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EY Human Capital Conference 2012: Service delivery model transformation
description
Transcript of EY Human Capital Conference 2012: Service delivery model transformation
2012 Human Capital Conference23–26 October
Service delivery model t f titransformation
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.
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► The views expressed by panelists in this session are not necessarily those of Ernst & Young LLP
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those of Ernst & Young LLP.
Presenter
► Tom McCabe► Ernst & Young LLP (UK)► [email protected]
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Agenda
Current trends and recent experience:p► Challenges affecting HR today► Anticipated benefits from HR service delivery model► Anticipated benefits from HR service delivery model
transformation► HR transformation experience and lessons learnedp
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Challenges affecting HR today
Business imperatives HR challenges
Market reach:• Deliver services locally via a global model• Alignment with business expansion and contraction• Source and sustain a global talent pool
Operational agility:
• Increased complexity of HR regulatory environment• Flexibility of HR operating model to support rapid deployment• Achieve and maintain consistency from transformational effortsy• Data and analytics to support business decisions
Cost competitiveness:• Sustain return on investment (ROI) on transformation• Further demand for HR cost reductionsCost 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:• Prior HR transformation results not sustained• Customer confusion with HR access points• Protect the brand – manage compliance to minimize risk
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Classical HR service delivery model
Policy and strategyClassical HR service delivery model
Centers of Expertise (CoE) CoE deliver centralized
i ti ith d biliti
Key capabilityShared services/outsourcingCorporate strategy and policies Centers of Expertise
Business partnering
Valueadded Shared services is the framework for:
framework for cost-effectively delivering common and transaction-based services; addresses
organization with deep capabilities difficult to fund and staff within business units; address business needs for specialization, leveraging a critical mass of these
Solutionsconsulting
and advisory
and transaction based services; addresses transaction support requirements, enabling the HR business partners to focus on building a strategic partnership with their internal business customers.
capabilities across the enterprise.
Nature of activity Life cycle and
people careservices
Transaction processing servicesTransaction processing services
Transactional
Local HR(business partners)
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Complexity of interactionLow High
Anticipated benefits of the model (1)
Opportunity
Reduced costs:
► Delivering economies of scale ► Delivering efficiencies through process improvement and standardization► 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
Greater flexibility:► Centralized infrastructure that is flexible to changes in business need, structure and volumes► Ability to add new value-added business activities without proportional infrastructure costs
Increasing revenues:
► Business unit/front office staff can focus on value-adding activities► Improved service levels enhancing customer retention► 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 activities
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Anticipated benefits of the model (2)
Opportunity
Standardized processes:
► Reduction in variation can reduce complexity and the level of effort► Increased opportunities to automate may result from common processes
Improved responsiveness to competitive pressures:
► Merger and acquisitions demand leverage of synergies and a fast integration of the new companies
► Ability to scale with anticipated growth from improvement in global economy and oil and gas sectorpressures: g
Global operations:
► Seamless and uniform global corporate services► Increased flexibility for borderless operations
Leverage technology:
► Enhance the ROI of existing and new IT implementations► Realize cost savings and avoid additional expenditures through elimination of system
redundancies
Reduce compliance risks:
► Shared processes and responsibilities decrease concerns with SOX compliance ► Changing legal requirements are easier to implement in a shared environment
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HR transformation experience and lessons learnedlessons learned
Challenges our clients are facing in HR service delivery transformationservice delivery transformationIssue Potential measures to addressShared services: RegionalizeShared services: Not achieving cost savings Seen as reduced quality service
RegionalizeConsolidate with other back officeExpand scopeOutsource, offshoreSupport with technology to drive consistent processes
C t f E ti “i t ” d t f U d t d d l d t fit fCenters of Expertise seen as “ivory tower” and remote from business
Understand model and purpose to ensure fit for purposeConsider virtual CoEs to maximize talent while keeping close to
business
Business partners not respected: Still undertake administrative work
Upgrade skills with business focus, consulting skillsEquip with analytical tools to provide business insight based on
Do not understand business “Follow” business rather than lead and add value
q p y p gpeople information
Dissatisfaction with outsourcing provider(s) Insource or renegotiateOutsource on point basis not wholesale
Lack of take-up/frustration with self-service Review user experience designConsider whether Manager Self-Service (MSS) appropriate
HR still perceived as administrative function Outsource value-added rolesUse savings to invest in value-added roles rather than taking
the profitthe profit
Confusion or lack of acceptance of model Focus on clarification and communication of design
Inability to support HR transformation because HR has too much else to focus on
Demonstrate and make case for value of transformation
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Why does HR service delivery underperform?underperform?
HR shared services have been seen as a key potential driver behind the decrease in HR operating expense asdriver behind the decrease in HR operating expense as
a percent of revenue over the last 10 years.Typical service center “failure spiral”
Service delivery implementation
People and skills Strategy and servicep
Colocation of processes, no reengineering
Continued process “bespoking”
Business unit process duplication
Key person dependencies
Inadequate skills – some deep technical expertise may exist but overall insufficient management capability (and not all deployed in right roles)
Mi i l b i k l d littl
Delivery model not optimized – mix of transaction processing and expert activity
Strategic priorities not defined –model covers both “scale” and “expertise” activities presenting challenge for further cost/scale
Cost efficiency
Servicequality
challenge
Loss of touch and trust with business
Information issues —“different versions of the
truth”Process
Business informationbreakdown
Minimal business knowledge – little staff movement to/from business areas
challenge for further cost/scale improvements
Processes and controls Systems and technology
“Process silos” with significant l i i h k li k
Complex and poorly integrated i d i iCost-efficiency
challenge Staff morale declines —“staff sink”
breakdown
Difficult to respond to
major change
Control lost
complexity in each – weak linkages across teams
Post migration process reengineering not completed
Weak process control and associated control environment complex with weak assurance
systems environment – driving significant reconciliation activity
Weighted or planned investment not delivered – e.g., large scale SAP/ ORACLE implementations not carried out
Systems standards not adhered toOrganically evolved HR functions,
skilled but cost inefficient
major change, new info requests
Over reliance on consultants and contractors
SOX issues
Cost growth
complex with weak assurance process
Systems standards not adhered to
organization and governance Location and site
Governance not robust – seen as remote from businesses and/or too close to Group
Site not optimized for cost/ability –unable to attract/retain appropriate staff
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Over reliance on consultants and contractors close to Group staff
Emerging models of shared services
Shared services center (SSC) second generation
Regional shared services Global shared services/regional hubs COEs and local/global outsourcing
Characteristics:► Regional SSC are often set up
independently to leverage internal leading practices, standardize the regional SSC
Characteristics:► Transaction-driven processes are
extremely labour intensive. To leverage further labor cost arbitrage, certain
Characteristics:► Global outsource model leveraging low-
cost labor► Local in-territory outsourcing to selective p act ces, sta da d e t e eg o a SSC
across the globe, improve global governance and to be prepared for future global process realignment; a global SSC operation or network inaugurates additional value.
Results:
u t e abo cost a b t age, ce taprocesses are provided by a global SSC, running 24-hour shifts. Global centralization improves governance by reducing the number of sites and control standardization.
Results:
y gareas where deep subject-matter knowledge is needed locally but where critical mass is lacking, such as tax and regulatory compliance
Results:► Labor cost arbitrageResults:
► Leverage of global leading practices in the organization
► Improved global governance► Global processing and additional value
add
Results:► Labor cost arbitrage► Global synergies► Reduced governance efforts
► Labor cost arbitrage► Variable cost base (depending on
contract structure with outsourcer)► Global synergies► Lower cost for subject-matter resource
and outsourced compliance risk to
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subject-matter professionals
Centers of Expertise (CoE) are more effective if designed for the specific business context
CoEs are dedicated to providing strategic, people-related consultative services to executives and HR business
Role definition:
p g g , p ppartners. CoEs provide technical, specialized HR talent (e.g., benefits design, compensation design) to develop newHR products and services tailored to meet the needs of the business, at both corporate and business unit levels. CoEsown 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 grouped by function (e.g., reward, learning, employee relations)
Typical characteristics:
Different organizations choose different content for their CoEs, depending on business strategy
S ti C E li d i di id l it i ifi
Common variations based on business context:
)
Key focus is on understanding the key needs of the organization and designing solutions
Challenged to develop groupwide policies and products that can be deployed consistently
Sometime CoE-aligned individuals sit in specific business units and provide functionally specific support (e.g., reward, learning, recruitment)
Often much delivery responsibility is kept within the CoEproducts that can be deployed consistently
Responsible for complex or high-profile service delivery (e.g., executive compensation)
Responsible for working with SSC to operationalizeli i
“Virtual” CoEs are implemented
Some double hatting of roles can occur between CoEs
new policies
Work through HR business partners to develop solutions to business issues and through corporate HR to deliver solutions to groupwide issues
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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► People► What are the critical skills for the CoE?► Should we look for talent internally or externally?
► Process► Process► Which HR processes should CoE focus on?► Do we need to change the HR communication flow for CoE?S► System► 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?
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► In which location should CoE be formed?
What do HR business partners need to be able to add value?able 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:A l ti d t t t b i d i i ki► Analytic data to support business decision-making
► Metrics on skills, performance, attrition, absenteeism, pipeline, engagement, labor market, competitors, etc. g g p
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Data analytics leading principlesEffective Information Delivery (EID)y ( )
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, detailed labor cost and custom reporting
► Workforce forecasts: actual, plan, prior
Executives/managers
Customized knowledge
► Interactive analysis to investigate and drill-down on issues raised by reports
► Ad-hoc analysis across full data set
► Alert pop-ups that repeat automatically
Power users/analysts
► Alert pop-ups that repeat automatically
► Standardized and streamlined reports available via self-service or web-based
Interactive information
delivery
► Provides basic information with limited analysis and ad-hoc functionality on selected datasets
Business user
Standardized data
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HR can and should drive measurable value
Efficient transactions/administration (administrative role):
The key challenge is for HR to improve in all three dimensions while retaining the right balance for the organization.
Sample value measures:role):
► Standardize and streamline HR processes for compensation, benefits, payroll, hiring, terminations, time and attendance, etc.
► Streamline data flows and touch points; improve data accuracy► Eliminate redundancies of HR staff
Sample value measures:► Increase revenue per full-time employee
(FTE)► Improve employee satisfaction► Reduce voluntary turnover
► Promote HR transactional automation as a leading practice
Effective HR operations (operational role):
► Improve HR service delivery model through outsourcing, CoE and
y► Increase retention of key talent► Increase customer satisfaction levels► Reduce time to proficiency► Improve workforce performance ► Reduce HR operating costs per FTEp y g g
Shared Service► Establish an effective HR control framework► Identify and implement cost-savings initiatives► Maintain effective vendor management protocols► Effective communications and change management for transactions
► Reduce HR operating costs per FTE► Decrease manager time per HR
transaction ► Decrease cycle time per HR transaction► Reduce cost per hire
D t i i ig g
► Effective risk and compliance procedures, employee relations, etc.
Strategic business support (strategic role):
► Strengthen business decision-making throughout the organization
► Decrease person to person inquiries► Reduce HR headcount
g g g gthrough 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 business
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Questions
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