Navigating Co-Location to Achieve Success

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THEORY, FINDINGS, PRACTICE, …

THEORY, FINDINGS, PRACTICE,
EFFICIENCY + THE CRITICAL ROLE
THAT CO-LOCATION AND TEAM
BUILDING HAS IN SHARED
SERVICES

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  • 1. Navigating Co-location to achieve Success THEORY, FINDINGS, PRACTICE,EFFICIENCY + THE CRITICAL ROLE THAT CO-LOCATION AND TEAM BUILDING HAS IN SHARED SERVICES SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 2. SHARED SERVICES ANDOUTSOURCING WEEK 2011
  • 3. SHARED SERVICES ANDOUTSOURCING WEEK 2011
  • 4. SHARED SERVICES ANDOUTSOURCING WEEK 2011
  • 5. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENTSecuring effective and viable initiatives for shared servicesand outsourcing remains one of the top priorities forfinancial executives in 2011. While these initiatives driveprocess efficiencies and achieve cost reductions in manycases, what are the implications for traditional areas oftechnology, governance and risk? And why is the teambuilding aspects frequently understated?This presentation will talk to : The strategic imperatives for centralising services Leveraging resources to remain competitive Team building imperatives 3rd party partnering to promote efficiency The need for enhanced governance [operational, ICT] Implications for risk mitigation Overall implications for CFOs and CIOs SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 6. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENT1. THE THEORY OF SHARED SERVICES2. RESEARCH AND SURVEYS3. BETTER PRACTICE, TIPS, SUCCESS + FAILURE4. LESSONS LEARNED5. WORKFLOW ISSUES6. THE ROLE OF ICT7. TRANSPARENCY OF PROCESSING8. THE JURY DECISION AFTER 20 YEARS9. THE FUTURE BACK OFFICE SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 7. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENTTHEORY AND PRACTICE Do it because it achieves your business objectives and do it with a strong focus on training and delivering on customer requirements. SMH Feb 2005 SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 8. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENTRESEARCH AND SURVEYS 76% of companies expected increased productivity from shared services, but only 56% achieved this goal. Similarly, 87% of companies expected to cut costs, but only 67% managed to save money. AT Kearney 75% of US and European multinational companies now use outsourcing or shared services to support their financial functions and will continue to do so over the next 12-24 months, although less than half consider outsourcing to be cost effective. PricewaterhouseCoopers’ Management Barometer Survey SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 9. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENT Implementations that concentrate solely on cutting expenses run the risk of resulting in poor service quality. "That’s why we measure productivity together with costs" Banesh Prabhu global operations head of international cards at Citigroup PwC survey shows in the US the top two outsourced financial functions are: payroll/billing/AP (74%) and benefits/claims administration (70%). In Europe, however, the top two functions are: IT/systems support (70%) and tax services (59%) with payroll/billing or AP services trailing (48%). PricewaterhouseCoopers’ Management Barometer Survey SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 10. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENTBETTER PRACTICE Like many result-oriented companies, Citigroup’s shared services group has created Service Level Agreements and charge-back schemes in which individual Departments are charged for the services they use to govern performance. Citigroup SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 11. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENT TIP 1 [IT’S ALL ABOUT THE CUSTOMER] Focus on internal customers. Involve them in all stages, from design and implementation to ongoing management of the shared services entity. AT Kearney SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 12. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENT TIP 2 [THE CRITICALITY OF OPERATING MODELS] Select an appropriate operating model. Companies can outsource operations to full- service providers or establish national, regional or global shared services centres. The decision depends on corporate objectives, cash flow projections, risk assessments and potential return on investment. AT Kearney SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 13. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENT TIP 3 [BUILD A CORE TEAM, THEN EXPAND] Choose experienced lieutenants for start-up and transition. Outsource peak skills and replace with in-house over the short to medium term [this strategy is dependent on other factors] Foster internal competition and a meritocracy. SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 14. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENT TIP 4 [THE CRITICAL ROLE OF GOVERNANCE] Create an effective governance structure. This involves creating direct reporting lines to senior management for accountability. Direct access to senior management both internally and for clients becomes more critical as shared services programs begin to include more complex strategies or higher value services. AT Kearney + others SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 15. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENT TIP 5 [THE CRITICAL ROLE OF ICT] Standardise ICT. To get the most out of shared services, leading organisations not only centralise and standardise their ICT, they make doing it a top priority. Except in select cases and unique operations, running decentralised ICT does not make economic sense. AT Kearney SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 16. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENT TIP 6 [THE HEART OF GOOD GOVERNANCE] Ensure performance transparency. Use measurement tools such as service level agreements (SLAs) or charge-back where appropriate. Leading organisations keep SLAs simple and engage in ongoing dialogue with internal customers for their feedback on service commitment and performance. AT Kearney SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 17. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENT SUCCESS STORY 1 : STEEL MANUFACTURER Developed a Business Process Outsourcing (BPO) model that resulted in the creation of a separate entity to provide the services n a commercial basis. The collaborative BPO approach has yielded benefits:• A clear understanding of the resource requirements of the processes that are under 3RD party management.• Structured frameworks around process control and changes.• A reduction in the inherent process risk under 3rd party management.• The outsourcing agreement helps target value by driving both parties to realise savings and efficiencies in the business processes that have been outsourced.IT’S ABOUT PROCESS MANAGEMENT ! SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 18. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENT SUCCESS STORY 2 : ALCOA Alcoa, the worlds leading producer of primary aluminum, fabricated aluminum, and alumina, has created a 400-member shared services organization serving some 60,000 Alcoa employees and another 60,000 retirees. Known as Alcoa Business Support Services (ABSS), this oversees many of the companys internal services, including purchasing. “The primary focus of a purchasing organisation should be on increasing the overall effectiveness as opposed to further reducing administrative costs. This is particularly true at top-performing companies. At these organizations, procurement administrative costs as a percentage of total corporate revenue have fallen from about 1.25 to 0.7% in the last 4 years.” Alcoa believes that if a company has the right people working to reduce the cost of goods sold, they will also focus on how to reduce administrative costs. The two are congruent and in focusing on the 99% of your spend, you don’t need to ignore the % administrative cost. IT’S ABOUT EFFICIENCY AND EFFECTIVENESS ! SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 19. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENT SUCCESS STORY 3 : NSW GOVERNMENT In NSW, shared services have been running since 1996 with its recently rebadged Shared Service Entity [ServiceFirst] reporting savings of $2M in its first two years of operation. Numbers aside, the example demonstrates that the approach can work when carefully managed. Until now, ServiceFirst has been focused on a few specific types of support : providing HR, financial services, ICT, records management, procurement and research assistance to Departments as and where it was requested.IT’S ABOUT MANAGEMENT ! SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 20. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENT FAILURE STORIES• Bank X• Local Government Agency Y2 DIFFERENT EXAMPLES OF TEAM FAILURE THAT LED TO PROJECT FAILUREIT’S ABOUT THE TEAM ! SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 21. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENT LESSON 1 In many organisations, operations and ICT are effectively separate entities. While they serve the same constituencies, and their staff often report to the same executives, their organisational structures, governance mechanisms, and channels of communication are seldom truly integrated. This translates into redundant platforms, higher interface costs, frustrated business users, unnecessary initiatives, and missed opportunities to leverage economies of scale and share best practices. Some leading organisations have found an innovative way to improve the situation. By integrating operations and ICT into centers of processing excellence (COPEs), they have driven costs down significantly, created a user-friendly interface between the business process architecture and business users, eliminated redundant platforms, and improved the overall quality of service and delivery across their organisations. Boston Consulting Group SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 22. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENT LESSON 2 Leaders had been sure that the their new shared services center [SSC] would be good for everyone. Administrative costs would go down, the quality of support services would go up and back-office processes would be easier to maintain, improve and control. But a year or two after implementing the SSC, the company just wasn’t getting the benefits it expected. Internal customers are unhappy about the center’s quality of service. The SSC cant get the internal customers to follow standardized processes. SSC morale is low. Turnover is rising. Costs are higher then expected. Everyone is pointing fingers, yet no one seems to be able to figure out where the problems are coming from... If this sounds familiar, you’re not alone. Shared Services Insight – Fourth Quarter 2007 Deloitte Touche Tohmatsu SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 23. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENT LESSON 3 The Shared Service concept will eventually die where you don’t have partners to support it or who genuinely service stakeholders. Don’t go for quick wins where this involves eliminating staffing at the expense of the future knowledge base of the shared services entity. Rather, create a competitive environment where transitioning staff compete to work in a future shared service entity. Pay commercial bonuses for commercial performance excellence and teamwork contributions. Pay bonuses to your ICT and processing partners and consultants to ensure they have their skin in the game.DON’T GUILD THE LILY WHEN PREPARING THE BUSINESS PLAN ! SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 24. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENT LESSON 4 Co-Location Planning. Team Building Aspects. Culture / Change ManagementNO TEAM, NO GAME ! SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 25. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENT LESSON 5 Prove the business case and keep the Benefits Realisation Plan in place for 3 years post go-live. Integrate the SS Entity into the Internal Audit Plan and conduct annual performance reviews with customers and clients. Concentrate on change and culture management. START SMALL, THINK BIG ! SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 26. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENT WORKFLOW Shared Services implies an automated workflow solution to support transaction processing. Transactions need to be delivered via a web based environment, taking the shortest possible route to ensure an appropriate level of internal control and accountability. The overall environment is by its nature relatively high volume, low value. Rules based process workflows need to be properly mapped and processes redesigned. SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 27. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENTWORKFLOW ISSUES It might be 2011 but too many organisations still struggle to eliminate paper invoices from the accounts payable process in the digital age. Integrating workflow and imaging technologies with existing corporate financial infrastructures will serve to ensure a seamless transition. Designing and implementing a workflow imaging system will improve process efficiency. Additionally, we may need to consider issues such as off-shoring as an alternative to outsourcing [even in Government this may be viable in future]. Why shared services has emerged over other automation alternatives as a viable strategy. Maintaining service levels in a changing environment. SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 28. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENT WORKFLOW ISSUES : EXAMPLES SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 29. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENT THE ROLE OF ICTLeveraging a Technology Platform If ever there was a cross-functional business process that can leverage technology to drive striking enterprise performance increases, it is in cashflow management. It’s a process that spans the entire cycle of cash in-flows, cash management and cash out-flows. Piecemeal automation and point solutions cannot address the broader needs of any organisation. Therefore a platform solution for revenue and receivables management is an imperative. A platform lets you start with a small portion of the order to pay cycle if desired, such as automating collections management or dispute prevention. And it allows you to expand your scope to encompass other portions of the cycle, including cash management, treasury and payments processing. SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 30. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENTTHE ROLE OF ICTExamples of what the Technology Platform may Provide:The ideal platform for shared services receivables, treasury and payments management supports your organisation’s success drivers through a combination of capabilities: Integration of operational and historical data across the enterprise; Collaborative workflows across units and functions to integrate them into a common business process, improve productivity and problem resolution; Integrated business rules capability to enforce policies and employ business intelligence techniques to identify errors and exceptions; Ad hoc querying and dynamic reporting in order to dig for information, view key quality metrics, pinpoint problem areas and uncover root causes; Comprehensive auditing capabilities to support quality assurance. SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 31. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENTTRANSPARENCY OF PROCESSING SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 32. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENTTHE JURY IS INWhat’s Standing in the Way of Greater Shared Services Success?Given these considerable benefits, why is it that so many shared services initiatives are achieving only simple cost savings? There are a number of traditional roadblocks including: Too much focus on cost reductions at the expense of service quality. Failing to understand and redesign underlying processes before consolidating functions. This is a wonderful way to amplify existing inefficiencies. Underestimating the planning and effort required to overcome cultural and other barriers. Implementing change across embedded cultures and managing the transition to shared services can be a formidable task. Often, there are key linkages that need to be leveraged by the shared services model, but which are either not recognised or not leveraged fully. Over-rationalisation : Many organisations fail to hold on to key specialists as they centralise operations into a shared services model. SHARED SERVICES AND OUTSOURCING WEEK 2011
  • 33. GOVERNANCE + RISKSHARED SERVICES DEPLOYMENTTHE FUTURE• BENCHMARK BASED DECISION-MAKING• 3rd PARTY OUTSOURCING INDUSTRY• COMMERCIAL SLAs• PROCESSING AND TECHNOLOGY ECONOMIES• ON-LINE SERVICES + SOFTWARE• SHARED + SPECIALIST MANAGEMENT• CORPORATE EXCELLENCE MODELS SHARED SERVICES AND OUTSOURCING WEEK 2011