WORLD-CLASS GBS Overview & Trends Aspire

January 2016

Tom Bangemann

SVP Business Transformation

WORLD-CLASS GBSOverview & Trends

Aspire

© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

The Presenter


About The Hackett Group

A global strategic business advisory, operations consulting

and finance strategy firm

Leader in business best practices, business

benchmarking, and transformation consulting services

including strategy and operations, working capital

management, and globalization advice.

We address both efficiency and effectiveness

improvements to enable strategic business objectives

Our insights are fact based, from over 8,000 performance

improvement benchmarks & consulting engagements

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differentiator and enabler. It contains:

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our Best Practices Intelligence Center™ is a

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We deliver results through a global team of senior

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HACKETT DEFINES AND ENABLES

WORLD-CLASS PERFORMANCE

Hackett Value Grid™

4© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Hackett Group Solution Offerings

▪ Library of 2,500+ Best Practice Research Perspectives, Books of Numbers, and Hackett

Certified Best Practices through the Best Practice Intelligence Center

▪ Unlimited inquiry access for members to Hackett experts for transformation steering

▪ Peer-to-Leader 1-2-1 Best Practices sharing, and Best Practices networking events

▪ Enterprise, functional and process-based performance studies & value accelerators

▪ “Gold Standard” Benchmark – over 8,500 conducted, the empirical backbone for your

transformation at the SG&A Enterprise, Functional, and Process level.

▪ World-Class, Peer, and Custom Peer comparative metrics and best practices

▪ Ability to provide multiyear World-Class Program view of performance over time

▪ Hackett Performance Exchange (automatic accumulation of performance data from Oracle or

SAP

Finance

Human Resources

Information Technology

Procurement

Supply Chain and Operations

Membership

Advisory &

Research (Provides insights into World

Class Performance)

Benchmarking(Defines World Class

Performance)Hackett Perspective on World-Class Finance – Accelerating GBS | 9

Peer Group World Class

The World-Class Advantage – FinanceWorld-Class organizations always find a way to get there

IT Cost (per end user Equivalent)

Procurement Cost (% of spend)


23%

$1.7K$2.2K

HR Cost (per employee)


19%

0.59%0.73%$6.0K

22%

2014 Cost of Finance by Process Category (as a % of revenue)

Finance Cost (% of revenue)


1.12% 46%

-59%-46%

-23%

0.60%$7.7K

0.39%

0.21% 0.23%

0.16%0.11%

0.17%

Transacting Control & Risk Planning & Strategy

Practice or

Outcome

Process

Taxonomy

Vision

Dimension

SDM

Component

Capability /

Enabler 1 - Lagging 2 - Achieving 3 - Exceeding 4 - Leading

Current

State

Assessment

PriorityFuture State

TargetAverage Gap

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Degree to which a

sourcing strategy

exists

Sourcing strategy is ad hoc or

nonexistent.

Sourcing strategies reflect and are

aligned with overall business

strategy and objectives, including

high level risk requirements.

Historical spend analyses are

regularly and routinely conducted

by market and across markets -

i.e. by specific commodity, service,

location and business.

Commodity management and

sourcing strategies define

appropriate purchasing and

payment processes and tools.

Contract terms, lengths, and

conditions are defined to drive

optimal benefits to the enterprise;

in terms of total life-cycle cost,

service, and quality.

Sourcing strategy is reviewed and

updated annually (or more

frequently) to reflect direct linkage

to the company's strategic growth

plans, market changes and

product innovations, production

plans and business

M&A/ventures.

2 - Achieving 2 - Medium 3 - Exceeding 1.00

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Breadth of supplier

universe

Supplier selection is based on

historical or personal

relationships; suppliers often

selected prior to Procurement’s

involvement in a project.

Projects are initiated to limit the

total number of suppliers and

bundle the spend volume.

Procurement is involved in the

supplier selection process.

Suppliers are often considered on

a regional or compartmentalized

basis.

Supplier universe is considered

by major commodity or service

area rather than in aggregate.

Suppliers are considered for

bundled and/or extended services

that may extend to multiple areas

of competency.

Supply universe is global and not

limited to traditional commodity

suppliers.

1 - Lagging 2 - Medium 2 - Achieving 1.00

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Degree to which

supplier risk is

measured and

managed within the

sourcing process

Risk not considered as part of

sourcing decisions or supplier

management.

Supply risk is considered as part

of category-specific sourcing

efforts and supplier performance

management processes.

Supply base risk is explicitly

factored into broader business

continuity objectives. Supplier

risk is considered beyond the

specific good or service being

sourced.

Procurement works with other risk

management staff, ensuring

alignment between internal

risk/return preferences, business

objectives, and both general and

specific supply market risks.

3 - Exceeding 3 - High 4 - Leading 0.90

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Degree of

contingency

planning performed

to assure supply

No supply contingency planning

exists.

Contingency plan exists in case of

supply shortage; alternate

suppliers and alternate locations

identified.

Alternative supply sources are

developed in conjunction with

current suppliers for key

purchases.

Back-up suppliers are required for

critical or strategic categories and

items, including formalized

contingency plans to ensure

seamless supplier transition and

application of penalties and

liabilities with supplier(s) at fault.

3 - Exceeding 2 - Medium 3 - Exceeding -0.55

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Degree of supplier

qualification in

place

No formal supplier qualification

process.

Simple processes in place to

register suppliers and inspect

supplier qualifications at time of

registration or category review.

Established supplier training

program on enablement

strategies and buyer’s

technologies. Formal program

exists to identify key qualification

metrics with stratification based

on category criticality and supply

alternatives.

Annual review of at risk suppliers

and suppliers of key categories.2 - Achieving 2 - Medium 2 - Achieving 0.37

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Degree of

effectiveness and

efficiency of price

refresh process

Quoting and price refresh process

is undefined and performed

manually and on an ad hoc basis.

Quoting and price refresh process

is defined and audited manually.

Quoting and price refresh

processes are structured to

minimize enterprise financial

impact to all parties.

Quoting and price refresh

processes are automated, nearly

error-proof,, with appropriate

controls in place..

2 - Achieving 2 - Medium 2 - Achieving 0.46

Practice

Sourcing and

Supply Base

Strategy

Purchased

Cost

Reduction

Process

Design

Level of

rationalization of

supply base size

Large number of suppliers due to

short-term, “one-off” relationships.

Organization has identified the

need to rationalize the number of

suppliers in order to create

leverage.

Supply base rationalization is

complete. Few new suppliers are

needed and an added supplier

typically results in a removed

supplier (equilibrium). Strong

relationships developed with

current suppliers focusing on JPI

in critical or large dollar spend

areas.

Structured process is in place that

benchmarks the marketplace and

ensures continual supply base

assessment.


Practice

Sourcing and

Supply Base

Strategy

Purchased

Cost

Reduction

Process

Design

Maturity of use of

supply market

intelligence

Supply market knowledge is ad

hoc and incomplete.

Process, tools, and sources

established to gather and

organize data on most categories.

Supply market intelligence /

knowledge captured to identify

when a supply strategy needs to

be re-visited.

Supply market intelligence /

knowledge captured, modeled,

and utilized for pro-forma

simulations done during strategic

planning, design, sales, etc.


Business

Transformation(Transforms Performance into

World Class)

Service

Delivery

Components

Information

Service

Placement /

Scope

Process

Sourcing /

Location

Strategy

Process

Design

Enabling

Technology

Skills &

Talent

Governance

&Organization

Enterprise Performance Management

Shared Services, Global Business Services & Outsourcing

Merger Integration

Working Capital Management

Oracle EPM (Platinum Partner)

SAP ERP (Gold Partner)

Hyperion

Kronos

Workforce Management

Application Managed Services

– Functional Application Support

– Technical Application Support

– Cloud and Hosting

– Remote Development

Best Practice

Technology

Enablement(Implements Technology to

enable World Class)

In

-h

ou

se

Co

mp

le

te

O

utso

urc

in

g

Colo

catio

n

CustomerResponsibility

ProviderResponsibility

Sa

aS

A

pp

lic

atio

ns


Hackett´s intellectual capital is derived from engagementswith the world´s leading companies

97%

of the Dow Jones

Industrials

80%

of the

Fortune 100

88%

of the Dow Jones

Global Titans

80%

of the

DAX 30

49%

of the

FTSE 100

35%

of the

CAC 40

Subtract


The Hackett Group Identifies Leading Performers by Empirically Defining both World-Class and Top Performer Status

World-Class

Defines leading performers within a Function

Top Performer

Defines leading performers within a Process

Hackett Performance ContinuumHackett Value Grid™

Procurement HR

IT Finance

Accounts Payable Payroll

Credit & Collections Planning/Budgeting

Efficiency

Effectiveness

Your Organization

Quartile 1Quartile 2Quartile 3Quartile 4

Top Performer

49%

76%


Accelerating the rate of change

Agile enterprise

“Outside” Rate of

ChangeResponsive

Customer-

centric

Value

Chain

Proactive

Decision-

making

“If the rate of change on the outside exceeds the rate of

change on the inside, the end is near.” ― Jack Welch

http://www.goodreads.com/author/show/3770.Jack_Welch

http://www.goodreads.com/author/show/3770.Jack_Welch


Improvement of SG&A as percentage of revenue,2011 - 2014

-5.0% -3.0% -1.0% 1.0% 3.0% 5.0%

Global

1000

49%

Global

1000

51%

Low agility High agility

2.0%

% Size = % Companies


Improvement of SG&A as percentage of revenue,2011 - 2014

Global 1000

Utilities

Transportation

Telecom

Technology Hardware

Software and Services

Pharma

Media

Energy

Consumer Durables

Banking

Automotive

** Difference between high and low may not add up to gap due to rounding

Low agility High agilitySG&A agility gap**

2.0%

2.0%

3.3%

1.1%

2.1%

3.8%

4.4%

3.0%

1.8%

2.9%

8.1%

1.3%

Source: Hackett Group Analysis, Capital IQ public data

-0.8% 0.6%

-3.7% 4.4%

-1.8%

-0.9% 0.9%

1.1%

-1.4% 1.5%

-1.7% 2.7%

-1.7% 2.0%

-0.7% 1.4%

-0.7% 2.7%

-0.5% 0.6%

-0.7% 1.3%

-1.0% 1.1%

-5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0%


1.15% 1.21% 1.22% 1.17% 1.10% 1.05% 1.04% 1.17% 1.22% 1.15% 1.00% 0.85% 0.83% 0.81% 0.80% 0.78%

0.64% 0.63% 0.57% 0.57% 0.58% 0.57% 0.62% 0.59% 0.65% 0.59% 0.64%0.64% 0.60% 0.57% 0.53% 0.50%

2.90% 2.58%2.34% 2.38% 2.36%

2.19% 2.30% 2.28% 2.34%2.06% 2.04%

1.99% 1.94% 1.90% 1.86% 1.82%

0.51%0.42%

0.33% 0.30% 0.30%0.31%

0.30% 0.30%0.28%

0.28% 0.28%0.30% 0.30% 0.29% 0.28% 0.28%

5.20%4.83%

4.46% 4.42% 4.34%4.12% 4.25% 4.35%

4.48%

4.09% 3.95%3.77% 3.67% 3.57% 3.47% 3.38%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F 2018F

FN HR IT PR

Hackett benchmark historical moving median Hackett forecasted results

Cost of G&A as % of Revenue

The good news: costs are down…


0.78%

0.60% 0.60%

1.11% 1.13% 1.12%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Finance Cost as % of Revenue

World-Class is a moving target for G&A functions

1.01%0.82%

0.73%

0.74%

0.60% 0.59%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Procurement Cost as % of Spend

$1,892

$2,185 $2,161

$1,390

$1,821$1,669

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

HR Cost per Employee

$10,240

$7,986$7,710

$8,446

$7,470

$6,0402004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

IT Cost per End User Equivalent

World-ClassPeer Group

30%47% 46%

27%

17% 23%

27%

25%19%

18%

6%

22%


Operations

Financial

Business Services

Commercial

Intersecting >>>

Intersecting >>>

Tactics and initiatives to achieve strategic business objectivesBusiness services and digital transformation are top priorities to support commercial agenda

27%

13%

8%

14%

17%

15%

12%

11%

22%

15%

12%

11%

14%

9%

6%

42%

25%

17%

31%

41%

46%

39%

49%

35%

38%

35%

25%

16%

19%

14%

OP T IMIZ E S A L E S A N D MA R K E T IN G S T R A T E GY

R A T ION A L IZE P R OD U C T / S E R V IC E P OR T F OL IO

C H A N GE B R A N D S T R A T E GY

D E V E L OP A N D E X E C U T E A "D IG IT A L B U S IN E S S …

OP T IMIZ E OR GA N IZ AT ION S T R U C T UR E

IMP R OV E E N T E R PR IS E T A L E N T MA N A GE MEN T …

A U T OMA TE IN T E R N A L B U S IN E S S P R OC ES SE S

E N H A N C E D AT A MA NA GE ME NT , B I A N D …

R E D U C E S G& A C OS T

R E D U C E C OS T OF GOOD S S OL D

R E D U C E U S A GE OF W OR K IN G C A P IT A L

C R E A T E A MOR E V A R IA B L E C OS T S T R U C T UR E

R E D E S IGN GL OB A L S U P P L Y C H A IN

E X P A N D GL OB A L OP E R A T IN G L OC A T IONS

C ON S OL ID AT E GL OB A L OP E R A TIN G L OC A T ION S

Top Priority Initiative Major Initiative

Source: Key Issues Study, The Hackett Group, 2015


Are Global Business Services (GBS) taking over the majority business support functions?

In many organizations, this is a real, if oftentimes unsaid, fear…

Our job as GBS professionals is to change the conversation


As most companies run “Shared Services” the question is:how they leverage it and where are they in the evolution to Global Business Solutions

Stage

3

Stage

2

Stage

1Function-Centric

Process/ServiceCentric

Value-Centric

Value

Enterprise Value

Enablement

Business

Service

Excellence

Function

Transaction

Excellence

•Functionally Focused & Owned Platform

•Transactional Standardization

•Regional Shared Services Consolidation

•Transactional Automation

•Unit Cost Reduction Focus

•Multiple Functions inside GBS Org

•Service Management Implementation

•Enterprise Standards

•Performance Technology Improvement

•Knowledge Centers of Excellence

•BPO & Managed Services Outsourcing

•Unit Cost Reduction + Service Value Focus

•Service Oriented Standalone GBS Entity

•Service Catalog Centric

•End-To-End Process Orientation

•Non-Traditional Knowledge Centers of Excellence

•Commercial Performance Profile

•Innovation

•Unit Cost Reduction + Service Value + Business Value Focus

Focus

Functional Shared Services

Global Business Services

GBS as Strategic Pillar

9%

41%

50%

The three stages of Global Business Services evolution


The Hackett Group GBS Evolution ModelGBS Continues to Move up the Value Curve with a Modest Increase of Companies Developing Stage-2 Type Models

Enterprise

Strategic Enablement

Stage

3

Stage

2

Stage

1

Maturity

Process

Value

Business Value

Business

Services Excellence

Function

Transactional

Excellence

50%Of companies have single-function shared

services organisations focused on

achieving function-specific value

9%Of companies reap benefits of an advanced

GBS operating model which integrates

business services and supply chain and

enables enterprise strategy

41%

Of companies have integrated multiple

function’s shared services organisations to

create more value through end-to-end

process management

Examples

Examples

Source: The Hackett Group’s annual Global Business Services (GBS) Performance Study, 2015

Examples


World-class GBS outperform peer in delivering cost, quality and productivity improvements

Source: Annual Global Business Services (GBS) performance study, 2015

8% 10% 11%

4% 5% 7%

7% 8% 7%

6% 7% 7%

6% 6% 7%

5% 6%11%

7% 5% 8%

Stage 1 Stage 2 Stage 3

7%

10%

8%

8%

8%

11%

13%

5%

6%

6%

6%

6%

7%

9%

Indirect Procurement improvements

Direct Procurement improvements

Working capital improvements

Customer Service Improvement

Quality Improvement

Operating cost

Productivity Improvement

Peer World-class

Year-on-year performance improvementsAverage % improvement peer vs world-class


The shift from single function to multi-function Global Business Services (GBS) is clear

% companies with single- function shared services vs. multi-

function

76%

24%

2003

28%

72%

2014

Single Function Multi-Function


Finance, HR, Procurement, and IT are the main functions included in most GBS In 2020 nearly as many GBS will have Finance as well as HR and Procurement in scope


92%

43%45%

21%

30%

84%

40%

51%

25%

36%

84%

43%

55%

26%

37%

84%

41%

59%

22%

48%

86%

42%

82%

26%

73%

Finance Information Technology Human Resources Direct Procurement Indirect Procurement

Adoption of GBS model by function (2012-2020)

2012 2013 2014 2015 2020(F)


A cross-functional GBS model creates synergies, delivering more value from IT investment


42% 38%

66%

% of IT projects meeting ROI target

29%

48%

72%

% of GBS with IT activities in scope

Value from including IT in scope of a multi-function GBS



GBS keep pushing the boundaries to include more value-adding finance processes and knowledge centric-activities

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Outlook/Interim forecast

Budgeting

Business performance analysis

Cost analysis

Business performance reporting

Tax filing & reporting

Cost Accounting

External reporting

Order Entry

Inventory Accounting

Treasury

Cash management

Time and Attendance

Customer billing

Credit

General ledger accounting

Payroll

Collections

Intercompany accounting

Fixed assets

Travel Expense

Cash application

Accounts payable

GBS - Transactional GBS - Knowledge-centric GBS - Outsourced Outside the GBS organization

Service Placement – Finance processes

5 years ago today In 5 years


Example: Forecasting accuracy – Few companies meet the forecast for next quarter with a difference of up to 5%

Forecasting Accuracy

28% 28%

11%

67%

50%

33%

Revenue Earning Cash

Peer EPM Top Performer

+/- 5% difference within the next quarter

between the number initially forecasted and

the actual number reported in Revenue



the actual number reported in Earnings



the actual number reported in Cash flow

Source: EPM Performance Study, 2011

Key

factors

for poor

forecast

accuracy

Declines in demand

(No.1)

Declines in selling prices

Declines in exchange rates

Changes in product mix

(more low/less high price)

Launch delay or failure

Increases in raw material prices

Labour cost fluctuations

Unscheduled depreciation (e.g.

for goodwill)

Provisions (e.g., redundancies)

Project cost overrun

Quality issues, extended lead

times

Exchange loss

Increases in credit risk (No.2);

aka financial viability of customers

Increases in late payments (No.3)

incl. bad debt expenses, customer

disputes

Falling financial viability of suppliers

beginning to surface/have

materialised

Increase in the number of supplier

disputes.

+ +

+ +

+

+ +

+ ++


World-class GBS offshore less activities in Finance value-add process indicating that it is uncertain as yet that offshoring these activities delivers value

A third of transactional finance activities is offshored and about a fifth is outsourced with World-class companies showing a modest preference for outsourcing

and peers for (captive) offshoring

In value-add processes peers appear to have offshored larger proportions of control and risk management and planning and strategy indicating that offshoring in

itself is not leading to World-class performance, process transformation, and technology investment remain more important performance drivers in these areas

Finance Function Sourcing Strategy

Offshored2

Outsourced3

Finance Transactional Control & Risk Management Planning & Strategy

20% 26%

Peer World-class

36% 29%

Peer World-class

8% 6%

Peer World-class

14%7%

Peer World-class

6%2%

Peer World-class

11%6%

Peer World-class


45%

23%

25%

7%

85%

12%3%

Level of process standardization – G&A Functions

Peer

World-

class

Enterprise-wide Business Unit

Within geographies No or limited standardization

WC GBS have almost

2Xthe level of enterprise-

wide process

standardization

compared to Peers

World-class GBS have enterprise-

wide process standardization:

– More than 2X greater in

Finance and Procurement

– Nearly 2X greater in HR

– Nearly 1.5X greater in IT

…as compared to Peers

Source: 2014 GBS Performance Study

World-Class GBS Organizations Achieve High Levels of Enterprise-wide Process Standardization across G&A


Strategic Sourcing and

Contracting

Requisitioning and

Order Processing

Receipt

Processing

Invoice

Processing

Invoice Discrepancy

ManagementInvoice Payment

Supply Data Management (Supplier, Item, Contract, Catalog Master)

Sales and Quote

Management

Credit and Risk

ManagementOrder Processing Invoicing Cash Application

Collections/Dispute

Management

Customer/Product Data Management

Strategic Planning

Annual Operating

and Capital

Budgeting

Financial

Forecasting

Business

Performance /

Management

Reporting

Business Analysis

Strategic Workforce Planning Recruiting and StaffingWorkforce Development

ServicesOrganizational Effectiveness

Purchase-to-

Pay

Customer-to-

Cash

Plan-to-

Results

Talent Management

IT Opportunity-to-

Proposal

46%66%

35%

63%

32%57%

32%

63%50%

61%Percentage of processes

standardized

enterprise-wide

Purchase-to-

Pay

Customer-to-

Cash

Plan-to-Results Talent Management IT Opportunity-to-

Proposal

Process ownership drives cross-functional standards

Source: 2013 Hackett Enterprise Ownership Study

Current In 2-3 Years

Business Technology Planning Enterprise Architecture PlanningIT Strategy

Development

Proposal Development &

Approval


More than two third of GBS’ are planning on investing in Finance technologies in the next year, the exception being Treasury and Tax

The number one priority

within Finance for

technology investment is in

self-service analytics and

business intelligence. Self-

service access helps the

GBS improve the customer

experience and the quality of

decisions while reducing the

volume of routine information

requests.

Applications to manage

supplier networks and

provide external partners

with self-service access to

financials systems and

information are also popular

targets for future

investments.

Tax management and

Treasury is where fewest

GBS investments are

expected.

29%

33%

35%

42%

43%

43%

45%

46%

52%

52%

21%

8%

29%

5%

20%

21%

13%

4%

19%

3%

13%

79%

92%

43%

62%

45%

37%

43%

52%

55%

35%

45%

35%

0% 50% 100%

Treasury and cash management tools

Tax management software

Workflow management tools

Compliance management tools

Automatic invoice processing

Self-service employees (T&E, payments,…

Account Reconciliation tools

Rapid close cockpit tools

Receivables management tools

E-Invoicing

Self-service external partner (vendor, customer)

Self-service analytics and BI reporting tools

Finance technology – plans to implement or upgrade

Planned to implement next year

Planned to upgrade existing technology next year

No implementation plans


Automation of Knowledge Work


RPA: Robotic Process Automation (of Knowledge Work)

Source: OpusCapita


Promising Business Processes for Robotic Process Automation

F&A

Accounts Payables Processing

Accounts Receivable

General Ledger

Order management

Procurement

Requisition to purchase order

Spend management

Invoice processing

HR

Employee data management

Employee on/off boarding

Customer Experience

Customer Service

Marketing

BANKING & FINANCIAL SERVICES (BFS)

Card activation

Print & mail services

Fake claims detection

INSURANCE

Claims processing

New business development

Policy serving and reporting

HEALTHCARE

Reports automation

System reconciliation

Claims coding & processing

MANUFACTURING

Generation of material bills

TELECOM

Billing

Order Processing

Industry specific processesSG&A Function

In addition to industry-specific processes, SG&A processes are also starting to use

RPA:


Enterprise operating model design: Corporate Center, Business Units and Global Business Services (GBS)

Enterprise operating model – principal organizational components

Corporate

Center

Function

Global

Business

Services

Business

Units

Sets strategic direction,

allocates resources and

exercises control over

enterprise goal achievement

by BUs.

Shared entity, providing

business services (such as

Finance, HR, IT,

Procurement and Supply

Chain activities) to multiple

BUs and corporate center

Retained activities,

providing business

services to business

units locally



GBS operating models can be defined as integrated or infrastructure depending on the primary reporting relationship of delivered services to GBS and function served

When establishing GBS

organization companies do

not start with a blank

canvas, existing functional

shared services

organizations, functional

executive demands and

business needs often

determine a ‘best-fitting’

approach

Our research has identified

a variety of models ranging

from Integrated to

Infrastructure operating

models as shown here and

analyzed in this section

GBS Operating models – variation in reporting lines between GBS and function

Integrated model – delivered services

report to GBS

and may have dotted line to Function

leader (CXO).

GBS LeaderCXO

services

GBS LeaderCXO

services

GBS LeaderCXO

transactional

knowledge-

centric

Combined model – transactional

delivered services report to GBS and

may have dotted line to Function leader

(CXO).Knowledge-centric services

report to the Function leader and . and

may have dotted line to GBS leader.

Infrastructure model – delivered

services report to Function

Leader(CXO), and may have dotted line

to GBS leader.

GBS LeaderCXO

GBS LeaderCXO

services

services


Nearly half of all GBS have an integrated model for delivering G&A services but significant minority favor an infrastructure or combined model

Across the various

functional elements

(transactional, value-

adding and strategy), the

transactional component is

most likely to be organized

in an infrastructure model,

and the knowledge-centric

and strategy component of

the function somewhat

less likely to be reporting

directly to GBS.

As a result, a functional

nearly half of all GBS have

a pure integrated model

for Finance, HR and IT, a

third a pure infrastructure

model and another third

combine both

GBS Delivered activities and relationship with

functionActivity type

Transactional Knowledge-centric Strategy

HR68%

32%

63%37%

1 53%47%

Finance76%

24%54%46%1

71%

29%

IT73%

27%

63%36%

1 50%50%

Primary reporting to GBS (Integrated Model)

Primary reporting to Function (Infrastructure Model)

46%

21%

32%

Both models combined for a function

47%

32%

31%

45%

27%

27%

Function


Process ownership is an attempt to resolve the issue of limited visibility, manageability and compliance by improved collaboration

Program/

Account/

Item

OpCo

BU

Corporate

Center

BU BU BU

Visibility &

Manageability

Coordination Problem

Coordination of scarce resources

between BUs

Incompatible incentives between

Functions and BUs

Ability to maintain global standards vs.

localization attempts

Ability to mine globally comparable data

for business decision-making

Solution

Man

ageab

ility

Vis

ibili

ty


Top performers recognize that collaboration improves compliance, visibility & manageability of process performance

% top performers vs. peer citing the items as enablers for end-to-end process performance

24%39%

29% 24%

67%83%

74% 72%

Foster cultureconducive to

development of talent

Foster collaborationacross organizational

boundaries

Foster collaborationwith external partners

Foster product andprocess innovation

55%97%

Increase regulatory compliance

52%97%

Increase visibility and managebility ofprocess

Colla-

boration

Compliance

Visibility &

Manageability

Source: The Hackett Group’s Enterprise Process Ownership Performance study, 2013

Peer Top performer


Designing Effective Process OwnershipThree Key Questions

Process Breadth – To what

degree does the process truly

extend from one end of the

organization to the other?

Organizational Reach – To

what extent are elements of

the organization (BUs, GBS

and corporate center) included

in the end-to-end process?

Span of Authority – How are

accountabilities assigned to

effectively manage the end-to-

end process?


World-class get significantly better results from their process ownership models

World-class GBS report

that their process

ownership approach is

highly effective in

reducing cost, creating

consistent service delivery

and improving data quality

The gap to peer is

significant, peer report

that their process

ownership approach is

only effective in reducing

cost, creating consistent

service delivery and

ineffective in improving

data quality

The contrast is stark and

suggests that getting

process ownership wrong

is a waste of resources,

conversely it pays to get it

right

Effectiveness of Enterprise Process

Ownership

3.0

4.0

5.0

5.0

5.0

1.7

2.0

1.0

2.7

2.7

Cycle time improvement

Customer satisfaction improvement

Data quality improvement

Process cost reduction

Consistency of delivery (processstandardization)

Peer World-class

Highly

effective

Mostly

effective

EffectiveHardly

effective

In-

effective

2.3

2.3

1.3

2.0

4.0

Gap


Enterprise process ownership usage is both a best practice used by World-class GBS as well as a practice more likely to be used by advanced GBS

In particular, all World-class

and advanced GBS have

adopted an enterprise

ownership in purchase-to-

pay and customer-to-cash

Time-to-pay is the third end-

to-end process where all

World-class GBS have

adopted an enterprise

process ownership model

as opposed to peers who

show low levels of adoption

(but not all advanced GBS)

Enterprise Process Ownership usage by end-

to-end process

25%

25%

75%

75%

100%

100%

100%

24%

28%

68%

44%

92%

68%

28%

Plan-to-Result

Reward-to-Retire

Account-to-Report

Talent Management

Purchase-to-Pay

Customer-to-Cash

Time-to-Pay

Peer World-class

85%54%

100%

38%

31%67%

100% 85% 100%

38% 54% 67%

67% 69% 69%

23% 23%67%

31%15%

33%



Degree of end-to-end process ownership in C2C

Process OwnershipAll Study Participants

25%

44%

13%

13%

6%

Designated “credit and collections” owner is accountable for “end-to-end” process (e.g. single accountability for the end-to-end process)

Separate credit, collections and/or disputes process owners with a high-levelof coordination

Separate credit, collections and disputes process owners with a moderatelevel of coordination

Multiple process owners, all with minimal level of coordination

Other

Process ownership has increased

from separate process owners to a

designated “Credit & Collections”

owner accountable for the end-to-end

process

Top Performers are leading in

establishing process ownership at the

global level with high degree of

accountability and coordination

Compared to last year,

companies have started

emphasizing on Individual

process owners, a shift from

earlier focus on designated

“end-to-end” process

ownership


Effective process ownership requires seniority, but not too much

A significant majority of World-class

GBS have Director-level process

owners, whereas the majority of peers

have either Directors or VPs and

SVP/EVP as process ownership

It appears that seniority is required to

effectively manage an end-to-end

process, but not too much. Also, the

higher levels of seniority observed of

process owners in peer companies

may indicate that at this level

ownership does not mean day-to-day

focus on an end-to-end improvement

agenda due to competing priorities

40%

65%

1%

11%

29%

11%

10%

7%17%

5%3% 0%

Peer World-class

Seniority of process owner

Director Supervisor VP C-level SVP/EVP Staff

GBS Advisory Services | 39© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. GBS Executive Advisory Program | 39© 2013 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Service Delivery Models supporting process based governance models

Case Study

BU A BU B BU C

1

2

4

Healthcare Company

End-to-end processes across all BUs and

geographies (G&A support is mostly

decentralized, with limited shared services

leverage within BUs).

Focusing on Finance, HR, IT, Supply Chain

processes.

Process owners are Function representatives

without budget but with delegated authority for

design, implementation and optimization.

Function representatives chair process councils

where end-to-end process SMEs are

represented. A Global Transformation

Management Office (TMO) has been established

to manage process redesign initiatives.

1

2

3

4

Global process owners are functions

leaders that drive global process and

policies standardization with strong PMO

support

3

Process council

Process owner

Functional Process owner in a company with limited shared services leverage

GBS Advisory Services | 40© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. GBS Executive Advisory Program | 40© 2013 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Service Delivery Models supporting process based governance models

Case Study

End-to-end processes that are part executed

within the GBS organization have process

owners within GBS owing the full end-to-end

process across BUs and geographies.

Includes Finance, IT and HR processes.

Process owners are separate positions, part of

the GBS organization delegated authority for

process design, implementation, optimization.

Process owners report to the GBS leader. The

GBS leader is part of the most senior

management committee. BUs ‘voice’ is

represented through the GBS customer council,

chaired by the GBS leader.

1

2

3

4

Global Business Services (GBS)

organization drives organizational

changes through end-to-end process

management extending out of the GBS

organization

Customer council

Process owner

GBS BU A BU B

1

2

3

Oil & Gas Company

4

Separate process owner in a company with shared services leverage

GBS Advisory Services | 41© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Purchase-to-Pay

Customer-to-Cash

Account-to-Report Plan-to-Results Time-to-Pay

Talent Management

Reward-to-Retire

IT Opportunity-to-Proposal

IT Plan-to-Deployment

Strategic Sourcing and Contracting

Customer/Product Data Management

Account to Report Master Data Management

Strategic Planning Time Reporting Strategic Workforce Planning

Total Rewards Planning

Business Technology

Planning

Portfolio Management

Supply Data Management

Sales and Quote Management

Cost Accounting Annual Operating and Capital Budgeting

Employee Data Maintenance

Recruiting and Staffing

Total Rewards Administration

Enterprise Architecture

Planning

Service Design

Requisitioning and Order Processing

Credit and Risk Management

Fixed Asset Accounting

Financial Forecasting

Payroll Inquiry & Response

Workforce Development

Services

Data Management, Reporting and

Compliance

IT Strategy Development

Solution Design & Development

Receipt Processing Order Processing Intercompany Accounting

Business Performance/Man

agement Reporting

Payment Calculation

Organizational Effectiveness

Proposal Development &

Approval

Services Transition & Solution

Deployment

Invoice Processing Invoicing General Ledger Accounting

Business Analysis Payment Distribution

Invoice Discrepancy

Management

Cash Application External Reporting Payroll Tax Filing & Payments

Invoice Payment Collections Management

Payroll Accounting

What is the End-to-End Enterprise Process Ownership Scope?Talent Management Process

Nine E2E processes were covered by the study, each decomposed into 4-7 underlying processes. Study participants completed

only the questionnaire sections within their area of expertise. The questionnaire structure was identical for all nine processes.


Demand outlook for general business skills for Finance

Extreme difficulty

attracting/retaining

Difficulty


Minor difficulty


Very strong demand

(Critical skill)

Significant demand

(Growing need)

Low demand

(Replace turnover)

R

E

D

Z

O

N

E

Q4.1 What is the current overall demand for the following general skills/knowledge within your function and how do

you expect it to change over the next 2-3 years?

Q4.2 What has your experience been attracting and retaining the following general skills/knowledge from the Function

labor market and what do you expect over the next 2-3 years?

Data analysis and modeling

Change management

Business acumen

Relationship management and interpersonal skills

Problem solving skills

Strategic thinking and analysis

Project/program management

Organizational know how

Process improvement orientation and skills

Group collaboration/ facilitation

Managing others

Current 2-3 years


R

E

D

Z

O

N

E

Demand outlook for finance specialist skills

Extreme difficulty


Difficulty


Minor difficulty


Very strong demand

(Critical skill)

Significant demand

(Growing need)

Low demand

(Replace turnover)

Current 2-3 years

Cash disbursements

Revenue cycleGeneral accounting

External reporting

Tax management

Treasury management

Business analysis

Financial planning and performance reporting

Function-specific technology systems and tools acumen

Master data management

Enterprise risk management

Compliance Management

Q5.1 What is the current overall demand for the following specialist

skills/ knowledge within your function and how do you expect it to

change over the next 2-3 years?

Q5.2 What has your experience been attracting and retaining the

following specialist skills/ knowledge from the function labor market and

what do you expect over the next 2-3 years?


Business skills gap

37%

35%

35%

40%

34%

43%

Change management

Data analysis andmodeling

Process improvement

Project/programmanagement

Strategic thinking andanalysis

Average of functionspecific skills

Finance

13%

12%

49%

37%

37%

55%

HR

35%

27%

35%

43%

35%

40%

Procurement

Percentage of companies with effective skills


Attracting and retaining qualified personnel leads the list of external factors impacting GBS performance


External risk factors Ranking

Ability to attract and retain qualified personnel

Introduction or expansion of cloud-based IT solutions

Introduction or expansion of 'big data' analytical IT solutions

Increased data privacy risk

Introduction or expansion of mobile IT solutions

Introduction or upgrade of ERP platform

Offshore wage rate increase

Exchange rate volatility in BPO/ITO contracts

Increased political risk

Increased natural disaster risk

1-No impact 2-Low impact 3-Medium impact 4-High impact

3.2

2.8

2.7

2.7

2.7

2.6

2.3

2.2

2.0

1.9

External risk factors and the relationship with GBS maturity


World-class GBS focus on integrated Talent Management for the GBS to deliver high quality services

GBS Talent Management practices(% used to a high extent)

60%

67%

70%

78%

78%

78%

80%

90%

21%

19%

23%

31%

16%

15%

34%

21%

Job rotation within GBS

Competency models

Career planning

Skill assessment

Succession planning

High-potential development programs

Employee performance management

Non-monetary awards and recognition

Peer World-class

Stage 2Stage 1 Stage 3

15% 42% 83%

28%50% 83%

5% 35% 83%

10% 35% 67%

23%46% 83%

15% 42% 67%

13% 31% 83%

13% 42% 50%


Upper quartile companies* in the top EU firms are 8.8 times faster at converting working capital into cash than Median† performers

* Upper or 1st quartile performance – Lowest DIO / DSO, or highest DPO in top 25% of companies

† Median performance – Median DIO, DSO, or DPO in all companies

The differences between median and upper quartile working capital performances are very industry dependent , hence the difference between median and upper quartile in inventory could be generated by comparing industrial with service companies.

Days Sales Outstanding Days Inventory On-Hand Days Payables Outstanding Cash Conversion Cycle

€53.9 Million of cash flow per €1Billion of sales

52.025.5

38%

Median 1st Quartile

32.3


57.1

62%

Median 1st Quartile

21.5


57.4

25.5

53%

Median 1st Quartile

87.9


46.7

25.5

92%

Median 1st Quartile

5.3


Main take-aways as summary..…

Multi-functional GBS is the model of today and the model of the future –

effective governance is the task2.

Hybrid sourcing and progressive placement are becoming the norm3.

Multi-dimensional is the holistic view of tomorrow:

running cost, cash, risk and spend4.

Maturity of GBS increases and requires re-balancing of efficiency and

effectiveness and a new focus on business value1.

The journey is about using technology to eliminate work – higher

productivity requires higher standardization as prerequisite5.

The remaining work will need to be performed by fewer people with

upgraded skills – Talent management is top of the agenda6.

Questions?

WORLD-CLASS GBS Overview & Trends Aspire

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