Improvement Process, IS/IT.11 SSON Finance Transformation May 25th 2010 11
  12. 12. 5- How to combine Service to Costs improvements & Value Added: Taking Commitments on Unit Prices and Value Added Delivery ?  Unit Prices :  To reinforce Governance : • Professional Services Billing Transparency vs. Management Fees • Switch to Outputs instead of contemplating Means (FTE)  To offer Flexibility to Business & keep the Challenge inside Shared Services : • Move from previous Fixed Costs to Variable Prices for Business Units • Implementation of flexible means and innovation within SSC  To encourage Continuous Process Improvements : • Business invoiced according to complexity : automation/standardization rewarded • Unit Prices easily Benchmarked with peers : CIP a permanent challenge  Value Added :  To balance Cost reduction and Downsizing attraction : • Upgrading Skills and Competencies within SSC and Outside • Allowing personal and professional developments to all employees  To contribute to Profitable Growth and Working Capital Initiatives : • Beyond delivering Services to Costs Commitments • Expertise sold to the Business Units or the Corporation allowing Exposure  To maintain Customers Intimacy and Proximity : • Difficulty to build confidence from Offshore SSC • Value Added could come from regular Relations to capture Issues, Objectives…12 SSON Finance Transformation May 25th 2010 12
  13. 13. 5- How to combine Service to Costs improvements & Value Added: In Reinforcing Data Reliability vs Process Efficiency ?  Data Reliability as part of End to End Process Efficiency :  + Consolidation of Process Ownership : • Order to Cash including Customer’s, Sales Articles Master Data • Purchase to Pay including Suppliers, Purchased Articles Master Data • Record to Report including Chart of Accounts, Business Structures Master Data • Hire to Retire including Employees Master Data  - Data may be used to support Process Delivery : • Process Owner may use data to solve downstream needs instead of either pushing back demands or addressing it at the right level • E.g. Data duplications generated by lack of IS Contract management • As a consequence Data redundancies may generate burden for Decision support • E.g. Customer’s and/or Supplier’s Business Consolidation  Data Reliability independent from End to End Process Efficiency :  + Master Data Administration for unique, reliable and shared data : • Master Data Management at same level than Process Owners • Potential synergies between Customer’s & Suppliers Administration • Specific Data Cleaning and Upgrades independently from Process Roll Out • Transversal team integrating Group, Business Unit and Functions expectations • Specific KPI on MDM to fuel Strategic Decisions on Business Developments  - Potential objectives divergence between Process and Data Owners : • But specific Organizations and Objectives doesnt means no transparency nor cooperation between MDM and Process teams !13 SSON Finance Transformation May 25th 2010 13
  14. 14. 6- Summary : Key Success Factors for Finance Transformation  Decide on your Strategic Objectives:  Costs Reductions and/or Value Added  Competency or Expertise gaps  Build the Business Case matching objectives and culture:  Balance between Social and Economic  Speed of Change accepted by Sponsors  Design the appropriate Service Delivery Model:  Global vs Regional vs National vs Local contributions  Design the Framework of SLA and KPI supporting Change  Select your Transformation Model: Simplification, Standardization, Automation, Offshoring….:  Sequential or Parallel  Invest in Productivity Tools and not only in ERP  Invest on Data to enhance Decision Support  Deliver the Business Case:  ASAP to move up in the VA Chain and expand the scope  Communicate with all Stakeholders and beyond !14 SSON Finance Transformation May 25th 2010 14
  15. 15. Questions / Answers ?15 SSON Finance Transformation May 25th 2010 15